THE MERGER AGREEMENT AND THE MERGER
The
following information describes the material terms and provisions
of the merger agreement and the merger. This discussion is subject,
and qualified in its entirety by reference, to the merger
agreement, which is incorporated herein by reference.
The
merger agreement, attached as Annex A hereto, and the summary of
its terms in this proxy statement/prospectus have been included
only to provide you with information about the terms and conditions
of the merger agreement. The representations, warranties and
covenants contained in the merger agreement were made solely for
the purposes of such agreement and as of specific dates, and were
qualified and subject to certain limitations and exceptions agreed
to by Old Line Bancshares and DCB Bancshares in connection with
negotiating the terms of the merger agreement. In particular, in
your review of the representations and warranties contained in the
merger agreement and described herein, it is important to bear in
mind that the representations and warranties were made solely for
the benefit of the parties to the merger agreement and were
negotiated for the purpose of allocating contractual risk among the
parties to the merger agreement rather than to establish matters as
facts. The representations and warranties may also be subject to a
contractual standard of materiality or material adverse effect
different from those generally applicable to stockholders and
reports and documents filed with the SEC, and, in some cases, they
may be qualified by disclosures made by one party to the other,
which are not necessarily reflected in the merger agreement or
other public disclosures made by Old Line Bancshares or DCB
Bancshares. The representations and warranties contained in the
merger agreement do not survive the effective time of the merger.
Moreover, information concerning the subject matter of the
representations, warranties and covenants, which do not purport to
be accurate as of the date of this document, may have changed since
the date of the merger agreement, and subsequent developments or
new information may not be fully reflected in public disclosures of
Old Line Bancshares.
For the
foregoing reasons, the representations, warranties and covenants or
any descriptions of those provisions should not be read alone or
relied upon as characterizations of the actual state of facts or
condition of Old Line Bancshares or DCB Bancshares or any of their
respective subsidiaries or affiliates. Instead, such provisions or
descriptions should be read only in conjunction with the other
information provided elsewhere in this document or incorporated by
reference into this document. Please see the sections of this proxy
statement/prospectus entitled “Incorporation of Certain
Documents by Reference” and “Where You Can Find More
Information.” Old Line Bancshares will provide additional
disclosures in its public reports to the extent it becomes aware of
the existence of any material facts that are required to be
disclosed under federal securities laws and that might otherwise
contradict the terms and information contained in the merger
agreement and will update such disclosure as required by federal
securities laws.
General
The
merger agreement provides that:
●
DCB Bancshares will
merge with and into Old Line Bancshares with Old Line Bancshares as
the surviving corporation;
●
If you are a
stockholder of DCB Bancshares, you will receive, for each share of
DCB Bancshares common stock that you own,
that number of shares of Old Line Bancshares
common stock determined by dividing $25.22 (160% of the tangible
book value of each share of DCB Bancshares common stock at December
31, 2016) by the Average Price, provided that if the Average Price
is $27.21 or more the exchange ratio will be fixed at 0.9269 and if
the average price is $20.85 or less the exchange ratio will be
fixed at 1.2096, and provided further
that cash will be paid
in lieu of fractional shares of Old Line Bancshares common
stock;
●
Immediately after
the merger, pursuant to an Agreement and Plan of Merger, dated as
of February 1, 2017, by and between Old Line Bank and Damascus
Community Bank, Damascus Community Bank will be merged with and
into Old Line Bank, with Old Line Bank as the surviving bank, which
we refer to as the bank merger; and
●
Stephen J. Deadrick
and another current director of DCB Bancshares will be elected as
members of the Old Line Bancshares and Old Line Bank boards of
directors.
Assuming the
requisite approval of DCB Bancshares’ stockholders and the
satisfaction of other conditions to closing, we currently expect
the merger to close in the second quarter of 2017. The merger will
result in an institution with pro forma assets of more than $2.0
billion and 27 full-service banking offices serving nine counties.
Old Line Bancshares expects the merger to be immediately accretive
to its tangible book value and earnings, excluding merger
expenses.
Background of the Merger
Old
Line Bancshares regularly considers strategic acquisitions to the
extent such opportunities arise and the institutions in question
have businesses and cultures complimentary to Old Line Bancshares
and Old Line Bank. On April 22, 2010, Old Line Bancshares appointed
a special committee of its board of directors (later reconstituted
as a joint committee of Old Line Bancshares and Old Line Bank) to
review potential strategic opportunities in general (the
“Strategic Opportunities Committee”), which at that
time included consideration of the acquisition of Maryland Bankcorp
or Maryland Bank and Trust Company, N.A. Since its formation, the
Strategic Opportunities Committee has considered potential
acquisitions on an ongoing basis.
From
time to time over the past several years, the board of directors of
Damascus Community Bank and, after the Reorganization (as defined
below), of DCB Bancshares, has considered various strategic
alternatives as part of their continuing efforts to enhance the
community banking franchise and to maximize stockholder value.
These strategic alternatives included continuing as an independent
institution, opening branch offices, establishing related lines of
business, and entering into a strategic transaction, such as a
merger, with one or more depository institutions. In fact, the
board of directors of Damascus Community Bank approved and
authorized the reorganization and share exchange transaction with
DCB Bancshares (the “Reorganization”) in large part to
position Damascus Community Bank for various growth opportunities
that might be easier or more effective to achieve as a bank holding
company. The Reorganization was effective on September 1, 2016. As
used in this section, the term “DCB Bancshares” means
both DCB Bancshares and, for periods ending prior to September 1,
2016, Damascus Community Bank.
During
the second half of 2015, Damascus Community Bank’s board and
management team devoted considerable effort toward developing both
short-term and long-term goals consistent with a newly defined
strategic vision. These efforts culminated in the adoption of a new
Strategic Plan (the “DCB Plan”) by the board on
December 22, 2015. The DCB Plan called for a combination of organic
and inorganic growth to reach an asset size whereby the board felt
that Damascus Community Bank could create the necessary operational
efficiencies of scale that would allow it to sustain continued
growth and enhance stockholder value.
As the
management team commenced implementation of the DCB Plan in early
2016, it did so knowing that organic growth alone was unlikely to
achieve either the board’s profitability growth objective or
its asset growth objective. Consequently, and in support of the
concept of inorganic growth, Stephen J. Deadrick, Chairman of the
Board of DCB Bancshares, and William L. Kincaid, Sr., who at the
time was serving as President and Chief Executive Officer (the
“CEO”) and a director of DCB Bancshares, held a series
of exploratory discussions with similarly-sized potential strategic
partners. The board of directors of DCB Bancshares determined that
none of those discussions presented the kinds of opportunities that
would achieve the objectives outlined in the DCB Plan.
In
mid-2016, in anticipation of the Reorganization, the board of
directors of DCB Bancshares began to explore the feasibility of a
capital raise that would provide Damascus Community Bank with the
capital necessary to not only grow but also meet the increased
regulatory capital standards imposed under the “Basel
III” regulatory capital reforms and changes required by the
Dodd-Frank Act. Simultaneously, the board began to explore in more
detail the feasibility of inorganic growth strategies.
As part
of its exploration efforts, the board invited David Danielson of
Ambassador Financial Group (“Ambassador”) to make a
presentation on the current state of community banking, both
locally and nationally, including industry banking updates, trends
in bank stock pricing, M&A trends and benefits associated with
various enterprise strategies at the regular board meeting held on
May 25, 2016. Mr. Danielson, together with Jay Shah, also of
Ambassador, made a follow-up presentation on Ambassador’s
analysis of potential merger and acquisition opportunities at the
regular DCB Bancshares board meeting held on July 27, 2016. Mr.
Danielson then made a presentation regarding a possible
subordinated debt offering at the regular DCB Bancshares board
meeting held on August 24, 2016. Ambassador gave these
presentations free of charge to market its services and not
pursuant to any engagement by DCB Bancshares or its
board.
On
September 1, 2016, Mr. Danielson met by conference call with Mr.
Deadrick, Robert L. Carpenter, Jr., then serving as the Executive
Vice President - Chief Financial Officer of DCB Bancshares and
Damascus Community Bank, and William F. Lindlaw, then serving as
the Executive Vice President - Chief Lending Officer of DCB
Bancshares and Damascus Community Bank, to discuss strategic
options and issues regarding a potential capital
raise.
On
September 26, 2016, Mr. Deadrick received a message from the chief
executive officer of a similarly-sized commercial bank (the
“First Contact”) in which it was suggested that the two
meet to discuss potential synergies. Mr. Deadrick returned this
message on October 7, 2016 and scheduled a meeting for October 11,
2016.
On
October 4, 2016, Mr. Kincaid resigned as the CEO. DCB
Bancshares’ board of directors met of October 5, 2016 to
discuss the leadership void created by Mr. Kincaid’s
departure. During that meeting, Messrs. Carpenter and Lindlaw were
appointed as interim co-CEOs, and an Executive Search Committee was
formed to facilitate the recruitment of a permanent CEO. Based on
the concern that the CEO vacancy would likely make a subordinated
debt offering both more difficult and more expensive to complete,
the DCB Bancshares board decided to suspend its exploration of a
subordinated debt offering until a permanent CEO was hired. In
addition, the board discussed and prepared for the possibility that
the CEO vacancy might result in unsolicited inquiries from
potential acquirers.
Between
October 6 and October 8, 2016, in anticipation of his upcoming
meeting with the First Contact, Mr. Deadrick held discussions with
Mr. Danielson regarding the feasibility of a merger with the First
Contact and how such a transaction might be structured in light of
the objectives outlined in the DCB Plan. The idea of a merger
between DCB Bancshares and the First Contact was discussed at the
October 11, 2016 meeting. Following that meeting, Mr. Deadrick
consulted with Messrs. Carpenter, Lindlaw and Danielson regarding
the potential opportunity. Based on those discussions and after
considering several factors relevant to the objectives outlined in
the DCB Plan, Mr. Deadrick concluded that a merger with the First
Contact was not advisable. Mr. Deadrick informally discussed his
conclusion with the other DCB Bancshares board members, who
concurred. Around October 15, 2016, Mr. Deadrick notified the First
Contact that DCB Bancshares was not interested in further
discussing the matter.
During
a phone conversation on October 8, 2016, Mr. Danielson mentioned to
Mr. Deadrick that DCB Bancshares should also have an exit strategy
in the event that an acceptable permanent CEO could not be hired.
Their discussion led Mr. Danielson to ask Mr. Deadrick whether he
would meet with James W. Cornelsen, President and Chief Executive
Officer of both Old Line Bancshares and Old Line Bank. Mr. Deadrick
advised Mr. Danielson that he would be receptive to meeting with
Mr. Cornelsen regarding a potential strategic partnership. On
October 11, 2016, Mr. Danielson sent an e-mail to Messrs. Deadrick
and Cornelsen, introducing them to each other and suggesting they
meet.
In the
meantime, on October 13, 2016, Mr. Danielson met with Mr. Deadrick,
some other DCB Bancshares directors and Mr. Carpenter by conference
call to discuss the possibility of a small subordinated debt raise
in light of the CEO vacancy. The parties determined to continue
exploring this possibility but that they should wait until after
Mr. Deadrick’s meeting with Mr. Cornelsen before spending
additional time or effort. Ultimately, DCB Bancshares did not move
forward believing that a small raise would not provide the capital
needed to fund potential growth in the market and that the
potential rate for a larger offering would likely be
unfavorable.
Messrs.
Deadrick and Cornelsen met on October 20, 2016. During that
meeting, Mr. Cornelsen expressed his interest in a strategic
partnership between Old Line Bancshares and DCB Bancshares. At the
conclusion of this meeting, Mr. Cornelsen extended an invitation to
Mr. Deadrick and two other DCB Bancshares directors selected by Mr.
Deadrick to visit him at Old Line Bancshares’ headquarters in
the near future.
After
this meeting, Mr. Deadrick contacted Mr. Danielson and recapped his
discussions with Mr. Cornelsen. Mr. Danielson asked Mr. Deadrick to
discuss the possibility of a transaction with Old Line Bancshares
with the other DCB Bancshares directors and determine whether the
DCB Bancshares board would be receptive to engaging in more formal
discussions with Old Line Bancshares.
On
October 24, 2016, Mr. Cornelsen called Mr. Deadrick to inquire on
the status of a visit to Old Line Bancshares. Mr. Deadrick
indicated that he had not yet discussed their meeting with the DCB
Bancshares board but would do so soon.
During
the October 26, 2016 DCB Bancshares regular board meeting, Mr.
Deadrick advised the board of his meeting with Mr. Cornelsen and
the board authorized Mr. Deadrick to continue discussions with Mr.
Cornelsen. At this meeting, it was agreed that Mr. Deadrick and
fellow directors James R. Clifford, Sr. and George C. Cramer would
meet with Mr. Cornelsen at Old Line Bancshares, and a meeting was
scheduled for October 31, 2016.
On
October 31, 2016, Mr. Deadrick contacted Andrew Bulgin of Gordon
Feinblatt LLC (“Gordon Feinblatt”), who serves as
outside counsel to DCB Bancshares, to inform him of the discussions
held with Old Line Bancshares and to engage Gordon Feinblatt for
advice and representation regarding a potential business
combination with Old Line Bancshares. Mr. Bulgin advised Mr.
Deadrick that DCB Bancshares and Old Line Bancshares should enter
into a confidentiality agreement before sharing any detailed
business information with each other. On that same date, Mr.
Deadrick sent a draft confidentiality agreement prepared by Baker,
Donelson, Bearman, Caldwell & Berkowitz, PC (“Baker,
Donelson”), outside counsel to Old Line Bancshares, to Mr.
Bulgin for review.
Between
October 31, 2016 and November 3, 2016, Mr. Bulgin and Frank C.
Bonaventure, Jr. of Baker, Donelson negotiated the confidentiality
agreement on behalf of their respective clients.
On
November 2, 2016, Mr. Deadrick informed Messrs. Carpenter and
Lindlaw of the discussions with Old Line Bancshares. On the same
day, Mr. Deadrick met with the chairman of the board of another
local commercial bank (the “Third Contact”). During
this meeting, the chairman of the Third Contact expressed interest
in a possible acquisition of DCB Bancshares. On December 12, 2016,
after considering the potential synergies of a transaction, the
potential benefit of a transaction to DCB Bancshares’
stockholders and the fact that the potential benefits of a
transaction with Old Line Bancshares were more closely aligned with
the objectives in the DCB Plan, Mr. Deadrick informed the chairman
of the Third Contact that DCB Bancshares was not interested in
exploring a transaction at that time.
On
November 3, 2016, Old Line Bancshares and DCB Bancshares entered
into a confidentiality agreement pursuant to which, among other
things, they agreed to conduct initial due diligence on each other
to explore the feasibility of a merger transaction.
On
November 4, 2016, Mr. Deadrick received an email message from the
chairman and CEO of another local community bank (the “Fourth
Contact”), who expressed an interest in meeting Mr. Deadrick
to discuss the possibility of a strategic partnership. After
considering whether a transaction with the Fourth Contact would be
consistent with the objectives outlined in the DCB Plan, and in
light of the ongoing discussions with Old Line Bancshares, the
potential benefits that Mr. Deadrick believed were possible from a
merger transaction with Old Line Bancshares and the fact that DCB
Bancshares and Old Line Bancshares had recently entered into a
confidentiality agreement and would spend considerable time and
effort conducting initial due diligence, Mr. Deadrick declined the
Fourth Contact’s invitation.
On
November 4, 2016, Mr. Cornelsen informed Mr. Deadrick that Old Line
Bancshares intended to engage Ambassador to provide investment
banking advice with respect to the potential merger with DCB
Bancshares. Later that day, Mr. Danielson verbally discussed Old
Line Bancshares’ initial due diligence information request
with Mr. Carpenter.
On
November 7, 2016, Mr. Danielson provided Messrs. Deadrick and
Carpenter with a formal initial due diligence request list. Between
November 7, 2016 and November 11, 2016, Messrs. Carpenter and
Lindlaw provided the requested initial due diligence information to
Mr. Danielson.
On
November 9, 2016, the Risk Committee of the DCB Bancshares board of
directors held a special meeting at which Mr. Danielson discussed
his views on the benefits to DCB Bancshares of a merger transaction
with Old Line Bancshares as compared to other potential local
merger partners.
On
November 14, 2016, Mr. Cornelsen, Mark A. Semanie, Executive Vice
President and Chief Operating Officer of Old Line Bancshares and
Old Line Bank, and Joseph E. Burnett, Executive Vice President and
Chief Lending Officer of Old Line Bancshares and Old Line Bank, met
with Messrs. Deadrick, Carpenter and Lindlaw at Ambassador’s
office. Mr. Danielson was also present at this meeting, where the
discussion focused on questions arising from Old Line
Bancshares’ review of the initial due diligence materials
provided by DCB Bancshares.
On
November 21, 2016 and December 15, 2016, Mr. Danielson presented
reports about a potential DCB Bancshares/Old Line Bancshares merger
to the Old Line Bancshares Strategic Opportunities Committee. At
both meetings, the Strategic Opportunities Committee determined to
continue moving forward with an acquisition of DCB
Bancshares.
On
November 21, 2016, Mr. Cornelsen, on behalf of Old Line Bancshares,
sent DCB Bancshares a preliminary written indication of interest to
Mr. Deadrick with respect to a proposed merger of DCB Bancshares
and Damascus Community Bank with Old Line Bancshares and Old Line
Bank, respectively. In its letter, Old Line Bancshares proposed a
transaction with an aggregate deal value (i.e. consideration) of
160% of DCB Bancshares tangible equity as of December 31, 2016,
payable in shares of Old Line Bancshares common stock. Old Line
Bancshares also proposed a termination fee equal to 3.25% of the
deal’s transaction value and to invite one member of DCB
Bancshares’ board of directors to join Old Line
Bancshares’ and Old Line Bank’s board of directors, and
indicated it was open to discussions about a second board
seat.
At a
special meeting of the DCB Bancshares board of directors on
November 29, 2016, also attended by Messrs. Carpenter and Bulgin,
the letter of interest from Old Line Bancshares was presented and
discussed in detail. The DCB Bancshares board concluded that the
terms described in the letter of interest seemed to present a very
good opportunity for DCB Bancshares to achieve many of the
objectives outlined in the DCB Plan at a very attractive price for
stockholders, but that DCB Bancshares needed to seek advice from a
qualified investment banking firm regarding the current merger
market and the terms and conditions contained in Old Line
Bancshares’ letter of interest, including the price being
offered. The DCB Bancshares board then authorized Mr. Deadrick to
conduct further negotiations with Old Line Bancshares, while at the
same time identifying and arranging for the interview of investment
banking firms to represent DCB Bancshares.
Between
November 23, 2016 and November 30, 2016, Mr. Deadrick received a
call from representatives of another community bank (the
“Fifth Contact”), who expressed interest in discussing
a possible strategic partnership. Mr. Deadrick indicated that he
would follow up with the Fifth Contact if interested in having
further discussions, as at that time Mr. Deadrick believed that Old
Line Bancshares’ letter of interest was compelling and needed
to be vetted. There was no further discussion with the Fifth
Contact.
On
December 1, 2016, the Risk Committee of the DCB Bancshares board of
directors held a special meeting at which it conducted
comprehensive interviews of three potential investment banking
firms. Messrs. Carpenter and Bulgin were also in attendance. On
December 2, 2016, formal proposals were received from all three
potential firms. On December 5, 2016, after reviewing and
discussing in detail the submitted proposals, the Risk Committee
chose and approved the engagement of RP Financial.
On
December 6, 2016, DCB Bancshares formally engaged RP Financial as
its financial advisor with respect to the merger.
On
December 8, 2016, Mr. Danielson provided a full due diligence
request list from Old Line Bancshares to Messrs. Deadrick,
Carpenter and Bulgin, as well as James P. Hennessey of RP
Financial. Additional information was requested throughout December
2016 and January 2017.
Between
December 6, 2016 and December 15, 2016, with the advice and
assistance of RP Financial and Gordon Feinblatt, DCB Bancshares
negotiated certain revisions to Old Line Bancshares’ letter
of interest.
On
December 15, 2016, in response to comments from Mr. Deadrick and RP
Financial based on the review by the DCB Bancshares board of
directors, Old Line Bancshares sent DCB Bancshares a revised
indication of interest that included downside protection for DCB
Bancshares in the form of a price collar. In this letter, among
other things, Old Line Bancshares clarified that the exchange ratio
for determining the number of shares of Old Line Bancshares common
stock to be paid to the holders of DCB common stock would be
determined based on DCB’s tangible equity as of December 31,
2016, and the most recent ten-day (trading days) weighted average
closing price of Old Line Bancshares common stock immediately prior
to signing a definitive agreement. The indication of interest
included added downside price protection in the event that Old Line
Bancshares’ stock price were to decline between the merger
announcement date and the merger closing date.
On
December 15, 2016 and December 16, 2016, DCB Bancshares and their
representatives proposed further revisions to the letter of
interest, which were accepted by Old Line Bancshares.
At a
special meeting of the DCB Bancshares board held on December 16,
2016, which was also attended by Messrs. Carpenter, Lindlaw, Bulgin
and Hennessey, the revised letter of interest was presented and
discussed in detail. Mr. Hennessey presented his initial analysis
of Old Line Bancshares’ offer, which presentation included a
discussion of the price offered to DCB Bancshares’
stockholders as compared to recent transactions and the synergies
that could reasonably be expected from a merger with Old Line
Bancshares. Mr. Bulgin then discussed the revisions that had been
made to the original letter of interest. The DCB Bancshares board,
after a thorough discussion, authorized Mr. Deadrick to execute the
letter of interest once some final revisions were made, including a
clarification of the description of the downside price protection
mechanism and the provision of a minimum severance benefit for
displaced employees of Damascus Community Bank.
On
December 16, 2016, in response to comments from Mr. Deadrick and RP
Financial, Old Line Bancshares submitted a second revised
indication of interest in which it indicated that the exchange
ratio would be based on the ten-day weighed average price of Old
Line Bancshares’ common stock immediately prior to the
closing of the merger instead of the signing of a definitive
agreement, and included a collar that provided the denominator in
the exchange ratio calculation would be no less than $20.85 and no
more than the ten-day weighted average closing price of the Old
Line Bancshares common stock immediately prior to signing a
definitive agreement. After confirming that it addressed the
minimum severance benefit discussed above, Mr. Deadrick executed
this third indication of interest on behalf of DCB Bancshares and
returned it to Old Line Bancshares on December 16,
2016.
On
December 28 and 29, 2016, Old Line Bancshares and their
representatives conducted on-site due diligence of Damascus
Community Bank’s loan portfolio. Messrs. Carpenter and
Lindlaw met with Mr. Burnett and M. John Miller, Executive Vice
President and Chief Credit Officer of Old Line Bank, at the
conclusion of this on-site loan due diligence, during which
representatives of the parties discussed DCB Bancshares’
operations, loan portfolio and financial condition.
On
January 4, 2017, Mr. Deadrick met with Mr. Cornelsen to discuss due
diligence progress. At that time, Mr. Cornelsen expressed Old Line
Bancshares’ interest in electing Mr. Deadrick to the boards
of Old Line Bancshares and Old Line Bank following the completion
of the merger so that DCB Bancshares’ stockholders would have
continued representation of the post-merger bank.
On January
8, 2017, Old Line Bancshares circulated an initial draft of the
merger agreement to DCB Bancshares for review. During the
remainder of January 2017, Old Line Bancshares and DCB Bancshares
and their respective advisers regotiated the terms of the merger
agreement and the ancillary documents appearing as exhibits to the
merger agreement. During this time, DCB Bancshares and Old
Line Bancshares also continued their due diligence investigations
of each other.
On
January 9, 2016, Mr. Deadrick confirmed that the DCB Bancshares
board of directors desired to have one additional director
represent DCB Bancshares’ stockholders on the board of the
post-merger bank, and he provided Mr. Cornelsen with a list of
three DCB Bancshares directors who were interested in being
considered for election to the boards of Old Line Bancshares and
Old Line Bank following the completion of the merger.
Also on
January 9, 2016, Mr. Carpenter and Bethany S. Lord, Vice President
of Human Resources for Damascus Community Bank, met with Mr.
Semanie and David L. Seyler, Senior Vice President – Cash
Management Services of Old Line Bank, to discuss how the merger
announcement should be communicated to the public once the merger
agreement was signed.
On
January 11, 2017, Messrs. Deadrick, Carpenter, Lindlaw, Bulgin and
Hennessey conducted on-site due diligence of Old Line Bancshares
and Old Line Bank. This review included a comprehensive review of
financial, corporate, legal, operations and other information as
well as discussions with various members of Old Line Bank’s
management team. Off-site due diligence of Old Line Bancshares and
Old Line Bank by Messrs. Carpenter and Lindlaw, Gordon Feinblatt
and RP Financial continued through January 29, 2017.
On
January 13, 2017, the Risk Committee of the DCB Bancshares board
held a special meeting to discuss the results of due diligence
performed to date. Messrs. Carpenter, Lindlaw, Bulgin and Hennessey
were also in attendance. The consensus of the due diligence
participants was that Old Line Bank was a well-managed, strong bank
whose branch footprint, product and service lines and culture
aligned well with Damascus Community Bank and the objectives
outlined in the DCB Plan. The Risk Committee also reviewed in
detail the initial draft of the merger agreement. The Risk
Committee directed Mr. Bulgin to negotiate certain changes to this
draft.
On
January 18, 2017, Mr. Deadrick met with Mr. Cornelsen and Craig E.
Clark, chairman of the board of directors of Old Line Bancshares
and Old Line Bank, to discuss due diligence issues as well as
progress on finalizing the merger agreement.
At a
special meeting of the DCB Bancshares board on January 19, 2017,
also attended by Messrs. Carpenter, Lindlaw, Hennessey, and Bulgin,
the draft of the merger agreement was reviewed in detail. At the
outset, Mr. Bulgin explained the duties of care and loyalty with
which each director must comply when reviewing the terms of the
merger and deciding whether to declare it advisable. During the
course of this review, the directors of DCB Bancshares engaged in a
thorough discussion of the material terms of the merger agreement
and their implications to DCB Bancshares and its stockholders, and
asked several questions of Mr. Bulgin regarding the legal aspects
of the transaction. Mr. Bulgin was directed to negotiate several
revisions to address the board’s questions and comments.
Following this legal review, Mr. Hennessey made a presentation that
included an overview of the proposed merger transaction from a
financial point of view, a detailed analysis of the price
calculations and possible exchange ratios, and a detailed analysis
of how the terms of the proposed merger, including the pricing
terms, compared to other recent transactions among banking
institutions. Directors asked many detailed questions of Mr.
Hennessey concerning his analysis and a robust discussion
followed.
On
January 20, 2017, Old Line Bancshares formally engaged Ambassador
as its financial advisor with respect to the merger.
On
January 23, 2017, Mr. Deadrick contacted Mr. Cornelsen to discuss
the status of the merger agreement negotiations and the anticipated
signing date.
During
the regular meeting of the DCB Bancshares board of directors held
on January 25, 2017, also attended by Messrs. Carpenter, Lindlaw,
Bulgin and Hennessey, the board was updated on continuing progress
of negotiations, the anticipated timing of a public announcement,
and when and how the merger should be communicated to employees,
stockholders and customers. Mr. Hennessey then presented RP
Financial’s preliminary fairness opinion, along with the
supporting analysis and methodology. At that time, Mr. Hennessey
stated that RP Financial believed that the merger would be fair to
DCB Bancshares’ stockholders from a financial point of
view.
The
Risk Committee of DCB Bancshares held a special meeting on January
30, 2017 to review the current draft of the merger agreement, which
included a detailed review of the representations and warranties to
be made by DCB Bancshares to Old Line Bancshares, along with all
supporting disclosure schedules. Several minor revisions to the
merger agreement were agreed upon, along with a few final questions
for Mr. Bulgin.
On
February 1, 2017, the DCB Bancshares board of directors held a
special meeting to consider the final terms of the merger
agreement. Also in attendance were Messrs. Carpenter, Lindlaw,
Bulgin and Hennessey. Mr. Hennessey presented RP Financial’s
final fairness opinion, which had been provided to all board
members on January 31, 2017. His presentation included the
supporting analysis and methodology overview. Mr. Hennessey also
answered several questions posed by directors and concluded by
stating RP Financial’s opinion that the transaction would be
fair from a financial point of view to DCB Bancshares’
stockholders. Mr. Bulgin then reviewed each term of the merger
agreement with the board and pointed out those provisions that had
been changed since the last review. Mr. Bulgin again reviewed with
the directors their fiduciary obligations when considering the
merger and deciding whether to declare it advisable. Following this
discussion and, after considering the opinion of RP Financial, the
board of directors of DCB Bancshares unanimously declared the
merger and the merger agreement to be advisable and in the best
interests of DCB Bancshares’ stockholders.
Also on
February 1, 2017, Old Line Bancshares’ board of directors
held a special meeting at which it considered the definitive merger
agreement and ancillary documents, and at which representatives of
Ambassador and Mr. Bonaventure, were also present. Mr. Bonaventure
presented the board with an overview of the material terms of the
merger agreement, copies of which were provided to each director
before the meeting. Also at this meeting, Mr. Danielson of
Ambassador reviewed the financial aspects of the proposed merger.
At the conclusion of these presentations and discussion and
deliberation, and after considering all of the factors that it
deemed relevant, the Old Line Bancshares board of directors
unanimously approved the merger agreement and the transactions
contemplated by the merger agreement, up to and including the
merger, approved the form of the related support agreement,
declared the merger advisable, and authorized Old Line
Bancshares’ President and Chief Executive Officer to execute
and deliver the definitive merger agreements and the support
agreements.
The
parties executed the merger agreement on February 1,
2017.
Following the close
of trading markets on February 1, 2017, DCB Bancshares and Old Line
Bancshares issued a joint press release announcing the approval,
adoption and execution of the merger agreement.
Old Line Bancshares’ Reasons for the Merger
In
evaluating acquisition opportunities, Old Line Bancshares looks for
financial institutions with business philosophies that are similar
to those of Old Line Bancshares and that operate in markets that
geographically complement its operations. In evaluating acquisition
opportunities, Old Line Bancshares also considers its long-range
strategies, including financial, customer and employee strategies.
Old Line Bancshares, from time to time, reviews its strategic plan
to analyze its geographic scope, financial performance and growth
opportunities. Since its acquisition of Maryland Bankcorp in 2011,
WSB in 2013 and Regal Bancorp in 2015, Old Line Bancshares has
considered a number of opportunities to expand its presence in its
primary market areas; however management and the Strategic
Opportunities Committee concluded that the acquisition of DCB
Bancshares was the best current opportunity to further this
business objective. In connection with its approval of the merger
with DCB Bancshares, Old Line Bancshares’ board of directors
reviewed the terms of the proposed acquisition and definitive
agreements and their potential impact to Old Line Bancshares’
constituencies. In reaching its decision to approve the merger
agreement and the merger, Old Line Bancshares’ board of
directors considered a number of factors, including the
following:
●
The acquisition of
DCB Bancshares and Damascus Community Bank represents an attractive
opportunity for Old Line Bank to enter and establish branches in
upper Montgomery County and Frederick County, Maryland, which
complements its current market area, while remaining a community
bank;
●
The results of due
diligence of DCB Bancshares and its business operations, including
asset quality;
●
The understanding
of the business operations, management, financial condition, asset
quality, product offerings and prospects of DCB Bancshares based
on, among other things, input from management and Old Line
Bancshares’ financial advisor;
●
The view that the
combined company will have the potential for a stronger competitive
position in a marketplace where relatively greater size and scale
may become increasingly more important factors for financial
performance and success;
●
The expectation
that the merger would be immediately accretive to book value and
earnings (excluding merger expenses) in light of the potential cost
savings and revenue enhancements;
●
DCB
Bancshares’ customer service-oriented emphasis with local
decision-making ability and a clear focus on the community and
local customers, which are consistent with Old Line
Bancshares’ business approach;
●
The financial
condition, operating results and future prospects of Old Line
Bancshares and DCB Bancshares;
●
A review of
comparable transactions, including a comparison of the price being
paid in the merger with the prices paid in other comparable
financial institution mergers from an earnings, deposit premium and
tangible book value perspective;
●
Management’s
view, based on, among other things, such comparable transactions
reviewed, that the consideration paid by Old Line Bancshares is
fair to Old Line Bancshares and its stockholders from a financial
point of view; and
●
The belief that DCB
Bancshares has a compatible business culture and shared approach to
customer service and increasing stockholder value.
All
business combinations, including the merger, also include certain
risks and disadvantages. The material potential risks and
disadvantages to Old Line Bancshares and its stockholders that Old
Line Bancshares’ board of directors and management identified
and the board of directors considered include the following
material matters, the order of which does not necessarily reflect
their relative significance:
●
The risk that DCB
Bancshares’ loans and other items were not discounted
properly or appropriately valued;
●
The risk that DCB
Bancshares’ deposit customers will choose to move their
business to a different bank;
●
The risk that
projected earnings, tangible book value increases and/or cost
savings will not materialize or will be less than
expected;
●
That Old Line
Bancshares might have to pass on other acquisitions in the near
term if proceeding with the merger with DCB Bancshares;
and
●
The risk that DCB
Bancshares terminates the merger by reason of a superior DCB
Bancshares transaction.
The
discussion and factors considered by Old Line Bancshares’
board of directors is not intended to be exhaustive, but includes
all material factors considered. Old Line Bancshares’ board
of directors considered these factors as a whole, and considered
them to be favorable to, and supportive of, its determination. Old
Line Bancshares’ board of directors did not consider it
practical, nor did it attempt, to quantify, rank or otherwise
assign relative weights to the specific factors that it considered
in reaching its decision. In considering the factors described
above, individual members of Old Line Bancshares’ board of
directors may have given different weights or priority to different
factors. Old Line Bancshares’ board of directors realized
there can be no assurance about future results, including results
expected or considered in the factors listed above. The board of
directors concluded, however, that the potential positive factors
outweighed the potential risks of completing the
merger.
After
deliberating with respect to the proposed merger with DCB
Bancshares, considering, among other things, the factors discussed
above, the Old Line Bancshares board of directors approved the
merger agreement and the merger with DCB Bancshares and declared
the merger advisable.
There
can be no certainty that the above benefits of the merger
anticipated by the Old Line Bancshares board of directors will
occur. Actual results may vary materially from those anticipated.
For more information on the factors that could affect actual
results, see “Caution Regarding Forward-Looking
Statements” and “Risk Factors.”
DCB
Bancshares’ Reasons for the Merger and Recommendation of the
Board of Directors
The DCB
Bancshares board of directors concluded that the merger offers DCB
Bancshares’ stockholders an attractive opportunity to achieve
the board’s strategic business objectives, including
increasing stockholder value, growing the size of the business and
enhancing liquidity for stockholders. In addition, the board
believes that both the customers and communities served by Damascus
Community Bank will enjoy significant benefits from the merger that
they might not otherwise enjoy if Damascus Community Bank were to
remain independent or merge with another bank.
In
deciding to approve the Merger, the DCB Bancshares board of
directors consulted with management, as well as its legal counsel
and financial adviser, and considered numerous factors, including
the following:
●
Information with
respect to the businesses, earnings, operations, financial
condition, prospects, capital levels and asset quality of Damascus
Community Bank and Old Line Bank, both individually and as a
combined company;
●
The perceived risks
and uncertainties attendant to Damascus Community Bank’s
operation as an independent banking organization, including the
risks and uncertainties related to the low interest rate
environment, competition in Damascus Community Bank’s market
area, and the increased regulatory costs and increased capital
requirements that will likely result from new and pending laws and
regulations;
●
The current and
prospective merger market and the board’s belief, based on,
among other information, RP Financial’s presentation, that
future merger opportunities for DCB Bancshares might not be as
favorable as the opportunity presented by Old Line
Bancshares’ offer;
●
The market values
of DCB Bancshares’ common stock and Old Line
Bancshares’ common stock prior to the execution of the merger
agreement and the immediate value of the merger to DCB
Bancshares’ stockholders given the merger
consideration’s significant premium over the then-current
trading price of the shares of DCB Bancshares’ common
stock;
●
The uncertainties
surrounding the CEO vacancy and the risks that such vacancy
presents to Damascus Community Bank’s growth and success,
and, in turn, future stockholder value;
●
The potential
long-term value to be realized by DCB Bancshares’
stockholders as a result of the merger as compared to stockholder
value projected for DCB Bancshares as an independent entity, and
the prospects for future appreciation of Old Line Bancshares’
common stock as a result of its strategic initiatives;
●
Old Line
Bancshares’ strategies to remain independent and to seek
profitable future expansion, which it expected to lead to continued
growth in overall stockholder value;
●
The enhanced
liquidity for stockholders of DCB Bancshares as a result of
receiving shares of Old Line Bancshares’ common stock given
the current trading market for Old Line Bancshares’ common
stock;
●
The culture and
business model of Old Line Bank, which the DCB Bancshares board of
directors believes are complimentary to Damascus Community
Bank’s culture and business model, and the perceived
competence, experience and community banking philosophy of Old Line
Bank’s management team, both of which the board believed
should increase the likelihood that Damascus Community Bank will be
successfully integrated with Old Line Bank;
●
Old Line
Bank’s commitment to retain as many employees of Damascus
Community Bank as practical, and its agreement to provide severance
benefits to terminated employees that is consistent with Damascus
Community Bank’s employee severance policy; and
●
Old Line
Bank’s successful acquisition track record and the belief
that the merger will be approved by the parties’ banking
regulators without undue burden and in a timely
manner.
The DCB
Bancshares board of directors also considered potential risks
associated with the merger when makings its decision to approve the
merger agreement, including:
●
The risk that the
terms of the merger agreement, including the provisions generally
prohibiting DCB Bancshares from soliciting, engaging in discussions
or providing information with respect to alternative transactions,
and those relating to the payment of a termination fee under
specified circumstances, which were required by Old Line Bancshares
as a condition to its willingness to enter into the transaction,
could have the effect of discouraging other parties that might be
interested in a transaction with DCB Bancshares from proposing such
a transaction;
●
The risk of an
all-stock transaction in the event that Old Line Bancshares’
stock price declines significantly after the merger is
completed;
●
The challenges of
combining the businesses of the two companies, which could affect
the post-merger success of the combined company, and the ability to
achieve anticipated cost savings and other potential benefits of
the merger;
●
The risk that the
merger would not be completed, leaving DCB Bancshares’
reputation severely damaged;
●
The risk that DCB
Bancshares’ stockholders and the community react negatively
to the loss of the local community bank; and
●
The risk that DCB
Bancshares’ stockholders, the community, and customers react
negatively to the job eliminations that will be required to achieve
the anticipated cost savings from the merger.
In the
judgment of the DCB Bancshares’ board of directors, the
potential benefits of the merger outweigh these potential
risks.
The
above discussion of the information and factors considered by DCB
Bancshares’ board of directors is not intended to be
exhaustive, but it does include a description of all material
factors considered by the board. In view of the wide variety of
factors considered by the board of directors in connection with its
evaluation of the merger, the board did not consider it practical
to, nor did it attempt to, quantify, rank or otherwise assign
relative weights to the specific factors that it considered. In
considering these factors, individual directors may have given
differing weights to different factors. DCB Bancshares’ board
of directors made a collective determination with respect to the
Merger, based on the conclusion reached by its members and the
factors that each of them considered appropriate, that the merger
is in the best interests of the stockholders of DCB
Bancshares.
Opinion of DCB Bancshares’ Financial Advisor
DCB
Bancshares retained RP Financial on December 6, 2016, to render an
opinion regarding the fairness from a financial point of view with
respect to the merger consideration to be received by DCB
Bancshares’ stockholders in the merger. In engaging RP
Financial for its fairness opinion, the DCB Bancshares board of
directors did not give any special instructions to RP Financial,
nor did it impose any limitations upon the scope of the
investigation that RP Financial wished to conduct to enable it to
give its opinion. RP Financial has delivered to DCB Bancshares its
written opinion, dated February 1, 2017, to the effect that, based
upon and subject to the matters set forth therein and other matters
it considered relevant, as of that date, the merger consideration
to be received in connection with the merger with Old Line
Bancshares was fair to the DCB Bancshares stockholders from a
financial point of view. The opinion of RP Financial is directed to
the board of directors of DCB Bancshares in its consideration of
the merger agreement, and does not constitute a recommendation to
any stockholder of DCB Bancshares as to any action that such
stockholder should take in connection with the merger agreement or
otherwise. RP Financial’s opinion is directed only to the
fairness of the merger consideration to the current stockholders of
DCB Bancshares from a financial point of view as of the date of the
merger agreement. A copy of the RP Financial opinion is set forth
as Annex B to this proxy statement/prospectus, and DCB Bancshares
stockholders should read it in its entirety. RP Financial has
consented to the inclusion and description of its written opinion
in this proxy statement/prospectus.
DCB
Bancshares selected RP Financial to act as its financial advisor
because of RP Financial’s expertise in the valuation of
businesses and their securities for a variety of purposes,
including its expertise in connection with mergers and acquisitions
of financial institutions. Pursuant to a letter agreement executed
by DCB Bancshares on December 6, 2016, RP Financial estimates that
it will receive from DCB Bancshares total professional fees of
approximately $100,000, $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, DCB Bancshares has agreed to indemnify and hold harmless
RP Financial, any affiliates of RP Financial, and the respective
directors, officers, agents and employees of RP Financial or their
successors and assigns who act for or on behalf of RP Financial in
connection with the services called for under DCB Bancshares’
engagement letter with RP Financial, from and against any and all
losses, claims, damages and liabilities (including, but not limited
to, all losses and expenses in connection with claims under the
federal securities laws), actually incurred by RP Financial and
attributable to: (i) any untrue statement of a material fact
contained in the financial statements or other information
furnished or otherwise provided by an authorized officer of DCB
Bancshares to RP Financial; (ii) the omission of a material fact
from the financial statements or other information furnished or
otherwise made available by an authorized officer of DCB Bancshares
to RP Financial; or (iii) any action or omission to act by DCB
Bancshares, or DCB Bancshares’ respective officers,
directors, employees or agents, which action or omission is
willful. Notwithstanding the foregoing, DCB Bancshares will be
under no obligation to indemnify RP Financial hereunder if a court
determines that RP Financial was negligent or acted in bad faith or
willfully with respect to any actions or omissions of RP Financial
related to a matter for which indemnification is
sought.
In
addition, if RP Financial is entitled to indemnification from DCB
Bancshares and in connection therewith incurs legal expenses in
defending any legal action challenging the opinion of RP Financial
where RP Financial is not negligent or otherwise at fault or is
found by a court of law to be not negligent or otherwise at fault,
DCB Bancshares will indemnify RP Financial for all reasonable
expenses.
In
rendering its opinion, RP Financial reviewed the following material
and/or conducted the following analyses with respect to the merger
agreement and DCB Bancshares:
●
the merger
agreement, as reviewed by the DCB Bancshares board of directors on
February 1, 2017, and certain exhibits;
●
the following
financial information for DCB Bancshares: (a) audited consolidated
financial statements, included in the annual reports for the fiscal
years ended December 31, 2012 through December 31, 2015; (b)
unaudited consolidated financial data, including stockholder
reports and financial statements through December 31, 2016; (c)
unaudited consolidated financial data through December 31, 2016;
(d) quarterly financial reports submitted to the FDIC by Damascus
Community Bank through September 30, 2016; (e) internal financial
and other reports provided to DCB Bancshares’ and Damascus
Community Bank’s board of directors from the beginning of
fiscal 2015 through December 31, 2016 with regard to balance sheet
and off-balance sheet composition, profitability and balance sheet
trends, certain risk factors and DCB Bancshares’ and Damascus
Community Bank’s operations; (f) historical
publicly-available financial information as published by SNL
Financial, Inc.; and (g) internally prepared budget
information;
●
the financial terms
of certain other recently completed and pending acquisitions of
banks headquartered in the Mid-Atlantic region of the United States
with comparable financial characteristics as DCB
Bancshares;
●
the financial terms
of certain other recently completed and pending acquisitions of
banks headquartered in the states of Maryland, Virginia and
Delaware as well as the District of Columbia with comparable
financial characteristics as DCB Bancshares;
●
the estimated pro
forma financial benefits of the merger to DCB Bancshares
stockholders; and
●
in person
interviews with senior executive officers of DCB
Bancshares.
In
addition, RP Financial reviewed or considered the following
materials or information for Old Line Bancshares and as further
described below certain peers of Old Line Bancshares:
●
the annual audited
financial statements for the fiscal years ended 2011 to 2015, as
presented in Old Line Bancshares’ Annual Report on Form 10-K
filings;
●
the quarterly
financial reports submitted to the FDIC by Old Line Bank from March
31, 2015 through December 31, 2016;
●
internally prepared
budget information for Old Line Bancshares for 2017;
●
stock price history
for Old Line Bancshares during past 12 months;
●
Old Line Bancshares
financial information versus a peer group of comparable
publicly-traded institutions; and
●
in person
interviews with senior executives of Old Line
Bancshares.
In
rendering its opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information
concerning DCB Bancshares and Old Line Bancshares furnished by the
respective institutions to RP Financial for review for purposes of
its opinion, as well as publicly-available information regarding
other financial institutions and competitive, economic and
demographic data. RP Financial further relied on the assurances of
management of DCB Bancshares and Old Line Bancshares as included in
the merger agreement. RP Financial has not been asked to and has
not undertaken an independent verification of any of such
information and RP Financial does not assume any such
responsibility or liability for the accuracy or completeness
thereof. DCB Bancshares did not restrict RP Financial as to the
material it was permitted to review. RP Financial did not perform
or obtain any independent appraisals or evaluations of the assets
and liabilities, the collateral securing the assets or the
liabilities (contingent or otherwise) of DCB Bancshares or Old Line
Bancshares or the collectability of any such assets, nor has RP
Financial been furnished with any such evaluations or appraisals.
RP Financial did not make an independent evaluation of the adequacy
of the allowance for loan losses of DCB Bancshares or Old Line
Bancshares nor did RP Financial review any individual credit files
relating to DCB Bancshares or Old Line Bancshares.
RP
Financial, with DCB Bancshares’ consent, has relied upon the
advice DCB Bancshares has received from its legal, accounting and
tax advisors as to all legal, accounting and tax matters relating
to the merger agreement and other transactions contemplated by the
merger agreement. In rendering its opinion, RP Financial assumed
that, in the course of obtaining the necessary regulatory and
governmental approvals for the proposed merger, no restriction will
be imposed on Old Line Bancshares that would have a material
adverse effect on the ability of the merger to be consummated as
set forth in the merger agreement. RP Financial also assumed that
there has been no material change in DCB Bancshares’ or Old
Line Bancshares’ assets, financial condition, results of
operations, business or prospects since the date of the most recent
financial statement made available to us. RP Financial assumed, in
all respects material to its analyses, that all of the
representations and warranties contained in the merger agreement
and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be
performed by such party under such agreements and that the
conditions precedent in the merger agreement are not
waived.
RP
Financial’s opinion was based solely upon the information
available to it and the economic, market and other circumstances as
they existed as of February 1, 2017. Events occurring after
February 1, 2017, could materially affect the assumptions used in
preparing the opinion. In connection with rendering its opinion
dated February 1, 2017, RP Financial performed a variety of
financial analyses that are summarized below. Although the
evaluation of the fairness, from a financial point of view, of the
merger consideration was to some extent subjective based on the
experience and judgment of RP Financial and not merely the result
of mathematical analyses of financial data, RP Financial relied, in
part, on the financial analyses summarized below in its
determinations. The preparation of a fairness opinion is a complex
process and RP Financial believes its analyses must be considered
as a whole. Selecting portions of such analyses and factors
considered by RP Financial without considering all such analyses
and other factors could create an incomplete view of the process
underlying RP Financial’s opinion. In its analyses, RP
Financial took into account its assessment of general business,
market, monetary, financial and economic conditions, industry
performance and other matters, many of which are beyond the control
of DCB Bancshares and Old Line Bancshares, as well as RP
Financial’s experience in securities valuation, its knowledge
of financial institutions, its knowledge of the current operating
and merger and acquisition environments for financial institutions,
and its experience in similar transactions. With respect to the
comparable transactions and control premium analyses described
below, no public company utilized as a comparison is identical to
DCB Bancshares and such analyses necessarily involve complex
considerations and judgments concerning the differences in
financial and operating characteristics of the companies and other
factors that could affect the acquisition values of the companies
concerned. The analyses were prepared solely for purposes of RP
Financial providing its opinion as to the fairness of the merger
consideration, and they do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities
actually may be sold. Any estimates contained in RP
Financial’s analyses are not necessarily indicative of future
results of values, which may be significantly more or less
favorable than such estimates.
Comparable Transactions Analysis.
RP
Financial compared the merger on the basis of the multiples or
ratios of reported earnings, tangible book value and tangible book
premium to core deposits reported in a selected comparable group of
completed and pending bank mergers and acquisitions. The Comparable
Transactions groups consisted of a sale of control transactions
where the acquired company had the following characteristics: (1)
based in the states of Maryland, Virginia and Delaware as well as
the District of Columbia announced during the period from January
1, 2015, to January 27, 2017, involving targets with total assets
between $150 million and $500 million at the announcement date (the
“Local Region Transactions”); and (2) all Mid-Atlantic
transactions announced during the period from January 1, 2015, to
January 27, 2017, involving targets with total assets between $100
million and $1 billion at the announcement date (the
“Mid-Atlantic Transactions”). The transactions
comprising the Local Region Transactions Group and the Mid-Atlantic
Transactions are set forth below.
Local
Region Transactions Group
Acquirer
|
Target
|
ACNB
Corp.
|
New
Windsor Bancorp Inc.
|
Bay
Banks of Virginia Inc.
|
Virginia BanCorp
Inc.
|
Dollar
Bank FSB
|
Bank
@LANTEC
|
First
Citizens BancShares Inc.
|
Cordia
Bancorp Inc.
|
Revere
Bank
|
Monument
Bank
|
Blue
Ridge Bankshares Inc.
|
River
Bancorp Inc.
|
Summit
Financial Group Inc.
|
Highland County
Bankshares Inc.
|
Hampton
Roads Bankshares Inc.
|
Xenith
Bankshares Inc.
|
Bay
Bancorp Inc.
|
Hopkins
Bancorp Inc.
|
Grayson
Bankshares Inc.
|
Cardinal Bankshares
Corp.
|
Southern
BancShares (NC)
|
Heritage Bankshares
Inc.
|
Revere
Bank
|
BlueRidge
Bank
|
Hamilton
Bancorp Inc.
|
Fraternity
Community Bancorp
|
Park
Sterling Corporation
|
First
Capital Bancorp Inc.
|
Old
Line Bancshares Inc.
|
Regal
Bancorp Inc.
|
Delmarva
Bancshares Inc.
|
Easton
Bancorp Inc.
|
Howard
Bancorp Inc.
|
Patapsco Bancorp
Inc.
|
Mid-Atlantic
Transactions Group
Acquirer
|
Target
|
ACNB
Corp.
|
New
Windsor Bancorp Inc.
|
Standard
Financial Corp
|
Allegheny
Valley Bancorp Inc.
|
Prudential
Bancorp Inc.
|
Polonia
Bncp, Inc.
|
DNB
Financial Corp.
|
East
River Bk
|
Norwood
Financial Corp.
|
Delaware
Bancshares Inc.
|
Lakeland
Bancorp
|
Harmony
Bank
|
Bay
Bancorp Inc.
|
Hopkins
Bancorp Inc.
|
Revere
Bank
|
BlueRidge
Bank
|
Hamilton
Bancorp Inc.
|
Fraternity
Community Bancorp
|
NexTier
Inc.
|
Eureka
Financial Corp
|
Northfield
Bancorp Inc.
|
Hopewell
Valley Cmnty Bank
|
Lakeland
Bancorp
|
Pascack
Bancorp Inc.
|
ESSA
Bancorp Inc.
|
Eagle
National Bancorp Inc.
|
Preferred
Bank
|
United
International Bk
|
Citizens
Financial Services
|
First
National Bk of Frederick
|
Howard
Bancorp Inc.
|
Patapsco
Bancorp Inc.
|
WSFS
Financial Corp.
|
Alliance
Bancorp of Penn
|
Cathay
General Bancorp
|
Asia
Bancshares Inc.
|
The
average and median selected financial data and acquisition pricing
multiples or ratios at announcement for the Regional Transaction
Group and the Mid-Atlantic Transaction Group relative to the DCB
Bancshares pricing multiples or ratios based on the merger
consideration are shown below:
|
Comparable Transactions (1)
|
|
|
Mid-Atlantic
Trans. Group
|
|
|
|
|
|
|
|
Financial
Data and Ratios
|
|
|
|
|
|
Assets
($000)
|
$
302,006
|
$
239,659
|
$
297,434
|
$
291,411
|
$
310,955
|
Tangible
Equity/Assets (%)
|
10.11
%
|
8.95
%
|
10.88
%
|
9.93
%
|
8.18
%
|
Return
on Average Assets (%)
|
0.42
|
0.52
|
0.45
|
0.51
|
0.28
|
Return
on Average Equity (%)
|
4.68
|
5.16
|
4.58
|
4.56
|
3.46
|
Non-Performing
Assets/Assets (%)
|
1.36
|
1.51
|
1.38
|
1.36
|
0.92
|
|
|
|
|
|
|
Deal Value and Pricing Ratios (3)
|
|
|
|
|
|
Deal
Value ($ Millions)
|
$
35.30
|
$
26.90
|
$
40.20
|
$
32.30
|
$
40.70
|
Price/Tangible
Book (%)
|
123.53
%
|
121.05
%
|
126.77
%
|
124.46
%
|
160.00
%
|
Price/Earnings
(x)
|
20.46
x
|
19.00
x
|
24.65
x
|
21.43
x
|
46.3
x
|
Tang.
Book Premium/Deposits(%)
|
2.97
%
|
2.98
%
|
5.22
%
|
3.41
%
|
6.04
%
|
(1)
Pricing ratios at announcement.
(2)
Reflects financial data as of or for the trailing 12 months ended
December 31, 2016.Earnings ratios and multiples reflect core
earnings which equals reported earnings net of a one-time recovery
of $800,000 on a non-performing loan and $136,000 of expense
related to the former CEO’s severance, all on a tax effected
basis at an assumed 38% marginal tax rate.
(3) Deal value and
multiples for DCB Bancshares based on the Starting Price as defined
in the merger agreement.
The
average and median pricing multiples (Price/Tangible Book Value
multiple, Price/Earnings multiple and Core Deposit Premium
multiple) of the Local Region Transactions and Mid-Atlantic
Transactions group were applied to DCB Bancshares’ actual
financial measures (tangible book value, core earnings and core
deposits) to derive a valuation range before adjustments. A
downward adjustment was then made to account for DCB
Bancshares’ lower return on assets and return on equity as
well as differences in the earnings composition including DCB
Bancshares’ reliance on income from secondary market loan
sales and indirect auto lending. The resulting valuation range was
$18.00 to $21.00 per share, which is below the merger consideration
of $25.22 per share as of February 1, 2017, while the value of the
merger consideration at the lower collar (assumes the Closing
Market Price for Old Line Bancshares is $16.68 per share) is
$20.18, which falls within the estimated range of value indicated
by the Comparable Transactions Approach.
Control Premium Analysis
The
Control Premium Analysis applies a multiple to the pre-announcement
fair market value or trading value of an acquisition target’s
common stock at various points in time (one-week and one -month
prior to announcement) to derive a sale of control value for a
share of the acquisition target’s stock. It is a two-step
process.
First
the fair market value of a minority share of DCB Bancshares common
stock is estimated based on a Peer Group of comparable
publicly-traded companies. Then a multiple is applied to the fair
market value and the trading value of DCB Bancshares’ stock
based on control premium multiples paid in comparable transactions.
The resulting valuation range is then compared to the offer
price.
The
fair market value of DCB Bancshares’ stock was based on the
trading multiples of a group of comparable publicly-traded
institutions (the “Peer Group”). The Peer Group
consisted of publicly-traded (listed on the NASDAQ Stock Market,
LLC or the New York Stock Exchange) group of commercial banks,
commercial bank holding companies, thrifts or savings and loan
holding companies headquartered in the Mid-Atlantic region of the
U.S., with total assets of less than $700 million and return on
average assets measures of less than 0.75%. There were a total of
17 institutions included in the Peer Group as follows:
Ticker
|
|
Headquarters
|
Symbol
|
Peer Group
Company
|
Location
|
BKJ
|
Bancorp of New
Jersey, Inc.
|
New
Jersey
|
BOTJ
|
Bank
of the James Financial Group, Inc.
|
Virginia
|
BYBK
|
Bay
Bancorp, Inc.
|
Maryland
|
CARV
|
Carver
Bancorp, Inc.
|
New
York
|
DNBF
|
DNB
Financial Corporation
|
Pennsylvania
|
EMCF
|
Emclaire Financial
Corp
|
Pennsylvania
|
FSBC
|
FSB
Bancorp, Inc.
|
New
York
|
GLBZ
|
Glen
Burnie Bancorp
|
Maryland
|
HBK
|
Hamilton Bancorp,
Inc.
|
Maryland
|
HMTA
|
HomeTown
Bankshares Corporation
|
Virginia
|
MSBF
|
MSB
Financial Corp.
|
New
Jersey
|
OPOF
|
Old
Point Financial Corporation
|
Virginia
|
PBHC
|
Pathfinder
Bancorp, Inc.
|
New
York
|
PBIP
|
Prudential
Bancorp, Inc.
|
Pennsylvania
|
SSFN
|
Stewardship
Financial Corporation
|
New
Jersey
|
SBBX
|
Sussex
Bancorp
|
New
Jersey
|
WVFC
|
WVS
Financial Corp.
|
Pennsylvania
|
RP
Financial compared the financial condition and recent performance
of DCB Bancshares to the median financial conditions and recent
performance measures of the Peer Group, as displayed in the table
on the following below.
|
|
|
|
|
|
Financial
Data and Ratios
|
|
|
|
Assets
($000)
|
$
609,515
|
$
606,336
|
$
310,955
|
Tangible
Equity/Assets (%)
|
10.02
%
|
9.11
%
|
8.19
|
Return
on Average Assets (%)
|
0.41
|
0.48
|
0.28
|
Return
on Average Equity (%)
|
4.45
|
4.32
|
3.46
|
Non-Performing
Assets/Assets (%)
|
1.53
|
1.22
|
0.92
|
|
|
|
|
Market
Capitalization and Pricing Ratios (3)
|
|
|
|
Market
Capitalization ($ Millions)
|
$
71.60
|
$
58.70
|
$
20.20
|
Price/Tangible
Book (%)
|
121.30
%
|
116.94
%
|
79.18
%
|
Price/Earnings
(x)
|
19.07
x
|
19.89
x
|
22.94
x
|
(1)
Pricing ratios at announcement.
(2)
Reflects financial data as of or for the trailing 12 months ended
December 31, 2016.Earnings ratios and multiples reflect core
earnings which equals reported earnings net of a one-time recovery
of $800,000 on a non-performing loan and $136,000 of expense
related to the former CEO’s severance, all on a tax effected
basis at an assumed 38% marginal tax rate.
(3)
Market capitalization and pricing ratios for DCB Bancshares are
based on the DCB Bancshares’ closing price of $12.50 per
share in the over-the-counter market as of January 27,
2017.
Relative to the
Peer Group, RP Financial made downward valuation adjustments for
DCB Bancshares’ smaller asset size lower earnings and
earnings composition that includes material contributions from
secondary market loan sales and indirect auto lending. Upward
valuation adjustments relative to the Peer Group were applied for
DCB Bancshares’ more leveraged equity position, lower ratio
of non-performing assets, and operations in the
Baltimore-Washington metropolitan area. RP Financial concluded with
a public equivalent value for DCB Bancshares equal to $15.00 per
share.
Then, a
Control Premium Analysis, which involved applying a control premium
to the fair market value of DCB Bancshares stock RP Financial
derived as well as to the actual trading value of DCB Bancshares
stock as of January 27, 2017 (DCB Bancshares’ stock traded on
a limited basis on the Pink marketplace of the OTC Markets Group)
to arrive at a range of sale of control values under this approach.
The control premium applied was the median of the 1-week and
one-month premiums paid over the trading value of the stock (i.e.,
acquisition price at announcement divided by price of target
one-week and one-month prior to announcement date involving selling
institutions with total assets between $100 million and $1 billion
that announced a transaction over the 12-month period ending
January 27, 2017).RP Financial applied a range of control premiums
from 35% to 50% to the range of trading values.
Applying this
premium to the fair market value of DCB Bancshares’ stock
that RP Financial derived and to the actual closing price of DCB
Bancshares’ stock as of February 1, 2017 resulted in a sale
of control valuation range of $17.00 to $22.50 per share, which was
below the merger consideration of $25.22 per share as of February
1, 2017, while the value of the merger consideration at the lower
collar (assumes the Closing Market Price for Old Line Bancshares is
$16.68 per share) is $20.18 and falls within the estimated range of
value indicated by the Control Premium Approach.
Discounted Cash Flow Analysis
RP
Financial evaluated the value per share of the current offer to the
implied value of DCB Bancshares’ current business plan. In
this regard, RP Financial measured the present value per share of
future dividends and the terminal value to DCB Bancshares’
current stockholders utilizing DCB Bancshares’ preliminary
2017 budget data which covered the five year period from January 1,
2017, to December 31, 2021. The discounted cash flow analysis
reflected the preliminary 2017 budget assumptions as
follows:
●
Beginning balance
sheet as of December 31, 2016, was utilized for modeling
purposes;
●
Asset growth in the
range of 6% to 9% annually and loan growth in the range of 10%
annually;
●
The projected
return on average assets was projected to equal 0.50% in 2017
increasing gradually to equal 0.79% by 2021;
●
Regulatory capital
required to capitalize the growth targeted within the 2017 five
year budget was bolstered by an assumed issuance of subordinated
debt in the amount of $7 million in May 2017, the proceeds of which
were downstreamed as tier 1 capital to Damascus Community Bank;
and
●
Dividends to
stockholders was assumed to remain stable at $0.08 per share
annually, which is equal to DCB Bancshares’ current dividend
policy.
The
discounted cash flow analysis reflected the following valuation
assumptions:
●
Fifth year terminal
value multipliers for earnings per share were in a range of 21 to
25 times earnings per share while the fifth year terminal value
multipliers for tangible book value per share were in a range of
1.15 times to 1.45 times tangible book value per share;
and
●
The cash flows were
then discounted to present value using two discount rates, a low of
13.0% and a high of 15.0%.
The
present per share value generated by the discounted cash flow under
these assumptions ranged from $18.00 per share to $23.50 per share.
The indicated range of value pursuant to the discounted cash flow
approach was below the merger consideration of $25.22 per share as
of February 1, 2017, while the value of the merger consideration at
the lower collar (assumes the Closing Market Price for Old Line
Bancshares is $16.68 per share) is $20.18 and falls within the
estimated range of value indicated by the Discounted Cash Flow
Approach.
Pro Forma Impact Analysis
Since
the merger consideration consists solely of Old Line
Bancshares’ common stock, RP Financial considered the
estimated pro forma impact of the merger on Old Line
Bancshares’ financial condition, operating results and stock
pricing ratios. Specifically, RP Financial considered that the
merger is anticipated to be immediately accretive to Old Line
Bancshares’ tangible book value per share and will be
accretive to Old Line Bancshares’ pro forma earnings per
share within the first year of completing the merger, assuming
incorporation of certain anticipated merger synergies and core
earnings estimates for DCB Bancshares, and will increase Old Line
Bancshares’ market capitalization and shares outstanding.
Furthermore, RP Financial considered the increased asset size,
competitive profile and geographic footprint of Old Line Bancshares
on a pro forma basis. RP Financial considered the pro forma impact
of the merger on Old Line Bancshares’ per share data and
pricing ratios based on Old Line Bancshares’ pre-announcement
trading price. RP Financial also considered other benefits of the
merger to DCB Bancshares’ stockholders, including the
potential for increased liquidity of the stock for DCB
Bancshares’ stockholders given Old Line Bancshares’
larger size, greater market capitalization and greater number of
shares outstanding, and listing on the NASDAQ Capital Market,
whereas the trading market for DCB Bancshares’ common stock
has been historically been limited as DCB Bancshares trades on the
Pink marketplace of the OTC Markets Group. Moreover, RP Financial
considered the enhanced ability to pursue growth within the
expanded market area and expanded management team. In comparing the
pro forma impact of the merger, RP Financial also took into
consideration that following the merger, DCB Bancshares’
stockholders will own approximately 12% to 15% of the common stock
in Old Line Bancshares, with the ownership level dependent upon the
closing market prices of Old Line Bancshares common stock prior to
the effective date of the merger, and that two directors of DCB
Bancshares will serve on the Old Line Bancshares’ board of
directors following the closing of the merger.
In
addition to the above analyses, RP Financial considered and
evaluated the operating history of DCB Bancshares, the historical
trading activity and trading price of the DCB Bancshares common
stock, the national, regional and local risks that could negatively
impact future operations on a stand-alone basis. RP
Financial’s opinion and presentation to the DCB Bancshares
board of directors was one of many factors taken into consideration
by the DCB Bancshares board of directors in making its
determination to approve the merger agreement. Although the
foregoing summary describes the material components of the analyses
presented by RP Financial to the DCB Bancshares board of directors
in anticipation of issuing the February 1. 2017, opinion, it does
not purport to be a complete description of all the analyses
performed by RP Financial and is qualified by reference to the
written opinion of RP Financial set forth as Annex B, which common
stockholders of DCB Bancshares are urged to read in its
entirety.
RP Financial Background and Experience
RP
Financial, as part of its financial institution valuation and
financial advisory practice, is regularly engaged in the valuation
of federally-insured depository institution securities in
connection with mergers and acquisitions, initial and secondary
stock offerings, and business valuations for financial institutions
for other purposes. As specialists in the valuation of securities
and providing financial advisory services to insured financial
institutions, RP Financial has experience in, and knowledge of, the
markets for the securities of such institutions
nationwide.
Terms of the Merger
Effects of the Merger
Upon
completion of the merger, DCB Bancshares will be merged with and
into Old Line Bancshares and the separate legal existence of DCB
Bancshares will cease. All property, rights, powers, duties,
obligations and liabilities of DCB Bancshares will automatically be
deemed transferred to Old Line Bancshares, as the surviving
corporation in the merger. Old Line Bancshares will continue to be
governed by its articles of incorporation and bylaws as in effect
immediately prior to the merger.
The
merger agreement provides that, pursuant to an Agreement and Plan
of Merger by and between Old Line Bank and Damascus Community Bank,
dated as of February 1, 2017, immediately after the merger Damascus
Community Bank will be merged with and into Old Line Bank, with Old
Line Bank as the surviving bank in the bank merger. Old Line Bank
will continue to be governed by its articles of incorporation and
bylaws in effect immediately prior to the bank merger.
Consideration to be Paid in the Merger
Pursuant to the
terms of the merger agreement, Old Line Bancshares will acquire DCB
Bancshares for consideration of shares of its common stock worth
160% of DCB Bancshares total stockholders’ equity less
intangible assets, if any, at December 31, 2016 (the “DCB
Tangible Equity”). At December 31, 2016, the DCB Tangible
Equity was $25.4 million. Accordingly, the value of the shares of
Old Line Bancshares common stock to be issued in the merger is
approximately $40.7 million, and absent the exercise of the Walk
Away Cure Right, as defined and discussed below under
“– Termination,” Old Line Bancshares will issue
between approximately 1,495,256 and 1,951,302 shares of its common
stock in the merger (based on the Average Price of its common
stock), which we refer to as the aggregate merger
consideration.
Changes
in the Average Price below $20.85 or above $27.21 will not,
however, absent the exercise of the Walk Away Cure Right, impact
the number of shares of Old Line Bancshares common stock that will
be issued in exchange for a share of DCB Bancshares common stock in
the merger (i.e. the per-share consideration), since at such point
the exchange ratio will be fixed. Therefore, to the extent the
Average Price falls below $20.85, the value of the aggregate merger
consideration will be below $40.7 million, and to the extent the
Average Price increases above $27.21, the value of the aggregate
merger consideration will be above $40.7 million.
What DCB Bancshares Stockholders Will Receive in the
Merger
Pursuant to the
merger agreement, except with respect to shares of DCB Bancshares
common stock held by stockholders who perfect their appraisal
rights as discussed in “– Appraisal Rights,” upon
completion of the merger, each share of DCB Bancshares common stock
that you hold at the effective time of the merger will be
automatically converted into the right to receive
that number of shares of Old Line Bancshares
common stock
(which we sometimes refer to as the per-share
consideration)
equal to the
“exchange ratio,” with the exchange ratio being the
number determined by dividing the Per Share Value by the Average
Price, where:
●
The
Per Share Value means the amount determined by multiplying DCB
Bancshares’ total stockholders’ equity, less intangible
assets, if any, at December 31, 2016 (the “DCB Tangible
Equity”) by 1.60 and dividing such product by the number of
shares of DCB Bancshares common stock issued and outstanding
immediately prior to the effective time of the merger (the Per
Share Value is $25.22 based on DCB Tangible Equity);
and
●
The
Average Price is the volume weighted average closing price of Old
Line Bancshares common stock for the ten trading days ending two
trading days before the closing of the merger;
provided that if the Average Price is $27.21 or
more or $20.85 or less, $27.21 or $20.85, respectively, will be
used as the Average Price, resulting in an exchange ratio of 0.9269
or 1.2096, respectively, subject to changes as a result of Old Line
Bancshares increasing the merger consideration as a result of
exercising the Walk Away Cure Right, discussed below under
“
–
DCB
Bancshares Price Termination Right
.”
Examples of the
potential effects of fluctuations in the Average Price on the
merger consideration are illustrated in the following table, based
upon a range of hypothetical Average Prices. The Average Prices set
forth in the following table have been included for illustrative
purposes only. The Average Price may be less than $16.68 or more
than $29.93. We cannot assure you as to what the Average Price will
be or what the value of the Old Line Bancshares common stock to be
issued in the merger will be at the effective time of the merger,
and the Average Price at the effective time could be different than
at the time of the DCB Bancshares annual meeting.
|
|
|
|
DCB
|
|
|
|
|
|
|
Tang.
Equity
|
Per Share Consideration
|
|
Type of
|
|
Consideration
|
|
Per
Share
|
/DCB
|
Aggregate
|
Exchange
|
Average
|
Offered Per
|
Exchange
|
as
of
|
Tang. Book
|
Consideration
|
Ratio
|
Price
|
DCB Share
|
Ratio
|
12/31/16
|
Per Share
|
(in thous.)
|
|
|
|
|
|
|
|
Fixed Exch. Ratio
|
29.93
|
27.74
|
0.9269
|
15.76
|
176%
|
44,746
|
28.57
|
26.48
|
0.9269
|
15.76
|
168%
|
42,712
|
Floating
Exchange Ratio
|
27.21
|
25.22
|
0.9269
|
15.76
|
160%
|
40,678
|
25.85
|
25.22
|
0.9756
|
15.76
|
160%
|
40,678
|
24.49
|
25.22
|
1.0298
|
15.76
|
160%
|
40,678
|
23.13
|
25.22
|
1.0904
|
15.76
|
160%
|
40,678
|
21.77
|
25.22
|
1.1585
|
15.76
|
160%
|
40,678
|
20.85
|
25.22
|
1.2096
|
15.76
|
160%
|
40,678
|
Fixed Exch. Ratio
|
20.41
|
24.69
|
1.2096
|
15.76
|
157%
|
39,839
|
19.05
|
23.04
|
1.2096
|
15.76
|
146%
|
37,169
|
16.68
|
20.18
|
1.2096
|
15.76
|
128%
|
32,542
|
Old
Line Bancshares will not issue fractional shares of Old Line
Bancshares common stock to DCB Bancshares stockholders. If you are
otherwise entitled to receive a fractional share of Old Line
Bancshares common stock under the exchange provisions described
above, you will instead receive cash for a fractional share of Old
Line Bancshares common stock you would otherwise be entitled to in
an amount that is equal to the product of (i) the fraction of a
share that would otherwise be due to you and (ii) the Average
Price.
To
illustrate the calculation of the per-share merger consideration,
for example, assuming the Average Price was $28.51, which was the
volume weighted average closing price of Old Line Bancshares common
stock for the ten trading days ending two trading days before March
17, 2017, the most recent practical date prior to the date hereof,
a DCB Bancshares stockholder who owned 100 shares of DCB Bancshares
common stock immediately prior to the effective time of the merger
would receive in the merger 92 shares of Old Line Bancshares common
stock (which would have a value of $2,606.36 based on the closing
sales price for Old Line Bancshares common stock of $28.33 on March
17, 2017) and $19.67 of cash in lieu of a fractional share of Old
Line Bancshares common stock.
DCB Bancshares Price Termination Right
DCB
Bancshares has the option, but is not required, to terminate the
merger agreement if the volume weighted average closing price of
Old Line Bancshares common stock during the ten trading days ending
five business days before the effective date of the merger (the
“Closing Market Price”) is less than $16.68, and the
ratio of the Closing Market Price to $27.21 is more than 20% lower
than any decrease in the NASDAQ Bank Stock Index over such period,
but, prior to such termination being effective, Old Line Bancshares
would then have the option to increase the aggregate merger
consideration (as a practical matter, by increasing the exchange
ratio) to an amount calculated as if the Average Price was $16.68
per share, in which case no termination will take place (the
“Walk-Away Cure Right”). DCB Bancshares cannot predict
whether or not it would exercise its right to terminate the merger
agreement if these conditions were met.
The
merger agreement does not provide for a resolicitation of DCB
Bancshares’ stockholders in the event that the conditions are
met and DCB Bancshares chooses to complete the merger. DCB
Bancshares’ board of directors has made no decision as to
whether it would exercise its right to terminate the merger under
these circumstances. In considering whether to exercise its right
to terminate the merger agreement, DCB Bancshares’ board of
directors would take into account all of the relevant facts and
circumstances that exist at the time and would consult with its
financial advisor and legal counsel
The
fairness opinion received by DCB Bancshares from RP Financial is
dated as of February 1, 2017, and is based on conditions in effect
on that date. Accordingly, the fairness opinion does not address
the possibilities presented if the termination provision relating
to the Closing Market Price is triggered, including the possibility
that DCB Bancshares’ board of directors might elect to
continue with the merger even if DCB Bancshares has the ability to
terminate the merger agreement under that provision. See
“– Opinion of DCB Bancshares’ Financial
Advisor.”
Approval of the
merger agreement and the merger by DCB Bancshares’
stockholders will confer on DCB Bancshares’ board of
directors the power to complete the merger even if the
price-related termination provision is triggered, without any
further action by or re-solicitation of the votes of DCB
Bancshares’ stockholders.
Exchange Procedures
If you
are a record holder of DCB Bancshares common stock, a letter of
transmittal for use in surrendering your certificates representing
your shares of DCB Bancshares common stock will be mailed to you no
more than five business days following the effective date of the
merger. The letter of transmittal will include instructions for
submitting your DCB Bancshares stock certificate(s) in exchange for
the Old Line Bancshares common stock you are entitled to as a
result of the merger. You must carefully follow the instructions on
the letter of transmittal and return a properly executed letter of
transmittal and your DCB Bancshares stock certificate(s) to the
exchange agent in order to receive the per-share merger
consideration for your shares. The DCB Bancshares stock
certificate(s) must be in a form that is acceptable for transfer
(as explained in the letter of transmittal).
Neither
Old Line Bancshares nor its exchange agent will be under any
obligation to notify any person of any defects in a letter of
transmittal.
Old
Line Bancshares’ exchange agent will mail to each former
stockholder of DCB Bancshares certificates representing shares of
Old Line Bancshares common stock and checks representing cash in
lieu of fractional share interests as soon as practicable after its
receipt of a properly completed and signed letter of transmittal
and all accompanying DCB Bancshares stock certificates representing
shares of DCB Bancshares common stock held by such former
stockholder. No interest will be paid on any cash
payment.
Certificates
representing shares of Old Line Bancshares common stock will be
dated the effective date of the merger and will entitle the holders
to dividends, distributions and all other rights and privileges of
an Old Line Bancshares stockholder from the effective date. Until
the certificates representing DCB Bancshares common stock are
surrendered for exchange, holders of such certificates will not
receive the merger consideration or dividends or distributions on
the Old Line Bancshares common stock into which such shares have
been converted. When the certificates are surrendered to the
exchange agent, any unpaid dividends or other distributions will be
paid without interest. Old Line Bancshares has the right to
withhold dividends or any other distributions on its shares until
the applicable DCB Bancshares stock certificates are surrendered
for exchange.
Until
surrendered, each DCB Bancshares stock certificate, following the
effective date of the merger, is evidence solely of the right to
receive the proportionate amount of the aggregate per-share merger
consideration. In no event will either Old Line Bancshares or DCB
Bancshares be liable to any former DCB Bancshares stockholder for
any amount paid in good faith to a public official or agency
pursuant to any applicable abandoned property, escheat or similar
law.
Under
the merger agreement, any shares of DCB Bancshares common stock
outstanding immediately prior to the effective time of the merger
that are evidenced by one or more certificates representing shares
of common stock of Damascus Community Bank, par value $3.00 per
share (“Bank Certificates”), that have not been
surrendered pursuant to Section 4(b) of the Plan of Reorganization
and Share Exchange dated as of April 27, 2016, by and between DCB
Bancshares and Damascus Community Bank, will be treated as
outstanding shares of DCB Bancshares common stock, and the Bank
Certificates will be treated as certificates evidencing shares DCB
Bancshares common stock, except that the holders thereof will be
entitled to receive the per-share consideration in exchange
therefor only upon the surrender of the Bank Certificates in
accordance with the terms of the merger agreement discussed above.
Shares of DCB Bancshares common stock evidenced by Bank
Certificates will in all other respects be subject to the same
terms and conditions set forth in the merger agreement that apply
to shares of DCB Bancshares common stock evidenced by stock
certificates issued by DCB Bancshares.
Old
Line Bancshares will not issue any fractions of a share of common
stock. Rather, Old Line Bancshares will pay cash for any fractional
share interest any DCB Bancshares stockholder would otherwise be
entitled to receive in the merger. For each fractional share that
would otherwise be issued, Old Line Bancshares will pay by check an
amount equal to the amount of such fractional share multiplied by
the Average Price.
Old Line Bancshares Common Stock
Each
share of Old Line Bancshares common stock outstanding immediately
prior to completion of the merger will remain outstanding after and
be unchanged by the merger.
Effective Date
The
merger will take effect when all conditions, including obtaining
stockholder and regulatory approval, have been fulfilled or waived,
or as soon as practicable thereafter as Old Line Bancshares and DCB
Bancshares may mutually select. By law, however, regulatory and
stockholder approval cannot be waived. We presently expect to close
the merger on or about June 30, 2017. See “– Conditions
to the Merger” and “– Regulatory
Approvals.”
Representations and Warranties
The
merger agreement contains customary representations and warranties
relating to, among other things:
●
Organization of Old
Line Bancshares and DCB Bancshares and their respective
subsidiaries;
●
Capital structures
of Old Line Bancshares and DCB Bancshares;
●
Authorization,
valid approval, valid execution and delivery, non-contravention and
enforceability of the merger agreement;
●
Consents, waivers
or approvals of regulatory authorities or third parties necessary
to complete the merger;
●
Consistency of
financial statements with GAAP;
●
Absence of material
adverse changes, since December 31, 2015, in assets, liabilities,
liquidity, net worth, property, financial condition and results of
operations, or any damage, destruction or loss;
●
Filing of tax
returns and payment of taxes;
●
Absence of
undisclosed material pending or threatened litigation, arbitration
or other proceedings, claims, actions or governmental
investigations or inquiries, and of facts that could be the basis
for any of the foregoing;
●
Compliance with
applicable laws and regulations;
●
Status of Old Line
Bancshares’ disclosure controls and procedures and internal
control over financial reporting, and DCB Bancshares’
internal accounting controls;
●
Absence of labor or
collective bargaining agreements, union organizing efforts, labor
strikes, labor disputes and similar matters, and absence of pending
or threatened arbitrations or proceedings with respect to labor
matters;
●
Retirement and
other employee benefit plans and matters relating to the Employee
Retirement Income Security Act of 1974;
●
Quality of title to
assets and properties;
●
Maintenance of
adequate insurance;
●
Absence of
undisclosed brokers’, finders’, investment bankers and
financial advisors’ fees or the retention of finders,
brokers, investment bankers or financial advisors;
●
Absence of material
environmental violations, actions or liabilities;
●
Accuracy of
information supplied by Old Line Bancshares and DCB Bancshares for
inclusion in the registration statement, filed under the Securities
Act, of which this proxy statement/prospectus is a part, and all
applications filed with regulatory authorities for approval of the
merger and the bank merger;
●
Intellectual
property used or owned;
●
Validity and
binding nature of loans reflected as assets in the financial
statements;
●
Disclosure of loans
and the extension of loans in compliance with applicable
regulations;
●
Disclosure of
material contracts;
●
Material compliance
with the Community Reinvestment Act of 1977 (the “CRA”)
and most recent CRA rating;
●
Material compliance
with the Bank Secrecy Act, USA PATRIOT Act, anti-money laundering
statutes, rules or regulations, and statutes, rules and regulations
relating to privacy of customer information;
●
Disclosure of any
event, circumstance or other occurrence that constitute a
“breach of a security system” under applicable
law;
●
Compliance with
laws related to securities activities by employees and
agents;
●
Disclosure of
related party transactions;
●
Establishment and
maintenance of the allowance for loan losses;
●
Investment
securities status;
●
Qualification of
the merger as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code;
●
Accuracy and
completeness of corporate books and records and maintenance of
corporate books and records in accordance with applicable
law;
●
Absence of certain
enumerated changes with respect to DCB Bancshares;
●
Absence of
undisclosed liabilities;
●
With respect to DCB
Bancshares, disclosure of brokered deposits;
●
With respect to DCB
Bancshares, absence of option plans and convertible
securities;
●
With respect to DCB
Bancshares, representations with respect to its certain risk
management arrangements; and
●
With respect to DCB
Bancshares, that it does not have trust powers or act as trustee,
agent, custodian, personal representative, guardian, conservator or
investment adviser, does not originate, maintain or administer
credit card accounts, and has not provided merchant credit card
processing services.
Conduct of Business Pending the Merger
In the
merger agreement, DCB Bancshares agreed to conduct its business and
to engage in transactions only in the usual, regular and ordinary
course of business, consistent with past practice, except as
otherwise required by or contemplated in the merger agreement or
consented to by Old Line Bancshares. DCB Bancshares also agreed to
use its commercially reasonable good faith efforts to preserve its
business organization intact, to maintain good relationships with
employees, and to preserve the good will of its customers and
others with whom business relationships exist. Further, in the
merger agreement DCB Bancshares agreed that, except as permitted by
the merger agreement or required in writing by its regulators (and
with notice to Old Line Bancshares), through the effective time of
the merger it will not, and will not allow any subsidiary to,
without the written consent of Old Line Bancshares:
●
Change its articles
of incorporation, bylaws, charter documents, operating agreement
and/or other governing documents;
●
Change the number
of authorized or issued shares of its capital stock, repurchase,
redeem or otherwise acquire any shares of its capital stock, or
issue or grant options or similar rights with respect to its
capital stock or any securities convertible into its capital
stock;
●
Declare, set aside
or pay any dividend or other distribution in respect of its capital
stock, except for cash dividends declared and paid in the normal
course of business consistent with past practice and in an amount
not to exceed $0.02 per share quarterly;
●
Grant any
severance, retention or termination pay, except in accordance with
policies or agreements in effect on February 1, 2017;
●
Enter into or amend
any employment, consulting, severance, compensation,
“change-in-control” or termination contract or
arrangement;
●
Grant job
promotions or increase the rate of compensation of, or pay any
bonus to, any director, officer, employee, independent contractor,
agent or other person associated with it, except with respect to
officers and employees at the level of Vice President or below (i)
to the extent such promotion or increase is made in the normal
course of its business consistent with past practices, or (ii)
routine periodic pay increases, selective merit pay increases and
pay raises in the normal course of business and consistent with
past practices, provided, however, that such aggregate increases in
the rate of compensation may not be in excess of 3% and such
aggregate bonuses may not be in excess of 5% of the aggregate
salaries of all such employees;
●
Hire any new
employees or fill any job vacancies above the level of Vice
President, unless DCB Bancshares determines in good faith is
necessary to preserve its business, maintain relationships and
preserve good will as set forth above;
●
Except in the
ordinary course consistent with past practice, sell, lease, assign,
transfer, mortgage, encumber or otherwise dispose of its assets,
other than consistent with past practice and for full and fair
consideration actually received;
●
Modify in any
material manner the manner in which it has previously conducted its
business or enter into any new line of business;
●
Except for Federal
Home Loan Bank of Atlanta advances with a maturity of six months or
less and deposits taken in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed
money or incur, assume or become subject to any obligations or
liabilities of any other person or entity, except for the issuance
of letters of credit in the ordinary course of business and in
accordance with the restrictions otherwise set forth in the merger
agreement;
●
Sell or otherwise
dispose of any real property, except other real estate owned in a
reasonably acceptable commercial manner in the ordinary course of
business;
●
Take any action
that would result in any of the conditions necessary to close the
merger, as set forth in the merger agreement, not being
satisfied;
●
Waive, release,
grant or transfer any rights of material value, or modify or change
in any material respect any existing material agreement to which it
is a party;
●
Change any
accounting methods, principles or practices, except as may be
required by GAAP, applicable law, rule, regulation, order, decree,
judgment, injunction, writ, regulatory policy or directive
(“Law”) or by any applicable regulatory
authority;
●
Implement any new
employee benefit plan, or amend any plans except as required by
applicable Law or by its terms as a result of the merger agreement,
and provided that amendments to an employee benefit plan to modify
the available investment options will be permitted;
●
Implement or adopt
any material change in its: (i) guidelines and policies in
existence on February 1, 2017 with regard to underwriting and
making extensions of credit, the establishment of reserves with
respect to possible losses thereon, or the charge-off of losses
incurred thereon; (ii) investment policies and practices; or (iii)
other material banking policies, or otherwise fail to conduct its
banking activities in the ordinary course of business consistent
with past practice except as may be required by changes in
applicable Law, GAAP or the direction of a regulatory
authority;
●
Change its deposit
or loan rates other than in the ordinary course of business
consistent with past practice, or otherwise fail to conduct its
lending and deposit activities in the ordinary course of business
consistent with past practice;
●
Enter into, modify,
amend or renew any agreement under which it is obligated to pay
more than $50,000 and that is not terminable by it with 60
days’ notice or less without penalty, payment or other
conditions (other than the condition of notice), or enter into,
renew, extend or modify any transaction with any affiliate, other
than deposit and loan transactions in the ordinary course of
business and that comply with applicable Law;
●
Except as required
by applicable Law: (i) implement or adopt any material change in
its interest rate and other risk management policies, procedures or
practices; or (ii) fail to follow its existing policies or
practices with respect to managing its exposure to interest rate
and other risk;
●
Take any action
that would give rise to a right of payment to any person under any
employment agreement, except for contractually required
compensation;
●
Purchase or sell
any securities other than in the normal course of business
consistent with past practice (does not limit issuer
redemptions);
●
Except in the
ordinary course of business consistent with past practice and
involving an amount not in excess of $50,000 (exclusive of any
amounts paid directly or reimbursed to it under any insurance
policy maintained by DCB Bancshares or any subsidiary), settle any
material action, suit, claim, arbitration, investigation, inquiry,
grievance or other proceeding (or basis therefor) pending or, to
the knowledge of DCB Bancshares, threatened, against or affecting
DCB Bancshares or any subsidiary or any of their respective
properties or assets, provided that no settlement may be made if it
involves a precedent for other similar claims that, in the
aggregate, could reasonably be determined to be material to DCB
Bancshares and its subsidiaries, taken as a whole;
●
Foreclose upon or
otherwise take title to or possession or control of any real
property without first obtaining a Phase I environmental report
thereon, except (i) where, after using commercially reasonable
efforts, it is unable to gain access to the property, provided that
DCB Bancshares has provided notice to Old Line Bancshares that it
has been unable to gain such access and as a result intends to
foreclose without obtaining a Phase I environmental report thereon,
or (ii) with respect to one- to four-family, non-agricultural
residential properties of five acres or less for which it has no
reason to believe that such property contains hazardous substances
known or reasonably suspected to be in violation of, or require
remediation under, applicable environmental laws;
●
Except as permitted
by the merger agreement in connection with a superior DCB
Bancshares transaction, merge or consolidate with any other entity,
or sell or lease a substantial portion of its assets or
business;
●
Acquire all or any
substantial portion of the business or assets of any other entity,
other than in connection with the collection of loan and credit
arrangements;
●
Enter into a
purchase and assumption transaction with respect to deposits and
liabilities;
●
Permit the
revocation or surrender of its certificate or authority to
maintain, file an application for opening, closing or relocation
of, or open, close or relocate, any branch or automated banking
facility;
●
Make any capital
expenditure, individually or in the aggregate, of $50,000 or
more;
●
Sell or acquire any
loans (excluding originations) or loan participations, except in
the ordinary course of business consistent with past practice (but
in the case of a sale, after giving Old Line Bancshares or Old Line
Bank a first right of refusal to acquire such loan or
participation), or sell or acquire any loan servicing rights,
provided that neither DCB Bancshares nor any of its subsidiaries is
permitted to sell or acquire any loan or loan participation having
a principal balance in excess of $500,000;
●
Take any action, or
knowingly fail to take any action, that would preclude the
treatment of the merger as a tax-free reorganization under Section
368(a) of the Internal Revenue Code;
●
Make any charitable
or similar contributions, except in amounts not to exceed $5,000
individually and $10,000 in the aggregate;
●
Except as already
committed to on February 1, 2017, enter into, grant, approve,
renew, materially modify or extend any loan, lease, advance, credit
facility, credit enhancement, guarantee, commitment, line of credit
or letter of credit other than for an owner-occupied residence (a
“Non-Residential Credit Extension”) except in the
ordinary course of business consistent with past practice, provided
that in any case none of DCB Bancshares nor any subsidiary thereof
may make a Non-Residential Credit Extension in excess of $2,000,000
or, if to an existing customer, that increases the aggregate loan
exposure to such customer to more than $2,000,000;
●
Except as already
committed to on February 1, 2017, enter into, grant, approve,
modify or extend any loan, credit facility, line of credit or
letter of credit for an owner-occupied residence (a
“Residential Credit Extension”) that would result in
credit exposure in excess of (i) $1,000,000 through March 31, 2017,
or (ii) the then-applicable Federal Housing Finance Agency jumbo
loan limit after March 31, 2017, provided that any Residential
Credit Extension in excess of the then-applicable FHA limit made
before March 31, 2017, must be made in in the ordinary course of
business consistent with past practice;
●
Issue any
communication relating to the merger or other transactions
contemplated by the merger agreement to employees (including
general communications relating to benefits and compensation)
without prior consultation with Old Line Bancshares and, to the
extent relating to post-closing employment, benefit or compensation
information, without the prior consent of Old Line Bancshares, or
issue any communication of a general nature to customers without
the prior approval of Old Line Bancshares, except as required by
Law or for communications in the ordinary course of business
consistent with past practice that do not relate to the merger or
other transactions contemplated by the merger
agreement;
●
Enter into any
interest rate swap, floor or cap or similar commitment, agreement
or arrangement, except in the ordinary course of business
consistent with past practice; or
●
Agree to do any of
the foregoing.
DCB
Bancshares also agreed in the merger agreement, among other things,
to:
●
Permit Old Line
Bancshares, if Old Line Bancshares elects to do so at its own
expense, to conduct environmental assessments with respect to all
real property owned, leased or operated by DCB Bancshares and its
subsidiaries;
●
Submit the proposed
merger and the merger agreement to its stockholders for approval at
a stockholders’ meeting to be held as promptly as
practicable, with an approval recommendation by its board of
directors; and
●
Dissolve any
non-operating subsidiaries of DCB Bancshares and Damascus Community
Bank prior to the closing of the merger.
Old
Line Bancshares and DCB Bancshares jointly agreed in the merger
agreement, among other things:
●
To cooperate with
each other in connection with the preparation of the registration
statement of which this proxy statement/prospectus is a part, all
applications for required regulatory approvals, waivers or
consents, and other necessary filings;
●
That the
information each party provides for inclusion in the registration
statement of which this proxy statement/prospectus is a part and
any regulatory application will be materially accurate and
complete;
●
Subject to the
terms of the merger agreement, to use their reasonable best efforts
to take all actions and do all things necessary to complete the
transactions contemplated by the merger agreement;
●
To maintain
adequate insurance;
●
To maintain books
and records in accordance with GAAP and consistent with past
practice;
●
To file all tax
returns and pay all taxes when due;
●
To cooperate with
each other in the interests of an orderly, cost-effective
consolidation of operations;
●
To give the other
reasonable access to its business, properties, assets, books and
records and personnel;
●
To deliver or, the
case of Old Line Bancshares, make available, to each other updated
financial statements as provided in the merger
agreement;
●
To deliver to each
other all documents that may be filed with the SEC, the NASDAQ
Stock Market LLC, or with banking or other regulatory authorities;
and
●
To consult upon the
form and substance of any press release or public statement related
to the merger agreement or the merger, and to not issue any press
release or make any public statement regarding such matters without
the prior written consent of the other party.
In
addition, Old Line Bancshares also agreed in the merger agreement,
among other things, that it will elect Stephen J. Deadrick and
another DCB Bancshares director to the Old Line Bancshares and Old
Line Bank boards or directors and purchase extended period
officers’ and directors’ liability insurance for the
officers and directors of DCB Bancshares and that it will not, and
will not allow any subsidiary to, except as permitted by the merger
agreement or as may be required by Law or in writing from any
regulatory authority, without the consent of DCB
Bancshares:
●
Take any action
that would result in any condition to closing of the merger from
being satisfied;
●
Take any action or
knowingly fail to take any action that would preclude the treatment
of the merger as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code; or
●
Agree to do either
of the foregoing.
Conditions to the Merger
Each of
Old Line Bancshares’ and DCB Bancshares’ obligations to
complete the merger are subject to various conditions, including,
among other things, the following:
●
The merger and the
merger agreement shall have been approved by the stockholders of
DCB Bancshares;
●
All necessary
consents and approvals for the merger shall have been received, all
necessary filings and registrations by DCB Bancshares and Old Line
Bancshares shall have been accepted or declared effective, except
where the failure to obtain such consent or approval or for any
such filing or registration to be accepted or declared effective
would not reasonably be expected to have a material adverse effect
on Old Line Bancshares or Old Line Bank after the merger; all
waiting periods relating to any necessary consents, approvals,
filings and registration statements shall have expired; and no such
consent or approval shall have imposed any condition or requirement
that in the reasonable opinion of either DCB Bancshares’
board of directors or Old Line Bancshares’ board of directors
would: (i) (a) prohibit or materially limit the ownership or
operation by Old Line Bancshares or any of its subsidiaries of all
or any material portion of the business or assets of DCB Bancshares
or any of its subsidiaries, (b) compel Old Line Bancshares or DCB
Bancshares to dispose of all or a material potion of either
party’s business or assets, (c) impose a material compliance
burden, penalty or obligation on Old Line Bancshares or DCB
Bancshares, or (d) otherwise materially impair the value of DCB
Bancshares to Old Line Bancshares; or (ii) so materially and
adversely impact the economic or business benefits of the merger to
either Old Line Bancshares or DCB Bancshares, as applicable, such
as to render it inadvisable. See “– Terms of the Merger
– Regulatory Approvals;”
●
No temporary
restraining order, injunction, or other judgment, order or decree
preventing the completion of the transactions contemplated by the
merger agreement shall have been issued and remain in
effect;
●
Receipt of an
opinion of its counsel that the merger constitutes for federal
income tax purposes a tax-free “reorganization” within
the meaning of Section 368(a) of the Internal Revenue Code and,
with respect to the opinion received by DCB Bancshares, that any
gain realized in the merger will be recognized only to the extent
of cash or other property (other than Old Line Bancshares common
stock) received in the merger, including cash received in lieu of
fractional share interests. See “– Certain Federal
Income Tax Consequences”;
●
No material adverse
change shall have occurred in the business, property, assets,
liabilities, operations, business prospects, liquidity, income or
financial condition of the other party or any of its
subsidiaries;
●
The accuracy, as of
February 1, 2017, and as of the closing date of the merger, of the
representations and warranties of the other, except as to any
representation or warranty that specifically relates to an earlier
date and except as otherwise contemplated by the merger
agreement;
●
The other
party’s performance in all material respects of all
obligations required to be performed by it at or prior to the
closing date of the merger; and
●
Other conditions
that are customary for transactions of the type contemplated by the
merger agreement.
In
addition, Old Line Bancshares’ obligation to close the merger
is also contingent on:
●
Old Line Bancshares
being satisfied that the recognized environmental conditions of any
environmental assessments it conducted with respect to property of
DCB Bancshares or its subsidiaries will not have a material adverse
effect on DCB Bancshares;
●
Holders of no more
than 10% of the outstanding shares of DCB Bancshares common stock
as of the record date for the DCB Bancshares annual meeting
qualifying their shares for appraisal rights; and
●
Old Line Bancshares
having received all consents and authorizations of landlords and
other persons that are necessary to permit the transactions
contemplated by the merger agreement to be consummated without the
violation of any lease or other material agreement to which DCB
Bancshares or any of its subsidiaries is a party or by which any of
their properties are bound, except where failure to obtain such
consent or authorization would be reasonably expected not to have a
material adverse effect on Old Line Bancshares or Old Line Bank
after the merger.
Each
party may waive each of the conditions described above in the
manner and to the extent described in “– Terms of the
Merger – Amendment; Waiver” immediately
below.
Amendment; Waiver
Subject
to applicable Law, at any time prior to the closing of the merger,
Old Line Bancshares and DCB Bancshares may:
●
Amend the merger
agreement;
●
Extend the time for
the performance of any of the obligations or other acts required in
the merger agreement;
●
Waive any term or
condition of the merger agreement, any inaccuracies in the
representations or warranties contained in the merger agreement or
in any document delivered pursuant thereto; or
●
Waive compliance
with any of the agreements or conditions contained in the merger
agreement.
By Law,
however, regulatory and stockholder approval cannot be
waived.
Termination
The
merger agreement may be terminated at any time prior to the
effective date of the merger by the mutual consent of Old Line
Bancshares and DCB Bancshares.
The
merger agreement may also be terminated by either party
if:
●
The merger is not
completed on or prior to October 31, 2017 or, because of the
failure to obtain any required regulatory approval or consent by
such date, the merger is not completed by November 30, 2017, if the
failure to complete the merger by that date is not due to a
material breach of the merger agreement by the party seeking to
terminate it.
●
There has been a
definitive written denial of a required regulatory approval or
consent, or the permanent withdrawal of an application for approval
or consent at the request of a regulatory authority.
●
The other party has
materially breached any representation, warranty, covenant or other
agreement in the merger agreement, and such breach either by its
nature cannot be cured prior to the closing of the merger or
remains uncured 30 days after receipt by such party of written
notice of such breach (provided that if such breach cannot
reasonably be cured within such 30-day period but may reasonably be
cured within 60 days and cure is being diligently pursued, then
termination can occur only after expiration of such 60-day period),
if the party terminating the merger agreement is not in material
breach.
●
DCB
Bancshares’ stockholders vote on but fail to approve the
merger agreement and the merger.
●
DCB Bancshares or
any DCB Bancshares subsidiary receives (with respect to DCB
Bancshares’ right to terminate) or enters into, approves or
resolves to approve (with respect to Old Line Bancshares’
right to terminate) an agreement, agreement in principle, letter of
intent or similar instrument with a view to being acquired, or more
than 50% of its assets or liabilities being acquired, by any person
other than Old Line Bancshares, or to sell 10% or more of its
outstanding equity securities, in a transaction the DCB Bancshares
board of directors determines is more favorable to the stockholders
of DCB Bancshares.
In
addition, DCB Bancshares may terminate the merger agreement
if:
●
Old Line Bancshares
or any Old Line Bancshares subsidiary enters into a definitive term
sheet, letter of intent, agreement or similar agreement to merge,
as a result of which Old Line Bancshares is not the surviving
entity or Old Line Bancshares’ directors as of February 1,
2017 do not comprise the majority of the surviving entity’s
board of directors, with any person other than DCB Bancshares, and
the DCB Bancshares board of directors determines, after considering
the advice of counsel and its financial advisor, that such
transaction is not in the best interests of DCB Bancshares’
stockholders.
●
The volume weighted
average closing price of Old Line Bancshares common stock during
the ten trading days ending five trading days before the effective
date of the merger (the “Closing Market Price”) is less
than $16.68, and the ratio of the Closing Market Price to $27.21 is
more than 20% lower than any decrease in the NASDAQ Bank Stock
Index over such period, provided, however, that Old Line Bancshares
would then have the option to increase the aggregate merger
consideration (as a practical matter, by increasing the exchange
ratio) to an amount calculated as if the Average Price was $16.68
per share, in which case no termination will take place (the
“Walk-Away Cure Right”). If Old Line Bancshares were to
exercise its option to increase the merger consideration under
these circumstances, the number of shares of Old Line Bancshares
common stock that is issued in exchange for each share of DCB
Bancshares common stock, and the total number of shares of common
stock that Old Line Bancshares issues in the merger, would
increase.
Finally, Old Line
Bancshares may terminate the merger agreement if DCB
Bancshares’ board of directors withdraws, changes or modifies
its recommendation to stockholders to approve the merger agreement
and the merger, or authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose,
an agreement to enter into a superior DCB Bancshares
transaction.
DCB Bancshares Termination Fee
DCB
Bancshares must pay the Termination Fee to Old Line Bancshares if
the merger agreement is terminated in certain circumstances. The
amount of the Termination Fee will be equal to approximately $1.3
million, which was calculated as 3.25% of the total deal value of
approximately $40.7 million (i.e., 160% of the DCB Tangible
Equity). DCB will be required to pay the Termination Fee to Old
Line Bancshares if the merger agreement is terminated
because:
●
DCB Bancshares has
materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained therein (provided
that Old Line Bancshares is not then in material breach of any
representation, warranty, covenant or other agreement contained in
the merger agreement);
●
The merger failed
to close by October 31, 2017 or, if due solely to the need to
obtain a regulatory approval or consent, November 30, 2017, or the
parties failed to receive all regulatory approvals and consents
required for the merger, and such failure resulted from the
knowing, willful and intentional actions or inactions of DCB
Bancshares or Damascus Community Bank (provided that Old Line
Bancshares is not then in material breach of any representation,
warranty, covenant or other agreement contained in the merger
agreement);
●
DCB Bancshares or
any DCB Bancshares subsidiary has (i) received a proposal for a
superior DCB Bancshares transaction (with respect to termination by
DCB Bancshares) or (ii) entered into, approved or resolved to
approve an agreement, agreement in principle, letter of intent or
similar instrument with respect to a superior DCB Bancshares
transaction (with respect to termination by Old Line Bancshares);
or
●
The board of
directors of DCB Bancshares has withdrawn, changed or modified its
recommendation to the stockholders of DCB Bancshares to approve the
merger agreement and the merger in a manner adverse to Old Line
Bancshares or authorizes, recommends or publicly proposes, or
publicly announces an intention to authorize, recommend or propose,
an agreement to enter into a superior DCB Bancshares transaction
(provided that Old Line Bancshares is not then in material breach
of any representation, warranty, covenant or other agreement
contained in the merger agreement).
Old Line Bancshares Termination Fee
Old
Line Bancshares has agreed to pay the Termination Fee to DCB
Bancshares if DCB Bancshares terminates the merger agreement
because:
●
Old Line Bancshares
has materially breached the merger agreement or any representation,
warranty, covenant or other agreement contained therein (provided
that DCB Bancshares is not then in material breach of any
representation, warranty, covenant or other agreement contained in
the merger agreement); or
●
The merger failed
to close by October 31, 2017 or, if due solely to the need to
obtain a regulatory approval or consent, November 30, 2017, or the
parties failed to receive all regulatory approvals and consents
required for the merger, and such failure resulted from the
knowing, willful and intentional actions or inactions of Old Line
Bancshares or Old Line Bank (provided that DCB Bancshares is not
then in material breach of any material representation, warranty,
covenant or other agreement contained in the merger
agreement).
No Solicitation of Other Transactions
In the
merger agreement, DCB Bancshares agreed that it will not, and will
not allow its officers, directors, employees, investment bankers,
financial advisors, attorneys or other representatives or agents
to, directly or indirectly:
●
Initiate, solicit,
induce, encourage (including by way of furnishing information) or
take any other action to facilitate the making of any inquiry,
offer or proposal that constitutes, relates to or could reasonably
be expected to lead to (i) a merger or consolidation of, a share
exchange involving, or an acquisition of 50% or more of the assets
or liabilities of, DCB Bancshares or any of its subsidiaries, or
any other business combination involving DCB Bancshares or any of
its subsidiaries, or (ii) a transaction that involves the transfer
of beneficial ownership of, the right to acquire beneficial
ownership of or to vote securities representing, 10% or more of the
then outstanding shares of DCB Bancshares common stock or the
outstanding equity securities any of its subsidiaries, each of
which we refer to as an acquisition proposal”;
●
Respond to any
inquiry relating to an acquisition proposal or participate in any
discussions or negotiations regarding any acquisition proposal or
furnish, or otherwise afford access, to any person or entity (other
than Old Line Bancshares) any information or data with respect to
DCB Bancshares or any subsidiary or otherwise relating to an
acquisition proposal;
●
Recommend or
endorse an acquisition proposal;
●
Release any person
or entity from, waive any provisions of, or fail to enforce any
confidentiality agreement or standstill agreement to which DCB
Bancshares or any subsidiary is a party; or
●
Enter into any
agreement, agreement in principle, letter of intent or similar
instrument with respect to any acquisition proposal or approve or
resolve to approve any acquisition proposal or any agreement,
agreement in principle, letter of intent or similar instrument,
including an exclusivity agreement, relating to an acquisition
proposal.
DCB
Bancshares may, however, respond to an inquiry, furnish nonpublic
information regarding DCB Bancshares and its subsidiaries to, or
enter into discussions with, any person in response to an
unsolicited acquisition proposal if (i) DCB Bancshares’ board
of directors determines in good faith, after consultation with and
having considered the advice of its outside legal counsel and RP
Financial, that such acquisition proposal constitutes or is
reasonably likely to lead to an acquisition proposal that is more
favorable to the stockholders of DCB Bancshares than the merger
(provided that such transaction is not conditioned on obtaining
financing and would result in the acquisition of more than all, but
not less than all, of the outstanding shares of DCB
Bancshares’ common stock or all or substantially all of the
assets of DCB Bancshares and its subsidiaries on a consolidated
basis), which we refer to as a superior proposal, (ii) DCB
Bancshares’ board of directors determines in good faith,
after consultation with and based upon the advice of its outside
legal counsel and RP Financial, that such action is required in
order for the board of directors to comply with its fiduciary
obligations under applicable Law, and (iii) at least two business
days prior to furnishing any nonpublic information to, or entering
into discussions with, such person or entity, DCB Bancshares
provides Old Line Bancshares with written notice of the identity of
such person or entity and of DCB Bancshares’ intention to
furnish nonpublic information to, or enter into discussions with,
such person or entity and DCB Bancshares receives from such person
or entity an executed confidentiality agreement on terms no more
favorable to such person or entity than the confidentiality
agreement between DCB Bancshares and Old Line Bancshares, which
confidentiality agreement shall not provide such person or entity
with any exclusive right to negotiate with DCB Bancshares. DCB
Bancshares has also agreed to promptly provide to Old Line
Bancshares any non-public information regarding DCB Bancshares or
any subsidiary provided to any other person or entity that was not
previously provided to Old Line Bancshares, such additional
information to be provided no later than the date of provision of
such information to such other person or entity.
The
agreement also provides that under certain circumstances as set
forth therein the DCB Bancshares board of directors can approve or
recommend that DCB Bancshares’ stockholders approve what they
have determined in good faith is a superior proposal and withdraw,
qualify or modify its recommendation in connection with the merger
agreement and the merger when the board of directors has in good
faith determined that failure to do so would be inconsistent with
its fiduciary duties after consultation with and having considered
the advice of its outside legal counsel and RP
Financial.
DCB
Bancshares has also agreed to notify Old Line Bancshares promptly
(and in any event within 24 hours) if it receives any acquisition
proposal or request for information, negotiations or discussions
with respect to any acquisition proposal, and to keep Old Line
Bancshares informed of the status and terms of any such proposal,
offer, information request, negotiations or discussions. DCB
Bancshares has further agreed to provide Old Line Bancshares with
the opportunity to present its own proposal to DCB
Bancshares’ board of directors in response to any such
proposal or offer, and to negotiate with Old Line Bancshares in
good faith with respect to any such proposal.
For a
discussion of circumstances under which certain actions relating to
DCB Bancshares or a subsidiary entering into an alternative
transaction could result in DCB Bancshares being required to pay
the Termination Fee, see “– DCB Bancshares Termination
Fee.”
Expenses
Each of
Old Line Bancshares and DCB Bancshares will pay all of the costs
and expenses that it incurs in connection with the transactions
contemplated by the merger agreement, including fees and expenses
of financial consultants, accountants and legal
counsel.
Regulatory Approvals
Completion of the
merger is subject to the prior receipt of all approvals and
consents of federal and state authorities required to complete the
merger of Old Line Bancshares and DCB Bancshares as well as the
merger of Old Line Bank and Damascus Community Bank.
Old
Line Bancshares and DCB Bancshares agreed to use their reasonable
best efforts to obtain all regulatory approvals required to
complete the merger and the bank merger. These approvals include,
with respect to the merger, approval from the FRB and the Maryland
Commissioner and, with respect to the bank merger, approval from
the FDIC and the Maryland Commissioner. The merger cannot proceed
without these required regulatory actions.
Regulatory Approvals Required for the Merger
Federal Reserve Board.
The acquisition
by a bank holding company of another bank holding company requires
the prior approval of the FRB under the Bank Holding Company Act.
Under this law, the FRB generally may not approve any proposed
transaction:
●
That would result
in a monopoly or that would further a combination or conspiracy to
monopolize banking in the United States; or
●
That could
substantially lessen competition in any section of the country,
that would tend to create a monopoly in any section of the country,
or that would be in restraint of trade, unless the FRB finds that
the public interest in meeting the convenience and needs of the
communities served outweighs the anti-competitive effects of the
proposed transaction.
The FRB
is also required to consider the financial and managerial resources
and future prospects of the companies and their subsidiary banks
and the convenience and needs of the communities to be served.
Under the CRA, the FRB also must take into account the record of
performance of Old Line Bancshares and DCB Bancshares in meeting
the credit needs of their communities, including low- and
moderate-income neighborhoods. In addition, the FRB must take into
account the effectiveness of the companies in combating money
laundering activities. Among other things, the FRB will evaluate
the capital adequacy of the combined company after completion of
the merger. The FRB also will take into consideration the extent to
which a proposed acquisition, merger or consolidation would result
in greater or more concentrated risks to the stability of the U.S.
banking or financial system. In connection with its review, the FRB
will provide an opportunity for public comment on the application
for the merger, and is authorized to hold a public meeting or other
proceedings if it determines that would be appropriate. Any
transaction approved by the FRB generally may not be completed
until 30 days after such approval, during which time the U.S.
Department of Justice may challenge such transaction on antitrust
grounds and seek divestiture of certain assets and
liabilities.
Maryland Commissioner
. The merger is
subject to the prior approval of the Maryland Commissioner under
Section 5-903 of the Financial Institutions Article of the Maryland
Annotated Code. In determining whether to approve the merger, the
Maryland Commissioner will consider:
●
Whether the merger
may be detrimental to the safety and soundness of Damascus
Community Bank or DCB Bancshares; and
●
Whether the merger
may result in an undue concentration of resources or a substantial
reduction of competition in the State of Maryland.
The
Maryland Commissioner will not approve any acquisition if upon
consummation the combined entity (including any of its bank
subsidiaries) would control 30% or more of the total amount of
deposits of insured depository institutions in the State of
Maryland, although the Maryland Commissioner may waive this
limitation upon good cause shown. Old Line Bank will not control
30% of the insured deposits in Maryland after the
merger.
Regulatory Approvals Required for the Bank Merger
Federal Deposit Insurance Corporation.
The bank merger is subject to the prior approval of the FDIC under
the Bank Merger Act. In evaluating an application filed under the
Bank Merger Act, the FDIC generally considers: (i) the competitive
impact of the transaction; (ii) financial and managerial resources
of each bank that is a party to the bank merger; (iii) each of the
banks’ effectiveness in combating money-laundering
activities; (iv) the convenience and needs of the communities in
which the banks serve; and (v) the extent to which the bank merger
would result in greater or more concentrated risks to the stability
of the U.S. banking or financial system. The FDIC also reviews the
performance records of the relevant depository institutions under
the CRA, including their CRA ratings. In connection with its review
under the Bank Merger Act, the FDIC will provide an opportunity for
public comment on the application for the bank merger, and is
authorized to hold a public meeting or other proceeding if it
determines that would be appropriate.
Maryland Commissioner
. The bank merger
is subject to the prior approval of the Maryland Commissioner under
Section 3-703(c) of the Financial Institutions Article of the
Maryland Annotated Code. The Maryland Commissioner will approve the
bank merger if it determines that: (i) Old Line Bank meets all the
requirements of Maryland law for the formation of a new commercial
bank; (ii) the bank merger agreement provides an adequate capital
structure, including surplus, for Old Line Bank in relation to its
deposit liabilities and other activities; (iii) the bank merger is
fair; and (iv) the proposed bank merger is not against the public
interest.
Applications
Old
Line Bancshares intends to file an application with the FRB and the
Maryland Commissioner requesting approval of the merger of DCB
Bancshares with and into Old Line Bancshares, and Old Line Bank
filed applications with the FDIC and Maryland Commissioner
requesting the approval of the merger of Damascus Community Bank
into Old Line Bank, on March 17, 2017. In general, the applications
will describe the terms of the merger or bank merger, the parties
involved and the activities to be conducted by the combined
entities following consummation of the transaction, and contain
certain related financial and managerial information.
We are
not aware of any material governmental approvals or actions that
are required to complete the merger or bank merger, except as
described above. If any other approval or action is required, we
will use our best efforts to obtain such approval or
action.
Management and Operations After the Merger
The
current officers and directors of Old Line Bancshares and Old Line
Bank, with the addition of Stephen J. Deadrick, Chairman of the
Board of DCB Bancshares and Damascus Community Bank, and another
current director of DCB Bancshares (or such replacements as named
in a schedule to the merger agreement if either of Mr. Deadrick or
the other current DCB Bancshares director become disqualified to
serve as directors pursuant to the merger agreement), to each
entity’s board of directors, will continue to be the officers
and directors of Old Line Bancshares and Old Line Bank,
respectively, after the merger
Employment; Severance
Following the
merger, Old Line Bancshares is not obligated to continue the
employment of any employees of DCB Bancshares or its subsidiaries.
As a result of the merger, some DCB Bancshares positions will be
eliminated. Old Line Bancshares will, however, endeavor to continue
the employment of all employees (as of December 16, 2016) of DCB
Bancshares and its subsidiaries (each a “DCB
Employee”), including Damascus Community Bank, in positions
that will contribute to the successful performance of the combined
organization. If a DCB Employee (i) is not offered employment with
Old Line Bancshares or a subsidiary of Old Line Bancshares, (ii)
does not accept an offer of employment because the offer is not for
a comparable position (as defined in the Damascus Community Bank
Employee Change in Control Plan (the “Plan”)), or (iii)
accepts an offer of employment but is involuntarily terminated
without cause (as defined in the merger agreement) within 12 months
after the date that the merger is effective, then Old Line
Bancshares will cause Old Line Bank or the other applicable Old
Line Bancshares subsidiary to make a severance payment to such DCB
Employee in accordance with and as set forth in the Plan, provided,
however, that each such employee that is eligible for a severance
payment will receive at least four weeks of “Base
Compensation” as defined in the Plan. Based on the terms of
the Plan, a DCB Employee eligible for severance under the terms of
the merger agreement that has at least one year of service would
receive a severance payment equal to the product of (i) the DCB
Employee’s years of service (rounded to the nearest full
year) and (ii) an amount equal to two weeks of the DCB
Employee’s “Base Compensation,” subject to a
maximum payment equal to six months of Base Compensation, and
provided that DCB Employees whose compensation is determined in
whole or in part on commission would be eligible for severance
equal to four percent of their prior 12-month Base Compensation for
each year of service, up to an amount equal to six months of Base
Compensation. The Plan defines “Base Compensation” as
follows:
●
For salaried DCB
Employees, their annual base salary in effect as of his or her
termination date or, if greater, the effective date of the
merger;
●
For DCB Employees
whose compensation is based in whole or in part on commission
income, base salary at termination (or if greater, at the effective
date of the merger), if any, plus the commission earned in the 12
months preceding the termination date (or if greater, the 12 months
preceding the effective date of the merger); or
●
For hourly DCB
Employees, total hourly wages for the 12 months preceding his or
her termination date or, if greater, the effective date of the
merger.
DCB
Employees who are a party to any employment, severance or
“change in control” agreement or any other agreement or
arrangement that would provide for a payment triggered by the
merger or the bank merger, including as described under
“– Interest of Directors and Officers in the Merger
– Change in Control Payments to be Made to Damascus Community
Bank Executive Officers,” will not be eligible for such
severance benefits unless such person waives or relinquishes his or
her right to such change in control payment.
Any DCB
Employee whose employment with Old Line Bancshares or a subsidiary
of Old Line Bancshares is terminated without cause after 12 months
from the effective date of the merger will receive such severance
benefits from Old Line Bancshares or the Old Line Bancshares
subsidiary as is provided for in Old Line Bancshares’ or such
subsidiary’s general severance policy for such terminations
(with full credit being given for each year of service with DCB
Bancshares or any DCB Bancshares subsidiary).
All of
the payments described in this section are subject to the receipt
of any necessary regulatory non-objections or waivers.
Employee Benefits
The
merger agreement provides that as of the effective date of the
merger, each DCB Employee who accepts employment with Old Line
Bancshares or a subsidiary thereof will be entitled to full credit
for each year of service with DCB Bancshares or any subsidiary
thereof for purposes of determining eligibility for participation,
vesting and benefit accrual in Old Line Bancshares’, or as
appropriate, in the Old Line Bancshares subsidiary’s,
employee benefit plans, programs and policies, except as prohibited
by Law. Old Line Bancshares will use the original date of hire by
DCB Bancshares or a DCB Bancshares subsidiary in making such
determinations. After the effective date of the merger, Old Line
Bancshares may discontinue or amend, or convert to or merge with an
Old Line Bancshares benefit plan, any DCB Bancshares benefit plan,
subject to the plan’s provisions and applicable
Law.
Interests of Directors and Officers in the Merger
Certain
members of management of DCB Bancshares and its board of directors
may have interests in the merger in addition to their interests as
stockholders of DCB Bancshares. The DCB Bancshares board of
directors was aware of these factors and considered them, among
other factors, in approving the merger agreement.
Change in Control Payments to be Made to DCB Bancshares’
Co-Chief Executive Officers
On
January 14, 2016, prior to having any discussions with Old Line
Bank or Old Line Bancshares, Damascus Community Bank entered into
change of control severance agreements with each of Robert L.
Carpenter, Jr., Co-Chief Executive Officer and Executive Vice
President - Chief Financial Officer of DCB Bancshares and Damascus
Community Bank, and William F. Lindlaw, Co-Chief Executive Officer
and Executive Vice President - Chief Lending Officer of DCB
Bancshares and Damascus Community Bank. Under such agreements, each
of Messrs. Carpenter and Lindlaw is entitled to a lump sum cash
payment equal to two times the amount of his base salary in effect
immediately prior to a change in control (subject to certain
limitations as set forth in the agreement) if his employment with
Damascus Community Bank is terminated involuntarily without cause,
as defined in the agreements, or voluntarily with good reason, as
defined in the agreements, in contemplation of or within 12 months
after a change in control of Damascus Community Bank. Under such
circumstances, each of Messrs. Carpenter and Lindlaw is entitled to
continued life and health insurance coverage substantially
identical to the coverage maintained for him by Damascus Community
Bank prior to the change in control, until the earlier of (i) his
death, (ii) his return to employment with Damascus Community Bank
or another employer that provides him with similar coverage, or
(iii) 18 months after his termination. The merger and the bank
merger constitute a change in control for purposes of these
agreements.
The
following table describes the change in control payment and the
value of the continuation of life and health insurance each of
Messrs. Lindlaw and Carpenter will be entitled to under his change
of control severance agreement upon consummation of the merger and
the bank merger, assuming he is not offered employment with Old
Line Bank or is offered employment but then such employment is
terminated involuntarily without cause or voluntarily with good
reasons within 12 months of the merger and the bank
merger.
Name
|
Change in Control Payment Amount
|
Value of Continued Insurance Coverage (assumes provided for 18
months)
|
William F.
Lindlaw
|
$369,000
|
$2,266
|
Robert
J. Carpenter, Jr.
|
$369,000
|
$7,826
|
Indemnification and Insurance
Old
Line Bancshares has agreed that for six years and one day after the
effective date of the merger, it will indemnify and hold harmless
each present and former director and officer of DCB Bancshares or
any of its subsidiaries against any costs or expenses (including
reasonable attorneys’ fees), judgments, fines, losses,
claims, damages or liabilities and amounts paid in settlement
incurred thereafter in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or
occurring at or prior to the effective time of the merger, based or
arising out of, or pertaining to the fact that he or she was a
director or officer of DCB Bancshares or any of its subsidiaries or
is or was serving at the request of DCB Bancshares or any of its
subsidiaries as a director, officer, employee, trustee or other
agent of any other organization or in any capacity with respect to
any employee benefit plan of DCB Bancshares, including any matters
arising in connection with or related to the negotiation, execution
and performance of the merger agreement or the merger or the bank
merger, and will advance expenses to such persons in connection
therewith, to the fullest extent to which such officers and
directors would have been entitled to indemnification and
advancement of expenses under the articles of incorporation and
bylaws of DCB Bancshares in effect on February 1, 2017, as though
such persons were present or former officers of Old line
Bancshares, or were serving at the request of Old Line Bancshares
or any of its subsidiaries, or as a director, officer, employee,
trustee or other agent of any organization or in any capacity with
respect to any employee benefit plan of Old Line Bancshares, as of
the effective time of the merger.
Old
Line Bancshares has further agreed that for a minimum of six years
and one day after the merger’s effective date, Old Line
Bancshares will, at its expense, maintain directors’ and
officers’ liability insurance for the former directors and
officers of DCB Bancshares and its subsidiaries with respect to
matters occurring at or prior to the merger’s effective time
(a “tail” policy), so long as the policy can be
obtained at a cost not in excess of an aggregate of 200% of the
current annual premium attributable to the applicable
officers’ and directors’ liability insurance coverage
in DCB Bancshares’ or Damascus Community Bank’s
liability insurance policy(ies) in effect on February 1, 2017. If
Old Line Bancshares is unable to purchase the tail policy at a cost
not in excess of such amount, Old Line Bancshares will obtain a
directors’ and officers’ liability insurance tail
policy with the maximum coverage reasonably available for a cost
that does not exceed such amount.
Board Positions and Compensation
Upon
completion of the merger and the subsequent bank merger, Stephen J.
Deadrick and another current director of DCB Bancshares will be
elected to the boards of directors of Old Line Bancshares and Old
Line Bank and will be entitled to compensation in such capacity on
the same basis as other Old Line Bancshares and Old Line Bank
directors. Currently, each non-employee director of Old Line Bank,
other than the Chairman of the Board and the Vice Chairman of the
Board, receive $700 for each attended meeting of the board of
directors, $300 for each attended meeting of the loan committee and
$400 for each attended meeting of the corporate governance
committee, the compensation committee, the audit committee, risk
committee, strategic opportunities committee and the asset and
liability committee of the board of directors. The Chairs of each
of the corporate governance, compensation, risk and audit
committees also receive an additional $300 for each attended
meeting of their respective committees. If a director attends any
of these meetings via teleconference in lieu of in person, the
director receives $200 instead of the regular in-person payment.
Each non-employee director of Old Line Bank, other than the
Chairman of the Board and the Vice Chairman of the Board, also
receive an $8,400 quarterly retainer.
Deferred Compensation Plan
Damascus Community
Bank maintains a deferred compensation plan, which provides for a
lump-sum payment to participants within 60 days of termination of
employment other than pursuant to retirement. One executive officer
of Damascus Community Bank, Rodney E. Reed, Senior Vice President
and Chief Credit Officer, participates in the plan and will receive
a lump-sum payment of his deferred compensation if his employment
is terminated in connection with the merger.
Support Agreements
As a
condition to Old Line Bancshares entering into the merger
agreement, all the directors and certain executive officers of DCB
Bancshares, who in the aggregate have the power to vote 12.9% of
shares outstanding on the record date for DCB Bancshares’
annual meeting, entered into an agreement with Old Line Bancshares,
dated as of February 1, 2017, pursuant to which each such director
or executive officer agreed to vote all of their shares of DCB
Bancshares common stock in favor of the merger agreement and the
merger. A form of support agreement is filed as Exhibit 99.2 to Old
Line Bancshares’ Current Report on Form 8-K filed on February
1, 2017. See “Where You Can Find More Information.” The
support agreements may have the effect of discouraging persons from
making a proposal for an acquisition transaction involving DCB
Bancshares. The following is a brief summary of the material
provisions of the support agreements.
Pursuant to the
support agreements, each director and executive officer of DCB
Bancshares agreed, among other things:
●
To vote, or cause
to be voted, at any meeting of DCB Bancshares’ stockholders
or other circumstance in which the vote, consent or other approval
of stockholders is sought, all of the DCB Bancshares common stock
as to which he or she is the record or beneficial owner (a) for
approval of the merger and the execution and delivery by DCB
Bancshares of the merger agreement, (b) against any superior DCB
Bancshares transaction, and (c) against certain other actions or
proposals that are intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or materially adversely
affect the merger, the merger agreement or the transactions
contemplated by the merger agreement.
●
To take all
reasonable actions to and assist in the consummation of the merger
and the other transactions contemplated by the merger agreement,
and to use his or her best efforts to cause DCB Bancshares and its
subsidiaries to take the actions set forth in the merger
agreement.
●
To continue to hold
his or her shares of DCB Bancshares common stock until the earlier
of the time the merger is effective or the date the DCB
stockholders approve the merger agreement.
●
Not to exercise his
or her appraisal rights.
●
Not to take any
action that could reasonably be expected to have the effect of
preventing or disabling him or her from performing his or her
obligations under the support agreement.
Accounting Treatment
The
merger will be accounted for using the acquisition method of
accounting with Old Line Bancshares treated as the acquirer. Under
this method of accounting, DCB Bancshares’ assets (including
identifiable intangible assets) and liabilities (including
executory contracts and other commitments) will be recorded by Old
Line Bancshares at their respective fair values as of the closing
date of the merger and added to those of Old Line Bancshares. Any
excess of purchase price over the net fair values of DCB
Bancshares’ assets and liabilities will be recorded as
goodwill. Financial statements of Old Line Bancshares issued after
the merger will reflect these values, but will not be restated
retroactively to reflect the historical financial position or
results of operations of DCB Bancshares prior to the merger. The
results of operations of DCB Bancshares will be included in the
results of operations of Old Line Bancshares beginning on the
effective date of the merger.
Certain Federal Income Tax Consequences
The
closing of the merger is conditioned upon (i) the receipt by Old
Line Bancshares of the opinion of Baker, Donelson, counsel to Old
Line Bancshares, and (ii) the receipt by DCB Bancshares of the
opinion of Gordon Feinblatt, counsel to DCB Bancshares, each dated
as of the effective date of the merger, to the effect
that:
●
The merger
constitutes a tax-free reorganization under Section 368(a) of the
Internal Revenue Code; and
●
Only as to the
opinion to be received by DCB Bancshares, any gain realized in the
merger will be recognized only to the extent of cash or other
property (other than Old Line Bancshares common stock) received in
the merger, including cash received in lieu of fractional share
interests.
The tax
opinions to be delivered in connection with the merger are not
binding on the IRS or the courts, and neither DCB Bancshares nor
Old Line Bancshares intends to request a ruling from the IRS with
respect to the United States federal income tax consequences of the
merger. Consequently, no assurance can be given that the IRS will
not assert, or that a court would not sustain, a position contrary
to any of those set forth below. In addition, if any of the facts,
representations or assumptions upon which the opinions are based is
inconsistent with the actual facts, the United States federal
income tax consequences of the merger could be adversely
affected.
The
following discussion describes the anticipated material
U.S. federal income tax consequences of the merger to
U.S. holders (as defined below) of DCB Bancshares common
stock. This discussion addresses only those holders that hold their
DCB Bancshares common stock as a capital asset within the meaning
of Section 1221 of the Internal Revenue Code and does not
address all the U.S. federal income tax consequences that may
be relevant to particular holders in light of their individual
circumstances or to holders that are subject to special rules, such
as:
●
financial
institutions;
●
individual
retirement and other tax-deferred accounts;
●
persons subject to
the alternative minimum tax provisions of the Internal Revenue
Code;
●
persons eligible
for tax treaty benefits;
●
entities treated as
partnerships or other flow-through entities for U.S. federal income
tax purposes;
●
foreign
corporations, foreign partnerships and other foreign
entities;
●
tax-exempt
organizations;
●
persons whose
functional currency is not the U.S. dollar;
●
traders in
securities that elect to use a mark-to-market method of
accounting;
●
persons who are not
citizens or residents of the United States;
●
persons that hold
DCB Bancshares common stock as part of a straddle, hedge,
constructive sale or conversion transaction; and
●
U.S. holders
who acquired their shares of DCB Bancshares common stock through
the exercise of an employee stock option or otherwise as
compensation.
The
following is based upon the Internal Revenue Code, its legislative
history, United States Department of the Treasury regulations
promulgated pursuant to the Internal Revenue Code and published
rulings and decisions, all as currently in effect as of the date of
this proxy statement/prospectus, and all of which are subject to
change, possibly with retroactive effect, and to differing
interpretations. Tax considerations under state, local and foreign
laws, or federal laws other than those pertaining to U.S. federal
income tax, are not addressed in this proxy
statement/prospectus.
Holders
of DCB Bancshares common stock should consult with their own tax
advisers as to the U.S. federal income tax consequences of the
merger as well as the effect of state, local, foreign and other tax
laws and of proposed changes to applicable tax laws, in light of
their particular circumstances.
For
purposes of this discussion, the term
“U.S. holder” means a beneficial owner of DCB
Bancshares common stock that is:
●
a U.S. citizen
or resident, as determined for federal income tax
purposes;
●
a corporation, or
entity taxable as a corporation, created or organized in or under
the laws of the United States; or
●
otherwise subject
to U.S. federal income tax on a net income basis.
The
U.S. federal income tax consequences of a partner in a
partnership holding DCB Bancshares common stock generally will
depend on the status of the partner and the activities of the
partnership. We recommend that partners in such a partnership
consult their own tax advisers.
Tax
Consequences
of
the
Merger
Generally
As a
result of the merger qualifying as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, the
following material U.S. federal income tax consequences will
result:
Receipt of Old Line
Bancshares Common Stock.
No gain or loss will be recognized
by a DCB Bancshares stockholder with respect to their receipt of
shares of Old Line Bancshares common stock (except for cash
received in lieu of fractional shares, as discussed below) in
exchange for his or her shares of DCB Bancshares common stock. The
tax basis of the shares of Old Line Bancshares common stock
received by a DCB Bancshares stockholder in such exchange will be
equal (except for the basis attributable to any fractional shares
of Old Line Bancshares common stock, as discussed below) to the
basis of the DCB Bancshares common stock surrendered in exchange
for the Old Line Bancshares common stock. The holding period of the
Old Line Bancshares common stock received will include the holding
period of shares of DCB Bancshares common stock surrendered in
exchange for the Old Line Bancshares common stock, provided that
such shares were held as capital assets of the DCB Bancshares
stockholder at the effective time of the merger.
Cash in Lieu of Fractional
Shares
.
A DCB
Bancshares stockholder who holds DCB Bancshares common stock as a
capital asset and who receives, in exchange for such stock, shares
of Old Line Bancshares common stock and cash in lieu of a
fractional share interest in Old Line Bancshares common stock will
be treated as having received such cash in full payment for such
fractional share of stock and as capital gain or loss.
Tax Treatment of the
Entities.
No gain or loss will be recognized by Old Line
Bancshares or DCB Bancshares as a result of the
merger.
Reporting
Requirements
DCB
Bancshares stockholders will be required to retain records
pertaining to the merger. Certain DCB Bancshares stockholders are
subject to certain reporting requirements with respect to the
merger. In particular, such stockholders will be required to attach
a statement to their tax returns for the year of the merger that
contains the information listed in Treasury Regulation
Section 1.368-3(b). Such statement must include the
stockholder’s adjusted tax basis in its DCB Bancshares common
stock and other information regarding the merger. DCB Bancshares
stockholders are urged to consult with their tax advisers with
respect to these and other reporting requirements applicable to the
merger.
THE
PRECEDING DISCUSSION IS A SUMMARY OF THE MATERIAL U.S. FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS
RELEVANT THERETO. DCB BANCSHARES STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISERS AS TO THE U.S. FEDERAL INCOME TAX
CONSEQUENCES TO THEM OF THE MERGER (INCLUDING, BUT NOT LIMITED TO,
TAX RETURN REPORTING REQUIREMENTS), AS WELL AS THE EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND ANY PROPOSED CHANGES TO
APPLICABLE TAX LAWS.
WHERE YOU CAN FIND MORE INFORMATION
Old
Line Bancshares files annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and
copy any reports, statements or other information on file with the
SEC at the SEC’s public reference room located at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
room. The SEC maintains an Internet Web site that contains reports,
proxy and information statements, and other information that
issuers file with the SEC at http://www.sec.gov
,
and Old Line
Bancshares SEC filings may be accessed there as well
.
Further, Old Line Bancshares makes available, free of charge
through its website, www.oldlinebank.com ,its reports on Forms
10-K, 10-Q and 8-K, and amendments to those reports, as soon as
reasonably practicable after such reports are filed with or
furnished to the SEC.
Old
Line Bancshares has filed a registration statement on Form S-4 to
register with the SEC the shares of Old Line Bancshares common
stock that DCB Bancshares stockholders will receive in the merger.
This proxy statement/prospectus is part of the registration
statement of Old Line Bancshares on Form S-4 and is a prospectus of
Old Line Bancshares and a proxy statement of DCB Bancshares for the
DCB Bancshares annual meeting.
Neither
Old Line Bancshares nor DCB Bancshares has authorized anyone to
give any information or make any representation about the merger or
the annual meeting that is different from, or in addition to, that
contained in this proxy statement/prospectus or in any of the
materials that are incorporated by reference into this proxy
statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. This proxy
statement/prospectus does not constitute an offer to sell, or a
solicitation of an offer to purchase, the securities offered by
this proxy statement/prospectus, or the solicitation of a proxy, in
any jurisdiction to or from any person to whom or from whom it is
unlawful to make such offer, solicitation of an offer or proxy
solicitation in such jurisdiction. Neither the delivery of this
proxy statement/prospectus nor any distribution of securities
pursuant to this proxy statement/prospectus shall, under any
circumstances, create any implication that there has been no change
in the information set forth or incorporated into this proxy
statement/prospectus by reference or in our affairs since the date
of this proxy statement/prospectus. The information contained in
this proxy statement/prospectus with respect to Old Line Bancshares
was provided by Old Line Bancshares, and the information contained
in this proxy statement/prospectus with respect to DCB Bancshares
was provided by DCB Bancshares. The information contained in this
proxy statement/prospectus speaks only as of the date of this proxy
statement/prospectus unless the information specifically indicates
that another date applies.
ANNEX A
AGREEMENT
AND PLAN OF MERGER
By and
between
OLD
LINE BANCSHARES, INC.
And
DCB
BANCSHARES, INC.
Dated
as of February 1, 2017
TABLE
OF CONTENTS
|
|
Page
|
|
|
|
BACKGROUND
|
6
|
AGREEMENT
|
6
|
ARTICLE I. GENERAL
|
6
|
Section
1.1
|
Background.
|
6
|
Section
1.2
|
Definitions.
|
6
|
Section
1.3
|
The Merger and Related Transactions.
|
14
|
Section
1.4
|
[Intentionally Omitted].
|
14
|
Section
1.5
|
Additional Actions.
|
15
|
Section
1.6
|
The Bank Merger.
|
15
|
ARTICLE II. CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES
15
|
|
Section
2.1
|
Merger Consideration.
|
15
|
Section
2.2
|
OLB Common Stock.
|
16
|
Section
2.3
|
Fractional Shares.
|
16
|
Section
2.4
|
Objecting DCB Common Stockholders.
|
16
|
Section
2.5
|
Exchange Fund; Exchange of DCB Certificates.
|
16
|
Section
2.6
|
Anti-Dilution Provisions.
|
18
|
Section
2.7
|
Other Matters.
|
18
|
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DCB
18
|
|
Section
3.1
|
Organization.
|
19
|
Section
3.2
|
Capitalization.
|
20
|
Section
3.3
|
Authority; No Violation.
|
21
|
Section
3.4
|
Consents; Regulatory Approvals.
|
22
|
Section
3.5
|
Financial Statements.
|
22
|
Section
3.6
|
No Material Adverse Effect.
|
23
|
Section
3.7
|
Taxes.
|
23
|
Section
3.8
|
Contracts; Certain Changes.
|
24
|
Section
3.9
|
Ownership of Personal Property; Insurance Coverage.
|
26
|
Section
3.10
|
Litigation and Other Proceedings.
|
28
|
Section
3.11
|
Compliance with Applicable Law.
|
28
|
Section
3.12
|
Labor Matters.
|
29
|
Section
3.13
|
ERISA.
|
30
|
Section
3.14
|
Brokers and Finders.
|
32
|
Section
3.15
|
Real Property and Leases.
|
32
|
Section
3.16
|
Environmental Matters.
|
33
|
Section
3.17
|
Intellectual Property.
|
33
|
Section
3.18
|
Information to be Supplied.
|
34
|
Section
3.19
|
Related Party Transactions.
|
34
|
Section
3.20
|
Loans.
|
34
|
Section
3.21
|
Allowance for Loan Losses.
|
35
|
Section
3.22
|
Community Reinvestment Act.
|
36
|
Section
3.23
|
Anti-Money Laundering, OFAC and Information Security.
|
36
|
Section
3.24
|
Securities Activities of Employees.
|
36
|
Section
3.25
|
Books and Records.
|
37
|
Section
3.26
|
Investment Securities.
|
37
|
Section
3.27
|
Reorganization.
|
37
|
Section
3.28
|
Fairness Opinion.
|
37
|
Section
3.29
|
Materials Provided to Stockholders.
|
38
|
Section
3.30
|
Absence of Certain Changes.
|
38
|
Section
3.31
|
Absence of Undisclosed Liabilities.
|
39
|
Section
3.32
|
No Option Plans or Convertible Securities.
|
39
|
Section
3.33
|
Deposits.
|
39
|
Section
3.34
|
Risk Management Instruments.
|
39
|
Section
3.35
|
Fiduciary Accounts.
|
39
|
Section
3.36
|
Credit Card Accounts and Merchant Processing.
|
39
|
Section
3.37
|
Anti-takeover Laws.
|
39
|
Section
3.38
|
Stockholders’ List.
|
40
|
Section
3.39
|
Bank Certificates.
|
40
|
Section
3.40
|
Disclosure.
|
40
|
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF OLB
|
40
|
Section
4.1
|
Organization.
|
40
|
Section
4.2
|
Capitalization.
|
41
|
Section
4.3
|
Authority; No Violation.
|
42
|
Section
4.4
|
Consents; Regulatory Approvals.
|
43
|
Section
4.5
|
Financial Statements.
|
43
|
Section
4.6
|
No Material Adverse Effect.
|
43
|
Section
4.7
|
Taxes.
|
44
|
Section
4.8
|
Contracts; Certain Changes.
|
44
|
Section
4.9
|
Ownership of Personal Property; Insurance Coverage.
|
45
|
Section
4.10
|
Litigation and Other Proceedings.
|
46
|
Section
4.11
|
Compliance with Applicable Law.
|
46
|
Section
4.12
|
Labor Matters.
|
48
|
Section
4.13
|
ERISA.
|
48
|
Section
4.14
|
Brokers and Finders.
|
50
|
Section
4.15
|
Real Property and Leases.
|
50
|
Section
4.16
|
Environmental Matters.
|
51
|
Section
4.17
|
Information to be Supplied.
|
51
|
Section
4.18
|
Related Party Transactions.
|
52
|
Section
4.19
|
Loans.
|
52
|
Section
4.20
|
Allowance for Loan Losses.
|
52
|
Section
4.21
|
Community Reinvestment Act.
|
53
|
Section
4.22
|
Securities Activities of Employees.
|
53
|
Section
4.23
|
Books and Records.
|
53
|
Section
4.24
|
Investment Securities.
|
54
|
Section
4.25
|
Reorganization.
|
54
|
Section
4.26
|
Fairness Opinion.
|
54
|
Section
4.27
|
Materials Provided to Stockholders.
|
54
|
Section
4.28
|
Absence of Undisclosed Liabilities.
|
54
|
Section
4.29
|
Anti-Money Laundering, OFAC and Information Security.
|
55
|
Section
4.30
|
Intellectual Property.
|
55
|
Section
4.31
|
Disclosure.
|
56
|
Section
4.32
|
Business.
|
56
|
ARTICLE V. COVENANTS OF THE PARTIES
55
|
56
|
Section
5.1
|
Conduct of DCB’s Business.
|
56
|
Section
5.2
|
Conduct of OLB’s Business.
|
59
|
Section
5.3
|
Access; Confidentiality.
|
59
|
Section
5.4
|
Regulatory Matters.
|
60
|
Section
5.5
|
Taking of Necessary Actions.
|
60
|
Section
5.6
|
Duty to Advise; Duty to Update of Disclosure
Schedules.
|
60
|
Section
5.7
|
Other Undertakings by OLB and DCB.
|
61
|
Section
5.8
|
Accuracy of the Registration Statement.
|
66
|
ARTICLE VI. CONDITIONS
|
67
|
Section
6.1
|
Conditions to DCB’s Obligations under this
Agreement.
|
67
|
Section
6.2
|
Conditions to OLB’s Obligations under this
Agreement.
|
60
|
ARTICLE VII. TERMINATION
|
70
|
Section
7.1
|
Termination.
|
70
|
Section
7.2
|
Effect of Termination.
|
72
|
ARTICLE VIII. MISCELLANEOUS
71
|
72
|
Section
8.1
|
Expenses and Other Fees.
|
72
|
Section
8.2
|
Non-Survival.
|
73
|
Section
8.3
|
Amendment, Extension and Waiver.
|
73
|
Section
8.4
|
Entire Agreement.
|
74
|
Section
8.5
|
Binding Agreement.
|
74
|
Section
8.6
|
Notices.
|
74
|
Section
8.7
|
Disclosure Schedules.
|
75
|
Section
8.8
|
Tax Disclosure.
|
75
|
Section
8.9
|
No Assignment.
|
75
|
Section
8.10
|
Captions; Interpretation.
|
75
|
Section
8.11
|
Counterparts; Electronic Signatures.
|
76
|
Section
8.12
|
Severability.
|
76
|
Section
8.13
|
Governing Law; Venue; No Jury Trial.
|
76
|
Section
8.14
|
Time of Essence.
|
76
|
|
|
|
Exhibit A
– List of Stockholders to
Execute Support Agreements
|
|
Exhibit B
– Support
Agreement
|
|
Exhibit C
– Bank Merger
Agreement
|
|
Exhibit D
–
Spreadsheet
|
|
Exhibit E
– Damascus Community Bank
Employee Change in Control Plan
|
|
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER
(“
Agreement
”), dated as of
February 1, 2017, is made by and between Old Line Bancshares, Inc.,
a Maryland corporation (“
OLB
”), and DCB
Bancshares, Inc., a Maryland corporation (“
DCB
”).
BACKGROUND
1.
DCB owns directly
all of the outstanding capital stock of Damascus Community Bank, a
Maryland-chartered commercial bank (“
Damascus
”).
2.
OLB owns directly
all of the outstanding capital stock of Old Line Bank, a trust
company with commercial banking powers chartered under the laws of
the State of Maryland (“
Old Line
”).
3.
OLB and DCB desire
for DCB to merge with and into OLB, with OLB surviving the Merger,
in accordance with the applicable laws of the State of Maryland and
this Agreement.
4.
As an additional
condition and inducement to OLB to enter into this Agreement, each
of the individuals listed on Exhibit A has executed a Support
Agreement in the form attached as Exhibit B.
5.
Each of the
parties, by signing this Agreement, adopts it as a plan of
reorganization as defined in IRC Section 368(a) and intends the
Merger to be a reorganization as defined in IRC
Section 368(a).
6.
OLB and DCB desire
to provide for certain undertakings, conditions, representations,
warranties, and covenants in connection with the transactions
contemplated hereby and governing the transactions contemplated
herein.
AGREEMENT
NOW THEREFORE
, in consideration of the
mutual covenants, agreements, representations and warranties herein
contained, the parties, intending to be legally bound hereby, agree
as follows:
ARTICLE I.
GENERAL
Section
1.1
Background.
The
Background information is a substantive part of this Agreement and
is incorporated herein and made a part hereof by
reference.
Section
1.2
Definitions.
As used
in this Agreement, the following terms shall have the indicated
meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
Acquisition Proposal
means a
bona fide
written proposal
by a Person other than OLB for: (a) a merger or consolidation of, a
share exchange involving, or an acquisition of 50% or more of the
assets or liabilities of, DCB or any DCB Subsidiary, or any other
business combination involving DCB or any DCB Subsidiary, in a
single transaction or series of related transactions; or (b) a
transaction that involves the transfer of beneficial ownership of
securities representing, or the right to acquire beneficial
ownership of or to vote securities representing, 10% or more of the
then outstanding shares of DCB Common Stock or the then outstanding
equity securities of any DCB Subsidiary.
Affiliate
means, with respect to any
Entity, any Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with, the Entity and, without limiting the generality of
the foregoing, includes any executive officer, director, manager or
Person who beneficially owns more than ten percent of the equity or
voting securities of the Entity.
AFTAP
means adjusted funding target
attainment percentage.
Agreement
means this Agreement and Plan
of Merger, including the exhibits and schedules hereto and any
amendment or supplement hereto.
Application
means an application for
regulatory approval that is required to consummate the Contemplated
Transactions.
Article III Standard
has the meaning
given to the term in Article III of this Agreement.
Article IV Standard
has the meaning
given to the term in Article IV of this Agreement.
Articles of Merger
means the articles
of merger to be executed by OLB and DCB and filed with SDAT in
accordance with the MGCL.
Average NASDAQ Bank Stock Index Value For The
Price Determination Period
has the meaning given to the term
in Section 7.1(j) of this Agreement.
Average Price
has the meaning given to
the term in
Section
2.1(b) of this Agreement.
Bank Certificates
has the meaning given
to the term in Section 2.5(e) of this Agreement.
Bank Merger
has the meaning given to
the term in
Section 1.6 of this
Agreement.
Bank Merger Agreement
has the meaning
given to the term in
Section 1.6 of this
Agreement.
BHC Act
means the Bank Holding Company
Act of 1956, as amended.
Burdensome Condition
has the meaning
given to the term in Section 5.4(a) of this Agreement.
Business Day(s)
means any day or days
other than (i) Saturday, (ii) Sunday or (iii) a day on which
Damascus or Old Line is authorized or obligated by applicable law
or executive order to close.
Calculation Date
has the meaning given
to the term in Section 2.2(a) of this Agreement.
Cause
means: (a) any act or failure to
act that constitutes fraud, incompetence, willful misconduct,
dishonesty, breach of fiduciary duty, intentional failure to
adequately perform his or her duties as an officer or employee of
the employer, or violation of any Law (other than a traffic
violation or similar offense) or any final regulatory order or
agreement with the employer; (b) the conviction of the employee of
a felony or crime involving moral turpitude; (c) the
employee’s entering into any employment or similar
relationship with a Person other than DCB or a DCB Subsidiary; (d)
the employee’s diversion of any business opportunity from
employer (other than on behalf of employer or with the prior
written consent of employer’s board of directors); or (e)
conduct by employee that results in removal or suspension of
employee as an officer or employee of employer pursuant to a
written order by any Regulatory Authority with authority or
jurisdiction over employer.
CERCLA
means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. §§ 9601,
et seq
.
CFPB
means the Consumer Financial
Protection Bureau.
CIC Agreement
has the meaning given to
the term in Section 5.7(c)(ii)(C) of this
Agreement.
CIC Payment
has the meaning given to
the term in Section 5.7(c)(ii)(C) of this
Agreement.
Closing
has the meaning given to the
term in Section 1.3(a) of this Agreement.
Closing Date
has the meaning given to
the term in Section 1.3(a) of this Agreement.
Closing Market Price has the meaning given to the term in Section
7.1(j) of this Agreement.
Commercial Law Article
has the meaning
given the term in Section 3.23(b) of this Agreement.
Commissioner
means the Maryland Office
of the Commissioner of Financial Regulation.
Confidentiality Agreement
means that
certain Confidentiality Agreement, dated as of November 3, 2016, by
and between OLB and DCB.
Contemplated Transactions
means all of
the transactions contemplated by this Agreement, including the (a)
Merger, (b) Bank Merger, and (c) performance by OLB and DCB of
their respective covenants and obligations under this
Agreement.
CRA
has the meaning given to the term
in Section 3.22 of this Agreement.
Credit Extension
means any loan, lease,
advance, credit facility, credit enhancement, guarantee,
commitment, line of credit or letter of credit.
Damascus
has the meaning given to the
term in the Background section of this Agreement.
DCB
has the meaning given to the term
in the Background section of this Agreement.
DCB Benefit Plans
means all employee
pension benefit plans within the meaning of ERISA
Section 3(2), profit sharing plans, stock purchase plans,
deferred compensation and supplemental income plans, supplemental
executive retirement plans, annual incentive plans, group insurance
plans, and all other employee welfare benefit plans within the
meaning of ERISA Section 3(1) (including vacation pay, sick
leave, short-term disability, long-term disability, and medical
plans) and all other employee benefit plans, policies, agreements
and arrangements currently maintained or contributed to for the
benefit of the employees or former employees (including retired
employees) and any beneficiaries thereof or directors or former
directors of DCB or any other Entity that, together with DCB, is
treated as a single employer under IRC Sections 414(b), (c), (m) or
(o).
DCB Certificate
means a
certificate that immediately
prior to the Effective Time represents issued and outstanding
shares of DCB Common Stock.
DCB Common Stock
has the meaning given
to the term in Section 3.2(a) of this Agreement.
DCB Common Stockholder
is any holder of
record of DCB Common Stock immediately prior to the Effective
Time.
DCB Common Stockholders’ Meeting
means the meeting of the holders of DCB Common Stock to consider
and vote on the Agreement and the Merger, and any postponement or
adjournment thereof.
DCB Companies
means DCB, Damascus and
any other DCB Subsidiary, collectively.
DCB Disclosure Schedule
means,
collectively, the disclosure schedules delivered by DCB to OLB at
or prior to the execution and delivery of this Agreement, as may be
updated pursuant to Section 5.6 of this
Agreement.
DCB Employee
has the meaning given to
the term in Section 5.7(c)(ii)(A) of this
Agreement.
DCB ERISA Affiliate
means any Entity
that, together with DCB, is treated as a single employer under IRC
Sections 414(b), (c), (m) or (o).
DCB Financials
means (a) the
consolidated balance sheets of DCB at December 31, 2015 and 2014
and the consolidated statements of income, statements of
stockholders’ equity and consolidated statements of cash
flows for DCB for the years ended December 31, 2015, 2014 and 2013,
and the notes thereto, as audited by Smith Elliott Kearns &
Company, LLC, (b) the unaudited interim financial statements of DCB
and the notes thereto for the calendar quarter ending September 30,
2016, (c) the consolidated balance sheet of DCB at December 31,
2016 and 2015 and the consolidated statements of income, statements
of stockholders’ equity and consolidated statements of cash
flows for DCB for the years ended December 31 2016, 2015 and 2014,
and the notes thereto, as audited by Smith Elliott Kearns &
Company, LLC, and to be delivered within 120 days of December 31,
2016, (d) the unaudited consolidated financial statements of DCB
and the notes thereto for each calendar quarter commencing with the
calendar quarter ending March 31, 2107, to be delivered within 45
days after the end of the respective quarter, (e) unaudited,
internally-prepared consolidated financial statements for each of
October 31, 2016, November 30, 2016 and December 31, 2016, and (f)
unaudited, internally-prepared consolidated financial statements
for each month commencing with the month ended January 31, 2017, to
be delivered within 20 days after the end of the respective month
(the financial statements described in items (e) and (f) are
collectively referred to herein as the “
Internal DCB
Financials
”).
DCB Governing Documents
has the meaning
given to the term in Section 3.1(f) of this
Agreement.
DCB Intellectual Property
has the
meaning given to the term in Section 3.17 of this
Agreement.
DCB IT Assets
has the meaning given to
the term in Section 3.17 of this Agreement.
DCB Nominees
has the meaning given to
the term in Section 1.3(d) of this Agreement.
DCB Real Property
has the meaning given
to the term in Section 3.15(a) of this Agreement.
DCB Regulatory Agreement
has the
meaning given to the term in Section 3.11(e)(iii) of this
Agreement.
DCB Returns
has the meaning given to
the term in Section 3.7(e) of this Agreement.
DCB Subsidiaries
means the subsidiaries
of DCB and Damascus as set forth in
DCB Disclosure Schedule
3.1(d)
.
DCB Tangible Equity
has the meaning
given to the term in
Section2.1(a) of this
Agreement.
DCB Taxes
has the meaning given to the
term in Section 3.7(e) of this Agreement.
DCB Termination Fee
has the meaning
given to the term in Section 8.1(b) of this Agreement.
Effective Date
means the date that
includes the Effective Time, which shall be as soon as practicable
after the Closing Date.
Effective Time
means the time at which
the Articles of Merger are filed with SDAT and become effective in
accordance with the MGCL.
Entity
means any corporation, limited
liability company, partnership, sole proprietorship, trust, joint
venture, or other form of organization.
Environmental Assessment
means an
environmental assessment that is consistent with ASTM 1527-05 or 40
C.F.R. Part 312 and that may include an assessment of the (a)
presence of hazardous, toxic, radioactive, or dangerous materials
or other materials regulated under Environmental Laws, or (b)
presence, amount, physical condition and location of
asbestos-containing materials and lead-based paint or an assessment
of indoor environmental issues.
Environmental Laws
means any applicable
federal, state or local Law, statute, ordinance, rule, regulation,
code, license, permit, authorization, common law, agency
requirement, approval, consent, order, judgment, decree, injunction
or agreement with any governmental entity relating to (a) the
protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil,
plant and animal life or any other natural resource), health and
safety as it relates to Hazardous Materials or natural resource
damages, (b) the use, presence, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or threatened release or disposal of Hazardous
Materials, and/or (c) noise, odor, wetlands, indoor air, pollution,
contamination or any injury to persons or property from exposure to
Hazardous Materials. Environmental Laws include without limitation:
(i) CERCLA; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. §6901,
et
seq
; the Clean Air Act, as amended, 42 U.S.C. §7401,
et seq
; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. §1251,
et seq
; the Toxic
Substances Control Act, as amended, 15 U.S.C. §2601,
et seq
; the Emergency
Planning and Community Right to Know Act, 42 U.S.C. §11001,
et seq
; the Safe Drinking
Water Act, 42 U.S.C. §300f,
et seq
; and all comparable state and
local Laws; and (ii) any common law (including without limitation
common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to the
presence of or exposure to any Hazardous Materials.
ERISA
means the Employee Retirement
Income Security Act of 1974, as amended, and the regulations
promulgated thereunder.
Exchange Act
means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Exchange Agent
means American Stock
Transfer & Trust Company, or such other agent as shall be
designated by OLB to act as the exchange agent for purposes of
conducting the exchange procedure described in Section 2.5 of
this Agreement.
Exchange Fund
has the meaning given to
the term in Section 2.5(a) of this Agreement.
Exchange Ratio
has the meaning given to
the term in
Section
2.1(b) of this Agreement.
FDIC
means the Federal Deposit
Insurance Corporation.
FHA
means the Federal Housing
Administration.
FHLB
means the Federal Home Loan Bank of
Atlanta.
FRB
means the Board of Governors of the
Federal Reserve System.
GAAP
means U.S. generally accepted
accounting principles.
Hazardous Materials
means: (a) any
petroleum or petroleum products, natural gas, or natural gas
products, radioactive materials, asbestos, urea formaldehyde foam
insulation, transformers or other equipment that contains
dielectric fluid containing levels of polychlorinated biphenyls
(PCBs), and radon gas; (b) any chemicals, materials, waste or
substances defined as or included in the definition of
“hazardous substances,” “hazardous wastes,”
“hazardous materials,” “extremely hazardous
wastes,” “restricted hazardous wastes,”
“toxic substances,” “toxic pollutants,”
“contaminants,” or “pollutants,” or words
of similar import, under any Environmental Laws; and (c) any other
chemical, material, waste or substance that is in any way regulated
for the protection of human health or environment by any Regulatory
Authorities, including mixtures thereof with other materials, and
including any regulated building materials such as asbestos and
lead.
Indemnified Parties
has the meaning
given to the term in Section 5.7(c)(iv) of this
Agreement.
Indemnifying Party
has the meaning
given to the term in Section 5.7(c)(iv) of this
Agreement.
Index Ratio
has the meaning given to
the term in Section 7.1(j) of this Agreement.
Insured Persons
has the meaning given
to the term in Section 5.7(c)(vi) of this Agreement.
Internal DCB Financials
has the meaning
given to the term in the definition of “DCB Financials”
set forth in this Section 1.2.
IRC
means the Internal Revenue Code of
1986, as amended, and the regulations promulgated
thereunder.
IRS
means the Internal Revenue
Service.
Knowledge of DCB
means the actual
knowledge of DCB’s and Damascus’ Chairman of the Board
of Directors, Chief Executive Officer, Executive Vice President and
Chief Lending Officer, Executive Vice President and Chief Financial
Officer, Chief Credit Officer and, with respect to Section 3.13
only, Damascus’ Vice President – Human Resources, or,
if no individual is named to any of such positions, the individual
or individuals who perform a similar function for DCB or Damascus,
as applicable, and includes any facts, matters or circumstances set
forth in any written notice or other correspondence from any
Regulatory Authority or any other written notice received by that
Person.
Knowledge of OLB
means the actual
knowledge of OLB’s Chairman of the Board, President and Chief
Executive Officer, Chief Financial Officer and Chief Operating
Officer, and Old Line’s Chairman of the Board, President and
Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer, Chief Credit Officer and Chief Lending Officer and, with
respect to Section 4.13 only, OLB’s and Old Line’s
Director of Human Resources, or, if no individual is named to any
of such positions, the individual or individuals who perform a
similar function for OLB or Old Line, as applicable, and includes
any facts, matters or circumstances set forth in any written notice
or other correspondence from any Regulatory Authority or any other
written notice received by that Person.
Law
means any and all foreign, federal,
state and local laws, statutes, ordinances, rules, regulations,
codes, and rules of common law, in each case as amended to date,
and any and all judicial and administrative interpretations
thereof, any judicial and administrative orders, decrees,
judgments, injunctions and writs, any and all policies and
directives (including, without limitation, any directive relating
to minimum capital levels) issued by any Regulatory Authority, and
any and all written legally permissible waivers or exceptions
granted by any Regulatory Authorities with respect to compliance
with any of the foregoing.
Letter of Transmittal
has the meaning
given to the term in Section 2.5(b) of this
Agreement.
Liens
means all liens, pledges,
charges, security interests, mortgages, claims, or other
encumbrances of any kind.
Material Adverse Effect
means, with
respect to OLB or DCB, respectively, any effect change,
circumstance, development or occurrence that individually, or taken
in the aggregate together with all other effects, changes,
circumstances, developments or occurrences, that (a) is or is
reasonably likely to be material and adverse to the financial
condition, results of operations or business of OLB and the OLB
Subsidiaries taken as a whole, or DCB and the DCB Subsidiaries
taken as a whole, respectively, or (b) materially impairs the
ability of either OLB, on the one hand, or DCB, on the other hand,
to perform its obligations under this Agreement or otherwise
materially threatens or materially impedes or delays the
consummation of the Contemplated Transactions, other than, in each
case, any change, circumstance, development, occurrence or effect
relating to (i) any change in the value of the respective loan or
investment portfolios of the OLB Companies or the DCB Companies
resulting from a change in interest rates generally, (ii) any
change occurring after the date hereof in any Law or
interpretations thereof by Regulatory Authorities or in GAAP or
applicable regulatory accounting principles, which change affects
banking institutions generally, including any change affecting the
Deposit Insurance Fund, (iii) changes in general economic (except
in the context of determining a Material Adverse Effect for
purposes of asset quality), capital market (except in the context
of determining a Material Adverse Effect for purposes of asset
quality), legal, regulatory or political conditions affecting
banking institutions generally, (iv) the effects of compliance with
this Agreement on the operating performance of OLB or DCB, as the
case may be, including the reasonable expenses incurred in
connection with this Agreement and the Contemplated Transactions,
(v) actions or omissions of a party (or any of its Subsidiaries)
taken pursuant to the terms of this Agreement in contemplation of
the Contemplated Transactions, (vi) any effect with respect to a
party hereto caused, in whole or in substantial part, by the other
party, (vii) any change resulting from any natural disaster or any
acts of terrorism, sabotage, military action or war (whether or not
declared) or any escalation or worsening thereof, (viii) the impact
of the Agreement and the Contemplated Transactions on relationships
with customers or employees (including the loss of personnel
subsequent to the date of this Agreement), and (ix) the public
disclosure of this Agreement or the Contemplated Transactions;
except, in any such case, to the extent any such change, effect,
development, occurrence or circumstance has or would have a
disproportionate effect on the business of DCB or OLB, as the case
may be, relative to other similarly-situated Entities.
Maximum Premium
has the meaning given
to the term in Section 5.7(c)(vi) of this Agreement.
Merger
has the meaning given to the
term in Section 1.3(b)(v) of this Agreement.
Merger Consideration
has the meaning
given to the term in Section 2.1(b) of this Agreement.
MGCL
means the Maryland General
Corporation Law, as amended.
NASDAQ
means the NASDAQ Stock Market
LLC.
NASDAQ Bank Index
has the meaning given
the term in Section 7.1(j) of this Agreement.
Non-Operational Subsidiaries
has the
meaning given to the term in Section 3.1(g) of this
Agreement.
Non-Residential Credit Extension
means
a Credit Extension other than for an owner-occupied
residence.
Notice of Superior Proposal
has the
meaning given to the term in Section 5.7(a)(ii) of this
Agreement.
Objecting DCB Shares
means any shares
of DCB Common Stock issued and outstanding immediately prior to the
Closing Date, the holder of which has not voted in favor of the
Merger and who has properly followed the procedures set forth in
Section 3-203 of the MGCL.
OLB
has the meaning given to the term
in the Background section of this Agreement.
OLB Benefit Plans
means all employee
pension benefit plans within the meaning of ERISA Section 3(2),
profit sharing plans, stock purchase plans, deferred compensation
and supplemental income plans, supplemental executive retirement
plans, annual incentive plans, group insurance plans, and all other
employee welfare benefit plans within the meaning of ERISA
Section 3(1) (including vacation pay, sick leave, short-term
disability, long-term disability, and medical plans) and all other
material employee benefit plans, policies, agreements and
arrangements currently maintained or contributed to for the benefit
of the employees or former employees (including retired employees)
and any beneficiaries thereof or directors or former directors of
OLB or any other Entity that, together with OLB, is treated as a
single employer under IRC Sections 414(b), (c), (m) or
(o).
OLB Common Stock
has the meaning given
to the term in Section 4.2(a) of this Agreement.
OLB Companies
means OLB, Old Line, and
any other OLB Subsidiary, collectively.
OLB Disclosure Schedule
means,
collectively, the disclosure schedules delivered by OLB to DCB at
or prior to the execution and delivery of this Agreement, as may be
updated pursuant to Section 5.6 of this
Agreement.
OLB ERISA Affiliate
means any Entity
that, together with OLB, is treated as a single employer under IRC
Sections 414(b), (c), (m) or (o).
OLB Financials
means (a) the
consolidated balance sheets of OLB at December 31, 2015 and 2014
and the consolidated statements of income, statements of
comprehensive income, statements of changes in stockholders’
equity and consolidated statements of cash flows for OLB for the
years ended December 31, 2015, 2014 and 2013, and the notes
thereto, as audited by Dixon Hughes Goodman LLP and as set forth in
OLB’s Annual Report on Form 10-K for the year ended December
31, 2015, (b) the consolidated balance sheet of OLB at December 31,
2016 and 2015 and the consolidated statements of income, statements
of comprehensive income, statements of changes in
stockholders’ equity and consolidated statements of cash
flows for OLB for the years ended December 31, 2016, 2015 and 2014,
and the notes thereto, as audited by Dixon Hughes Goodman LLP and
as will be set forth in OLB’s Annual Report on Form 10-K for
the year ended December 31, 2016, to be delivered or made available
within 90 days of December 31, 2016, (c) the unaudited interim
consolidated financial statements and notes thereto included in
OLB’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2016, and (d) the unaudited interim consolidated
financial statements and notes thereto included in OLB’s
Quarterly Reports on Form 10-Q for each calendar quarter commencing
with the quarter ended March 31, 2017, to be delivered or made
available within 45 days after the end of the respective
quarter.
OLB Governing Documents
has the meaning
given to the term in Section 4.1(f) of this Agreement.
OLB Intellectual Property
has the
meaning given to the term in Section 4.30 of this
Agreement.
OLB IT Assets
has the meaning given to
the term in Section 4.30 of this Agreement.
OLB Preferred Stock
has the meaning
given to the term in Section 4.2 of this Agreement.
OLB Price Ratio
has the meaning given
to the term in Section 7.1(j) of this Agreement.
OLB Real Property
has the meaning given
to the term in Section 4.15(a) of this Agreement.
OLB
Regulatory Agreement
has the meaning
given to the term in Section 4.11(e)(iii) of this
Agreement.
OLB Reports
has the meaning given to
the term in Section 4.11 of this Agreement.
OLB Returns
has the meaning given to
the term in Section 4.7(c) of this Agreement.
OLB Subsidiaries
means the subsidiaries
of OLB and Old Line as set forth in
OLB Disclosure Schedule
4.1(d)
.
OLB Taxes
has the meaning given to the
term in Section 4.7(c) of this Agreement.
OLB Termination Fee
has the meaning
given to the term in Section 8.1(c) of this Agreement.
Old Line
has the meaning given to the
term in the Background section of this Agreement.
PBGC
has the meaning given to the term
in Section 3.13(b) of this Agreement.
Per Share Consideration
has the meaning
given to the term in Section 2.1(b) of this Agreement.
Per Share Value
has the meaning given
to the term in
Section
2.1(b)(ii) of this Agreement.
Permitted Employees
means officers and
employees of any of the DCB Companies at the level of Vice
President or below.
Person
means an individual, an Entity
and any Regulatory Authority; provided, however, that if any
provision of this Agreement in which the term “person”
is used specifies a particular definition of “person”
for purpose of that provision, then the term shall have the meaning
so defined.
Plan of Reorganization
has the meaning
given to the term in Section 2.5(e) of this Agreement
Pre-Closing Period
means the period
commencing on the date of execution of this Agreement through the
earlier of (a) the Closing Date, and (b) the date this Agreement is
terminated pursuant to Article VII herein.
Price Determination Period
has the
meaning given to the term in Section 7.1(j) of this
Agreement.
Prospectus/Proxy Statement
means the
prospectus/proxy statement, together with any supplements thereto,
to be sent to holders of DCB Common Stock in connection with the
Merger and the DCB Common Stockholders’ Meeting.
Registration Statement
means the
registration statement on Form S-4, including any pre-effective or
post-effective amendments or supplements thereto, as filed by OLB
with the SEC under the Securities Act with respect to the OLB
Common Stock to be issued to the DCB Common Stockholders in
connection with the Merger.
Regulatory Authority
means any federal,
state or local governmental authority, agency or instrumentality,
or any self-regulatory organization, including, without limitation,
the SEC, the Commissioner, the FRB, the FDIC, NASDAQ, and the
respective staffs thereof.
REO
means, with respect to the DCB
Companies and the OLB Companies, real property that the DCB
Companies or the OLB Companies, as the case may be, classify as
other real estate owned for financial statement reporting and
regulatory purposes.
Replacement Nominee
has the meaning
given to the term in Section 5.7(c)(i) of this
Agreement.
Representatives
means, with respect to
an Entity, such Entity’s officers, directors, or employees,
or any investment bankers, financial advisors, attorneys,
accountants, consultants, agents or other representative retained
by any of them.
Residential Credit Extension
has the
meaning given to the term in Section 5.1(aa) of this
Agreement.
Retained Employees
has the meaning
given to the term in Section 5.7(c)(ii)(A) of this
Agreement.
Rights
means warrants, options, rights,
convertible securities, stock appreciation rights, other capital
stock equivalents and other arrangements or commitments that
obligate an Entity to issue or dispose of any of its capital stock
or other ownership interests or that provide for compensation based
on the equity appreciation of its securities.
SDAT
means the Maryland State
Department of Assessments and Taxation.
SEC
means the U.S. Securities and
Exchange Commission.
SEC Reports
has the meaning given to
the term in 4.11(c) of this Agreement.
Securities Act
means the Securities Act
of 1933, as amended, and the rules and regulations promulgated
thereunder.
Securities Laws
means the Securities
Act, the Exchange Act, and any applicable state blue sky laws,
collectively.
Starting Price
has the meaning given to
the term in Section 7.1(j) of this Agreement.
Subsidiary
means any Entity, 50% or
more of the equity or other ownership interest of which is owned,
either directly or indirectly, by another Entity, except any Entity
the interest in which is held in the ordinary course of the lending
or fiduciary activities of a bank.
Superior Proposal
has the meaning given
to the term in Section 5.7(a)(ii)
of this Agreement.
Support Agreement
means the Agreement
as set forth in Exhibit B hereto to be signed by the persons set
forth on Exhibit A hereto.
Tail Policy
has the meaning given to
the term in Section 5.7(c)(vi) of this Agreement.
Taxing Authority
means any federal,
state, local or foreign government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body
exercising tax regulatory authority.
Trading Days
means the days on which
NASDAQ is open for trading.
Section
1.3
The Merger and
Related Transactions.
(a)
Closing
. Unless the parties
hereto agree otherwise, the closing of the Contemplated
Transactions (the “
Closing
”) will take place
at the offices of Baker, Donelson, Bearman, Caldwell &
Berkowitz, PC, located at 100 Light Street, Baltimore, Maryland, at
a time and date to be reasonably selected by OLB after consultation
with DCB and after all conditions to Closing set forth in Article
VI of this Agreement (other than the delivery of certificates,
opinions, and other instruments and documents to be delivered at
the Closing) have been satisfied or waived (the “
Closing Date
”); provided,
however, that any certificate, opinion, instrument or other
document to be delivered at the Closing may be delivered
electronically. Unless expressly provided otherwise, all
certificates, instruments and other documents to be delivered at
the Closing shall be dated on or as of the Closing Date. The
parties agree to use reasonable efforts to accomplish the Closing
on or before July 7, 2017.
(b)
The Merger
. Subject to the
terms and conditions of this Agreement and in accordance with the
applicable laws of the State of Maryland, at the Effective
Time:
(i)
DCB shall merge
with and into OLB;
(ii)
The
separate existence of DCB shall cease;
(iii)
OLB
shall be the surviving corporation;
(iv)
Each
share of DCB Common Stock issued and outstanding immediately prior
to the Effective Time shall be converted into the right to receive
the Per Share Consideration as provided in Article II of this
Agreement; and
(v)
All of the property
(real, personal and mixed), rights, powers, duties, obligations and
liabilities of DCB shall be taken and deemed to be transferred to
and vested in OLB, as the surviving corporation, without further
act or deed (the transactions described in the foregoing items (i)
through (v) are collectively referred to herein as the
“
Merger
”).
At and
after the Effective Time, the Merger shall have the effects set
forth in Section 3-114 of the MGCL.
(c)
OLB’s Articles of Incorporation
and Bylaws
. On and after the Effective Time, the articles of
incorporation and bylaws of OLB, as in effect immediately prior to
the Effective Time, shall automatically be and remain the articles
of incorporation and bylaws of OLB, as the surviving corporation in
the Merger, until thereafter altered, amended or
repealed.
(d)
OLB’s and Old Line’s
Boards of Directors and Officers
.
(i)
Subsequent to the
date of this Agreement and in accordance with Section 5.7(c)(i),
OLB shall take such actions as may be necessary to, as of the
Effective Time, elect Stephen J. Deadrick and another individual
currently serving on DCB’s Board of directors as the parties
mutually agree to at a later date (the “
DCB Nominees
”) or, if
applicable, a Replacement Nominee listed on
DCB Disclosure Schedule 1.3(d)
,
to the OLB and Old Line boards of directors.
(ii)
At
the Effective Time, the officers of OLB duly elected and holding
office immediately prior to the Effective Time shall be the
officers of OLB, as the surviving corporation in the
Merger.
Section
1.4
[Intentionally
Omitted].
Section
1.5
Additional
Actions.
If, at
any time after the Effective Time, OLB shall consider or be advised
that any further deeds, assignments or assurances in law or any
other acts are necessary or desirable to (a) vest, perfect or
confirm, of record or otherwise, in OLB its right, title or
interest in, to or under any of the rights, properties or assets of
DCB or Damascus, or (b) otherwise carry out the purposes of this
Agreement, DCB, Damascus and their officers and directors shall be
deemed to have granted to OLB and Old Line an irrevocable power of
attorney to execute and deliver all such deeds, assignments or
assurances in law or any other acts as are necessary or desirable
to (i) vest, perfect or confirm, of record or otherwise, in OLB or
Old Line its right, title or interest in, to or under any of the
rights, properties or assets of DCB or (ii) otherwise carry out the
purposes of this Agreement, and the officers and directors of OLB
and Old Line are authorized in the name of DCB, Damascus or
otherwise to take any and all such action.
Section
1.6
The Bank
Merger.
Subject
to the terms and conditions of the Agreement and Plan of Merger
attached hereto as Exhibit C (the “
Bank Merger Agreement
”)
and in accordance with Title 3, Subtitle 7 of the Financial
Institutions Article of the Annotated Code of Maryland and
applicable federal law, immediately after the Merger, Damascus
shall be merged with and into Old Line and the separate existence
of Damascus shall cease (the “
Bank Merger
”). Old Line
shall be the surviving Entity in the Bank Merger and shall continue
its existence as a trust company with commercial banking powers
under the laws of the State of Maryland, and as a wholly-owned
operating subsidiary of OLB, subject to the provisions of this
Section 1.6.
ARTICLE
II.
CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES
Section
2.1
Merger
Consideration.
(a)
Calculation of DCB Tangible
Equity
. Within three Business Days following the date on
which the consolidated financial statements of DCB for the year
ended December 31, 2016 have been audited and finalized (the
“
Calculation
Date
”), DCB shall calculate the “
DCB Tangible Equity
”,
which shall be DCB’s total stockholders’ equity at
December 31, 2016 less its intangible assets, if any, at December
31, 2016, as such amounts are set forth in DCB’s audited
consolidated balance sheet at the December 31, 2016. Within five
Business Days after the Calculation Date, DCB shall provide OLB
with its calculation of the DCB Tangible Equity and any supporting
documentation necessary for OLB to review such
calculation.
(b)
Per Share Consideration
.
Subject to Section 2.3 and Section 2.4 hereof, each share of DCB
Common Stock that is issued and outstanding immediately prior to
the Effective Time shall, at the Effective Time, by reason of the
Merger and without any action on the part of the holder thereof,
cease to be outstanding and be automatically cancelled, and shall
be converted into the right to receive that number of shares of OLB
Common Stock (the “
Per Share Consideration
”)
equal to the exchange ratio (the “
Exchange Ratio
”)
calculated in accordance with the following:
(i)
The Exchange Ratio
shall be the number determined by dividing the Per Share Value
(defined below) by the Average Price (defined below), rounded to
the nearest ten-thousandth.
(ii)
The
term “
Per Share
Value
” shall mean the amount determined by (a)
multiplying the DCB Tangible Equity by 1.60 and (b) dividing such
product by the number of shares of DCB Common Stock that are issued
and outstanding immediately prior to the Effective
Time.
(iii)
The
term “
Average
Price
” shall mean the amount equal to the volume
weighted average of the closing prices of OLB Common Stock for the
ten Trading Days ending two Trading Days prior to the Closing Date;
provided, however, that, except as provided in Section 7.1(j) of
this Agreement, in no event will the Average Price be less than
$20.85 nor greater than the Starting Price.
Example
: Assume that the DCB Tangible
Equity is $25,332,000, that 1,613,180 shares of DCB Common Stock
are issued and outstanding immediately prior to the Effective Time,
and the Average Price is $25.09. In such case, the Per Share Value
would be
$25.13
(
i.e.
, ($25,332,000 x 1.6)
/ 1,613,180), the Exchange Ratio would be
1.0016
(
i.e.
, $25.13 / $25.09) and, thus, the
Per Share Consideration would be 1.0016 shares of OLB Common
Stock.
Exhibit
D hereto is an example of how the Exchange Ratio and Per Share
Consideration could be calculated under various Average Price
scenarios. One day prior to the Closing Date, OLB shall provide DCB
with its calculation of the Exchange Ratio and any supporting
documentation necessary for DCB to review such
calculation.
The
aggregate Per Share Consideration is sometimes referred to herein
as the “
Merger
Consideration
.”
Section
2.2
OLB Common
Stock.
Each
share of OLB Common Stock issued and outstanding immediately prior
to the Effective Date shall, on and after the Effective Date,
continue to be issued and outstanding.
Section
2.3
Fractional
Shares.
Notwithstanding
anything to the contrary contained herein, no fractional shares of
OLB Common Stock and no scrip or certificates therefor shall be
issued in connection with the Merger, no dividend or distribution
with respect to OLB Common Stock shall be payable on or with
respect to any fractional share interest, and such fractional share
interests shall not entitle the owner thereof to vote or to any
other rights of a stockholder of OLB. In lieu of the issuance of
any such fractional share, OLB shall pay to each former holder of
DCB Common Stock who otherwise would be entitled to receive a
fractional share of OLB Common Stock an amount in cash, rounded to
the nearest whole cent and without interest, equal to the product
of (a) the fraction of a share of OLB Common Stock to which such
holder would otherwise have been entitled and (b) the Average
Price. For purposes of determining any fractional share interest,
all shares of DCB Common Stock owned by a DCB Common Stockholder
shall be combined so as to calculate the maximum number of whole
shares of OLB Common Stock issuable to such DCB Common
Stockholder.
Section
2.4
Objecting DCB
Common Stockholders.
(a)
The Objecting DCB
Shares will not be converted into or represent a right to receive
the Merger Consideration under this Agreement, and the holder
thereof shall be entitled only to such rights as are granted by
Section 3-202 of the MGCL.
(b)
If any holder of
Objecting DCB Shares shall have failed to comply with Section 3-203
of the MGCL, or shall have effectively withdrawn or lost the right
granted thereunder, the Objecting DCB Shares held by such holder
shall be converted into a right to receive the Per Share
Consideration in accordance with the applicable provisions of this
Agreement.
(c)
All payments in
respect of Objecting DCB Shares, if any, will be made by
OLB.
Section
2.5
Exchange Fund;
Exchange of DCB Certificates.
(a)
Subject to the
other provisions of this Article II, on or immediately prior to the
Closing Date, OLB shall deposit in trust with or otherwise make
available to the Exchange Agent for the benefit of the DCB Common
Stockholders, for exchange in accordance with this Agreement,
through the Exchange Agent, (i) certificates representing the
Merger
Consideration and (ii)
cash sufficient to pay holders of what would have been fractional
shares of OLB Common Stock pursuant to Section 2.3 of this
Agreement (such certificates for shares of OLB Common Stock and
cash being hereinafter referred to as the “
Exchange
Fund
”).
(b)
As a condition to
receiving the Per Share Consideration for each share of DCB Common
Stock held, each DCB Common Stockholder shall be required to duly
execute and deliver to the Exchange Agent a letter of transmittal
(each, a “
Letter of
Transmittal
”). As promptly as practicable, but in any
event no later than five Business Days following the Effective
Time, and provided that DCB has delivered, or caused to be
delivered, to the Exchange Agent all information that is necessary
for the Exchange Agent to perform its obligations as specified
herein, the Exchange Agent shall mail to each holder of record of a
DCB Certificate a Letter of Transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the DCB
Certificate shall pass, only upon delivery of the DCB Certificate
to the Exchange Agent) and instructions for use in effecting the
surrender of the DCB Certificates in exchange for the Merger
Consideration as provided for in this Agreement. Each DCB Common
Stockholder, upon proper surrender of DCB Certificates to the
Exchange Agent, accompanied by duly executed Letters of
Transmittal, shall be entitled to receive in exchange therefor (i)
a certificate representing the number of whole shares of OLB Common
Stock to which such DCB Common Stockholder shall have become
entitled pursuant to the provisions of Section 2.1, and/or
(ii) a check representing the amount of cash in lieu of fractional
shares that such holder has the right to receive hereunder. Each
DCB Certificate so surrendered shall be cancelled. Until so
surrendered, each DCB Certificate will be deemed for all purposes
after the Effective Time to represent and evidence solely the right
to receive the Merger Consideration to be paid therefor pursuant to
this Agreement. Except as required by Law, no interest shall be
payable with respect to the cash payable for fractional shares or
the cash payable for Objecting Shares. If any DCB Common
Stockholder is unable to locate any DCB Certificate(s) to be
surrendered for exchange, the Exchange Agent shall deliver the
corresponding share of the Merger Consideration to the registered
stockholder thereof upon receipt of a lost certificate affidavit
and an indemnity agreement in a form acceptable to the Exchange
Agent and OLB.
(c)
The delivery of the
Merger Consideration following the Closing by the Exchange Agent
shall be as soon as practicable following the Exchange
Agent’s receipt of the applicable DCB Certificate(s) and duly
executed Letters of Transmittal.
(d)
No dividends or
other distributions declared with respect to OLB Common Stock shall
be paid to the holder of any unsurrendered DCB Certificate until
the holder thereof shall surrender such DCB Certificate(s) in
accordance with this Section 2.5. Pending such surrender, any
dividend or distribution payable in respect of such shares shall be
delivered to the Exchange Agent to be held as part of the Exchange
Fund. After the surrender of a DCB Certificate in accordance with
this Section 2.5, the record holder thereof shall be entitled to
receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect
to shares of OLB Common Stock represented by such DCB
Certificate.
(e)
To the extent that
shares of DCB Common Stock outstanding immediately prior to the
Effective Time are evidenced by one or more certificates
representing shares of common stock of Damascus, par value $3.00
per share (“
Bank
Certificates
”), that have not been surrendered
pursuant to Section 4(b) of that certain Plan of Reorganization and
Share Exchange, dated as of April 27, 2016, by and between DCB and
Damascus (the “
Plan
of Reorganization
”), such shares shall be treated as
outstanding shares of DCB Common Stock, and the Bank Certificates
shall be treated as certificates evidencing shares of DCB Common
Stock, for purposes of this Agreement, except that the holders
thereof shall be entitled to receive the Per Share Consideration in
respect thereof only upon the surrender of the Bank Certificates in
accordance with Section 2.5(b). Shares evidenced by Bank
Certificates shall in all other respects be subject to the same
terms and conditions that apply to shares of DCB Common Stock
evidenced by DCB Certificates under this Section 2.5, including,
without limitation, Section 2.5(d).
(f)
If the Person
surrendering a DCB Certificate and signing the accompanying Letter
of Transmittal is not the record holder thereof, or if any
certificate representing shares of OLB Common Stock is to be issued
in a name other than that in which a DCB Certificate surrendered in
exchange therefor is registered, it shall be a condition of the
payment of the Merger Consideration that: (i) such DCB Certificate
is properly endorsed to such Person or is otherwise in the proper
form for transfer, in either case signed exactly as the name of the
record holder appears on such DCB Certificate, and is otherwise in
proper form for transfer, or is accompanied by appropriate evidence
of the authority of the Person surrendering such Certificate and
signing the letter of transmittal to do so on behalf of the record
holder; and (ii) the Person requesting such exchange shall pay to
the Exchange Agent in advance any transfer or other taxes required
by reason of the payment to a Person other than the registered
holder of the DCB Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not
payable.
(g)
From and after the
Effective Time, there shall be no transfers on the stock transfer
books of DCB of the shares of DCB Common Stock that were issued and
outstanding immediately prior to the Effective Time. If, after the
Effective Time, DCB Certificates are presented for transfer, they
shall be cancelled and exchanged for the Merger Consideration as
provided in this Article II.
(h)
The Exchange Agent
will be entitled to deduct and withhold from the cash portion of
the Exchange Fund otherwise payable pursuant to this Agreement or
the Contemplated Transactions hereby to any holder of DCB Common
Stock such amounts as the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the IRC,
or any applicable provision of U.S. federal, state, local or
non-U.S. tax law. To the extent that such amounts are properly
withheld by the Exchange Agent, such withheld amounts will be
treated for all purposes of this Agreement as having been paid to
the holder of the DCB Common Stock in respect of whom such
deduction and withholding were made by the Exchange
Agent.
(i)
Any portion of the
Exchange Fund that remains unclaimed by the DCB Common Stockholders
for six months after the Effective Time shall be delivered by the
Exchange Agent to OLB. Any DCB Common Stockholder who has not
theretofore complied with this Section 2.5 shall thereafter be
entitled to look only to OLB for payment of the DCB Common
Stockholder’s share of the Merger Consideration deliverable
in respect of each share of DCB Common Stock such DCB Common
Stockholder holds as determined pursuant to this Agreement, without
any interest thereon.
(j)
No Liability
. None of OLB, DCB
or the Exchange Agent shall be liable to any Person in respect of
any distributions from the Exchange Fund properly delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar Law. If any DCB Certificate shall not have been
surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any Merger
Consideration would otherwise escheat to or become the property of
any Regulatory Authority), any such Merger Consideration shall, to
the extent permitted by applicable Law, become the property of OLB,
free and clear of all claims or interest of any Person previously
entitled thereto.
Section
2.6
Anti-Dilution
Provisions.
In the
event OLB changes (or establishes a record date for changing) the
number of, or provides for the exchange of, shares of OLB Common
Stock issued and outstanding prior to the Effective Time as a
result of a stock split, reverse stock split, stock dividend,
reclassification, or similar transaction with respect to the
outstanding OLB Common Stock, an appropriate adjustment shall be
made to the Exchange Ratio so as to provide the holders of the DCB
Common Stock the same economic benefit as contemplated by this
Agreement prior to such event; provided that, for the avoidance of
doubt, no such adjustment shall be made with regard to the Exchange
Ratio if (a) OLB issues additional shares of OLB Common Stock and
receives consideration for such shares in a bona fide third party
transaction, (b) OLB issues employee or director stock grants or
similar equity awards in the ordinary course of business consistent
with past practice, or (c) shares of OLB Common Stock are
repurchased by or on behalf of OLB.
Section
2.7
Other
Matters.
Nothing
set forth in this Agreement or any exhibit or schedule to this
Agreement shall be construed to:
(a)
Preclude any of the
OLB Companies from acquiring or assuming, or to limit in any way
the right of any of the OLB Companies to acquire or assume, prior
to or following the Effective Date, the stock, assets or
liabilities of any financial services institution or Entity other
than DCB or Damascus, whether for cash or by issuance or exchange
of OLB Common Stock or any securities convertible into shares of
OLB Common Stock, unless such transaction would result in a
Material Adverse Effect on OLB;
(b)
Preclude OLB from
issuing, or to limit in any way the right of OLB to issue, OLB
Common Stock or other securities in a transaction(s) other than the
Contemplated Transactions;
(c)
Preclude OLB from
granting employee, director, or compensatory options at any time
with respect to OLB Common Stock or other securities in the
ordinary course of business consistent with past
practices;
(d)
Preclude option
holders or equity compensation plan participants of OLB from
exercising options at any time with respect to OLB Common Stock or
other securities; or
(e)
Preclude any of the
OLB Companies from taking, or to limit in any way the right of any
of them to take, any other action not expressly and specifically
prohibited by the terms of this Agreement;
provided, however,
that no action taken by OLB pursuant to this Section 2.7 may impair
the ability of OLB to perform its obligations under this
Agreement.
ARTICLE III.
REPRESENTATIONS AND
WARRANTIES OF DCB
DCB
represents and warrants to OLB, for itself and with respect to and
on behalf of each of the DCB Subsidiaries (to the extent
applicable), that the statements contained in this Article III (and
as reflected on the DCB Disclosure Schedules) are true and correct
as of the date of this Agreement and will be true and correct as of
the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout
this Article III, except that those representations and warranties
that by their terms speak as of the date of this Agreement or some
other date shall be true and correct as of such date); provided,
however, that no representation or warranty contained in this
Article III shall be deemed untrue or incorrect, and DCB shall not
be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, circumstance or event
unless such fact, circumstance or event, individually or taken
together with all other facts, circumstances or events inconsistent
with any paragraph of Article III, has had or is reasonably
expected to have a Material Adverse Effect on DCB, disregarding for
these purposes (i) any qualification or exception for, or reference
to, materiality in any such representation or warranty and (ii) any
use of the terms “material,” “materially,”
“in all material respects,” “Material Adverse
Effect” or similar terms or phrases in any such
representation or warranty; provided, however, that the foregoing
standard shall not apply to representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.6, 3.14, 3.18, 3.27, 3.32
and 3.38, which shall be deemed untrue, incorrect and breached if
they are not true and correct in all material respects (the
“
Article III
Standard
”).
DCB has
made a good faith effort to ensure that the disclosure on each
schedule of the DCB Disclosure Schedules corresponds to the section
referenced herein. For purposes of the DCB Disclosure Schedules,
however, any item disclosed on any schedule therein is deemed to be
fully disclosed with respect to all schedules under which such item
may be relevant as and to the extent that it is reasonably clear on
the face of such schedule that such item applies to such other
schedule.
Section
3.1
Organization.
(a)
DCB is a
corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Maryland. DCB is a bank
holding company duly registered under the BHC Act. DCB has the full
corporate power and lawful authority to carry on its business and
operations as now being conducted and to own or lease all of its
properties and assets as presently owned or leased. DCB is duly
licensed, registered or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or
leased by it makes such licensing, registration or qualification
necessary, except where the failure to be so licensed, registered
or qualified would not have a Material Adverse Effect on DCB, and
all such licenses, registrations and qualifications are in full
force and effect in all material respects. DCB engages in
activities and holds properties only of the types permitted to bank
holding companies by the BHC Act and the rules and regulations
promulgated thereunder.
(b)
Damascus is a
Maryland-state chartered bank duly organized, validly existing and
in good standing under the laws of the State of Maryland. Damascus
has the full corporate power and lawful authority to carry on its
business and operations as now being conducted and to own or lease
all of its properties and assets as presently owned or leased.
Damascus is duly licensed, registered or qualified to do business
in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets
owned or leased by it makes such licensing, registration or
qualification necessary, except where the failure to be so
licensed, registered or qualified would not have a Material Adverse
Effect on DCB, and all such licenses, registrations and
qualifications are in full force and effect in all material
respects.
(c)
The deposits of
Damascus are insured by the FDIC to the extent provided in the
Federal Deposit Insurance Act and all premiums and assessments
required to be paid in connection therewith have been paid when
due.
(d)
DCB Disclosure Schedule 3.1(d)
contains a complete and accurate list of all DCB Subsidiaries. Each
DCB Subsidiary is duly organized, validly existing and in good
standing under the laws of the state of its organization and has
the full corporate power and lawful authority to carry on its
business and operations as now being conducted and to own or lease
all of its properties and assets as presently owned or leased. Each
DCB Subsidiary is duly licensed, registered or qualified to do
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing, registration or
qualification necessary, except where the failure to be so
licensed, registered or qualified would not have a Material Adverse
Effect on DCB, and all such licenses, registrations and
qualifications are in full force and effect in all material
respects. Other than shares of capital stock of the DCB
Subsidiaries listed on
DCB
Disclosure Schedule 3.1(d)
, DCB does not own or control,
directly or indirectly, or have the right to acquire directly or
indirectly, an equity interest in any Entity.
(e)
The respective
minute books of DCB and each DCB Subsidiary accurately reflect, in
all material respects, all material actions of their respective
owners and governing bodies, including committees, in each case in
accordance with the ordinary business practice of DCB or the
applicable DCB Subsidiary.
(f)
Prior to the date
of this Agreement, DCB has delivered to OLB true and correct copies
of the articles of incorporation and bylaws of DCB, and the charter
documents and bylaws, operating agreement and/or other governing
instrument of each DCB Subsidiary and each as in effect on the date
hereof (collectively, the “
DCB Governing
Documents
”).
(g)
DCB Disclosure Schedule 3.1(g)
contains a complete and accurate list of all DCB Subsidiaries that
are no longer operational or provide any business function for or
on behalf of DCB or Damascus (the “
Non-Operational
Subsidiaries
”).
Section
3.2
Capitalization.
(a)
The authorized
capital stock of DCB consists of 5,000,000 shares of common stock,
$0.01
par value per
share (“
DCB Common
Stock
”), of which, as of the date of this Agreement,
1,613,180 (which number includes 209,450 shares represented by Bank
Certificates) shares are duly authorized, validly issued and
outstanding. Except as provided in
DCB Disclosure Schedule 3.2(a)
,
as of the date of this Agreement, there are no bonds, debentures,
notes or other indebtedness of DCB or any DCB Subsidiary having the
right to vote on any matters on which stockholders of DCB may vote,
nor are any trust preferred or subordinated debt securities of DCB
or any DCB Company issued or outstanding. All of the issued and
outstanding shares of DCB Common Stock are fully paid and
nonassessable, free of preemptive rights, except as may be defined
in DCB’s articles of incorporation, and were not issued in
violation of the preemptive rights of any Person or in violation of
any applicable Laws. Except as set forth in
DCB Disclosure Schedule 3.2(a)
,
DCB has not issued nor is DCB or any DCB Subsidiary bound by any
subscription, call, commitment, agreement or other Right of any
character relating to the purchase, sale or issuance of, or right
to receive dividends or other distributions on, any shares of DCB
Common Stock or any other security of DCB or any securities
representing the right to vote, purchase or otherwise receive any
shares of DCB Common Stock or any other security of DCB.
Accordingly, the only securities of DCB to be outstanding
immediately prior to the Effective Time will be 1,613,180 shares of
DCB Common Stock.
(b)
Except as disclosed
in
DCB Disclosure Schedule
3.2(b)
, DCB owns, directly or indirectly, all of the capital
stock or other equity ownership interests of the DCB Subsidiaries,
free and clear of any Liens, agreements and restrictions of any
kind or nature, and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
(c)
Except as set forth
on
DCB Disclosure Schedule
3.2(c)
, to the Knowledge of DCB no person or group is the
beneficial owner of five percent or more of the outstanding shares
of DCB Common Stock (the terms “person,”
“group” and “beneficial owner” are as
defined in Section 13(d) of the Exchange Act, and the rules
and regulations thereunder).
(d)
DCB does not have a
dividend reinvestment plan or any stockholders’ rights
plan.
Section
3.3
Authority; No
Violation.
(a)
DCB
has full corporate power and authority to execute and deliver this
Agreement and, subject to the receipt of all consents, waivers and
approvals described in
DCB
Disclosure Schedule 3.4
and approval of the Agreement and
the Merger by the holders of DCB Common Stock as required by
DCB’s articles of incorporation and bylaws and the MGCL, to
consummate the Contemplated Transactions and to otherwise comply
with its obligations under this Agreement. The execution and
delivery of this Agreement by DCB and the consummation by DCB of
the Contemplated Transactions, up to and including the Merger, have
been duly and validly authorized by the board of directors of DCB
and, except for approval by the holders of DCB Common Stock as
required by DCB’s articles of incorporation and bylaws and
the MGCL, no other corporate proceedings on the part of DCB are
necessary to consummate the Contemplated Transactions. This
Agreement has been duly and validly executed and delivered by DCB
and, assuming the due authorization, execution and delivery of this
Agreement by OLB, constitutes the valid and binding obligation of
DCB, enforceable against DCB in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and subject, as to
enforceability, to general principles of equity.
(b)
The execution and
delivery of this Agreement by DCB, the consummation of the
Contemplated Transactions, and the compliance by DCB with any of
the terms or provisions hereof, subject to the receipt of all
consents described in
DCB
Disclosure Schedule 3.4
, the approval of this Agreement and
the Merger by the holders of DCB Common Stock as required by
DCB’s articles of incorporation and bylaws and the MGCL,
DCB’s and OLB’s compliance with any conditions
contained in this Agreement, and compliance by DCB or any DCB
Subsidiary with any of the terms or provisions hereof, do not and
will not:
(i)
Conflict with or
result in a breach of any provision of the DCB Governing
Documents;
(ii)
Violate
any Law applicable to DCB or any DCB Subsidiary or any of their
respective properties or assets, except where such violation would
not have a Material Adverse Effect; or
(iii)
Except
as described in
DCB
Disclosure Schedule 3.3(b)
or pursuant to which consent or
notification is required as set forth in
DCB Disclosure Schedule 3.4
,
violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event that, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of, or acceleration of, the performance required by, or
result in a right of termination or acceleration or the creation of
any Lien upon any of the properties or assets of DCB or any DCB
Subsidiary under any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other
instrument or obligation to which DCB or any DCB Subsidiary is a
party, or by which they or any of their respective properties or
assets may be bound or affected, except where such termination,
acceleration or creation would not have a Material Adverse Effect
on DCB.
(c)
Damascus has all
requisite corporate power and authority to execute and deliver the
Bank Merger Agreement and, subject to the receipt of all consents
described in
DCB
Disclosure Schedule 3.4,
to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger
Agreement and the consummation of the transactions contemplated
thereby have been duly and validly authorized by the board of
directors of Damascus and, other than the approval of the Bank
Merger Agreement by DCB as the sole stockholder of Damascus as
required by Law, no further corporate proceedings of Damascus are
needed to execute and deliver the Bank Merger Agreement and
consummate the transactions contemplated thereby. DCB, as the sole
stockholder of Damascus, shall promptly hereafter approve the Bank
Merger Agreement, and the Bank Merger Agreement will be duly
executed by Damascus on the date of this Agreement. The Bank Merger
Agreement has been duly authorized and, upon due authorization,
execution and delivery by Damascus, will be a legal, valid and
binding agreement of Damascus enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors’ rights generally and general equitable principles.
At the Closing, all other agreements, documents and instruments to
be executed and delivered by Damascus that are referred to in the
Bank Merger Agreement, if any, will have been duly executed and
delivered by Damascus and, assuming due authorization, execution
and delivery by the counterparties thereto, will constitute the
legal, valid and binding obligations of Damascus, enforceable
against Damascus in accordance with their respective terms and
conditions, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors’ rights generally and by general equitable
principles.
(d)
The approval of the
Agreement and the Merger by the holders of DCB Common Stock is the
only vote of holders of any class of DCB capital stock necessary to
adopt and approve this Agreement and the Contemplated Transactions.
The affirmative vote of Persons holding at least two-thirds of the
issued and outstanding shares of DCB Common Stock as of the record
date for the DCB Common Stockholders’ Meeting is required to
approve the Agreement and the Merger under the MGCL and DCB’s
articles of incorporation and bylaws.
(e)
DCB’s board
of directors, by resolution duly adopted by the unanimous vote of
the entire board of directors at a meeting duly called and held,
has (i) determined that this Agreement and the Contemplated
Transactions, including the Merger, are advisable and are in the
best interests of DCB and its stockholders, (ii) authorized and
approved this Agreement and the Contemplated Transactions, (iii)
directed that the Agreement and the Merger be submitted for
consideration at the DCB Common Stockholders’ Meeting, and
(iv) recommended that its stockholders approve this Agreement and
the Merger.
Section
3.4
Consents;
Regulatory Approvals.
Except
as described in Section 3.3(b) of this Agreement and as described
in
DCB Disclosure Schedule
3.4
, no consents, waivers or approvals of, or filings or
registrations with, any Regulatory Authorities or other third
parties are necessary in connection with the execution and delivery
of this Agreement by DCB or the consummation of the Contemplated
Transactions by DCB. DCB has no reason to believe that it will not
be able to obtain all requisite consents, waivers or approvals from
the Regulatory Authorities or any third party in order to
consummate the Contemplated Transactions on a timely basis. To the
Knowledge of DCB, no fact or circumstance exists, including any
possible other transaction pending or under consideration by DCB or
any DCB Company, that would (a) reasonably be expected to prevent
or delay in any material respect, any filings or registrations
with, or consents, waivers or approvals required from, any
Regulatory Authority, or (b) cause a Regulatory Authority acting
pursuant to applicable Law to seek to prohibit or materially delay
consummation of the Contemplated Transactions or impose a
Burdensome Condition.
Section
3.5
Financial
Statements.
(a)
DCB has previously
delivered the DCB Financials to OLB, except those pertaining to
annual and quarterly periods commencing after September 30, 2016
and monthly periods commencing after December, 31, 2016, which it
will deliver by each respective delivery date as required by this
Agreement. The delivered DCB Financials fairly present, in all
material respects, the consolidated financial position, results of
operations, changes in stockholders’ equity and cash flows of
DCB as of and for the periods ended on the dates thereof. The
delivered DCB Financials comply in all material respects with
applicable accounting and regulatory requirements and, other than
the Internal DCB Financials, have been prepared in accordance with
GAAP consistently applied, except for (i) omission of the notes
from the financial statements, applicable to any interim period,
and (ii) with respect to any interim period, normal year-end
adjustments and notes thereto. Smith Elliott Kearns & Company,
LLC has not resigned (or informed DCB that it intends to resign) or
been dismissed as independent public accountants of DCB as a result
of or in connection with any disagreements with DCB on a matter of
accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
(b)
DCB did not, as of
the date of the DCB Financials or any subsequent date, have any
liabilities, obligations or loss contingencies of any nature,
whether absolute, accrued, contingent or otherwise, that are not
fully reflected or reserved against in the balance sheets included
in the DCB Financials at the date of such balance sheets that would
have been required to be reflected therein in accordance with GAAP
consistently applied or fully disclosed in a note thereto, except
for liabilities, obligations and loss contingencies that are not
material in the aggregate and that are incurred in the ordinary
course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies that are within the
subject matter of a specific representation and warranty herein or
that have not had a Material Adverse Effect and subject, in the
case of any unaudited statements, to normal recurring audit
adjustments and the absence of notes thereto.
Section
3.6
No Material Adverse
Effect.
Except
as disclosed on
DCB
Disclosure Schedule 3.6
, neither DCB nor any DCB Subsidiary
has suffered any adverse change in its assets (including loan
portfolio), liabilities (whether absolute, accrued, contingent or
otherwise), liquidity, net worth, property, financial condition or
results of operations, or any damage, destruction or loss, whether
or not covered by insurance, since December 31, 2015, that in the
aggregate has had or is reasonably likely to have a Material
Adverse Effect on the DCB Companies taken as a whole.
(a)
Except as disclosed
in
DCB Disclosure Schedule
3.7(a)
, all DCB Returns required by applicable Law to have
been filed with any Taxing Authority by, or on behalf of, each of
the DCB Companies have been filed on a timely basis in accordance
with all applicable Laws, and such DCB Returns are true, complete
and correct in all material respects, or requests for extensions to
file the DCB Returns have been timely filed, granted and have not
expired, except to the extent that such failures to file, to be
complete or correct or to have extensions granted that remain in
effect individually or in the aggregate would not have a Material
Adverse Effect on DCB. All DCB Taxes shown to be due and payable on
the DCB Returns or on subsequent assessments with respect thereto
have been paid in full or adequate reserves have been established
in the DCB Financials for the payment of such DCB Taxes, except
where any such failure to pay or establish adequate reserves, in
the aggregate, has not had, and is not reasonably likely to have, a
Material Adverse Effect on the DCB Companies. Each of the DCB
Companies has timely withheld and paid over all DCB Taxes required
to have been withheld and paid over by it, and complied with all
information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party. There are no Liens on
any of the assets of the DCB Companies with respect to DCB Taxes,
other than Liens for DCB Taxes not yet due and
payable.
(b)
Except as disclosed
on
DCB Disclosure Schedule
3.7(b)
, no deficiencies for DCB Taxes have been claimed,
proposed or assessed, with notice to any of the DCB Companies, by
any taxing or other governmental authority against the DCB
Companies that have not been settled, closed or reached a final
determination, or that have not been adequately reserved for in the
DCB Financials, except for deficiencies that, individually or in
the aggregate, have not had, and are not reasonably likely to have,
a Material Adverse Effect on DCB. There are no pending audits
relating to any DCB Tax liability of which any of the DCB Companies
has received written notice. Except as disclosed on
DCB Disclosure Schedule 3.7(b)
,
none of the DCB Companies is a party to any action or proceeding
for assessment or collection of DCB Taxes, nor have such events
been asserted or, to the Knowledge of DCB, threatened against any
of the DCB Companies or any of their assets. No waiver or extension
of any statute of limitations relating to DCB Taxes is in effect
with respect to the DCB Companies. No power of attorney has been
executed by any of the DCB Companies with respect to any DCB Tax
matter that is currently in force.
(c)
The DCB Companies
have disclosed on the federal income tax DCB Returns all positions
taken therein that could give rise to a substantial understatement
penalty within the meaning of Section 6662 of the IRC. None of
the DCB Companies has agreed to make, nor is it required to make,
any adjustment under IRC Section 481(a) by reason of a change
in accounting method or otherwise. None of the property of the DCB
Companies is subject to a safe-harbor lease (pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect after the Economic Recovery Tax Act of 1981 and before the
Tax Reform Act of 1986) or is “tax-exempt use property”
(within the meaning of Section 168(h) of IRC) or
“tax-exempt bond financed property” (within the meaning
of Section 168(g)(5) of IRC). Except as disclosed on
DCB Disclosure Schedule
3.7(c
), none of the DCB Companies is a party to any tax
sharing agreement or has any continuing obligations under any prior
tax sharing agreement. None of the DCB Companies is, or has been, a
member of any affiliated group within the meaning of Section
1504(a) of the IRC or any similar group defined under a similar
provision of state, local, or non-U.S. law other than a group the
common parent of which was DCB.
(d)
None of the DCB
Companies has been a party to any distribution occurring during the
last three years in which the parties to such distribution treated
the distribution as one to which Section 355 of the IRC (or
any similar provision of state, local or foreign law)
applied.
(e)
As used in this
Agreement, the term “
DCB Taxes
” shall mean all
taxes, however denominated, including any interest, penalties or
other additions to tax that may become payable in respect thereof,
imposed by any federal, territorial, state, local or foreign
government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the
generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state
income taxes), real property gains taxes, payroll and employee
withholding taxes, unemployment insurance taxes, social security
taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, and other obligations of the
same or of a similar nature to any of the foregoing, which any of
the DCB Companies is required to pay, withhold or collect. As used
in this Agreement, the term “
DCB Returns
” shall mean
all reports, estimates, declarations of estimated tax, information
statements and returns relating to, or required to be filed in
connection with, any DCB Taxes, including information returns or
reports with respect to backup withholding and other payments to
third parties.
(f)
True and complete
copies of the federal income tax returns and any amendments thereto
of the DCB Companies as filed with the IRS for the years ended
December 31, 2014 and 2015 have been furnished to OLB, and, if the
Effective Date is later than the due dates therefor, true and
complete copies of the federal income tax returns of the DCB
Companies for the years ended on or after December 31, 2016 will be
furnished to OLB within five business days of filing.
(g)
True and complete
copies of the state income tax returns of the DCB Companies as
filed with the State of Maryland for the years ended December 31,
2014 and 2015 have been furnished to OLB, and, if the Effective
Date is later than the due dates therefor, true and complete copies
of the state income tax returns of the DCB Companies for the years
ended on or after December 31, 2016 will be furnished to OLB within
five business days of filing.
Section
3.8
Contracts; Certain
Changes.
(a)
Except as described
in
DCB Disclosure Schedule
3.8(a
),
3.11
,
3.13(a)
, or
3.15(a)
, neither DCB nor any
DCB Subsidiary is a party to or subject to:
(i)
Any employment,
consulting, severance, “change-in-control,”
indemnification or termination contract or arrangement with or for
any officer, director, employee, independent contractor, agent or
other Person;
(ii)
Any
plan, arrangement or contract providing for bonuses, pensions,
options, deferred compensation, retirement payments, profit
sharing, or similar arrangements for or with any officer, director,
employee, independent contractor, agent, or other
Person;
(iii)
Except
as provided in the DCB Governing Documents, any agreement that
provides for the indemnification of any of its present or former
directors, officers or employees, or other persons who serve or
served as a director, officer or employee of another corporation,
partnership or other enterprise at the request of DCB and, to the
Knowledge of DCB, there are no claims for which any such person
would be entitled to indemnification under DCB Governing Documents,
under any applicable Law or under any indemnification
agreement;
(iv)
Any
collective bargaining agreement with any labor union relating to
its employees;
(v)
Any agreement that
by its terms limits its payment of dividends;
(vi)
Any
material instrument (A) evidencing or relating to indebtedness for
borrowed money, whether directly or indirectly, by way of purchase
money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which it is an obligor to any Person,
other than deposits, FHLB advances, repurchase agreements,
bankers’ acceptances and “treasury tax and loan”
accounts established in the ordinary course of business, and
transactions in “federal funds,” or (B) that contains
financial covenants or other restrictions, other than those
relating to the payment of principal and interest when due, that
would be applicable on or after the Effective Time;
(vii)
Any
contract, other than this Agreement, that restricts or prohibits it
from engaging in any type of business permissible under applicable
Law;
(viii)
Any
contract, plan or arrangement that provides for payments or
benefits in certain circumstances that, together with other
payments or benefits payable to any participant therein or party
thereto, might render any portion of any such payments or benefits
subject to disallowance of deduction therefor as a result of the
application of Section 280G of the IRC;
(ix)
Any
contract involving Intellectual Property (other than contracts
entered into in the ordinary course with customers and
off-the-shelf, “shrink wrap” or force placed software
licenses);
(x)
Any lease for real
property;
(xi)
Any
contract or arrangement with any broker-dealer or investment
adviser;
(xii)
Any
investment advisory contract with any investment company registered
under the Investment Company Act of 1940;
(xiii)
Any
contract or arrangement with, or membership in, any local clearing
house or self-regulatory organization;
(xiv)
any
agreement (other than this Agreement), contract, arrangement,
commitment or understanding (whether written or oral) that
restricts or limits in any material way the conduct of its business
(it being understood that any non-compete, non-solicitation or
similar provision shall be deemed material);
(xv)
any
agreement that grants any right of first refusal, right of first
offer or similar right with respect to any of its material assets,
rights or properties;
(xvi)
Any
contract in which it has liability or would incur a contract
termination fee of over $50,000; or
(xvii)
Any
contract or arrangement not disclosed pursuant to the other items
of this paragraph (a) that would constitute a “material
contract” as defined in Item 601(b)(10) of Regulation S-K of
the SEC.
(b)
True and correct
copies of the contracts, plans, arrangements and instruments listed
in
DCB Disclosure Schedule
3.8(a)
,
3.11
,
3.13(a)
, or
3.15(a)
have been made
available to OLB on or before the date hereof and are in full force
and effect on the date hereof. None of the DCB Companies nor, to
the Knowledge of DCB, any other party to any such contract, plan,
arrangement or instrument, has breached any provision of, or is in
default under any term of, any such contract, plan, arrangement or
instrument and no party to any such contract, plan, arrangement or
instrument will have the right to terminate any or all of the
provisions thereof as a result of the Contemplated Transactions,
except where such breach, default or termination is not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect.
(c)
Except as described
in
DCB Disclosure Schedule
3.8(c
), since December 31, 2015, through and including the
date of this Agreement, none of the DCB Companies has (i) made any
material change in its credit policies or procedures, the effect of
which was or is to make any such policy or procedure less
restrictive in any material respect, (ii) made any material
acquisition or disposition of any assets or properties, or entered
into any contract for any such acquisition or disposition, other
than loans, loan commitments and the disposition of REO in the
ordinary course of business consistent with past practice, (iii)
entered into any lease of real or personal property requiring
annual payments in excess of $50,000, other than in connection with
foreclosed property or in the ordinary course of business
consistent with past practice, or (iv) changed any accounting
methods, principles or practices affecting its assets, liabilities
or businesses, including any reserving, renewal or residual method,
practice or policy.
(d)
Except as disclosed
on
DCB Disclosure Schedule
3.8(d)
, neither DCB nor any of the DCB Subsidiaries has
issued, or is obligated under, any letter of credit that is not
fully secured.
Section
3.9
Ownership of
Personal Property; Insurance Coverage.
(a)
Except as disclosed
on
DCB Disclosure Schedule
3.9(a)
, each of the DCB Companies has good and marketable
title to all material assets and properties owned by it in the
conduct of its businesses, whether such assets and properties are
real or personal, tangible or intangible, including assets and
property reflected in the balance sheets contained in the DCB
Financials or acquired subsequent thereto, subject to no Liens,
except:
(i)
Those items that
secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to the FHLB,
inter-bank credit facilities or reverse repurchase agreements and
that are described in
DCB
Disclosure Schedule 3.9(a)
or permitted under Article V
hereof;
(ii)
Mechanics
liens and similar liens for labor, materials, services or supplies
provided for such property and incurred in the ordinary course of
business for amounts not yet delinquent or that are being contested
in good faith;
(iii)
Statutory
Liens for amounts not yet delinquent or that are being contested in
good faith;
(iv)
Liens
for current DCB Taxes not yet due and payable;
(v)
Pledges to secure
deposits and other Liens incurred in the ordinary course of the
business of banking;
(vi)
Liens,
imperfections of title, easements and other defects of title that
are not reasonably likely to have a Material Adverse
Effect;
(vii)
With
respect to personal property reflected in the balance sheets
contained in the DCB Financials, (A) dispositions and encumbrances
for adequate consideration in the ordinary course of business since
the date of such balance sheets and/or (B) dispositions of obsolete
personal property since the date of such balance
sheets;
(viii)
Those
items that are reflected as liabilities in the DCB Financials;
and
(ix)
Items
of personal property that are held in any fiduciary or agency
capacity.
(b)
With respect to
material items of real and personal property that are used in the
conduct of its business and leased from other Persons, each of the
DCB Companies has the right under valid and existing leases to use
such real and personal property in all material respects as
presently occupied and used.
(c)
With respect to all
agreements pursuant to which any of the DCB Companies has purchased
securities subject to an agreement to resell, if any, it has a
valid, perfected first lien or security interest in the securities
or other collateral securing the repurchase agreement, and the
value of such collateral equals or exceeds the amount of the debt
secured thereby.
(d)
Each of the DCB
Companies currently maintains insurance with reputable insurers
against such risks and in such amounts as the management of DCB has
determined to be prudent for such DCB Company’s operations,
and, to the Knowledge of DCB, such insurance is similar in scope
and coverage in all material respects to insurance maintained by
other similarly-situated businesses. Each of DCB and each DCB
Subsidiary is in compliance with its insurance policies, is not in
default under any of the terms thereof and has made accurate
statements on any insurance renewal application. Each such policy
is in full force and effect and, except for policies insuring
against potential liabilities of officers, directors and employees
of DCB and the DCB Subsidiaries, DCB or the relevant DCB Subsidiary
is the sole beneficiary of such policies. All premiums and other
payments due under any such policy have been paid, and all claims
thereunder have been filed in a due and timely
fashion.
(e)
None of the DCB
Companies has received notice from any insurance carrier
that:
(i)
The insurance will
be cancelled or that coverage thereunder will be reduced or
eliminated; or
(ii)
Premium
costs with respect to such insurance will be substantially
increased, except as set forth in
DCB Disclosure Schedule
3.9(f)
.
(f)
There are presently
no material claims pending under such policies of insurance and
none of the DCB Companies has received any notices under such
policies. All such insurance is valid and enforceable and in full
force and effect, and within the last three years, each of the DCB
Companies has received each type of insurance coverage for which it
has applied and during such periods it has not been denied
indemnification for any material claims submitted under any of its
insurance policies.
DCB
Disclosure Schedule 3.9(f)
identifies all policies of
insurance maintained by the DCB Companies as well as the other
matters required to be disclosed under Section 3.9(e)(ii) and this
Section 3.9(f).
Section
3.10
Litigation and
Other Proceedings.
Except
as described in
DCB
Disclosure Schedule 3.10
, there are no legal,
quasi-judicial, administrative, suit, arbitration or other
proceedings, claims (whether asserted or unasserted), actions or
governmental investigations or inquiries of any kind or nature now
pending or, to the Knowledge of DCB, threatened, before any court,
administrative, regulatory, arbitration or similar body in any
manner against any of the DCB Companies or any of their properties,
and to the Knowledge of DCB there are no facts that reasonably
could be expected to be the basis for any such suit, arbitration,
other proceeding, claim, action, investigation or inquiry. To the
Knowledge of DCB, no pending or threatened suit, arbitration
proceeding claim, action, investigation or inquiry described in
DCB Disclosure Schedule
3.10
could reasonably be expected to (a) have a Material
Adverse Effect, (b) question the validity of any action taken or to
be taken in connection with this Agreement or the Contemplated
Transactions, or (c) materially impair or delay the ability of the
DCB Companies to perform their obligations under this Agreement.
Except as described in
DCB
Disclosure Schedule 3.10
, none of the DCB Companies is in
default with respect to any judgment, order, writ, injunction,
decree, award, rule, or regulation of any court, arbitrator or
Regulatory Authority.
Section
3.11
Compliance with
Applicable Law.
Except
as disclosed on
DCB
Disclosure Schedule 3.11
:
(a)
Each of the DCB
Companies conducts its business in compliance with all Laws
applicable to it, its properties, assets and deposits, its
business, and its conduct of business and its relationship with its
employees conducting such business, except where noncompliance
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect;
(b)
Each of the DCB
Companies has all material permits, licenses, authorizations,
orders and approvals of all Regulatory Authorities that are
required in order to permit it to own or lease its properties and
carry on its business as it is presently conducted; all such
permits, licenses, authorizations, orders and approvals are in full
force and effect, and no suspension or cancellation of any of them
is, to the Knowledge of DCB, threatened, and to the Knowledge of
DCB no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from
the consummation of the Contemplated Transactions, subject to
obtaining the receipt of all requisite approvals or consents from
the Regulatory Authorities in order to consummate the Contemplated
Transactions. None of the DCB Companies have been given notice or
been charged with any violation of any law, ordinance, regulation,
order, writ, rule, decree or condition to approval of any
Regulatory Authority that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse
Effect;
(c)
Since January 1,
2011, each of the DCB Companies has timely filed all reports,
forms, schedules, registrations, statements and other documents,
together with any amendments required to be made with respect
thereto, that it was required by Law to file with any Regulatory
Authority, and has paid all fees and assessments due and payable in
connection therewith, and each of such filings complied in all
material respects with all Laws under which it was filed (or was
amended so as to be in compliance promptly following discovery of
such noncompliance) and, to the extent such filings contain
financial information, have been prepared in all material respects
in accordance with applicable regulatory accounting principles and
practices throughout the periods covered by such filing, except to
the extent failure to timely file would not, individually or in the
aggregate, be expected to have a Material Adverse Effect; none of
the DCB Companies is required to file periodic reports pursuant to
Sections 13 or 15(d) of the Exchange Act;
(d)
No Regulatory
Authority has initiated any proceeding or, to the Knowledge of DCB,
investigation into the business or operations of the DCB Companies
that has not been resolved;
(e)
Since January 1,
2014, none of the DCB Companies has received any notification or
communication from any Regulatory Authority:
(i)
Asserting that it
is not in substantial compliance with any Law that such Regulatory
Authority enforces, unless such assertion has been waived,
withdrawn or otherwise resolved;
(ii)
Threatening
to revoke any license, franchise, permit or governmental
authorization that is material to it; or
(iii)
Requiring
or threatening to require it, or indicating that it may be
required, to enter into a cease and desist order, consent
agreement, other agreement or memorandum of understanding, or any
other agreement directing, restricting or limiting, or purporting
to direct, restrict or limit, in any manner its operations,
including without limitation any restriction on the payment of
dividends (any such notice, communication, memorandum, agreement or
order described in this Section 3.11(e)(iii) and addressed
specifically to a DCB Company herein referred to as a
“
DCB Regulatory
Agreement
”);
(f)
None of the DCB
Companies has received, consented to or entered into any DCB
Regulatory Agreement that is currently in effect, nor has any DCB
Company been advised since January 1, 2013 by any Regulatory
Authority that it is considering issuing, initiating, ordering or
requesting any DCB Regulatory Agreement that has not already been
issued, initiated, ordered or requested;
(g)
There is no
injunction, order, award, judgment, settlement, decree or
regulatory restriction imposed upon or entered into by any of the
DCB Companies or upon any of their assets; and
(h)
Since January 1,
2013, (i) none of the DCB Companies nor, to the Knowledge of DCB,
any director, officer, employee, auditor, accountant or other
Representative of DCB or any DCB Subsidiary, has received or
otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding
its accounting or auditing practices, procedures, methodologies or
methods or its internal accounting controls, including any material
complaint, allegation, assertion or claim that it has engaged in
questionable accounting or auditing practices, and (ii) no attorney
representing it, whether or not employed by it, has reported
evidence of a material violation of Securities Laws, breach of
fiduciary duty or similar violation by it or any of its officers,
directors, employees or agents to its board of directors or any
committee thereof or to any director or officer.
Section
3.12
Labor
Matters.
There
are no labor or collective bargaining agreements to which any of
the DCB Companies is a party. There is no union organizing effort
pending or, to the Knowledge of DCB, threatened, against any of the
DCB Companies. There is no labor strike, labor dispute (other than
routine employee grievances that are not related to union
employees), work slowdown, stoppage or lockout pending or, to the
Knowledge of DCB, threatened, against any of the DCB Companies.
There are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or, to the
Knowledge of DCB, threatened, involving employees of any of the DCB
Companies. No arbitration or proceeding asserting that any of the
DCB Companies has committed an unfair labor practice (within the
meaning of the National Labor Relations Act of 1935) or seeking to
compel any of the DCB Companies to bargain with any labor
organization as to wages or conditions of employment is pending or,
to the Knowledge of DCB, threatened, with respect to any of the DCB
Companies before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other Regulatory Authority
(other than routine employee grievances that are not related to
union employees). Each of the DCB Companies is in compliance in all
material respects with all applicable Laws respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice.
None of the DCB Companies has made any commitments to others
inconsistent with or in derogation of any of the foregoing. Except
as described in
DCB
Disclosure Schedule 3.12
, there are no pending or, to the
Knowledge of DCB, threatened, claims or suits against any of the
DCB Companies under any applicable labor or employment Law or
brought or made by a current or former employee or applicant for
employment.
(a)
DCB has set forth
in
DCB Disclosure Schedule
3.13(a)
a complete and accurate list of the DCB Benefit
Plans and made available to OLB a copy of all available written
documents regarding such Benefit Plans including:
(i)
A copy of each of
the DCB Benefit Plans and any related trust agreements or other
funding arrangements;
(ii)
The
most recent actuarial reports (if any) and financial reports it has
received relating to the DCB Benefit Plans that constitute
“qualified pension plans” under IRC
Section 401(a);
(iii)
The
most recently filed Form 5500, together with schedules and
attachments, as required (if any) relating to the DCB Benefit Plans
that have been filed with the United States Department of
Labor;
(iv)
The
most recent favorable determination letters (or opinion letter for
a prototype plan) issued by the IRS that pertain to any of the DCB
Benefit Plans that are “qualified pension plans” under
IRC Section 401(a); and
(v)
Summary plan
descriptions and any amendments or material modifications thereto
and any insurance, third party administrator or administrative
services only contracts related to the DCB Benefit Plans within the
meaning of ERISA Section 3(1) or 3(2).
(b)
The DCB Companies
have paid in full any insurance premiums due to the Pension Benefit
Guaranty Corporation (“
PBGC
”) with respect to
any defined benefit pension plans for the six years prior to, and
through, the Effective Date. Except as disclosed in
DCB Disclosure Schedule
3.13(b)
, no pension plan (within the meaning of ERISA
Section 3(2)) maintained or contributed to by any of the DCB
Companies has been terminated or is under notice from the PBGC of
any threat of termination under the procedures of the PBGC. To the
Knowledge of DCB, no circumstance has occurred for which any
reportable event under ERISA Section 4043(b) has been or would
be required that has not been reported or with respect to which the
notice requirement has not been waived. Except as set forth on
DCB Disclosure Schedule
3.13(b)
, no DCB Benefit Plan is subject to IRC Section 412
or Title IV of ERISA, and as of the Effective Date, to the
Knowledge of DCB, no condition exists that will present a material
risk to OLB of incurring any liability to the PBGC or on account of
the failure to comply with any such provisions in connection with
any such DCB Benefit Plan. Except as disclosed in
DCB Disclosure Schedule
3.13(b)
, no DCB Benefit Plan provides, and none of the DCB
Companies has any obligation to provide, health or welfare benefits
to any individual following termination of such individual’s
employment or service with it or an Affiliate (other than as
required under the Consolidated Omnibus Budget Reconciliation Act
of 1986, as amended or any similar state law).
(c)
To the Knowledge of
DCB, none of the DCB Companies has ever contributed to, or
otherwise incurred, any liability with respect to a multi-employer
plan (within the meaning of ERISA Section 3(37)).
(d)
Each DCB Benefit
Plan complies in all material respects with the applicable
requirements of ERISA, the IRC, the Patient Protection and
Affordable Care Act of 2010, and any other applicable Laws
governing the DCB Benefit Plan, and each DCB Benefit Plan has at
all times been administered in all material respects in accordance
with all requirements of applicable Law and in accordance with its
terms. Each pension plan adopted by the DCB Companies that is
intended to be qualified under Section 401(a) of the IRC is so
qualified, and, to the Knowledge of DCB, each trust established by
each pension plan is exempt from federal income tax under Section
501(a) of the IRC. Each of the pension plans adopted by the DCB
Companies is, and from its establishment has been, exempt from
federal income tax under Section 501(a) of the IRC. Each of the
pension plans adopted by the DCB Companies has received, or is
entitled to rely upon, a favorable determination letter (or opinion
letter for a prototype plan) from the IRS, and to the Knowledge of
DCB there are no circumstances that will or could result in
revocation of, or inability to continue to rely upon, any such
favorable determination letter or opinion letter. No lawsuits,
claims (other than routine claims for benefits) or complaints to,
or by, any Person, governmental authority, regulatory body or
arbiter have been filed, are pending or, to the Knowledge of DCB,
are threatened, with respect to any DCB Benefit Plan and, to the
Knowledge of DCB, there is no fact or contemplated event that would
give rise to any lawsuit, claim (other than routine claims for
benefits) or complaint with respect to any DCB Benefit Plan.
Without limiting the foregoing, to the Knowledge of DCB, the
following are true:
(i)
Each
DCB Benefit Plan that is a defined benefit pension plan subject to
IRC Section 412 or Title IV of ERISA as of the most recent
actuarial valuation has an AFTAP determined under IRC Section 430
and 436 that exceeds the AFTAP level that would impose any
funding-based limit on such plan under IRC Section
436;
(ii)
Each
DCB Benefit Plan that is a defined contribution pension plan that
is intended to be
qualified
under IRC Section 401(a) has had all contributions
made to the plan trust in accordance with the terms of the plan on
a timely basis under the IRC and ERISA;
(iii)
With
respect to each DCB Benefit Plan, to the Knowledge of DCB, there is
no occurrence or contract that would constitute any
“prohibited transaction” within the meaning of
Section 4975(c) of the IRC or Section 406 of ERISA, which
transaction is not exempt under applicable Law, including
Section 4975(d) of the IRC or Section 408 of
ERISA;
(iv)
Except
as disclosed in
DCB
Disclosure Schedule 3.13(d)(iv)
, no DCB Benefit Plan is an
Employee Stock Ownership Plan as defined in Section 4975(e)(7)
of the IRC;
(v)
No DCB Benefit Plan
is a Qualified Foreign Plan as the term is defined in
Section 404A of the IRC and no DCB Benefit Plan or any related
trust assets or agreements are subject to the laws of any
jurisdiction other than the United States of America or any state,
county or municipality of the United States;
(vi)
None
of the welfare plans adopted by the DCB Companies is a Voluntary
Employees’ Beneficiary Association as defined in
Section 501(c)(9) of the IRC;
(vii)
All
of the welfare plans adopted by the DCB Companies and their related
trusts comply in all material respects with and have been
administered in substantial compliance with (A) Section 4980B
of the IRC and Sections 601 through 609 of ERISA and all U.S.
Department of the Treasury and U.S. Department of Labor regulations
issued thereunder, respectively, (B) the Health Insurance
Portability and Accountability Act of 1996, (C) the applicable
provisions of the Patient Protection and Affordable Care Act of
2010, and (D) the U.S. Department of Labor regulations issued with
respect to such welfare benefit plans; and
(viii)
With
respect to each DCB Benefit Plan, DCB or any DCB ERISA Affiliate
has the authority to amend or terminate such DCB Benefit Plan at
any time, subject to the applicable requirements of ERISA and the
IRC and the provisions of the DCB Benefit Plan.
(e)
There is no
existing or, to the Knowledge of DCB, contemplated audit of any DCB
Benefit Plan by the IRS, the U.S. Department of Labor, the PBGC,
any Regulatory Authority or any other governmental authority. In
addition, there are no pending or, to the Knowledge of DCB,
threatened claims by, on behalf of or with respect to any DCB
Benefit Plan, or by or on behalf of any individual participant or
beneficiary of any DCB Benefit Plan, alleging any violation of
ERISA or any other applicable Laws, or claiming benefits (other
than claims for benefits made in the ordinary course of business),
nor, to the Knowledge of DCB, is there any basis likely to enable
such claim to prevail.
(f)
Except as disclosed
on
DCB Disclosure Schedule
3.13(f)
, (i) no payment contemplated or required by or under
any DCB Benefit Plan and employment-related agreement would in the
aggregate constitute excess parachute payments as defined in
Section 280G of the IRC (without regard to subsection (b)(4)
thereof), (ii) no DCB Benefit Plan provides for the gross-up or
reimbursement of taxes under Sections 280G, 4999 or 409A of the
IRC, and (iii) neither the execution and delivery of this Agreement
nor the consummation of Contemplated Transactions will (either
alone or in conjunction with any other event) result in, cause the
vesting, exercisability or delivery of, or increase the amount or
value of, any payment, right or other benefit to any current or
former employee, officer, director or other service provider of any
of the DCB Companies.
(g)
Except as disclosed
on
DCB Disclosure Schedule
3.13(g)
, no DCB Benefit Plan is a nonqualified deferred
compensation plan within the meaning of Section 409A of the IRC.
Each DCB Benefit Plan (including employment agreements or other
compensation arrangements) that constitutes a nonqualified deferred
compensation plan within the meaning of Section 409A of the IRC has
been written, executed and operated in compliance with Section 409A
of the IRC and the regulations thereunder or an applicable
exemption therefrom.
(h)
None of the DCB
Companies is a record-keeper, administrator, custodian, fiduciary,
trustee or otherwise acts on behalf of any plan, program, or
arrangement subject to ERISA (other than any DCB Benefit
Plan).
Section
3.14
Brokers and
Finders.
Except
as set forth on
DCB
Disclosure Schedule 3.14
, none of the DCB Companies and, to
the Knowledge of DCB, no officer, director, employee, independent
contractor or agent of any DCB Company on its behalf, has employed
any broker, finder, investment banker or financial advisor, or
incurred any liability for any fees or commissions to any broker,
finder, investment banker or financial advisor, in connection with
the Contemplated Transactions
Section
3.15
Real Property and
Leases.
(a)
DCB
Disclosure Schedule 3.15(a)
contains a true, correct and
complete list of all real property owned, leased or operated by the
DCB Companies, including but not limited to all REO (the
“
DCB Real
Property
”). True, correct and complete copies of all
deeds, surveys, title insurance policies and leases for the
properties listed on
DCB
Disclosure Schedule 3.15(a)
, and of all mortgages, deeds of
trust and security agreements to which such properties are subject,
have been made available to OLB to the extent DCB possesses such
deeds, surveys, title insurance policies, leases, mortgages, deeds
of trust and security agreements.
(b)
No lease with
respect to any DCB Real Property and no deed with respect to any
DCB Real Property contains any restrictive covenant that materially
restricts the use, transferability or value of such DCB Real
Property. Each lease with respect to any DCB Real Property is a
legal, valid and binding obligation of the parties thereto
enforceable in accordance with its terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the
availability of equitable remedies), and is in full force and
effect. There are no existing defaults by the DCB Companies or, to
the Knowledge of DCB, the other party, under any lease with respect
to any DCB Real Property and, to the Knowledge of DCB, there are no
allegations or assertions of such defaults by any party under any
lease with respect to any DCB Real Property or any events that,
with notice or lapse of time or the happening or occurrence of any
other event, would constitute a default under any lease with
respect to any DCB Real Property, except where the existence of
such defaults, individually or in the aggregate, has not had, and
is not reasonably likely to have, a Material Adverse
Effect.
(c)
To the Knowledge of
DCB, none of the buildings and structures located on any DCB Real
Property, nor any improvements or appurtenances thereto or
equipment therein, nor the operation or maintenance thereof,
violates in any material manner any land use Laws or restrictive
covenants, or encroaches on any property owned by others, nor does
any building or structure of third parties encroach upon any DCB
Real Property, except for those violations and encroachments that
in the aggregate could not reasonably be expected to have a
Material Adverse Effect. Except as disclosed on
DCB Disclosure Schedule
3.15(c)
, no condemnation proceeding is pending or, to the
Knowledge of DCB, threatened, that would preclude or materially
impair the use of any DCB Real Property in the manner in which it
is currently being used.
(d)
The DCB Companies
have a valid and enforceable leasehold interest in or, to the
Knowledge of DCB, based on title insurance owned by it, good and
marketable title to, all DCB Real Property and all improvements
thereon, subject to no Liens of any kind except (i) as noted in the
DCB Financials, (ii) statutory Liens not yet delinquent or that are
being contested in good faith, (iii) minor defects and
irregularities in title and encumbrances that do not materially
impair the use thereof for the purposes for which they are held,
(iv) mechanics liens not yet delinquent or that are being contested
in good faith, and (v) those assets and properties disposed of for
fair market value in the ordinary course of business since the date
of the DCB Financials. All DCB Real Property used in the business
of the DCB Companies is in adequate condition (ordinary wear and
tear excepted) and, to the Knowledge of DCB, is free from defects
that could materially interfere with the current or future use of
such facilities, provided such future use is substantially similar
to its current use.
(e)
Except as listed on
DCB Disclosure Schedule
3.15(e)
, there are no contracts, agreements or arrangements
to sell, lease or otherwise dispose of any of the DCB Real
Property.
Section
3.16
Environmental
Matters.
With
respect to DCB and each DCB Subsidiary:
(a)
Neither the
conduct nor operation of its business nor any condition of any
property currently or previously owned or operated by it (including
REO) results or resulted in a violation of any Environmental Laws
that is reasonably likely to impose a material liability (including
a material remediation obligation) upon DCB or any DCB Subsidiary.
To the Knowledge of DCB, no condition has existed or event has
occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely
to result in any material liability to DCB or any DCB Subsidiary by
reason of any Environmental Laws. Neither DCB nor any DCB
Subsidiary during the past five years has received any written
notice from any Person or Regulatory Authority that DCB or any DCB
Subsidiary or the operation or condition of any property ever owned
or operated (including Participation Facilities) by any of them are
currently in violation of or otherwise are alleged to have
liability under any Environmental Laws or relating to Hazardous
Materials (including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of
any Hazardous Materials at, on, beneath, or originating from any
such property) for which a material liability is reasonably likely
to be imposed upon DCB or any DCB Subsidiary;
(b)
There is no
suit, action, executive or administrative order, directive or
proceeding pending or, to the Knowledge of DCB threatened, before
any court, governmental agency or other forum against DCB or any
DCB Subsidiary (i) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or
(ii) relating to the presence of, or release (defined herein) into
the environment of, any Hazardous Materials on any DCB Real
Property;
(c)
To the Knowledge of
DCB, except as disclosed in
DCB Disclosure Schedule
3.16(c)
, (i) there are no underground storage tanks on, in
or under any DCB Real Property, and (ii) no underground storage
tanks have been closed or removed from any DCB Real Property except
in compliance with Environmental Laws in all material respects;
and
(d)
To the
Knowledge of DCB, the DCB Real Properties (including, without
limitation, soil, groundwater or surface water on, or under the
properties, and buildings thereon) are not contaminated with and do
not otherwise contain any Hazardous Materials other than as
permitted under applicable Environmental Laws.
Section
3.17
Intellectual
Property.
(a)
DCB Disclosure Schedule 3.17(a)
sets forth a complete and correct list of all trademarks, trade
dress, trade names, service marks, domain names, patents,
technology, inventions, trade secrets, know-how and copyrights and
works of authorship owned by or licensed to each of the DCB
Companies for use in its business, and all licenses or other
agreements relating thereto and all agreements relating to third
party intellectual property that it is licensed or authorized to
use in its business, including without limitation any software
licenses other than “shrink wrap” or force placed
software licenses (collectively, the “
DCB Intellectual
Property
”). Each of the DCB Companies owns or
possesses valid, binding and assignable licenses and other rights
to use without payment all DCB Intellectual Property that is used
in the conduct of its existing businesses free and clear of all
Liens and any claims of ownership by current or former employees or
contractors, other than royalties or payments with respect to
off-the-shelf software. With respect to each item of DCB
Intellectual Property that any of the DCB Companies is licensed or
authorized to use, the license, sublicense or agreement covering
such item is legal, valid, binding, enforceable and in full force
and effect. To the Knowledge of DCB, none of the DCB Companies is
infringing, diluting, misappropriating or violating the
intellectual property of any other Person, and none of the DCB
Companies has received any communications alleging that it has
infringed, diluted, misappropriated or violated any such
intellectual property. None of the DCB Companies has sent any
communications alleging that any Person has infringed, diluted,
misappropriated or violated any DCB Intellectual Property and, to
the Knowledge of DCB, no Person is infringing, diluting,
misappropriating or violating any of the DCB Intellectual Property.
Each of the DCB Companies has taken all commercially reasonable
actions to protect and maintain (a) all material DCB
Intellectual Property and (b) the security and integrity of
its software, databases, networks, systems, equipment and hardware
and to protect the same against unauthorized use, modification or
access thereto, or the introduction of any viruses or other
unauthorized or damaging or corrupting elements. To the Knowledge
of DCB, the computers, computer software, other information
technology equipment, information technology passwords and other
credentials, and all associated documents and records owned or
leased by the DCB Companies (the “
DCB IT Assets
”) operate
and perform in all material respects in accordance with their
documentation and functional specifications as required by them in
connection with their business, and none of the DCB IT Assets has
materially malfunctioned or failed to meet its requirements within
the past two years except for such malfunctions or failures that
have been remediated. To the Knowledge of DCB, no Person has gained
unauthorized access to the DCB IT Assets. The DCB Companies have
implemented commercially reasonable backup and disaster recovery
technology consistent with industry practices for institutions of
comparable size and complexity.
(b)
DCB
Disclosure Schedule 3.17(b)
sets forth a complete and
correct list of all Persons, other than directors, officers and
employees of the DCB Companies, who have access to any of the DCB
IT Assets.
Section
3.18
Information to be
Supplied.
(a)
The information
supplied by DCB for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement), at the time the
Registration Statement is declared effective pursuant to the
Securities Act, and as of the date the Prospectus/Proxy Statement
is mailed to the holders of DCB Common Stock, and up to and
including the date of the DCB Common Stockholders’ Meeting,
(i) will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances in which
they were made, not misleading, (ii) will disclose all facts that
the DCB board of directors deems material to a vote on the
Agreement and the Merger and to the exercise of appraisal rights
pursuant to Subtitle 2 of Title 3 of the MGCL, and (iii) will
comply in all material respects with the applicable requirements of
the Registration Statement as promulgated by the SEC.
(b)
The information
supplied by DCB for inclusion in the Applications will, at the time
each such document is filed with any Regulatory Authority and up to
and including the dates of any required regulatory approvals or
consents, as such Applications may be amended by subsequent
filings, be accurate in all material respects.
(c)
No document or
certificate delivered to OLB by or for DCB pursuant to a
requirement of this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statement contained in such document or certificate in light of
the circumstances under which it was made not
misleading.
Section
3.19
Related Party
Transactions.
(a)
Except as set forth
on
DCB Disclosure Schedule
3.19
, none of the DCB Companies is a party to any
transaction (including any loan or other credit accommodation but
excluding deposits in the ordinary course of business) with any of
DCB’s Affiliates, and all such transactions (i) were made in
the ordinary course of business, (ii) were made on substantially
the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with Persons who
are not related to or Affiliates of DCB, and (iii) did not involve
more than the normal risk of collectability or present other
unfavorable features.
(b)
Except as set forth
in
DCB Disclosure Schedule
3.19
, as of the date hereof, no Credit Extension by any of
the DCB Companies to any DCB Subsidiary or Affiliate of DCB is
presently in material default or, during the three-year period
prior to the date of this Agreement, has been in material default
or has been restructured, modified or extended in order to avoid or
cure a default, except for rate modifications pursuant to its loan
modification policy that is applicable to all Persons. As of the
date hereof, to the Knowledge of DCB, principal and interest with
respect to any such Credit Extension will be paid when due and the
loan grade classification accorded such Credit Extension is
appropriate.
(a)
Except as disclosed
on
DCB Disclosure Schedule
3.20(a)
, all Credit Extensions reflected as assets in the
DCB Financials arose out of bona fide arm’s-length
transactions, were made for good and valuable consideration in the
ordinary course of business, and are being transferred to OLB
and/or Old Line with good and marketable title, free and clear of
any and all Liens and are evidenced by notes, agreements or other
evidences of indebtedness that are true, genuine, correct and what
they purport to be, and to the extent secured, are secured by valid
Liens that are legal, valid and binding obligations of the maker
thereof, enforceable in accordance with the respective terms
thereof, except as such enforcement may be limited by (i)
bankruptcy, insolvency, reorganization or other similar Laws or
equitable principles affecting the enforcement of creditors’
rights that have been perfected or (ii) the pledge of any Credit
Extension to the FHLB as collateral to secure the performance by
the DCB Companies of all obligations owed thereto. All Credit
Extensions reflected as assets in the DCB Financials were made in
accordance in all material respects with sound banking practices,
and, to the Knowledge of DCB, are not subject to any defenses,
setoffs or counterclaims, including without limitation any such as
are afforded by usury or truth in lending Laws, except as may be
provided by bankruptcy, insolvency or similar Laws or by general
principles of equity.
(b)
To the Knowledge of
DCB, neither the terms of any Credit Extension by any of the DCB
Companies, any of the documentation for any such Credit Extension,
the manner in which any such Credit Extension has been administered
and serviced, nor the practices of approving or rejecting
applications for a Credit Extension by the DCB Companies, violate
in any material respect any Law applicable thereto, including,
without limitation, the Truth In Lending Act and the CFPB’s
Regulation Z, the CRA, the Equal Credit Opportunity Act, and any
Laws relating to consumer protection, installment sales and
usury.
(c)
Except as disclosed
on
DCB Disclosure Schedule
3.20(c)
, none of the agreements pursuant to which any of the
DCB Companies has sold Credit Extensions or pools of Credit
Extensions or participations in Credit Extensions or pools of
Credit Extensions contains any obligation to repurchase such Credit
Extensions or interests therein solely on account of a payment
default by the obligor on any such Credit Extension.
(d)
DCB Disclosure Schedule 3.20(d)
sets forth a list of all Credit Extensions as of the date hereof by
DCB or Damascus to any directors, executive officers and principal
stockholders (as such terms are defined in the FRB’s
Regulation O) of any of the DCB Companies. There are no employee,
officer, director or other insider Credit Extensions by any of the
DCB Companies on which the borrower is paying a rate other than
that reflected in the note or other relevant credit or security
agreement or on which the borrower is paying a rate that was not in
compliance with Regulation O and all such Credit Extensions are and
were originated in compliance in all material respects with all
applicable laws.
(e)
To the Knowledge of
DCB, no shares of DCB Common Stock were purchased with the proceeds
of a loan made by any of the DCB Companies.
(f)
DCB Disclosure Schedule 3.20(f)
sets forth the aggregate amount of all overdrafts that have
occurred during each calendar month since December 31,
2015.
Section
3.21
Allowance for Loan
Losses.
The
allowance for loan losses reflected in reports by the DCB Companies
to each Regulatory Authority has been and will be established in
compliance with the requirements of all regulatory criteria, and
the allowance for loan losses shown in the DCB Financials has been
and will be established and maintained in accordance with GAAP and
applicable Law and in a manner consistent with Damascus’
internal policies. The allowance for loan losses reflected in such
reports and the allowance for loan losses shown in the DCB
Financials, in the opinion of management, was or will be adequate
as of the dates thereof. DCB has disclosed to OLB on
DCB Disclosure Schedule 3.21
all Credit Extensions (including participations) by and all
interest-bearing assets of the DCB Companies (a) that have been
accelerated during the past 12 months, (b) that have been
terminated during the past 12 months by reason of a default or
adverse development in the condition of the borrower or other
events or circumstances affecting the credit of the borrower, (c)
pursuant to which a borrower, customer or other party has notified
any of the DCB Companies during the past 12 months of, or has
asserted against any of the DCB Companies, in each case in writing,
any “lender liability” or similar claim, and, to the
Knowledge of DCB, each borrower, customer or other party that has
given any of the DCB Companies any oral notification of, or orally
asserted to or against any of the DCB Companies, any such claim,
(d) that are contractually past due 90 days or more in the payment
of principal and/or interest, (e) that are on non-accrual status,
(f) that are classified as “Other Loans Specially
Mentioned,” “Special Mention,”
“Substandard,” “Doubtful,”
“Loss,” “Classified,”
“Criticized,” “Credit Risk Assets,”
“Concerned Loans,” “Watch List” or words of
similar import by any DCB Company or any Regulatory Authority, (g)
to the Knowledge of DCB, as to which a reasonable doubt exists as
to the timely future collectability of principal and/or interest,
whether or not interest is still accruing or the loans are less
than 90 days past due, (h) where, during the past three years, the
interest rate terms have been reduced and/or the maturity dates
have been extended subsequent to the agreement under which the loan
was originally created due to concerns regarding the
borrower’s ability to pay in accordance with such initial
terms, (i) where a specific reserve allocation exists in connection
therewith, (j) that are required to be accounted for as a troubled
debt restructuring in accordance with Statement of Financial
Accounting Standards No. 15, (k) that were made pursuant to an
exception to policy, and (l) that, to the extent not already
disclosed pursuant to the foregoing items (a) through (k), have
been charged-off at any time since January 1, 2014, together with
true, complete and materially correct copies of reports containing
the principal amount and accrued and unpaid interest of each such
Credit Extension and interest-bearing asset and the identity of the
obligor thereunder, and DCB shall provide an updated
DCB Disclosure Schedule 3.21
promptly to OLB after the end of each month after the date hereof
and on the Business Day prior to the Closing Date. The REO and
in-substance foreclosures included in any of Damascus’
non-performing assets are carried at fair value based on current
independent appraisals or current management
appraisals.
Section
3.22
Community
Reinvestment Act.
Damascus is the
only DCB Company that is subject to the Community Reinvestment Act
(12 U.S.C. §§ 2901
et
seq
.) (the “
CRA
”). To the Knowledge
of DCB, Damascus is in compliance in all material respects with the
CRA and all regulations promulgated thereunder. DCB has supplied
OLB with a copy of Damascus’ current CRA Statement, all
letters and written comments received by Damascus since January 1,
2016 pertaining thereto and any responses by Damascus to such
comments. Damascus has a rating of “satisfactory” or
better as of its most recent CRA compliance examination and DCB and
Damascus have received no communication from any Regulatory
Authority that would lead DCB to believe that Damascus will not
receive a rating of “satisfactory” or better pursuant
to its next CRA compliance examination or that any Regulatory
Authority would seek to restrain, delay or prohibit any of the
Contemplated Transactions as a result of any act or omission of
Damascus under the CRA.
Section
3.23
Anti-Money
Laundering, OFAC and Information Security.
(a)
To the Knowledge of
DCB, there do not exist any facts or circumstances that would cause
any of the DCB Companies: (i) to be deemed to be operating in
violation in any material respect of the Bank Secrecy Act, the USA
PATRIOT Act, any order issued with respect to anti-money laundering
by the U.S. Department of the Treasury’s Financial Crimes
Enforcement Network or Office of Foreign Assets Control, or any
other applicable anti-money laundering Law, as well as the
provisions of the Bank Secrecy Act/anti-money laundering program
adopted by the DCB Companies; or (ii) to be deemed not to be in
satisfactory compliance in any material respect with the applicable
privacy of customer information requirements contained in any
federal and state privacy Laws, including without limitation, in
Title V of the Gramm-Leach-Bliley Act of 1999 and the regulations
promulgated thereunder, as well as the provisions of the
information security program adopted by the DCB Companies. To the
Knowledge of DCB, no non-public customer information has been
disclosed to or accessed by an unauthorized third party in a manner
that would cause any of the DCB Companies to undertake any remedial
action. The board of directors or other governing body of each DCB
Company that is subject to Section 326 of the USA PATRIOT Act and
the regulations thereunder has adopted, and each such DCB Company
has implemented, a Bank Secrecy Act/anti-money laundering program
that contains adequate and appropriate customer identification
verification procedures that comply with Section 326 of the USA
PATRIOT Act and the regulations thereunder and such Bank Secrecy
Act/anti-money laundering program meets the requirements in all
material respects of Section 352 of the USA PATRIOT Act and the
regulations thereunder, and it has not received written notice from
any Regulatory Authority that such program (A) does not contain
adequate and appropriate customer identification verification
procedures, or (B) has been deemed ineffective. Each of the DCB
Companies has complied in all material respects with any
requirements to file reports and other necessary documents as
required by the USA PATRIOT Act and the regulations
thereunder.
(b)
DCB Disclosure Schedule 3.23(b)
describes any event, circumstance or other occurrence, and the
remedial steps taken by any of the DCB Companies with respect
thereto, since January 1, 2011, that constituted either (i) a
“breach of the security of a system,” as such phrase is
defined in Section 14-3504(a) of the Commercial Law Article of the
Annotated Code of Maryland (the “
Commercial Law Article
”)
with respect to personal information maintained by any of the DCB
Companies, without regard to the application of Section 14-3507(b)
of the Commercial Law Article, or (ii) any other data breach with
respect to, or other unauthorized access to, the electronic
information and records of any of the DCB Companies, including,
without limitation, communications, regulatory correspondence and
reports, documents and data, information relating to products and
services, activities, strategies and plans, IT Assets, other
financial data, and identities of and information regarding sales,
customers, prospects, vendors, suppliers and personnel, including,
without limitation, passwords and other information technology
credentials.
Section
3.24
Securities
Activities of Employees.
To the
Knowledge of DCB, the officers, employees and agents of the DCB
Companies are now, and at all times in the past have been, in
compliance with all applicable Laws that relate to securities
activities conducted by such officers, employees and agents,
including Laws relating to licenses and permits.
Section
3.25
Books and
Records.
(a)
The minute books
and stock ledgers of the DCB Companies that have been made
available to OLB, its Representatives or its Affiliates constitute
all of the minute books and stock ledgers of the DCB Companies and
as of their dates contain a materially complete and accurate record
of all actions of their respective stockholders and boards of
directors (and any committees thereof) and have been maintained in
accordance with applicable Law. All personnel files, reports,
feasibility studies, environmental assessments and reports,
strategic planning documents, financial forecasts, deeds, leases,
lease files, land files, accounting and tax records and all other
records that relate to the business and properties of the DCB
Companies that have been requested by OLB have been made available
to OLB, its Representatives or its Affiliates, and are located at
the offices of the DCB Companies at 26500 Ridge Road, Damascus,
Maryland 20872.
(b)
Each of the DCB
Companies makes and keeps books, records and accounts that, in
reasonable detail and in all material respects, accurately and
fairly reflect its transactions in and dispositions of its assets
and securities, and all such books, records and accounts have been
maintained in accordance with applicable Law and accounting
requirements. Each of the DCB Companies maintains a system of
internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance
with management’s general or specific authorizations;
(ii) transactions are recorded as necessary (A) to permit
the preparation of financial statements and reports filed with any
Regulatory Authority in conformity with GAAP consistently applied
and any other criteria applicable to such statements, and
(B) to maintain accountability for assets and liabilities;
(iii) access to its assets and incurrence of liabilities is
permitted only in accordance with management’s general or
specific authorizations; (iv) the recorded accountability for
assets and liabilities is compared with existing assets and
liabilities at reasonable intervals and appropriate action is taken
with respect to any differences; and (v) extensions of credit and
other receivables are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a
current and timely basis. None of the systems, controls, data or
information of the DCB Companies are recorded, stored, maintained,
operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic
process, whether computerized or not) that (including all means of
access thereto and therefrom) are not under the exclusive ownership
and control of the DCB Companies or their accountants, except as
would not reasonably be expected to have a Material Adverse Effect.
Except as disclosed on
DCB
Disclosure Schedule 3.25(b)
, to the Knowledge of DCB there
are no significant deficiencies or material weaknesses in the
design or operation of such internal accounting controls that are
reasonably likely to adversely affect in any material respect
DCB’s ability to record, process, summarize and report
financial information. To the Knowledge of DCB, there has occurred
no fraud, whether or not material, that involves management or
other employees who have a significant role in DCB’s internal
accounting controls.
Section
3.26
Investment
Securities.
Each of
the DCB Companies has good and marketable title to all securities
that it owns. None of the investment securities reflected in the
DCB Financials under the headings “Securities Available for
Sale” and “Securities Held to Maturity” and,
except as described in
DCB
Disclosure Schedule 3.26
or otherwise provided for by this
Agreement, none of the investment securities that any of the DCB
Companies acquired after September 30, 2016, are subject to any
restrictions, whether contractual or statutory, that materially
impair such DCB Company’s ability to freely dispose of such
investment securities at any time, and such DCB Company was
permitted by applicable Law to acquire such investment securities
at the time they were acquired.
Section
3.27
Reorganization.
As of
the date hereof, DCB does not have any reason to believe that the
Merger will fail to qualify as a tax-free reorganization within the
meaning of Section 368(a) of the IRC. None of the DCB
Companies will take any action that will cause, cause any action to
be taken that will cause, or fail to take any action or fail to
cause any action to be taken if such failure to act will have the
effect of causing, the Merger not to qualify as a tax-free
reorganization within the meaning of Section 368(a) of the
IRC, nor have any of the DCB Companies taken, caused, agreed to
take or cause, or failed to take or cause any such
action.
Section
3.28
Fairness
Opinion.
DCB’s board
of directors has received an opinion (which, if initially rendered
verbally, has been or will be confirmed by a written opinion, dated
no later than the date of this Agreement) from RP Financial, LC. to
the effect that, as of the date thereof, and subject to the terms,
conditions and qualifications set forth therein, the consideration
to be received by the stockholders of DCB pursuant to the terms of
this Agreement is fair, from a financial point of view, to the
stockholders of DCB. Such opinion has not been amended or rescinded
as of the date of this Agreement.
Section
3.29
Materials Provided
to Stockholders.
All
proxy materials used in connection with the meetings of DCB’s
stockholders held in 2014, 2015 and 2016, if any, along with any
other form of correspondence between DCB and its stockholders
during those years, including, without limitation, any annual or
quarterly reports provided to stockholders, have been made
available to OLB.
Section
3.30
Absence of Certain
Changes.
Except
as disclosed in
DCB
Disclosure Schedule 3.30
and provided for or contemplated in
this Agreement, since December 31, 2015:
(a)
There has not been
any material transaction by any of the DCB Companies other than in
the ordinary course of business and in conformity with past
practices;
(b)
There has not been
any acquisition or disposition by any of the DCB Companies of any
property or asset, whether real or personal, having a fair market
value, singularly or in the aggregate, in an amount greater than
$50,000, other than acquisitions or dispositions, including
acquisitions and dispositions of REO and investment securities,
made in the ordinary course of business;
(c)
There has not been
any Lien on any of the properties or assets of the DCB Companies,
except to secure extensions of credit in the ordinary course of
business and in conformity with past practice (i.e., Liens on
assets to secure Federal Home Loan Bank, Federal Reserve Bank or
correspondent bank advances being deemed both in the ordinary
course of business and consistent with past
practices);
(d)
There has not been
any increase in, or commitment to increase, the compensation
payable or to become payable to any of the officers, directors,
employees or agents of the DCB Companies, or any bonus payment,
other than routine increases made in the ordinary course or
business and consistent with past practice, or any stock option
award, restricted stock award or similar arrangement made to or
with any of such officers, directors, employees or
agents;
(e)
None of the DCB
Companies has incurred, assumed or taken any property subject to
any liability in excess of $50,000, except for liabilities incurred
or assumed or property taken subsequent to December 31, 2015 in the
ordinary course of business and in conformity with past
practices;
(f)
There has not been
any material alteration in the manner of keeping the books,
accounts, or records of the DCB Companies, or in the accounting
policies or practices therein reflected;
(g)
There has not been
any elimination or addition of employee benefits;
(h)
There has not been
any deferred routine maintenance of any DCB Real
Property;
(i)
There has not been
any elimination of a reserve by any DCB Company where the liability
related to such reserve has remained;
(j)
There has not been
any failure by a DCB Company to depreciate capital assets in
accordance with past practice or to eliminate capital assets that
are no longer used in its business; and
(k)
There has not been
any extraordinary reduction or deferral by any of the DCB Companies
of ordinary or necessary expenses.
Section
3.31
Absence of
Undisclosed Liabilities.
None of
the DCB Companies has any obligation or liability that is material
to its financial condition or operations or that, when combined
with all similar obligations or liabilities, would be material to
its financial condition or operations except (a) as disclosed in
the DCB Financials delivered to OLB prior to the date of this
Agreement, or (b) as contemplated under this Agreement. Except as
disclosed on
DCB
Disclosure Schedule 3.31
, since December 31,
2015,
none of the DCB
Companies has incurred or paid any obligation or liability that
would be material to its financial condition or operations, except
for obligations that are (a) fully reflected or reserved against on
the most recent balance sheet contained in the DCB Financials or
(b) paid in connection with transactions made in the ordinary
course of its business consistent with past practice and applicable
Law.
Section
3.32
No Option Plans or
Convertible Securities.
None of the DCB
Companies maintains any form of equity plan, including without
limitation, an equity compensation or other stock option plan, that
might entitle any Person to receive Rights from it, and no Rights
with respect to any equity plan of any DCB Company are
outstanding.
Except
as described in
DCB
Disclosure Schedule 3.33
, none of Damascus’ deposits
is a “brokered deposit” as defined in 12 C.F.R. Section
337.6(a)(2).
Section
3.34
Risk Management
Instruments.
All
interest rate swaps, caps, floors, option agreements, futures and
forward contracts and other similar risk management arrangements,
whether entered into for DCB’s own account or for the account
of one or more of DCB’s Subsidiaries or their customers (all
of which are set forth in
DCB Disclosure Schedule 3.34
),
were in all material respects entered into in compliance with all
applicable Laws, and with counterparties believed to be financially
responsible at the time; and to the Knowledge of DCB each of them
constitutes the valid and legally binding obligation of DCB or such
DCB Subsidiary, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors’
rights or by general equity principles), and is in full force and
effect. Neither DCB nor any DCB Subsidiary, nor, to the Knowledge
of DCB, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement in any material
respect.
Section
3.35
Fiduciary
Accounts.
Except
as described in
DCB
Disclosure Schedule 3.35
, none of the DCB Companies has
trust powers or acts as a trustee, agent, custodian, personal
representative, guardian, conservator or investment
adviser.
Section
3.36
Credit Card
Accounts and Merchant Processing.
None of
the DCB Companies originates, maintains or administers credit card
accounts. Except as described in
DCB Disclosure Schedule 3.36
,
none of the DCB Companies provides, or has provided, merchant
credit card processing services to any merchants.
Section
3.37
Anti-takeover
Laws.
The DCB
Companies have taken all actions required to exempt OLB, the
Agreement, the Bank Merger Agreement, the Contemplated Transactions
and the Bank Merger from any provisions of an anti-takeover nature
contained in the DCB Organizational Documents, and the provisions
of any federal or state “anti-takeover,” “fair
price,” “moratorium,” “control share
acquisition” or similar Laws.
Section
3.38
Stockholders’
List.
Attached hereto as
DCB Disclosure Schedule
3.38
is a list of holders of shares of the DCB Common Stock
complied and provided by Computershare, Inc., the registrar and
transfer agent in respect of the DCB Common Stock, containing their
names, addresses and number of shares held of record. To the
Knowledge of DCB, such stockholders’ list is complete and
accurate in all material respects.
Section 3.39
Bank
Certificates.
Each
issued and outstanding Bank Certificate that has not been
surrendered pursuant to Section 4(b) of the Plan of Reorganization
constitutes and is deemed for all corporate purposes as evidence
and ownership of an equal number of shares of DCB Common Stock.
Each such Bank Certificate has been cancelled by Damascus and does
not entitle any holder thereof to exercise any rights as a
stockholder of Damascus.
The
schedules delivered by DCB pursuant to this Article III and
elsewhere in this Agreement, which have been delivered concurrently
with the execution and delivery of this Agreement, are true and
correct in all material respects and contain no untrue statements
of material fact or omit any material fact necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE IV.
REPRESENTATIONS AND
WARRANTIES OF OLB
OLB
represents and warrants to DCB, for itself and with respect to and
on behalf of each of the OLB Subsidiaries (to the extent
applicable), that the statements contained in this Article IV (and
as reflected on the OLB Disclosure Schedules) are true and correct
as of the date of this Agreement and will be true and correct as of
the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout
this Article IV, except that those representations and warranties
that by their terms speak as of the date of this Agreement or some
other date shall be true and correct as of such date); provided,
however, that no representation or warranty of OLB contained in
this Article IV shall be deemed untrue or incorrect, and OLB shall
not be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, circumstance or event
unless such fact, circumstance or event, individually or taken
together with all other facts, circumstances or events inconsistent
with any paragraph of Article IV, has had or is reasonably expected
to have a Material Adverse Effect on OLB, disregarding for these
purposes (i) any qualification or exception for, or reference to,
materiality in any such representation or warranty and (ii) any use
of the terms “material,” “materially,”
“in all material respects,” “Material Adverse
Effect” or similar terms or phrases in any such
representation or warranty; provided, however, that the foregoing
standard shall not apply to representations and warranties
contained in Sections 4.1, 4.2, 4.3, 4.6, 4.14, 4.17 and 4.25,
which shall be deemed untrue, incorrect and breached if they are
not true and correct in all material respects (the
“
Article IV
Standard
”).
OLB has
made a good faith effort to ensure that the disclosure on each
schedule of the OLB Disclosure Schedules corresponds to the section
referenced herein. For purposes of the OLB Disclosure Schedules,
however, any item disclosed on any schedule therein is deemed to be
fully disclosed with respect to all schedules under which such item
may be relevant as and to the extent that it is reasonably clear on
the face of such schedule that such item applies to such other
schedule.
Section
4.1
Organization.
(a)
OLB is a
corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Maryland. OLB is a bank
holding company duly registered under the BHC Act. OLB has the full
corporate power and lawful authority to carry on its business and
operations as now being conducted and to own or lease all of its
properties and assets as presently owned or leased. OLB is duly
licensed, registered or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or
leased by it makes such licensing, registration or qualification
necessary, except where the failure to be so licensed, registered
or qualified would not have a Material Adverse Effect on OLB, and
all such licenses, registrations and qualifications are in full
force and effect in all material respects. OLB engages in
activities and holds properties only of the types permitted to bank
holding companies by the BHC Act and the rules and regulations
promulgated thereunder.
(b)
Old Line is a trust
company duly organized, validly existing and in good standing under
the laws of the State of Maryland. Old Line has the full corporate
power and lawful authority to carry on its business and operations
as now being conducted and to own or lease all of its properties
and assets as presently owned or leased. Old Line is duly licensed,
registered or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character
or location of the properties and assets owned or leased by it
makes such licensing, registration or qualification necessary,
except where the failure to be so licensed, registered or qualified
would not have a Material Adverse Effect on OLB, and all such
licenses, registrations and qualifications are in full force and
effect in all material respects.
(c)
The deposits of Old
Line are insured by the FDIC to the extent provided in the Federal
Deposit Insurance Act, and all premiums and assessments required to
be paid in connection therewith have been paid when
due.
(d)
OLB Disclosure Schedule 4.1(d)
contains a complete and accurate list of all OLB Subsidiaries. Each
OLB Subsidiary is duly organized, validly existing and in good
standing under the laws of the state of its organization and has
the full corporate power and lawful authority to carry on its
business and operations as now being conducted and to own or lease
all of its properties and assets as presently owned or leased. Each
OLB Subsidiary is duly licensed, registered or qualified to do
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing, registration or
qualification necessary, except where the failure to be so
licensed, registered or qualified would not have a Material Adverse
Effect on OLB, and all such licenses, registrations and
qualifications are in full force and effect in all material
respects. Other than shares of capital stock of the OLB
Subsidiaries listed on
OLB
Disclosure Schedule 4.1(d)
, OLB does not own or control,
directly or indirectly, or have the right to acquire directly or
indirectly, an equity interest in any Entity.
(e)
The respective
minute books of OLB and each OLB Subsidiary accurately reflect, in
all material respects, all material actions of their respective
owners and governing bodies, including committees, in each case in
accordance with the ordinary business practice of OLB or the
applicable OLB Subsidiary.
(f)
Prior to the date
of this Agreement, OLB has delivered or made available to DCB true
and correct copies of the articles of incorporation and bylaws of
OLB, and the charter documents and bylaws, operating agreement
and/or other governing instrument of each OLB Subsidiary and each
as in effect on the date hereof (collectively, the
“
OLB Governing
Documents
”).
Section
4.2
Capitalization.
(a)
The authorized
capital stock of OLB consists of (i) 25,000,000 shares of Common
Stock, par value $0.01 per share (“
OLB Common Stock
”), of
which 10,915,914.5 shares are duly authorized, validly issued and
outstanding, and (ii) 1,000,000 shares of preferred stock, par
value $0.01 per share (“
OLB Preferred Stock
”),
none of which are outstanding, in each case on the date hereof. As
of the date of this Agreement, there are no bonds, debentures,
notes or other indebtedness of OLB or any OLB Subsidiary having the
right to vote on any matters on which stockholders of OLB may vote.
All of the issued and outstanding shares of OLB Common Stock are
fully paid and nonassessable, free of preemptive rights, except as
may be defined in OLB’s articles of incorporation, and were
not issued in violation of the preemptive rights of any Person or
in violation of any applicable Laws. Except pursuant to this
Agreement or as set forth in
OLB Disclosure Schedule 4.2(a)
,
OLB has not issued nor is OLB or any OLB Subsidiary bound by any
subscription, call, commitment, agreement or other Right of any
character relating to the purchase, sale or issuance of, or right
to receive dividends or other distributions on, any shares of OLB
Common Stock, OLB Preferred Stock or any other security of OLB or
any securities representing the right to vote, purchase or
otherwise receive any shares of OLB Common Stock, OLB Preferred
Stock or any other security of OLB. The shares of OLB Common Stock
to be issued pursuant to the Merger have been duly authorized and,
when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid, nonassessable and
free of preemptive rights.
(b)
OLB owns, directly
or indirectly, all of the capital stock or other equity ownership
interests of the OLB Subsidiaries, free and clear of any Liens,
agreements and restrictions of any kind or nature, except for those
Subsidiaries identified in
OLB Disclosure Schedule 4.2(b)
,
and all of such shares or equity ownership interests are duly
authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to
the ownership thereof.
Section
4.3
Authority; No
Violation.
(a)
OLB
has full corporate power and authority to execute and deliver this
Agreement and, subject to the receipt of all consents, waivers and
approvals described in
OLB
Disclosure Schedule 4.4
, to consummate the Contemplated
Transactions and to otherwise comply with its obligations under
this Agreement. The execution and delivery of this Agreement by OLB
and the consummation by OLB of the Contemplated Transactions, up to
and including the Merger, have been duly and validly authorized by
the board of directors of OLB and no other corporate proceedings on
the part of OLB are necessary to consummate the Contemplated
Transactions. This Agreement has been duly and validly executed and
delivered by OLB and, assuming the due authorization, execution and
delivery of this Agreement by DCB, constitutes the valid and
binding obligation of OLB, enforceable against OLB in accordance
with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally and
subject, as to enforceability, to general principles of
equity.
(b)
The execution and
delivery of this Agreement by OLB, the consummation of the
Contemplated Transactions and the compliance by OLB with any of the
terms or provisions hereof, subject to the receipt of all consents,
waivers and approvals described in
OLB Disclosure Schedule 4.4
,
OLB’s and DCB’s compliance with any conditions
contained herein, and compliance by OLB or any OLB Subsidiary with
any of the terms or provisions hereof, do not and will
not:
(i)
Conflict with, or
result in a breach of, any provision of the OLB Governing
Documents;
(ii)
Violate
any Law applicable to OLB or any OLB Subsidiary or any of their
respective properties or assets, except where such violation would
not have a Material Adverse Effect; or
(iii)
Except
as described in
OLB
Disclosure Schedule 4.3(b)
or pursuant to which consent or
notification is required as set forth in
OLB Disclosure Schedule 4.4
,
violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event that, with notice or lapse of
time, or both, would constitute a default) under, result in the
termination of, or acceleration of, the performance required by, or
result in a right of termination or acceleration or the creation of
any Lien upon any of the properties or assets of OLB or any OLB
Subsidiary under any of the terms or conditions of any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other
instrument or obligation to which OLB or any OLB Subsidiary is a
party, or by which they or any of their respective properties or
assets may be bound or affected, except where such termination,
acceleration or creation would not have a Material Adverse Effect
on OLB.
(c)
Old Line has all
requisite corporate power and authority to execute and deliver the
Bank Merger Agreement, and, subject to the receipt of all consents
described in
OLB
Disclosure Schedule 4.4,
to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger
Agreement and the consummation of the transactions contemplated
thereby have been duly and validly authorized by the board of
directors of Old Line and, other than the approval of the Bank
Merger Agreement by OLB as the sole stockholder of Old Line as
required by Law, no further corporate proceedings of Old Line are
needed to execute and deliver the Bank Merger Agreement and
consummate the transactions contemplated thereby. OLB, as the sole
stockholder of Old Line, shall promptly hereafter approve the Bank
Merger Agreement, and the Bank Merger Agreement will be duly
executed by Old Line on the date of this Agreement. The Bank Merger
Agreement has been duly authorized and, upon due authorization,
execution and delivery by Old Line, will be a legal, valid and
binding agreement of Old Line enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors’ rights generally and general equitable principles.
At the Closing, all other agreements, documents and instruments to
be executed and delivered by Old Line that are referred to in the
Bank Merger Agreement, if any, will have been duly executed and
delivered by Old Line and, assuming due authorization, execution
and delivery by the counterparties thereto, will constitute the
legal, valid and binding obligations of Old Line, enforceable
against Old Line in accordance with their respective terms and
conditions, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors’ rights generally and by general equitable
principles.
Section
4.4
Consents;
Regulatory Approvals.
Except
as described in
OLB
Disclosure Schedule 4.4
, no consents, waivers or approvals
of, or filings or registrations with, any Regulatory Authorities or
other third parties are necessary in connection with the execution
and delivery of this Agreement by OLB or the consummation of the
Contemplated Transactions by OLB. OLB has no reason to believe that
it will not be able to obtain all requisite consents, waivers or
approvals from the Regulatory Authorities or any third party in
order to consummate the Contemplated Transactions on a timely
basis. To the Knowledge of OLB, no fact or circumstance exists,
including any possible other transaction pending or under
consideration by OLB or any OLB Company, that would (a) reasonably
be expected to prevent or delay in any material respect, any
filings or registrations with, or consents, waivers or approvals
required from, any Regulatory Authority, or (b) cause a Regulatory
Authority acting pursuant to applicable Law to seek to prohibit or
materially delay consummation of the Contemplated Transactions or
impose a Burdensome Condition.
Section
4.5
Financial
Statements.
(a)
OLB has previously
delivered or made available the OLB Financials to DCB, except those
pertaining to periods commencing after September 30, 2016, which it
will deliver or make available by each respective delivery date as
required by this Agreement. The delivered or made available OLB
Financials fairly present, in all material respects, the
consolidated financial position, results of operations, changes in
stockholders’ equity and cash flows of OLB as of and for the
periods ended on the dates thereof. The delivered or made available
OLB Financials comply in all material respects with applicable
accounting and regulatory requirements and have been prepared in
accordance with GAAP consistently applied, except for (i) omission
of the notes from the financial statements, applicable to any
interim period, and (ii) with respect to any interim period, normal
year-end adjustments and notes thereto. Dixon Hughes Goodman LLP
has not resigned (or informed OLB that it intends to resign) or
been dismissed as independent public accountants of OLB as a result
of or in connection with any disagreements with OLB on a matter of
accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
(b)
OLB did not, as of
the date of the OLB Financials or any subsequent date, have any
liabilities, obligations or loss contingencies of any nature,
whether absolute, accrued, contingent or otherwise, that are not
fully reflected or reserved against in the balance sheets included
in the OLB Financials at the date of such balance sheets that would
have been required to be reflected therein in accordance with GAAP
consistently applied or fully disclosed in a note thereto, except
for liabilities, obligations and loss contingencies that are not
material in the aggregate and that are incurred in the ordinary
course of business, consistent with past practice, and except for
liabilities, obligations and loss contingencies that are within the
subject matter of a specific representation and warranty herein or
that have not had a Material Adverse Effect and subject, in the
case of any unaudited statements, to normal recurring audit
adjustments and the absence of notes thereto.
Section
4.6
No Material Adverse
Effect.
Neither
OLB nor any OLB Subsidiary has suffered any adverse change in its
assets (including loan portfolio), liabilities (whether absolute,
accrued, contingent or otherwise), liquidity, net worth, property,
financial condition or results of operations, or any damage,
destruction or loss, whether or not covered by insurance, since
December 31, 2015, that in the aggregate has had or is reasonably
likely to have a Material Adverse Effect on the OLB Companies taken
as a whole.
(a)
Except as disclosed
on
OLB Disclosure Schedule
4.7(a)
, all OLB Returns required by applicable Law to have
been filed with any Taxing Authority by, or on behalf of, each of
the OLB Companies have been filed on a timely basis in accordance
with all applicable Laws, and such OLB Returns are true, complete
and correct in all material respects, or requests for extensions to
file the OLB Returns have been timely filed, granted and have not
expired, except to the extent that such failures to file, to be
complete or correct or to have extensions granted that remain in
effect individually or in the aggregate would not have a Material
Adverse Effect on OLB. All OLB Taxes shown to be due and payable on
the OLB Returns or on subsequent assessments with respect thereto
have been paid in full or adequate reserves have been established
in the OLB Financials for the payment of such OLB Taxes, except
where any such failure to pay or establish adequate reserves, in
the aggregate, has not had, and is not reasonably likely to have, a
Material Adverse Effect on the OLB Companies. Each of the OLB
Companies has timely withheld and paid over all OLB Taxes required
to have been withheld and paid over by it, and complied with all
information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party. There are no Liens on
any of the assets of the OLB Companies with respect to OLB Taxes,
other than Liens for OLB Taxes not yet due and
payable.
(b)
Except as disclosed
on
OLB Disclosure Schedule
4.7(b)
, no deficiencies for OLB Taxes have been claimed,
proposed or assessed, with notice to any of the OLB Companies, by
any taxing or other governmental authority against the OLB
Companies that have not been settled, closed or reached a final
determination, or that have not been adequately reserved for in the
OLB Financials, except for deficiencies that, individually or in
the aggregate, have not had, and are not reasonably likely to have,
a Material Adverse Effect on OLB. There are no pending audits
relating to any OLB Tax liability of which any of the OLB Companies
has received written notice. Except as disclosed on
OLB Disclosure Schedule 4.7(b)
,
none of the OLB Companies is a party to any action or proceeding
for assessment or collection of OLB Taxes, nor have such events
been asserted or, to the Knowledge of OLB, threatened against any
of the OLB Companies or any of their assets. No waiver or extension
of any statute of limitations relating to OLB Taxes is in effect
with respect to the OLB Companies. No power of attorney has been
executed by any of the OLB Companies with respect to any OLB Tax
matter that is currently in force.
(c)
As used in this
Agreement, the term “
OLB Taxes
” shall mean all
taxes, however denominated, including any interest, penalties or
other additions to tax that may become payable in respect thereof,
imposed by any federal, territorial, state, local or foreign
government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the
generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state
income taxes), real property gains taxes, payroll and employee
withholding taxes, unemployment insurance taxes, social security
taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, and other obligations of the
same or of a similar nature to any of the foregoing, which any of
the OLB Companies is required to pay, withhold or collect. As used
in this Agreement, the term “
OLB Returns
” shall mean
all reports, estimates, declarations of estimated tax, information
statements and returns relating to, or required to be filed in
connection with, any OLB Taxes, including information returns or
reports with respect to backup withholding and other payments to
third parties.
Section
4.8
Contracts; Certain
Changes.
Except
as described in
OLB
Disclosure Schedule 4.8
or in the SEC Reports, neither OLB
nor any OLB Subsidiary is a party to or subject to:
(a)
Any collective
bargaining agreement with any labor union relating to its
employees;
(b)
Any agreement that
by its terms limits its payment of dividends;
(c)
Any contract, other
than this Agreement, that restricts or prohibits it from engaging
in any type of business permissible under applicable
Law;
(d)
any agreement
(other than this Agreement), contract, arrangement, commitment or
understanding (whether written or oral) that restricts or limits in
any material way the conduct of its business (it being understood
that any non-compete, non-solicitation or similar provision shall
be deemed material);
(e)
Any contract, the
terms of which will require, on account of this Agreement or any of
the Contemplated Transactions, the payment, individually or when
aggregated with all other similar contracts, of a material
financial fee or penalty by OLB or an Old Line Company;
and
(f)
Any contract or
arrangement not disclosed pursuant to the other paragraphs of this
Section 4.8 that constitutes a “material contract” as
defined in Item 601(b)(10) of Regulation S-K of the
SEC.
Section
4.9
Ownership of
Personal Property; Insurance Coverage.
(a)
Each of the OLB
Companies has good and marketable title to all material assets and
properties owned by it in the conduct of its businesses, whether
such assets and properties are real or personal, tangible or
intangible, including assets and property reflected in the balance
sheets contained in the OLB Financials or acquired subsequent
thereto, subject to no Liens, except:
(i)
Those items that
secure liabilities for public or statutory obligations or any
discount with, borrowing from or other obligations to the FHLB,
inter-bank credit facilities or reverse repurchase agreements and
that are described in
OLB
Disclosure Schedule 4.9(a)
or permitted under Article V
hereof;
(ii)
Mechanics
liens and similar liens for labor, materials, services or supplies
provided for such property and incurred in the ordinary course of
business for amounts not yet delinquent or that are being contested
in good faith;
(iii)
Statutory
Liens for amounts not yet delinquent or that are being contested in
good faith;
(iv)
Liens
for current OLB Taxes not yet due and payable;
(v)
Pledges to secure
deposits and other Liens incurred in the ordinary course of the
business of banking;
(vi)
Liens,
imperfections of title, easements and other defects of title that
are not reasonably likely to have a Material Adverse
Effect;
(vii)
With
respect to personal property reflected in the balance sheets
contained in the OLB Financials, (A) dispositions and encumbrances
for adequate consideration in the ordinary course of business since
the date of such balance sheets and/or (B) dispositions of obsolete
personal property since the date of such balance
sheets;
(viii)
Those
items that are reflected as liabilities in the OLB Financials;
and
(ix)
Items
of personal property that are held in any fiduciary or agency
capacity.
(b)
With respect to
material items of real and personal property that are used in the
conduct of its business and leased from other Persons, each of the
OLB Companies has the right under valid and existing leases to use
such real and personal property in all material respects as
presently occupied and used.
(c)
Each of the OLB
Companies currently maintains insurance with reputable insurers
against such risks and in such amounts as the management of OLB has
determined to be prudent for such OLB Company’s operations,
and, to the Knowledge of OLB, such insurance is similar in scope
and coverage in all material respects to insurance maintained by
other similarly-situated businesses. Each of OLB and each OLB
Subsidiary is in compliance with its insurance policies, is not in
default under any of the terms thereof and has made accurate
statements on any insurance renewal application. Each such policy
is in full force and effect and, except for policies insuring
against potential liabilities of officers, directors and employees
of OLB and the OLB Subsidiaries, OLB or the relevant OLB Subsidiary
is the sole beneficiary of such policies. All premiums and other
payments due under any such policy have been paid, and all claims
thereunder have been filed in a due and timely
fashion.
(d)
None of the OLB
Companies has received notice from any insurance carrier
that:
(i)
The insurance will
be cancelled or that coverage thereunder will be reduced or
eliminated; or
(ii)
Premium
costs with respect to such insurance will be substantially
increased.
(e)
The OLB Companies
maintain such fidelity bonds and errors and omissions insurance as
may be customary or required under applicable Laws.
Section
4.10
Litigation and
Other Proceedings.
Except
as set forth in
OLB
Disclosure Schedule 4.10
, there are no legal,
quasi-judicial, administrative, arbitration or other proceedings,
claims (whether asserted or unasserted), actions or governmental
investigations or inquiries of any kind or nature now pending or,
to the Knowledge of OLB, threatened, before any court,
administrative, regulatory, arbitration or similar body in any
manner against any of the OLB Companies or any of their properties,
and to the Knowledge of OLB there are no facts that reasonably
could be expected to be the basis for any such suit, arbitration,
other proceeding, claim, action, investigation or inquiry. To the
Knowledge of OLB, no pending or threatened suit, arbitration,
proceeding
claim, action,
investigation or inquiry
described in
OLB Disclosure Schedule 4.10
could reasonably be expected to (a) have a Material Adverse Effect,
(b) question the validity of any action taken or to be taken in
connection with this Agreement or the Contemplated Transactions, or
(c) materially impair or delay the ability of the OLB Companies to
perform their obligations under this Agreement. Except as disclosed
on
OLB Disclosure Schedule
4.10
, none of the OLB Companies is in default with respect
to any judgment, order, writ, injunction, decree, award, rule, or
regulation of any court, arbitrator or Regulatory
Authority.
Section
4.11
Compliance with
Applicable Law.
Except
as disclosed on
OLB
Disclosure Schedule 4.11
:
(a)
Each of the OLB
Companies conducts its business in compliance with all Laws
applicable to it, its properties, assets and deposits, its
business, and its conduct of business and its relationship with its
employees conducting such business, except where noncompliance
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect;
(b)
Each of the OLB
Companies has all material permits, licenses, authorizations,
orders and approvals of all Regulatory Authorities that are
required in order to permit it to own or lease its properties and
carry on its business as it is presently conducted; all such
permits, licenses, authorizations, orders and approvals are in full
force and effect, and no suspension or cancellation of any of them
is, to the Knowledge of OLB, threatened, and to the Knowledge of
OLB no suspension or cancellation of any such permit, license,
certificate, order or approval is threatened or will result from
the consummation of the Contemplated Transactions, subject to
obtaining the receipt of all requisite approvals or consents from
the Regulatory Authorities in order to consummate the Contemplated
Transactions. None of the OLB Companies have been given notice or
been charged with any violation of any law, ordinance, regulation,
order, writ, rule, decree or condition to approval of any
Regulatory Authority that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse
Effect;
(c)
]Since January 1,
2011, each of the OLB Companies has timely filed all reports,
forms, schedules, registrations, statements and other documents,
together with any amendments required to be made with respect
thereto, that it was required by Law to file with any Regulatory
Authority (collectively, the “
OLB Reports
”), and has
paid all fees and assessments due and payable in connection
therewith, and each of such filings complied in all material
respects with all Laws under which it was filed (or was amended so
as to be in compliance promptly following discovery of such
noncompliance) and, to the extent such filings contain financial
information, have been prepared in all material respects in
accordance with applicable regulatory accounting principles and
practices and, in the case of SEC reports, GAAP, throughout the
periods covered by such filing, except to the extent failure to
timely file would not, individually or in the aggregate, be
expected to have a Material Adverse Effect; none of the OLB Reports
when filed with the SEC (the “
SEC Reports
”), and if
amended prior to the date hereof, as of the date of such amendment,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, and there are no outstanding
comments from or unresolved issues raised by the SEC, as
applicable, with respect to any of the SEC Reports; none of the OLB
Subsidiaries is required to file periodic reports pursuant to
Sections 13 or 15(d) of the Exchange Act;
(d)
No Regulatory
Authority has initiated any proceeding or, to the Knowledge of OLB,
investigation into the business or operations of the OLB Companies
that has not been resolved;
(e)
Since January 1,
2014, none of the OLB Companies has received any notification or
communication from any Regulatory Authority:
(i)
Asserting that it
is not in substantial compliance with any Law that such Regulatory
Authority enforces, unless such assertion has been waived,
withdrawn or otherwise resolved;
(ii)
Threatening
to revoke any license, franchise, permit or governmental
authorization that is material to it; or
(iii)
Requiring
or threatening to require it, or indicating that it may be
required, to enter into a cease and desist order, consent
agreement, other agreement or memorandum of understanding, or any
other agreement directing, restricting or limiting, or purporting
to direct, restrict or limit, in any manner its operations,
including without limitation any restriction on the payment of
dividends (any such notice, communication, memorandum, agreement or
order described in this Section 4.11(e)(iii) and addressed
specifically to an OLB Company herein referred to as an
“
OLB Regulatory
Agreement
”);
(f)
None of the OLB
Companies has received, consented to or entered into any OLB
Regulatory Agreement that is currently in effect, nor has any OLB
Company been advised, since January 1, 2013 by any Regulatory
Authority that it is considering issuing, initiating, ordering or
requesting any OLB Regulatory Agreement that has not already been
issued, initiated, ordered or requested;
(g)
There is no
unresolved violation, criticism or exception by any Regulatory
Authority with respect to any OLB Regulatory Agreement, except to
the extent permitted by such OLB Regulatory Agreement;
(h)
There is no
injunction, award, order, judgment, settlement, decree or
regulatory restriction imposed upon or entered into by any of the
OLB Companies or upon their assets;
(i)
OLB has designed,
implemented and maintained disclosure controls and procedures
(within the meaning of Rules 13a-15(e) and 15d-15(e) of the
Exchange Act) to ensure that material information relating to the
OLB Companies is made known to the management of OLB by others
within those entities as appropriate to allow timely decisions
regarding required disclosure and to make the certifications
required by the Exchange Act with respect to the OLB Reports;
and
(j)
Since January 1,
2013, (x) no OLB Company nor, to the Knowledge of OLB, any
director, officer, employee, auditor, accountant or other
Representative of any OLB Company, has received or otherwise had or
obtained knowledge of any material complaint, allegation, assertion
or claim, whether written or oral, regarding its accounting or
auditing practices, procedures, methodologies or methods or its
internal accounting controls, including any material complaint,
allegation, assertion or claim that it has engaged in questionable
accounting or auditing practices, and (y) no attorney representing
any OLB Company, whether or not employed by it, has reported
evidence of a material violation of Securities Laws, breach of
fiduciary duty or similar violation by it or any of officers,
directors, employees or agents to its board of directors or any
committee thereof or to any director or officer.
Section
4.12
Labor
Matters.
There
are no labor or collective bargaining agreements to which any of
the OLB Companies is a party. There is no union organizing effort
pending or, to the Knowledge of OLB, threatened, against any of the
OLB Companies. There is no labor strike, labor dispute (other than
routine employee grievances that are not related to union
employees), work slowdown, stoppage or lockout pending or, to the
Knowledge of OLB, threatened, against any of the OLB Companies.
There are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or, to the
Knowledge of OLB, threatened, involving employees of any of the OLB
Companies. No arbitration or proceeding asserting that any of the
OLB Companies has committed an unfair labor practice (within the
meaning of the National Labor Relations Act of 1935) or seeking to
compel any of the OLB Companies to bargain with any labor
organization as to wages or conditions of employment is pending or,
to the Knowledge of OLB, threatened, with respect to any of the OLB
Companies before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other Regulatory Authority
(other than routine employee grievances that are not related to
union employees). Each of the OLB Companies is in compliance in all
material respects with all applicable Laws respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice.
None of the OLB Companies has made any commitments to others
inconsistent with or in derogation of any of the foregoing. Except
as described in
OLB
Disclosure Schedule 4.12
, there are no pending or, to the
Knowledge of OLB, threatened, claims or suits against any of the
OLB Companies under any applicable labor or employment Law or
brought or made by a current or former employee or applicant for
employment.
(a)
OLB has set forth
in
OLB Disclosure Schedule
4.13(a)
a complete and accurate list of the OLB Benefit
Plans and made available to DCB a copy of all OLB Benefit
Plans.
(b)
The OLB Companies
have paid in full any insurance premiums due to the PBGC with
respect to any defined benefit pension plans for the six years
prior to, and through, the Effective Date. Except as disclosed in
OLB Disclosure Schedule
4.13(b)
, no pension plan (within the meaning of ERISA
Section 3(2)) maintained or contributed to by the OLB
Companies has been terminated or is under notice from the PBGC of
any threat of termination under the procedures of the PBGC. To the
Knowledge of OLB, no circumstance has occurred for which any
reportable event under ERISA Section 4043(b) has been or would
be required that has not been reported or with respect to which the
notice requirement has not been waived. Except as set forth on
OLB Disclosure Schedule
4.13(b)
, no OLB Benefit Plan is subject to IRC Section 412
or Title IV of ERISA, and as of the Effective Date, to the
Knowledge of OLB, no condition exists that will result in any
liability to the PBGC or on account of the failure to comply with
any such provisions in connection with any such OLB Benefit
Plan.
(c)
To the Knowledge of
OLB, none of the OLB Companies has ever contributed to or otherwise
incurred any liability with respect to a multi-employer plan
(within the meaning of ERISA Section 3(37)).
(d)
Each OLB Benefit
Plan complies in all material respects with the applicable
requirements of ERISA, the IRC, the Patient Protection and
Affordable Care Act of 2010, and any other applicable Laws
governing the OLB Benefit Plan, and each OLB Benefit Plan has at
all times been administered substantially in all material respects
in accordance with all requirements of applicable law. To the
Knowledge of OLB, each of the pension plans adopted by the OLB
Companies that is intended to be qualified under
Section 401(a) of the IRC and, to the Knowledge of OLB, its
trust, is exempt from federal income tax under IRC Section 501(a)
has received, or is entitled to rely upon, a favorable
determination letter (or opinion letter for a prototype plan) from
the IRS, and to the Knowledge of OLB there are no circumstances
that will or could result in revocation of, or inability to
continue to rely upon, any such favorable determination letter or
opinion letter. Without limiting the foregoing, to the Knowledge of
OLB, the following are true:
(i)
Each
OLB Benefit Plan that is a defined benefit pension plan subject to
IRC Section 412 or Title IV of ERISA as of the most recent
actuarial valuation has an AFTAP determined under IRC Section 430
and 436 that exceeds the AFTAP level that would impose any
funding-based limit on such plan under IRC Section
436;
(ii)
Each
OLB Benefit Plan that is a defined contribution pension plan that
is intended to be
qualified
under IRC Section 401(a) has had all contributions
made to the plan trust in accordance with the terms of the plan on
a timely basis under the IRC and ERISA;
(iii)
With
respect to each OLB Benefit Plan, to the Knowledge of OLB there is
no occurrence or contract that would constitute any
“prohibited transaction” within the meaning of
Section 4975(c) of the IRC or Section 406 of ERISA, which
transaction is not exempt under applicable Law, including
Section 4975(d) of the IRC or Section 408 of
ERISA;
(iv)
Except
as disclosed in
OLB
Disclosure Schedule 4.13(d)(iv)
, no OLB Benefit Plan is an
Employee Stock Ownership Plan as defined in Section 4975(e)(7)
of the IRC;
(v)
No OLB Benefit Plan
is a Qualified Foreign Plan as the term is defined in
Section 404A of the IRC and no OLB Benefit Plan or any related
trust assets or agreements are subject to the laws of any
jurisdiction other than the United States of America or any state,
county or municipality of the United States;
(vi)
None
of the welfare plans adopted by the OLB Companies is a Voluntary
Employees’ Beneficiary Association as defined in
Section 501(c)(9) of the IRC;
(vii)
All
of the welfare plans adopted by the OLB Companies and their related
trusts comply in all material respects with and have been
administered in substantial compliance with (A) Section 4980B
of the IRC and Sections 601 through 609 of ERISA and all U.S.
Department of the Treasury and U.S. Department of Labor regulations
issued thereunder, respectively, (B) the Health Insurance
Portability and Accountability Act of 1996, (C) the applicable
provisions of the Patient Protection and Affordable Care Act of
2010, and (D) the U.S. Department of Labor regulations issued with
respect to such welfare benefit plans; and
(viii)
With
respect to each OLB Benefit Plan, OLB or any OLB ERISA Affiliate
has the authority to amend or terminate such OLB Benefit Plan at
any time, subject to the applicable requirements of ERISA and the
IRC and the provisions of the OLB Benefit Plan.
(e)
There is no
existing or, to the Knowledge of OLB, contemplated, audit of any
OLB Benefit Plan by the IRS, the U.S. Department of Labor, the
PBGC, and Regulatory Authority or any other governmental authority.
In addition, there are no pending or, to the Knowledge of OLB,
threatened material claims by, on behalf of or with respect to any
OLB Benefit Plan, or by or on behalf of any individual participant
or beneficiary of any OLB Benefit Plan, alleging any violation of
ERISA or any other applicable Laws, or claiming benefits (other
than claims for benefits made in the ordinary course of business),
nor, to the Knowledge of OLB, is there any basis likely to enable
such claim to prevail.
(f)
Except as disclosed
on
OLB Disclosure Schedule
4.13(f)
, (i) no payment contemplated or required by or under
any OLB Benefit Plan and employment-related agreement would in the
aggregate constitute excess parachute payments as defined in
Section 280G of the IRC (without regard to subsection (b)(4)
thereof), (ii) no OLB Benefit Plan provides for the gross-up or
reimbursement of Taxes under Sections 280G, 4999 or 409A of the
IRC, and (iii) neither the execution and delivery of this Agreement
nor the consummation of Contemplated Transactions will (either
alone or in conjunction with any other event) result in, cause the
vesting, exercisability or delivery of, or increase the amount or
value of, any payment, right or other benefit to any current or
former employee, officer, director or other service provider of any
of the OLB Companies.
(g)
None of the OLB
Companies is a record-keeper, administrator, custodian, fiduciary,
trustee or otherwise acts on behalf of any plan, program, or
arrangement subject to ERISA (other than any OLB Benefit Plan).
Each OLB Benefit Plan (including employment agreements or other
compensation arrangements) that constitutes a nonqualified deferred
compensation plan within the meaning of Section 409A of the IRC has
been written, executed and operated in compliance with Section 409A
of the IRC and the regulations thereunder or an applicable
exemption therefrom.
Section
4.14
Brokers and
Finders.
Other
than Ambassador Financial Group, Inc., none of the OLB Companies
and, to the Knowledge of OLB, no officer, director, employee,
independent contractor or agent of any OLB Company on its behalf,
has employed any broker, finder, investment banker or financial
advisor, or incurred any liability for any fees or commissions to
any broker, finder, investment banker or financial advisor, in
connection with the Contemplated Transactions.
Section
4.15
Real Property and
Leases.
(a)
No deed or lease
with respect to any real property owned, leased or operated by the
OLB Companies, including but not limited to all REO (the
“
OLB Real
Property
”) contains any restrictive covenant that
materially restricts the use, transferability or value of such OLB
Real Property. Each lease with respect to any OLB Real Property is
a legal, valid and binding obligation of the parties thereto
enforceable in accordance with its terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the
availability of equitable remedies), and is in full force and
effect. There are no existing defaults by the OLB Companies or, to
the Knowledge of OLB, the other party, under any lease with respect
to any OLB Real Property and, to the Knowledge of OLB, there are no
allegations or assertions of such defaults by any party under any
lease with respect to any OLB Real Property or any events that,
with notice or lapse of time or the happening or occurrence of any
other event, would constitute a default under any lease with
respect to any OLB Real Property, except where the existence of
such defaults, individually or in the aggregate, has not had, and
is not reasonably likely to have, a Material Adverse
Effect.
(b)
To the Knowledge of
OLB, none of the buildings and structures located on any OLB Real
Property, nor any improvements or appurtenances thereto or
equipment therein, nor the operation or maintenance thereof,
violates in any material manner any land use Laws or restrictive
covenants, except for those violations and encroachments that in
the aggregate could not reasonably be expected to have a Material
Adverse Effect. No condemnation proceeding is pending or, to the
Knowledge of OLB, threatened, that would preclude or materially
impair the use of any OLB Real Property in the manner in which it
is currently being used.
(c)
The OLB Companies
have a valid and enforceable leasehold interest in or, to the
Knowledge of OLB, based on title insurance owned by it, good and
marketable title to, all OLB Real Property and all improvements
thereon, subject to no Liens of any kind except (i) as noted in the
OLB Financials, (ii) statutory Liens not yet delinquent or that are
being contested in good faith, (iii) minor defects and
irregularities in title and encumbrances that do not materially
impair the use thereof for the purposes for which they are held,
(iv) mechanics liens not yet delinquent or that are being contested
in good faith, and (v) those assets and properties disposed of for
fair market value in the ordinary course of business since the date
of the OLB Financials. To the Knowledge of OLB, all OLB Real
Property used in the business of the OLB Companies is free from
defects that could materially interfere with the current or
intended future use of such facilities.
Section
4.16
Environmental
Matters.
With
respect to OLB and each OLB Subsidiary:
(a)
Neither the
conduct nor operation of its business nor any condition of any
property currently or previously owned or operated by it (including
REO) results or resulted in a violation of any Environmental Laws
that is reasonably likely to impose a material liability (including
a material remediation obligation) upon OLB or any OLB Subsidiary.
To the Knowledge of OLB, no condition has existed or event has
occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely
to result in any material liability to OLB or any OLB Subsidiary by
reason of any Environmental Laws. Neither OLB nor any OLB
Subsidiary during the past five years has received any written
notice from any Person or Regulatory Authority that OLB or any OLB
Subsidiary or the operation or condition of any property ever owned
or operated (including Participation Facilities) by any of them are
currently in violation of or otherwise are alleged to have
liability under any Environmental Laws or relating to Hazardous
Materials (including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of
any Hazardous Materials at, on, beneath, or originating from any
such property) for which a material liability is reasonably likely
to be imposed upon OLB or any OLB Subsidiary;
(b)
There is no
suit, action, executive or administrative order, directive or
proceeding pending or, to the Knowledge of OLB threatened, before
any court, governmental agency or other forum against OLB or any
OLB Subsidiary (i) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or
(ii) relating to the presence of, or release (defined herein) into
the environment of, any Hazardous Materials on any OLB Real
Property;
(c)
To the Knowledge of
OLB, (i) there are no underground storage tanks on, in or under any
OLB Real Properties, and (ii) no underground storage tanks have
been closed or removed from any OLB Real Properties except in
compliance with Environmental Laws in all material respects;
and
(d)
To the Knowledge of
OLB, the OLB Real Properties (including, without limitation, soil,
groundwater or surface water on, or under the properties, and
buildings thereon) are not contaminated with and do not otherwise
contain any Hazardous Materials other than as permitted under
applicable Environmental Laws.
Section
4.17
Information to be
Supplied.
(a)
The information
supplied by OLB for inclusion in the Registration Statement
(including the Prospectus/Proxy Statement), at the time the
Registration Statement is declared effective pursuant to the
Securities Act, and as of the date the Prospectus/Proxy Statement
is mailed to the holders of DCB Common Stock, and up to and
including the date of the DCB Common Stockholders’ Meeting,
(i) will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances in which
they were made, not misleading, and (ii) will comply in all
material respects with the provisions of the Exchange
Act.
(b)
The information
supplied by OLB for inclusion in the Applications will, at the time
each such document is filed with any Regulatory Authority and up to
and including the dates of any required regulatory approvals or
consents, as such Applications may be amended by subsequent
filings, be accurate in all material respects.
(c)
No document or
certificate delivered to DCB by or for OLB pursuant to a
requirement of this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statement contained in such document or certificate in light of
the circumstances under which it was made not
misleading.
Section
4.18
Related Party
Transactions.
Except
as set forth on
OLB
Disclosure Schedule 4.18
, as is disclosed in the OLB
Financials, and/or as disclosed in the SEC Reports, neither OLB nor
any OLB Subsidiary is a party to any transaction (including any
loan or other credit accommodation but excluding deposits in the
ordinary course of business) with any Affiliate of OLB or any OLB
Subsidiary, and all such transactions were made on substantially
the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with persons who
are not related to or Affiliates of OLB or any OLB
Subsidiary.
(a)
Except as set forth
on the
OLB Disclosure
Schedule 4.19
, all Credit Extensions reflected as assets in
the OLB Financials arose out of bona fide arm’s-length
transactions, were made for good and valuable consideration in the
ordinary course of business, and are evidenced by notes, agreements
or other evidences of indebtedness that are true, genuine and
correct and are what they purport to be, and to the extent secured,
are secured by valid Liens that are legal, valid and binding
obligations of the maker thereof, enforceable in accordance with
the respective terms thereof, except as such enforcement may be
limited by (i) bankruptcy, insolvency, reorganization or other
similar Laws or equitable principles affecting the enforcement of
creditors’ rights that have been perfected or (ii) the pledge
of any Credit Extension to the FHLB as collateral to secure the
performance by the OLB Companies of all obligations owed thereto.
All Credit Extensions reflected as assets in the OLB Financials
were made in accordance in all material respects with sound banking
practices, and, to the Knowledge of OLB, are not subject to any
defenses, setoffs or counterclaims, including without limitation
any such as are afforded by usury or truth in lending Laws, except
as may be provided by bankruptcy, insolvency or similar Laws or by
general principles of equity.
(b)
To the Knowledge of
OLB, neither the terms of any Credit Extension by any of the OLB
Companies, any of the documentation for any such Credit Extension,
the manner in which any such Credit Extension has been administered
and serviced, nor the practices of approving or rejecting
applications for a Credit Extension by the OLB Companies, violate
in any material respect any Law applicable thereto, including,
without limitation, the Truth In Lending Act and the CFPB’s
Regulation Z, the CRA, the Equal Credit Opportunity Act, and any
Laws relating to consumer protection, installment sales and
usury.
(c)
There are no
executive officer or director (as such terms are defined in the
FRB’s Regulation O) Credit Extensions by any of the OLB
Companies on which the borrower is paying a rate other than that
reflected in the note or other relevant credit or security
agreement or on which the borrower is paying a rate that was not in
compliance with Regulation O and all such Credit Extensions are and
were originated in compliance in all material respects with all
applicable laws.
(d)
To the Knowledge of
OLB, no shares of OLB Common Stock were purchased with the proceeds
of a loan made by any of the OLB Companies.
Section
4.20
Allowance for Loan
Losses.
The
allowance for loan losses reflected in reports by the OLB Companies
to each Regulatory Authority has been and will be established in
compliance with the requirements of all regulatory criteria, and
the allowance for loan losses shown in the OLB Financials has been
and will be established and maintained in accordance with GAAP and
applicable Law and in a manner consistent with Old Line’s
internal policies. The allowance for loan losses reflected in such
reports and the allowance for loan losses shown in the OLB
Financials, in the opinion of management, was or will be adequate
as of the dates thereof. The REO and in-substance foreclosures
included in any of Old Line’s non-performing assets are
carried net of reserves at the lower of cost or market value based
on current independent appraisals or current management appraisals.
OLB has disclosed to DCB on
OLB Disclosure Schedule 4.20
all Credit Extensions (including participations) by and all
interest-bearing assets of the OLB Companies (a) that are in an
amount of at least $1 million and have been accelerated during the
past 12 months, (b) that are in an amount of at least $1 million
and have been terminated during the past 12 months by reason of a
default or adverse development in the condition of the borrower or
other events or circumstances affecting the credit of the borrower,
and (c) pursuant to which a borrower, customer or other party has
notified any of the OLB Companies during the past 12 months of, or
has asserted against any of the OLB Companies, in each case in
writing, any “lender liability” or similar claim, and,
to the Knowledge of OLB, each borrower, customer or other party
that has given any of the OLB Companies any oral notification of,
or orally asserted to or against any of the OLB Companies, any such
claim, and OLB shall provide an updated
OLB Disclosure Schedule 4.20
promptly to DCB after the end of each month after the date hereof
and on the Business Day prior to the Closing Date.
Section
4.21
Community
Reinvestment Act.
Old
Line is the only OLB Company that is subject to the CRA. To the
Knowledge of OLB, OLB is in compliance in all material respects
with the CRA and all regulations promulgated thereunder. OLB has
supplied DCB with a copy of Old Line’s current CRA Statement,
all letters and written comments received by Old Line since July 8,
2013 pertaining thereto and any responses by Old Line to such
comments. Old Line has a rating of “satisfactory” or
better as of its most recent CRA compliance examination and OLB and
Old Line have received no communication from any Regulatory
Authority that would lead OLB to believe that Old Line will not
receive a rating of “satisfactory” or better pursuant
to its next CRA compliance examination or that any Regulatory
Authority would seek to restrain, delay or prohibit any of the
Contemplated Transactions as a result of any act or omission of Old
Line under the CRA.
Section
4.22
Securities
Activities of Employees.
To the
Knowledge of OLB, the officers, employees and agents of the OLB
Companies are now, and at all times in the past have been, in
compliance with all applicable Laws that relate to securities
activities conducted by such officers, employees and agents,
including Laws relating to licenses and permits.
Section
4.23
Books and
Records.
(a)
The minute books
and stock ledgers of the OLB Companies that have been made
available to DCB, its Representatives or its Affiliates constitute
all of the minute books and stock ledgers of the OLB Companies and
as of their dates contain a materially complete and accurate record
of all actions of their respective stockholders and boards of
directors (and any committees thereof) and have been maintained in
accordance with applicable Law. All personnel files, reports,
feasibility studies, environmental assessments and reports,
strategic planning documents, financial forecasts, deeds, leases,
lease files, land files, accounting and tax records and all other
records that relate to the business and properties of the OLB
Companies that have been requested by DCB have been made available
to DCB, its Representatives or its Affiliates, and are located at
the offices of the OLB Companies at 1525 Pointer Ridge Place,
Bowie, Maryland 20716.
(b)
Each of the OLB
Companies makes and keeps books, records and accounts that, in
reasonable detail and in all material respects, accurately and
fairly reflect its transactions in and dispositions of its assets
and securities, and all such books, records and accounts have been
maintained in accordance with applicable Law and accounting
requirements. Each of the OLB Companies maintains a system of
internal control over financial reporting (within the meaning of
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to
provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary
(A) to permit the preparation of financial statements and
reports filed with any Regulatory Authority in conformity with GAAP
consistently applied and any other criteria applicable to such
statements, and (B) to maintain accountability for assets and
liabilities; (iii) access to its assets and incurrence of
liabilities is permitted only in accordance with management’s
general or specific authorizations; (iv) the recorded
accountability for assets and liabilities is compared with existing
assets and liabilities at reasonable intervals and appropriate
action is taken with respect to any differences; and (v) extensions
of credit and other receivables are recorded accurately, and proper
and adequate procedures are implemented to effect the collection
thereof on a current and timely basis. None of the systems,
controls, data or information of the OLB Companies are recorded,
stored, maintained, operated or otherwise wholly or partly
dependent on or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not)
that (including all means of access thereto and therefrom) are not
under the exclusive ownership and control of the OLB Companies or
their accountants, except as would not reasonably be expected to
have a Material Adverse Effect. Except as disclosed on
OLB Disclosure Schedule 4.23(b)
or in the SEC Reports, to the Knowledge of OLB there are no
significant deficiencies or material weaknesses in the design or
operation of such internal control over financial reporting that
are reasonably likely to adversely affect in any material respect
OLB’s ability to record, process, summarize and report
financial information. To the Knowledge of OLB, there has occurred
no fraud, whether or not material, that involves management or
other employees who have a significant role in OLB’s internal
control over financial reporting.
Section
4.24
Investment
Securities.
Each of
the OLB Companies has good and marketable title to all securities
that it owns. None of the investment securities reflected in the
OLB Financials under the headings “investment securities
available for sale” and “investment securities held to
maturity” and, except as described in
OLB Disclosure Schedule 4.24
,
none of the investment securities acquired by the OLB Companies
since September 30, 2016, are subject to any restrictions, whether
contractual or statutory, that materially impair such OLB
Company’s ability to freely dispose of such investment
securities at any time, and such OLB Company was permitted by
applicable Law to acquire such investment securities at the time
they were acquired.
Section
4.25
Reorganization.
As of
the date hereof, OLB does not have any reason to believe that the
Merger will fail to qualify as a tax-free reorganization within the
meaning of Section 368(a) of the IRC. None of the OLB Companies
will take any action that will cause, cause any action to be taken
that will cause, or fail to take any action or fail to cause any
action to be taken if such failure to act will have the effect of
causing, the Merger not to qualify as a tax-free reorganization
within the meaning of Section 368(a) of the IRC, nor have any of
the OLB Companies taken, caused, agreed to take or cause, or failed
to take or cause any such action.
Section
4.26
Fairness
Opinion.
OLB’s board
of directors has received an opinion (which, if initially rendered
verbally, has been or will be confirmed by a written opinion, dated
no later than the date of this Agreement) from Ambassador Financial
Group, Inc. to the effect that, as of the date thereof, and subject
to the terms, conditions and qualifications set forth therein, the
consideration payable by OLB to stockholders of DCB pursuant to the
terms of this Agreement are fair, from a financial point of view,
to the stockholders of OLB. Such opinion has not been amended or
rescinded as of the date of this Agreement.
Section
4.27
Materials Provided
to Stockholders.
All
proxy materials used in connection with the meetings of OLB’s
stockholders held in 2014, 2015 and 2016, along with any other form
of correspondence between OLB and its stockholders during that time
period, either have been filed with the SEC and are publicly
available to DCB via the SEC’s Electronic Data Gathering and
Retrieval system or have been provided to DCB.
Section
4.28
Absence of
Undisclosed Liabilities.
None of
the OLB Companies has any obligation or liability that is material
to its financial condition or operations or that, when combined
with all similar obligations or liabilities, would be material to
its financial condition or operations except (a) as disclosed in
the OLB Financials delivered or made available to DCB prior to the
date of this Agreement, or (b) as contemplated under this
Agreement. Except as disclosed in
OLB Disclosure Schedule 4.28
,
since September 30, 2016, none of the OLB Companies has incurred or
paid any obligation or liability that would be material to its
financial condition or operations of, except for obligations paid
in connection with transactions made by them in the ordinary course
of its business consistent with past practice and applicable
Law.
Section
4.29
Anti-Money
Laundering, OFAC and Information Security.
(a)
To the Knowledge of
OLB there do not exist any facts or circumstances that would cause
any of the OLB Companies: (i) to be deemed to be operating in
violation in any material respect of the Bank Secrecy Act, the USA
PATRIOT Act, any order issued with respect to anti-money laundering
by the U.S. Department of the Treasury’s Financial Crimes
Enforcement Network or Office of Foreign Assets Control, or any
other applicable anti-money laundering Law, as well as the
provisions of the Bank Secrecy Act/anti-money laundering program
adopted by the OLB Companies; or (ii) to be deemed not to be in
satisfactory compliance in any material respect with the applicable
privacy of customer information requirements contained in any
federal and state privacy Laws, including without limitation, in
Title V of the Gramm-Leach-Bliley Act of 1999 and the regulations
promulgated thereunder, as well as the provisions of the
information security program adopted by the OLB Companies. To the
Knowledge of OLB, no non-public customer information has been
disclosed to or accessed by an unauthorized third party in a manner
that would cause any of the OLB Companies to undertake any remedial
action. The board of directors or other governing body of each OLB
Company that is subject to Section 326 of the USA PATRIOT Act and
the regulations thereunder has adopted, and each such OLB Company
has implemented, a Bank Secrecy Act/anti-money laundering program
that contains adequate and appropriate customer identification
verification procedures that comply with Section 326 of the USA
PATRIOT Act and the regulations thereunder and such Bank Secrecy
Act/anti-money laundering program meets the requirements in all
material respects of Section 352 of the USA PATRIOT Act and the
regulations thereunder, and it has not received written notice from
any Regulatory Authority that such program (x) does not contain
adequate and appropriate customer identification verification
procedures, or (y) has been deemed ineffective. Each of the OLB
Companies has complied in all material respects with any
requirements to file reports and other necessary documents as
required by the USA PATRIOT Act and the regulations
thereunder.
(b)
OLB Disclosure Schedule 4.29(b)
describes any event, circumstance or other occurrence, and the
remedial steps taken by any of the OLB Companies with respect
thereto, since January 1, 2011, that constituted either (i) a
“breach of the security of a system,” as such phrase is
defined in Section 14-3504(a) of the Commercial Law Article with
respect to personal information maintained by any of the OLB
Companies, without regard to the application of Section 14-3507(b)
of the Commercial Law Article, or (ii) any other data breach with
respect to, or other unauthorized access to, the electronic
information and records of any of the OLB Companies, including,
without limitation, communications, regulatory correspondence and
reports, documents and data, information relating to products and
services, activities, strategies and plans, the computers, computer
software, other information technology equipment, information
technology passwords and other credentials, and all associated
documents and records owned or leased by the OLB Companies, other
financial data, and identities of and information regarding sales,
customers, prospects, vendors, suppliers and personnel, including,
without limitation, passwords and other information technology
credentials.
Section
4.30
Intellectual
Property.
Each of
the OLB Companies owns or possesses valid, binding and assignable
licenses and other rights to use without payment all trademarks,
trade dress, trade names, service marks, domain names, patents,
technology, inventions, trade secrets, know-how and copyrights and
works of authorship owned by or licensed to each of the OLB
Companies for use in its business, and all licenses or other
agreements relating thereto and all agreements relating to third
party intellectual property that it is licensed or authorized to
use in its business, including without limitation any software
licenses other than “shrink wrap” or force placed
software licenses (collectively, the “
OLB Intellectual
Property
”), that is used in the conduct of its
existing businesses free and clear of all Liens and any claims of
ownership by current or former employees or contractors, other than
royalties or payments with respect to off-the-shelf software. With
respect to each item of OLB Intellectual Property that any of the
OLB Companies is licensed or authorized to use, the license,
sublicense or agreement covering such item is legal, valid,
binding, enforceable and in full force and effect. To the Knowledge
of OLB, none of the OLB Companies is infringing, diluting,
misappropriating or violating the intellectual property of any
other Person, and none of the OLB Companies has received any
communications alleging that it has infringed, diluted,
misappropriated or violated any such intellectual property. None of
the OLB Companies has sent any communications alleging that any
Person has infringed, diluted, misappropriated or violated any OLB
Intellectual Property and, to the Knowledge of OLB, no Person is
infringing, diluting, misappropriating or violating any of the OLB
Intellectual Property. Each of the OLB Companies has taken all
commercially reasonable actions to protect and maintain
(a) all material OLB Intellectual Property and (b) the
security and integrity of its software, databases, networks,
systems, equipment and hardware and to protect the same against
unauthorized use, modification or access thereto, or the
introduction of any viruses or other unauthorized or damaging or
corrupting elements. To the Knowledge of OLB, the computers,
computer software, other information technology equipment,
information technology passwords and other credentials, and all
associated documents and records owned or leased by the OLB
Companies (the “
OLB
IT Assets
”) operate and perform in all material
respects in accordance with their documentation and functional
specifications as required by them in connection with their
business, and none of the OLB IT Assets has materially
malfunctioned or failed to meet its requirements within the past
two years except for such malfunctions or failures that have been
remediated. To the Knowledge of OLB, no Person has gained
unauthorized access to the OLB IT Assets. The OLB Companies have
implemented commercially reasonable backup and disaster recovery
technology consistent with industry practices for institutions of
comparable size and complexity.
The
schedules delivered by OLB pursuant to this Article IV and
elsewhere in this Agreement, which have been delivered concurrently
with the execution and delivery of this Agreement, are true and
correct in all material respects and contain no untrue statements
of material fact or omit any material fact necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
OLB and
the OLB Subsidiaries are engaged in all material respects only in
the business described in the SEC Reports, and the SEC Reports
contain a complete and accurate description in all material
respects of the business of OLB and the OLB Subsidiaries, taken as
a whole.
ARTICLE V.
COVENANTS OF THE PARTIES
Section
5.1
Conduct of
DCB’s Business.
Through
the Effective Time, DCB shall, and shall cause each DCB Subsidiary
to, in all material respects, conduct its businesses and engage in
transactions only in the usual, regular and ordinary course and
consistent with past practice, except as otherwise required or
contemplated by this Agreement or with the prior written consent of
OLB. DCB shall, and shall cause each DCB Subsidiary to, use its
commercially reasonable good faith efforts to preserve its business
organization intact, maintain good relationships with employees and
preserve the good will of its customers and others with whom
business relationships exist, provided that, other than in the case
of a Permitted Employee that DCB determines, in good faith, is
necessary to comply with the foregoing requirements, job vacancies
that occur prior to the Effective Date through attrition shall not
be filled and new officers and employees shall not be hired without
the prior written consent of OLB, which shall not be unreasonably
conditioned, withheld or delayed. Through the Effective Time,
without the consent in writing of OLB (such consent not to be
unreasonably withheld, conditioned or delayed), as permitted by
this Agreement or except as may be required, in writing, by any
Regulatory Authority (in which case DCB shall immediately provide
OLB with a copy of such written document), DCB shall not, and shall
not permit any DCB Subsidiary to:
(a)
Change any
provision of the DCB Governing Documents;
(b)
Change the number
of authorized or issued shares of its capital stock; repurchase,
redeem or otherwise acquire any shares of its capital stock; issue
or grant any call, commitment, subscription, Right or agreement of
any character relating to its authorized or issued capital stock or
any securities convertible into shares of capital stock; or
declare, set aside or pay any dividends (including any special
dividends) or other distribution in respect of capital stock except
for cash dividends declared and paid in the normal course of
business consistent with past practices in an amount not to exceed
$0.02 per share quarterly;
(c)
Except as set forth
in
DCB Disclosure Schedule
5.1(c)
or for retention payments as OLB and DCB may mutually
agree upon for DCB or Damascus employees who remain employed
through the Effective Time, grant any severance, retention or
termination pay, other than pursuant to policies or agreements of
DCB or any DCB Subsidiary in effect on the date hereof for
employees, or enter into or amend any employment, consulting,
severance, compensation, “change-in-control” or
termination contract or arrangement with, any officer, director,
employee, independent contractor, agent or other Person associated
with DCB or any DCB Subsidiary;
(d)
Grant job
promotions or increase the rate of compensation of, or pay any
bonus to, any director, officer, employee, independent contractor,
agent or other Person associated with DCB or any DCB Subsidiary,
except, with respect to a Permitted Employee, (i) to the extent
such promotion or increase is made by DCB or a DCB Subsidiary in
the normal course of its business and consistent with its past
practices, or (ii) routine periodic pay increases, selective merit
pay increases and pay-raises in the normal course of business and
consistent with past practices, provided, however, that such
aggregate increases in the rate of compensation shall not be in
excess of 3%, and such aggregate bonuses shall not be in excess of
5% of the aggregate salaries, for all Permitted
Employees;
(e)
Except in the
ordinary course consistent with past practice, sell, lease, assign,
transfer, mortgage, encumber or otherwise dispose of or discontinue
any of its assets (excluding loans, which are governed by Section
5.1(w), and securities, which are governed by Section 5.1(q)),
deposits, business or properties or cancel or compromise any debt
or claim, or waive or release any right or claim, except in the
ordinary course of business consistent with past practice for full
and fair consideration actually received; or modify in any material
manner the manner in which it has heretofore conducted its business
or enter into any new line of business;
(f)
Except for FHLB
advances with a maturity of six (6) months or less and deposits
taken in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money; or incur,
assume or become subject to, whether directly or by way of any
guarantee or otherwise, any obligations or liabilities (absolute,
accrued, contingent or otherwise) of any other Person, other than
the issuance of letters of credit in the ordinary course of
business and in accordance with the restrictions set forth in
Sections 5.1(y) and (z);
(g)
Sell or otherwise
dispose of any DCB Real Property except REO in a reasonably
acceptable commercial manner in the ordinary course of
business;
(h)
Take any action
that would result in any of the conditions set forth in Article VI
hereof not being satisfied;
(i)
Change any method,
practice, or principle of accounting, except as may be required
from time to time by Law or changes in GAAP or by any Regulatory
Authority;
(j)
Waive, release,
grant or transfer any rights of material value or modify or change
in any material respect any existing material agreement to which it
is a party;
(k)
Implement any
pension, retirement, profit-sharing, bonus, welfare or similar plan
or arrangement that was not in effect on the date of this
Agreement, or amend any existing pension, retirement,
profit-sharing, bonus, welfare or similar plan or arrangement
except to the extent (i) required by Law or (ii) required by its
terms as a result of this Agreement or in connection with the
Contemplated Transactions; provided, however,
that amendments to a DCB Benefit
Plan to modify any of the investment options available thereunder
shall not constitute a breach of this Section 5.1(k);
(l)
Implement or adopt
any material change in its: (i) guidelines and policies in
existence on the date hereof with regard to underwriting and making
extensions of credit, the establishment of reserves with respect to
possible losses thereon or the charge-off of losses incurred
thereon; (ii) investment policies and practices; or (iii) other
material banking policies, or otherwise fail to conduct its banking
activities in the ordinary course of business consistent with past
practice except as may be required by changes in Law, GAAP, or the
direction of a Regulatory Authority;
(m)
Change deposit or
loan rates, or otherwise fail to conduct its lending and deposit
activities in the ordinary course of business consistent with past
practice;
(n)
Enter into, modify,
amend or renew any agreement under which it is obligated to pay
more than $50,000 and that is not terminable by it with 60
days’ notice or less without penalty, payment or other
conditions (other than the condition of notice), or enter into,
renew, extend or modify any other transaction with any of its
Affiliates, other than deposit and loan transactions in the
ordinary course of business and that are in compliance with the
requirements of Law;
(o)
Except as required
by Law or at the direction of a Regulatory Authority: (i) implement
or adopt any material change in its interest rate and other risk
management policies, procedures or practices; or (ii) fail to
follow its existing policies or practices with respect to managing
its exposure to interest rate and other risk;
(p)
Take any action
that would give rise to a right of payment to any individual under
any employment agreement except for contractually required
compensation;
(q)
Purchase or sell
any securities other than in the normal course of business
consistent with past practices other than pursuant to redemptions
by the issuer thereof;
(r)
Except in the
ordinary course of business consistent with past practice and
involving an amount not in excess of $50,000 (exclusive of any
amounts paid directly or reimbursed to DCB or any DCB Subsidiary
under any insurance policy maintained by DCB or any DCB
Subsidiary), settle any material action, suit, claim, arbitration,
investigation, inquiry, grievance or other proceeding (or basis
therefor) pending or, to the Knowledge of DCB, threatened, against
or affecting DCB, any DCB Subsidiary or any of their respective
properties or assets. Notwithstanding the foregoing, no settlement
shall be made if it involves a precedent for other similar claims
that, in the aggregate, could reasonably be determined to be
material to DCB and the DCB Subsidiaries, taken as a
whole;
(s)
Foreclose upon or
otherwise take title to or possession or control of any real
property without first obtaining a Phase I environmental report
thereon; provided, however, that neither DCB nor any DCB Subsidiary
shall be required to obtain such a report: (i) where, after using
commercially reasonable efforts, it is unable to gain access to the
property, provided that DCB has provided notice to OLB that it has
been unable to gain such access and as a result intends to
foreclose without obtaining a Phase I environmental report thereon;
or (ii) with respect to any one- to four-family, non-agricultural
residential property of five acres or less to be foreclosed upon
unless it has reason to believe that such property contains
hazardous substances known or reasonably suspected to be in
violation of, or require remediation under, Environmental
Laws;
(t)
Except as permitted
by Section 5.7(a)(ii), merge or consolidate with any other Entity;
sell or lease all or any substantial portion of its assets or
business; make any acquisition of all or any substantial portion of
the business or assets of any other Person other than in connection
with the collection of any loan or credit arrangement; enter into a
purchase and assumption transaction with respect to deposits and
liabilities; permit the revocation or surrender of its certificate
of authority to maintain, file an application for the opening,
closing or relocation of, or open, close or relocate, any branch or
automated banking facility;
(u)
Make any new
capital expenditure, individually or in the aggregate, of $50,000
or more;
(v)
Sell or acquire any
loans (excluding originations) or loan participations, except in
the ordinary course of business consistent with past practice (but
in the case of a sale, after giving OLB or Old Line a first right
of refusal to acquire such loan or participation), or sell or
acquire any servicing rights;
provided, however, that in no
event shall any of the DCB Companies sell or acquire any loan or
loan participation having a principal balance in excess of
$500,000;
(w)
Take any action or
knowingly fail to take any action, which action or failure to act
would preclude the Merger from qualifying as a tax-free
reorganization within the meaning of Section 368(a) of the
IRC;
(x)
Make any charitable
or similar contributions, except consistent with past practice and
in amounts not to exceed $5,000 individually and $10,000 in the
aggregate;
(y)
Except for any
Non-Residential Credit Extension already committed to by DCB or a
DCB Subsidiary on the date of this Agreement and set forth on
DCB Schedule
5.1(y)
, enter into, grant, approve, modify or extend any
Non-Residential Credit Extension except in the ordinary course of
business consistent with past practice;
provided
,
however
, that none of the DCB Companies
may make a Non-Residential Credit Extension (i) in excess of
$2,000,000, or (ii) to an existing customer that increases the
aggregate loan exposure to such customer to more than
$2,000,000.
(z)
Except for any
loan, credit facility, line of credit, or letter of credit for an
owner-occupied residence (collectively, a “
Residential Credit
Extension
”) already committed to by DCB or a DCB
Subsidiary and set forth on
DCB Disclosure Schedule 5.1(z)
,
enter into, grant, approve, modify or extend any Residential Credit
Extension that would result in a credit exposure in excess of
$1,000,000; provided, however, that (i) after March 31, 2017 none
of the DCB Companies may make a Residential Credit Extension in a
principal amount that exceeds FHA jumbo limit in effect at such
time and (ii) all Residential Credit Extensions made between the
date of this Agreement and March 31, 2017 in a principal amount
that exceeds FHA jumbo limit in effect at such time shall be made
in the ordinary course of business and consistent with past
practice;
(aa)
Issue
any communication relating to the Contemplated Transactions to
employees (including general communications relating to benefits
and compensation) without prior consultation with OLB and, to the
extent relating to post-Closing employment, benefit or compensation
information, without the prior consent of OLB (which shall not be
unreasonably withheld, conditioned or delayed) or issue any
communication of a general nature to customers without the prior
approval of OLB (which shall not be unreasonably withheld,
conditioned or delayed), except as required by Law. For
clarification, communications in the ordinary course of business
consistent with past practice that do not relate to the
Contemplated Transactions shall not be prohibited pursuant to this
Section 5.1(aa);
(bb)
Change
deposit or loan rates other than in the ordinary course of business
consistent with past practice;
(cc)
Enter
into any interest rate swap, floor or cap or similar commitment,
agreement or arrangement, except in the ordinary course of business
consistent with past practice; or
(dd)
Agree
to do any of the foregoing.
Section
5.2
Conduct of
OLB’s Business.
Through
the Effective Time, except as otherwise consented to in writing by
DCB or as permitted by this Agreement, and except as may be
required by Law or, in writing, by any Regulatory Authority (in
which case OLB shall immediately provide DCB with a copy of such
written document), OLB shall not, and shall not permit any OLB
Subsidiary to:
(a)
Take any action
that would result in any of the conditions set forth in Article VI
hereof not being satisfied;
(b)
Take any action or
knowingly fail to take any action, which action or failure to act
would preclude the Merger from qualifying as a tax-free
reorganization within the meaning of Section 368(a) of the
IRC; or
(c)
Agree to do either
of the foregoing.
Section
5.3
Access;
Confidentiality.
(a)
Through the
Effective Time, each party hereto shall afford to the other,
including its authorized Representatives, reasonable access to its
and its Subsidiaries’ businesses, properties, assets, books
and records and personnel, at reasonable hours and after reasonable
notice; and the officers of each party shall furnish the other
party making such investigation, including its authorized
Representatives, with such financial and operating data and other
information with respect to such businesses, properties, assets,
books and records, and personnel as the party making such
investigation, or its authorized Representatives, shall from time
to time reasonably request. Each party hereto agrees that it, and
its authorized Representatives, will conduct such investigation and
discussions hereunder in a confidential manner and otherwise in a
manner so as not to interfere unreasonably with the other
party’s normal operations and customer and employee
relationships. Notwithstanding the foregoing, neither OLB nor DCB
shall be required to provide access to or to disclose information
where such access or disclosure would violate the rights of its
customers, jeopardize the attorney-client privilege of the entity
in possession or control of such information or contravene any Law
or binding agreement entered into prior to the date of this
Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the
restrictions of the previous sentence apply.
(b)
DCB and OLB each
agree that it will not, and will cause their Representatives not
to, use any information obtained pursuant to this Section 5.3
(as well as any other information obtained prior to the date hereof
in connection with entering into this Agreement) for any purpose
unrelated to the consummation of the Contemplated Transactions. DCB
and OLB shall hold all information obtained pursuant to this
Section 5.3 (as well as any other information obtained prior
to the date hereof in connection with entering into this Agreement)
in confidence to the extent required by, and in accordance with,
the provisions of the Confidentiality Agreement, which is
incorporated herein by reference. The parties hereto agree that
such Confidentiality Agreement shall continue in accordance with
its terms, notwithstanding the termination of this
Agreement.
Section
5.4
Regulatory
Matters.
Through
the Effective Time:
(a)
OLB and DCB shall
cooperate with one another in the preparation of the Registration
Statement (including the Prospectus/Proxy Statement) and all
Applications, which shall be prepared by OLB and OLB’s
counsel, to the extent such Applications are required to be filed
by an OLB Company, and by DCB and DCB’s counsel, to the
extent such Applications are required to be filed by a DCB Company,
and the making of all filings for, and shall use their reasonable
best efforts to obtain, as promptly as practicable, all necessary
permits, consents, approvals, waivers and authorizations of all
Regulatory Authorities necessary or advisable to consummate the
Contemplated Transactions; provided, however, that in no event
shall OLB or DCB be required to agree to any prohibition,
limitation or other requirement that would (a) prohibit or
materially limit the ownership or operation by OLB or any OLB
Subsidiary of all or any material portion of the business or assets
of DCB or any DCB Subsidiary, (b) compel OLB or DCB to dispose of
all or any material portion of either party’s business or
assets, (ii) impose a material compliance burden, penalty or
obligation on OLB or DCB, or (iii) otherwise materially impair the
value of DCB to OLB (any such requirement alone, or more than one
such requirement together, a “
Burdensome
Condition
”).
(b)
DCB and OLB shall
each promptly furnish the other with copies of written
communications to, or received by them from, any Regulatory
Authority with respect to the Contemplated Transactions to the
extent permitted by Law.
(c)
DCB and OLB shall
cooperate with each other in the foregoing matters and shall
furnish the other with all information concerning itself as may be
necessary or advisable in connection with any Application or
filing, including any report filed with the SEC, made by or on
behalf of such party to or with any Regulatory Authority in
connection with the Contemplated Transactions, and in each such
case, the information shall be accurate and complete in all
material respects. In connection therewith, DCB and OLB shall use
their reasonable good faith efforts to provide each other
certificates, “comfort” letters and other documents
reasonably requested by the other to the extent such disclosure is
permitted by Law. Each party hereto shall have the right to review
and approve in advance (such approval not to be unreasonably
withheld, conditioned or delayed) all characterizations of the
information relating to it and any of its subsidiaries that appear
in any filing made in connection with the Contemplated Transactions
with any Regulatory Authority. In addition, OLB and DCB shall each
give the other reasonable time to review the Registration Statement
and any Application to be filed by it prior to the time such
Application is filed with the relevant Regulatory Authority, and
each shall consult the other with respect to the substance and
status of such filings.
Section
5.5
Taking of Necessary
Actions.
Through
the Effective Time, in addition to the specific agreements
contained herein, each party hereto shall use their reasonable best
efforts to take, or cause to be taken by each of its Subsidiaries,
all actions, and to do, or cause to be done by each of its
Subsidiaries, all things necessary, proper or advisable under
applicable Law to consummate and make effective the Contemplated
Transactions as soon as practicable after the date hereof
including, if necessary, appealing any adverse ruling with respect
to any Application.
Section
5.6
Duty to Advise;
Duty to Update of Disclosure Schedules.
Through
the closing date, each of DCB and OLB shall promptly advise the
other of any change or event having or reasonably likely to have a
Material Adverse Effect or that it believes would or would be
reasonably likely to cause or constitute a material breach of any
of its representations, warranties or covenants set forth herein.
Through the Closing Date, DCB shall update the DCB Disclosure
Schedules, and OLB shall update the OLB Disclosure Schedules, as
promptly as practicable after the occurrence of any event that, if
such event had occurred prior to the date hereof, would have been
disclosed on such schedule. In addition, DCB shall update and
deliver to OLB the
DCB
Disclosure Schedule 3.20(a
), and OLB shall update and
deliver to DCB the
OLB
Disclosure Schedule 4.20
, promptly after the end of each
calendar month during the Pre-Closing Period and on the Business
Day immediately preceding the Closing Date. The delivery of such
updated Disclosure Schedules shall not relieve either party from
liability for any breach or violation of this Agreement and shall
not have any effect for the purposes of determining the
satisfaction of the condition set forth in Sections 6.1(b) or
6.2(b).
Section
5.7
Other Undertakings
by OLB and DCB.
(a)
Undertakings of
DCB
.
(i)
Stockholder Approval
. As
promptly as practicable after the Registration Statement becomes
effective under the Securities Act, in accordance with applicable
Law and this Agreement, DCB shall submit the Agreement and the
Merger to its stockholders for approval at the DCB Common
Stockholders’ Meeting with the recommendation that its
stockholders approve the Agreement and the Merger.
(ii)
Acquisition
Proposals
. So long as this Agreement remains in effect,
except as otherwise expressly permitted by this Agreement, DCB
shall not, and it shall not authorize, permit or cause any DCB
Subsidiary and their respective Representatives to, directly or
indirectly: (A) initiate, solicit, induce or encourage (including
by way of furnishing information), or take any action to facilitate
the making of, any inquiry, offer or proposal that constitutes,
relates or could reasonably be expected to lead to an Acquisition
Proposal; (B) respond to any inquiry relating to an Acquisition
Proposal; (C) recommend or endorse an Acquisition Proposal; (D)
participate in any discussions or negotiations regarding any
Acquisition Proposal or furnish, or otherwise afford access, to any
Person (other than OLB) any information or data with respect to DCB
or any DCB Subsidiary or otherwise relating to an Acquisition
Proposal; (E) release any Person from, waive any provisions of, or
fail to enforce any confidentiality agreement or standstill
agreement to which DCB or any DCB Subsidiary is a party; or (F)
enter into any agreement, agreement in principle, letter of intent
or similar instrument, including any exclusivity agreement, with
respect to any Acquisition Proposal or approve or resolve to
approve any Acquisition Proposal or any agreement, agreement in
principle, letter of intent or similar instrument relating to an
Acquisition Proposal. Any violation of the foregoing restrictions
by DCB or any of its Representatives, whether or not such
Representative is so authorized and whether or not such
Representative is purporting to act on behalf of DCB or otherwise,
shall be deemed to be a breach of this Agreement by DCB. DCB and
each DCB Subsidiary shall, and shall cause each of its
Representatives to, immediately cease and cause to be terminated
any and all existing discussions, negotiations, and communications
with any Person with respect to any existing or potential
Acquisition Proposal.
Notwithstanding the
foregoing, prior to the approval of the Agreement and the Merger by
DCB’s stockholders at the DCB Common Stockholders’
Meeting, DCB may respond to an inquiry, furnish nonpublic
information regarding itself and the DCB Subsidiaries to, or enter
into discussions with, any Person in response to an unsolicited
Acquisition Proposal that is submitted to DCB by such Person (and
not withdrawn) if: (A) DCB’s board of directors determines in
good faith, after consultation with and having considered the
advice of its outside legal counsel and the advice of RP Financial,
LC., that such Acquisition Proposal constitutes or is reasonably
likely to lead to a Superior Proposal (as defined below); (B) DCB
has not violated any of the restrictions set forth in this Section
5.7(a)(ii); (C) DCB’s board of directors determines in good
faith, after consultation with and based upon the advice of its
outside legal counsel and the advice of RP Financial, LC., that
such action is required in order for the board of directors to
comply with its fiduciary obligations under applicable Law; and (D)
at least two Business Days prior to furnishing any nonpublic
information to, or entering into discussions with, such Person, DCB
provides OLB with written notice of the identity of such Person and
of DCB’s intention to furnish nonpublic information to, or
enter into discussions with, such Person and DCB receives from such
Person an executed confidentiality agreement on terms no more
favorable to such Person than the Confidentiality Agreement, which
confidentiality agreement shall not provide such Person with any
exclusive right to negotiate with DCB. DCB shall promptly provide
to OLB any non-public information regarding DCB or any DCB
Subsidiary provided to any other Person that was not previously
provided to OLB, such additional information to be provided no
later than the date of provision of such information to such other
Person.
DCB
shall promptly (and in any event within 24 hours) notify OLB in
writing if any proposals or offers are received by, any information
is requested from, or any negotiations or discussions are sought to
be initiated or continued with, DCB, any DCB Subsidiary or any of
their Representatives, in each case in connection with any
Acquisition Proposal, and such notice shall indicate the name of
the Person initiating such discussions or negotiations or making
such proposal, offer or information request and the material terms
and conditions of any proposals or offers (and, in the case of
written materials relating to such proposal, offer, information
request, negotiations or discussion, providing copies of such
materials (including e-mails or other electronic communications)).
DCB agrees that it shall keep OLB informed, on a current basis, of
the status and terms of any such proposal, offer, information
request, negotiations or discussions (including any amendments or
modifications to such proposal, offer or request). DCB further
agrees that it will provide OLB with the opportunity to present its
own proposal to the DCB board of directors in response to any such
proposal or offer and negotiate with OLB in good faith with respect
to any such proposal.
For
purposes of this Agreement, “
Superior Proposal
” means
any unsolicited, bona fide written proposal (or its most recently
amended or modified terms, if amended or modified) made by a third
party to consummate an Acquisition Proposal on terms that the DCB
board of directors determines in its good faith judgment, after
consultation with and having considered the advice of DCB’s
outside legal counsel and RP Financial, LC.: (A) would, if
consummated, result in consideration that is more favorable to the
stockholders of DCB than the Contemplated Transactions (taking into
account all legal, financial, regulatory and other aspects of the
Acquisition Proposal and the Person making the proposal); (B) is
not conditioned on obtaining financing (and with respect to which
DCB has reasonably assured itself of such Person’s ability to
fully finance its Acquisition Proposal); (C) would, if consummated,
result in the acquisition of all, but not less than all, of the
issued and outstanding shares of DCB Common Stock or all or
substantially all of the assets and liabilities of the DCB
Companies on a consolidated basis; and (D) is reasonably likely to
be completed on the terms proposed, in each case taking into
account all legal, financial, regulatory and other aspects of the
proposal.
Neither
the DCB board of directors nor any committee thereof shall: (A)
withdraw, qualify or modify, or propose to withdraw, qualify or
modify, in a manner adverse to OLB in connection with the
Contemplated Transactions (including the Merger), its
recommendation to the stockholders of DCB to approve the Agreement
and the Merger, or make any statement, filing or release, in
connection with the DCB Common Stockholders’ Meeting or
otherwise, inconsistent with the recommendation to the stockholders
of DCB to approve the Agreement and the Merger (it being understood
that taking a neutral position or no position with respect to an
Acquisition Proposal shall be considered an adverse modification of
such recommendation); (B) approve or recommend, or publicly propose
to approve or recommend, any Acquisition Proposal; or (C) enter
into (or cause DCB or any DCB Subsidiary to enter into) any letter
of intent, agreement in principle, acquisition agreement or other
agreement (1) related to any Acquisition Proposal or (2) requiring
DCB to abandon, terminate or fail to consummate any of the
Contemplated Transactions.
Notwithstanding the
foregoing, prior to the date of the DCB Common Stockholders’
Meeting, DCB’s board of directors may approve or recommend to
the stockholders of DCB a Superior Proposal and withdraw, qualify
or modify its recommendation in connection with the Agreement and
the Merger or take any of the other actions otherwise prohibited by
this Section 5.7(a)(ii) after the third Business Day following the
receipt by OLB of a notice (the “
Notice of Superior
Proposal
”) from DCB advising OLB that the DCB board of
directors has decided that a bona fide unsolicited written
Acquisition Proposal that it received (that did not result from a
breach of this Section 5.7(a)(ii)) constitutes a Superior Proposal
(it being understood that DCB shall be required to deliver a new
Notice of Superior Proposal in respect of any materially revised
Superior Proposal from such third party or its affiliates that DCB
proposes to accept and the subsequent notice period shall be three
Business Days) if, but only if, (A) the DCB board of directors has
reasonably determined in good faith, after consultation with and
having considered the advice of outside legal counsel and the
advice of RP Financial, LC., that the failure to take such actions
would be inconsistent with its fiduciary duties under applicable
law and (B) at the end of such three Business Day period, after
taking into account any adjusted, modified or amended terms as may
have been committed to in writing by OLB since OLB’s receipt
of such Notice of Superior Proposal (provided, however, that OLB
shall not have any obligation to propose any adjustments,
modifications or amendments to the terms and conditions of this
Agreement), the DCB board of directors has again in good faith made
the determination (1) in clause (A) of this paragraph, and (2) that
such Acquisition Proposal constitutes a Superior
Proposal.
(iii)
Envir
onmental
Assessments
.
(A)
OLB shall have the
express right, but not the obligation, to conduct, at its sole cost
and expense, Environmental Assessments of the DCB Companies’
assets, operations and secured interests, including, but not
limited to, the DCB Real Properties. For any DCB Real Property that
is not owned by a DCB Company, access to such DCB Real Property by
OLB shall be conditioned on approval by the property
owner.
(B)
If OLB, in its sole
discretion, is unable to reasonably determine that the recognized
environmental conditions identified in the Environmental
Assessments will not result in a Material Adverse Effect, OLB shall
have the express right, but not the obligation, to further assess,
at its sole cost and expense, the recognized environmental
conditions as OLB deems appropriate subject to the following
provisions of this Section 5.7(a)(iii)(B). For any DCB Real
Property that is owned by a DCB Company, such further assessment
shall be subject to prior notice to DCB. For any DCB Real Property
that is not owned by a DCB Company, such further assessment by OLB
shall be conditioned on approval by the property
owner.
(C)
OLB agrees to
notify DCB a reasonable time in advance of any Environmental
Assessments scheduled pursuant to this Section 5.7(a)(iii).
Upon receipt of such notice, DCB agrees to permit OLB and its
Representatives to (i) conduct such Environmental Assessments, (ii)
have access to the properties, facilities, environmental documents
and personnel of the DCB Companies, and (iii) conduct such
consultations with the Persons conducting such examinations, as OLB
shall deem necessary; provided, however, that OLB agrees that the
exercise of its rights under this Section 5.7(a)(iii) shall not
unreasonably disturb or interfere with the business activities or
operations of the DCB Companies. Upon request by DCB, OLB shall
provide copies of reports prepared by OLB or its Representatives
for the assessments conducted under this Section
5.7(a)(iii).
(iv)
Dissolve
Non-Operational Subsidiaries
. Prior to Closing, DCB shall
cause the liquidation and legal dissolution of any and all
Non-Operational Subsidiaries.
(b)
Undertakings of OLB and
DCB
.
(i)
Public
Announcements
. OLB and DCB shall consult upon the form and
substance of any press release or public statement related to this
Agreement and the Contemplated Transactions and shall not issue any
press release or make any public statement without the prior
consent of the other party, which shall not be unreasonably delayed
or withheld, but nothing contained herein shall prohibit either
party, following notification to the other party, from making any
disclosure that its counsel deems necessary under applicable
Law.
(ii)
Maintenance
of Insurance
. OLB and each OLB Subsidiary, and DCB and each
DCB Subsidiary, shall maintain insurance in such amounts as OLB and
DCB, respectively, believe are reasonable to cover such risks as
are customary in relation to the character and location of its and
their respective Subsidiaries’ properties and the nature of
its and their respective Subsidiaries’
businesses.
(iii)
Maintenance
of Books and Records
. OLB and each OLB Subsidiary, and DCB
and each DCB Subsidiary, shall maintain books of account and
records in accordance with GAAP and on a basis consistent with past
practice.
(iv)
Taxes
.
OLB and each OLB Subsidiary shall file all OLB Returns, and DCB and
each DCB Subsidiary shall file all DCB Returns, required to be
filed by them, respectively, on or before the date such returns are
due, including any extensions, and pay all taxes shown to be due on
such returns on or before the dates such payments are due, except
those being contested in good faith.
(v)
In-House
Operations
. OLB and DCB shall cooperate with each other in
the interest of an orderly, cost-effective consolidation of
operations.
(vi)
Delivery
of Financial Statements
. OLB and DCB shall each deliver, or
in the case of OLB, make available to the other, promptly upon
their completion, but in each case by each respective delivery
date, financial statements that fairly present, in all material
respects, its consolidated financial condition, results of
operations for the periods then ended in accordance with GAAP,
subject to year-end audit adjustments and notes
thereto.
(vii)
Delivery
of Regulatory Filings and Documents
. Except where prohibited
by Law or the regulations of any Regulatory Authority, OLB and DCB
shall each deliver to the other copies of all reports filed with
Regulatory Authorities promptly upon the filing
thereof.
(c)
Undertakings of
OLB
.
(i)
DCB Director Nominees
. Subject
to the articles of incorporation and bylaws of OLB and Old Line,
the MGCL, any approvals and/or requirements of any Regulatory
Authority relating to OLB and the continuing fiduciary duties of
the OLB board of directors, the OLB board of directors shall take
such actions as may be necessary to (A) elect, as soon as is
practicable following the Effective Time, the DCB Nominees to serve
on the OLB board of directors until the next annual meeting of OLB
stockholders that occurs after the Effective Time, (B) cause the
DCB Nominees to be elected, as soon as is practicable following the
Effective Time, to serve on the Old Line board of directors until
the next annual meeting of Old Line’s stockholders that
occurs after the Effective Time, (C) nominate the DCB Nominees for
re-election to the OLB board of directors at the annual meeting of
OLB’s stockholders that follows the Effective Time, to serve
(1) in the case of Stephen J. Deadrick, for a term of at least two
years and (2) in the case of the other DCB Nominee, for a term of
at least one year, and (D) cause the DCB Nominees to be elected to
serve on the Old Line board of directors at the annual meeting of
Old Line’s stockholders that follows the Effective Time, to
serve for a term consistent with those set forth in subsection (C)
hereof; provided, however, that if the DCB Nominees shall be
subject to a Disqualification Event, OLB shall take such actions as
may be necessary to fill the vacancy so created with one of the
individuals set forth on
DCB Disclosure Schedule 1.3(d)
,
or with such other individuals as DCB may propose (each a
“
Replacement
Nominee
”), with the selection being at OLB’s
discretion.
On and
after the Effective Time, (A) the directors of OLB duly elected and
holding office immediately prior to the Effective Time, and (B)
provided the DCB Nominees agree to serve as a director of OLB, the
DCB Nominees, shall be the directors of OLB, each to hold office
until his or her successor is elected and qualified or otherwise in
accordance with applicable Law and the articles of incorporation
and bylaws of OLB and Old Line, as applicable; further provided,
that in no event shall OLB’s obligations under this section
apply with respect to either of the DCB Nominees if such DCB
Nominee shall be subject to a Disqualification Event.
As used
in this Agreement, the term “
Disqualification Event
”
means, as to the DCB Nominees, the occurrence of any of the
following events: (i) such nominee shall be prohibited by Law or
otherwise from serving as a director of OLB; (ii) such nominee
shall have been charged with or convicted of any felony or a crime
of moral turpitude; (iii) such nominee shall file (or any Entity of
which such nominee shall have been an executive officer or
controlling person within the 90 days prior to filing shall file) a
voluntary petition under any applicable federal or state bankruptcy
or insolvency law, or such nominee shall become (or any Entity
indebted to OLB of which such nominee shall have been an executive
officer or controlling person within the 90 days prior to filing
shall become) the subject of an involuntary petition filed under
any such law that is not dismissed within 90 days; (iv) such
nominee shall be involved in any of the events or circumstances
enumerated in Item 401(f)(3)-(6) of Regulation S-K (or any
successor or substitute provision of similar import) promulgated by
the SEC, or similar provisions of state “blue sky”
laws; (v) the death, disability or other personal reasons beyond
the control of such nominee that prevents him from serving, as
determined by OLB in its sole discretion, as a nominee; or (vi)
such nominee shall violate any covenant or agreement contained in
the Support Agreement. OLB will (i) take such actions as are
necessary to cause Old Line, subject to the fiduciary duties of the
Old Line board of directors, Old Line’s articles of
incorporation and bylaws and the eligibility requirements of any
Regulatory Authority relating to Old Line, and provided that the
DCB Nominees are not subject to a Disqualification Event, to
nominate the DCB Nominees to serve as directors of Old Line during
any time, and for the same term, that the DCB Nominees serve as
directors of OLB, in compliance with Section 1.3(d), and (ii) will,
as the sole stockholder of Old Line, vote to elect the DCB Nominee
so nominated by Old Line.
(ii)
Employees,
Severance Policy
.
(A)
Subject to
OLB’s or the applicable OLB Subsidiary’s personnel and
employment qualification policies and the provisions hereof, and
subject to OLB’s right to require, in its sole discretion and
as a condition of employment, such individuals to execute
confidentiality, non-competition and/or non-solicitation
agreements, OLB will endeavor to continue the employment of each
individual who was an employee of DCB or a DCB subsidiary as of
December 16, 2016 and was continuously an employee of DCB or a DCB
subsidiary through the Effective Time (a “
DCB Employee
”) in a
position that will contribute to the successful performance of the
combined organization as OLB deems appropriate, consistent with its
plans and strategies, for the efficient and effective operation of
the OLB Companies after the Effective Time. All such employees who
accept offers of employment from an OLB Company (the
“
Retained
Employees
”) will be employed on an at-will basis.
Notwithstanding anything to the contrary contained in this Section
5.7(c)(ii), no provision of this Agreement shall create any
obligation of OLB or an OLB Subsidiary to retain any DCB Employee
or create any third party benefit except for the Indemnified
Parties’ rights under Section 5.7(c)(iv), which are
expressly intended to be for the irrevocable benefit of, and shall
be enforceable by, each Indemnified Party and his or her heirs and
Representatives. If a DCB Employee (1) is not offered employment
with OLB or an OLB Company, (2) does not accept an offer of
employment because the offer is not for a “Comparable
Position” (as defined in the Damascus Community Bank Employee
Change in Control Plan attached as Exhibit E hereto (the
“
Plan
”)) or (3) accepts
employment and becomes a Retained Employee but is involuntarily
terminated without Cause within 12 months of the Effective Date,
then OLB will cause Old Line or the applicable OLB Subsidiary to
make a severance payment to the displaced DCB Employee in
accordance with and as set forth in the Plan; provided, however,
that each such DCB Employee eligible for a severance payment
hereunder will receive at least four weeks of “Base
Compensation,” as defined in the Plan.
(B)
Any Retained
Employee whose employment with OLB or an OLB Subsidiary is
terminated without Cause after 12 months from the Effective Date
shall receive such severance benefit from OLB or such OLB
Subsidiary as is provided for in OLB’s or the applicable OLB
Subsidiary’s general severance policy for such terminations
(with full credit being given for each full year of service with
DCB or any DCB Subsidiary).
(C)
Any DCB Employee
who has or is party to any employment agreement, severance
agreement, change in control agreement or any other agreement or
arrangement (a “
CIC
Agreement
”) that provides for any payment that would
be triggered by the Merger or the Bank Merger (“
CIC Payment
”) shall not
receive any severance benefits as provided in Sections
5.7(c)(ii)(A) and (B) but will receive the CIC Payment upon the
occurrence of a triggering event under the CIC Agreement. Any DCB
Employee who waives and relinquishes his or her right to a CIC
Payment will be eligible for a severance payment as provided in
Section 5.7(c)(ii)(A) or (B).
(D)
OLB and any OLB
Subsidiary’s obligation hereunder to make payments as
provided in this Section 5.7(c)(ii) is expressly subject to OLB
obtaining a non-objection or waiver of any regulatory prohibition
or limitation on such payment, and OLB’s obligation hereunder
is limited to such amount as determined by the Regulatory
Authorities. DCB will obtain written acknowledgement of OLB’s
obligation hereunder from all DCB employees and officers who may be
eligible for such payments. OLB will use reasonable efforts to
obtain any required regulatory approval or non-objection and shall
file any required notice or application to obtain such approval or
non-objection no later than the later of (i) the date it files its
application for approval of the Bank Merger or (ii) it becomes
aware of the need to obtain any such approval or
non-objection.
(iii)
Employee
Benefits
. As of the Effective Time, each Retained Employee
shall be entitled to full credit for each year of service with DCB
or any DCB Subsidiary for purposes of determining eligibility for
participation and vesting and benefit accrual in OLB’s or, as
appropriate, in the OLB Subsidiary’s, employee benefit plans,
programs and policies, except as prohibited by Law. OLB shall use
the original date of hire by DCB or a DCB Subsidiary in making
these determinations.
(iv)
Indemnification
.
From and after the Effective Time, subject to applicable Law, OLB
(the “
Indemnifying
Party
”) shall indemnify and hold harmless each present
and former director and officer of DCB or a DCB Subsidiary, as
applicable, determined as of the Effective Time (the
“
Indemnified
Parties
”) against any costs or expenses (including
reasonable attorneys’ fees), judgments, fines, losses,
claims, damages or liabilities and amounts paid in settlement
incurred after the Effective Time in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or
occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, based in whole or
in part, or arising in whole or in part out of, or pertaining to
the fact that he or she was a director or officer of DCB or a DCB
Subsidiary or is or was serving at the request of DCB or any DCB
Subsidiary as a director, officer, employee, trustee or other agent
of any other organization or in any capacity with respect to any
DCB Benefit Plan, including, without limitation, any matters
arising in connection with or related to the negotiation, execution
and performance of this Agreement or any of the Contemplated
Transactions, and will advance expenses to such Indemnified Party
in connection therewith, to the fullest extent to which such
Indemnified Parties would be entitled to the right to advancements
of expenses or to be indemnified under the articles of
incorporation and bylaws of DCB in effect on the date of this
Agreement as though the Indemnified Parties were present or former
directors or officers of OLB, or were serving at the request of OLB
or any OLB Subsidiary as a director, officer, employee, trustee or
other agent of any other organization or in any capacity with
respect to any OLB Benefit Plan, as of the Effective Time.
OLB’s obligations under this
Section 5.7(c)(iv) shall continue in full force and effect for a
period of six years and one day from the Effective Date; provided,
however, that all rights to indemnification in respect of any claim
asserted or made within such period shall continue until the final
disposition of such claim
.
(v)
NASDAQ Listing
. To the extent
required, OLB agrees to
timely file a
“Listing of Additional Shares Notification Form”
with
NASDAQ
with respect to the
shares of OLB Common Stock to be issued in the Merger, and to use
its best efforts to have the review of such form completed prior to
the Effective Time.
(vi)
Directors’
and Officers’ Liability Insurance
. Contemporaneously
with the Closing, OLB shall purchase an extended reporting period
to DCB’s current liability insurance policy(ies), for a
period to last from the day after the Effective Date until at least
the date that is six years and one day after the Effective Date,
for purposes of covering actions occurring prior to the Effective
Time (the “
Tail
Policy
”). Provided that the aggregate cost of the Tail
Policy will not exceed 200.0% of the current annual premium
attributable to the applicable officers’ and directors’
liability coverage in DCB’s and/or Damascus’ liability
insurance policy(ies) in effect as of the date of this Agreement
(the “
Maximum
Premium
”), the Tail Policy shall provide the same or
better coverage for the individuals who are presently covered by
DCB’s or Damascus’ officers’ and directors’
liability insurance policy(ies) and any other insurance policy(ies)
providing insurance coverage for DCB’s or Damascus’
executive officers and directors (all of such individuals, the
“
Insured
Persons
”), with respect to actions, omissions, events,
matters or circumstances occurring through the Effective Time. If
OLB is unable to purchase the Tail Policy having the coverage and
aggregate limits contemplated by the foregoing sentence at a cost
that does not exceed Maximum Premium, then the Tail Policy
purchased by OLB shall provide such coverage as may be reasonably
purchased for a cost that does not exceed the Maximum Premium. In
either event, OLB may not cancel, modify or take any action to
limit or terminate the Tail Policy purchased pursuant to this
Section 5.7(c)(iv) unless it replaces such Tail Policy with
coverage provided by insurers having the same or better rating,
coverage and aggregate limits as such Tail Policy; provided,
however
,
that OLB may, at
its option, replace at any time such policy with another policy
having the same coverage rate.
Section
5.8
Accuracy of the
Registration Statement.
The
Prospectus/Proxy Statement and the Registration Statement shall
comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and the rules
and regulations thereunder. DCB and OLB shall promptly notify the
other party if at any time it becomes aware that the
Prospectus/Proxy Statement or the Registration Statement contains
any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances
under which they were made, not misleading. In such event, DCB
shall cooperate with OLB in the preparation of a supplement or
amendment to such Prospectus/Proxy Statement or Registration
Statement that corrects such misstatement or omission, and OLB
shall file an amended Registration Statement or supplement to the
Registration Statement with the SEC, and DCB shall mail a
Prospectus/Proxy Statement and any required amendment or supplement
to holders of DCB Common Stock. OLB will provide DCB and its
counsel with a reasonable opportunity to review and comment on the
Registration Statement and the Prospectus/Proxy Statement and all
responses to requests for additional information by and replies to
comments of the SEC prior to filing such with, or sending such to,
the SEC, and will provide DCB and its counsel with a copy of all
such filings made with the SEC.
ARTICLE VI.
CONDITIONS
Section
6.1
Conditions to
DCB’s Obligations under this Agreement.
The
obligations of DCB hereunder shall be subject to satisfaction at or
prior to the Closing Date of each of the following conditions,
unless waived by DCB pursuant to Section 8.3
hereof:
(a)
Corporate Proceedings
. All
action required to be taken by, or on the part of, OLB and Old Line
to authorize the execution, delivery and performance of this
Agreement, and the consummation of the Contemplated Transactions,
shall have been duly and validly taken by OLB and Old Line,
respectively, and DCB shall have received certified copies of the
resolutions evidencing such authorizations.
(b)
Covenants; Representations
. The
obligations of OLB and Old Line required by this Agreement to be
performed by OLB and Old Line at or prior to the Closing Date shall
have been duly performed and complied with in all material
respects; and the representations and warranties of OLB set forth
in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty that
specifically relates to an earlier date, in each case in accordance
with the Article IV Standard.
(c)
Consents
. (i) DCB and Damascus
shall have received all consents and approvals described in
DCB Disclosure Schedule
3.4
and all filings and registrations by DCB and Damascus
described in
DCB
Disclosure Schedule 3.4
shall have been accepted or declared
effective, except where the failure to obtain any such consent or
approval, or for any such filing or registration to be accepted or
declared effective, would not reasonably be expected to have a
Material Adverse Effect on OLB or Old Line subsequent to the
Effective Time; (ii) OLB and Old Line shall have received all
consents and approvals described in
OLB Disclosure Schedule 4.4
and
all filings and registrations by OLB and Old Line described in
OLB Disclosure Schedule
4.4
shall have been accepted or declared effective, except
where the failure to obtain any such consent or approval, or for
any such filing or registration to be accepted or declared
effective, would not reasonably be expected to have a Material
Adverse Effect on OLB or Old Line subsequent to the Effective Time;
(iii) any statutory waiting period or periods relating to the
consents, approvals, filings and registrations identified in the
foregoing items (i) or (ii) shall have expired; and (iv) no consent
or approval identified in the foregoing items (i) or (ii) shall
have imposed any condition or requirement that, in the reasonable
opinion of the board of directors of DCB, would constitute a
Burdensome Condition or otherwise so materially and adversely
impact the economic or business benefits to DCB of the Contemplated
Transactions as to render consummation of the Merger
inadvisable.
(d)
No Injunction or Restraints
. No
temporary restraining order, preliminary or permanent injunction or
other judgment, order or decree issued by a Regulatory Authority of
competent jurisdiction located in the United States that enjoins or
prohibits the consummation of the Contemplated Transactions shall
have been issued and remain in effect.
(e)
Officer’s Certificate
.
OLB shall have delivered to DCB a certificate, dated the Closing
Date and signed, without personal liability, by its President and
Chief Executive Officer, to the effect that, to the best of his
knowledge, information and belief, the conditions set forth in
subsections (a), (b), (c)(ii) and (c)(iii) (but only with respect
to waiting periods applicable to OLB), (d), (f), (k) and (l) of
this Section 6.1 have been satisfied.
(f)
Registration Statement
. The
Registration Statement shall be effective under the Securities Act,
and no proceedings shall be pending or threatened by the SEC to
suspend the effectiveness of the Registration Statement; and all
approvals deemed necessary by OLB’s counsel from state
securities or “blue sky” authorities with respect to
the Contemplated Transactions shall have been
obtained.
(g)
Tax Opinion
. DCB shall have
received an opinion of Gordon Feinblatt LLC, counsel to DCB, dated
the Closing Date, to the effect that on the basis of the facts,
representations and assumptions set forth in such opinion (i) the
Merger constitutes a tax-free reorganization under
Section 368(a) of the IRC, and (ii) any gain realized in the
Merger will be recognized only to the extent of cash or other
property (other than OLB Common Stock) received in the Merger,
including cash received in lieu of fractional share interests; in
rendering their opinion, such counsel may require and rely upon
representations and reasonable assumptions, including those
contained in certificates of officers of DCB, OLB and
others.
(h)
Approval by DCB’s
Stockholders
. The Agreement and the Merger shall have been
approved by the stockholders of DCB by such vote as is required by
the MGCL and the articles of incorporation and bylaws of
DCB.
(i)
Other Documents
. DCB shall have
received such other certificates, documents or instruments from OLB
or its officers or others as DCB shall have reasonably requested in
connection with the accounting or income tax treatment of the
Contemplated Transactions, related Securities Laws compliance or to
evidence fulfillment of the conditions set forth in Section 6.1 as
DCB may reasonably request.
(j)
Illegality
. No Law shall have
been enacted, entered, promulgated or enforced by any Regulatory
Authority that prohibits, restricts or makes illegal the
consummation of the Contemplated Transactions.
(k)
No Material Adverse Effect
. No
change in the business, property, assets (including loan
portfolios), liabilities (whether absolute, contingent or
otherwise), operations, business prospects, liquidity, income, or
financial condition of OLB or any of the OLB Subsidiaries shall
have occurred since the date of this Agreement, and no information
shall have been provided solely in an updated OLB Disclosure
Schedule pursuant to Section 5.6 of this Agreement, that has had,
or would reasonably be likely to have, a Material Adverse Effect on
OLB.
(l)
NASDAQ Listing
. To the extent
required, NASDAQ shall have completed its review of the
“Listing of Additional Shares
Notification Form” filed by OLB with
NASDAQ
with respect to the shares of OLB
Common Stock to be issued in the Merger.
Section
6.2
Conditions to
OLB’s Obligations under this Agreement.
The
obligations of OLB hereunder shall be subject to satisfaction at or
prior to the Closing Date of each of the following conditions,
unless waived by OLB pursuant to Section 8.3
hereof:
(a)
Corporate Proceedings
. All
action required to be taken by, or on the part of, DCB and Damascus
to authorize the execution, delivery and performance of this
Agreement, and the consummation of the Contemplated Transactions,
shall have been duly and validly taken by DCB and Damascus,
respectively, and OLB shall have received certified copies of the
resolutions evidencing such authorizations.
(b)
Covenants; Representations
. The
obligations of DCB and Damascus required by this Agreement to be
performed by DCB and Damascus at or prior to the Closing Date shall
have been duly performed and complied with in all material
respects; and the representations and warranties of DCB set forth
in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of
the Closing Date, except as to any representation or warranty that
specifically relates to an earlier date, in each case in accordance
with the Article III Standard.
(c)
Consents
. (i) OLB and Old Line
shall have received all consents and approvals described in
OLB Disclosure Schedule
4.4
and all filings and registrations by OLB and Old Line
described in
OLB
Disclosure Schedule 4.4
shall have been accepted or declared
effective, except where the failure to obtain any such consent or
approval, or for any such filing or registration to be accepted or
declared effective, would not reasonably be expected to have a
Material Adverse Effect on OLB or Old Line subsequent to the
Effective Time; (ii) DCB and Damascus shall have received all
consents and approvals described in
DCB Disclosure Schedule 3.4
and
all filings and registrations by DCB and Damascus described in
DCB Disclosure Schedule
3.4
shall have been accepted or declared effective, except
where the failure to obtain any such consent or approval, or for
any such filing or registration to be accepted or declared
effective, would not reasonably be expected to have a Material
Adverse Effect on OLB or Old Line subsequent to the Effective Time;
(iii) any statutory waiting period or periods relating to the
consents, approvals, filings and registrations identified in the
foregoing items (i) or (ii) shall have expired; and (iv) no consent
or approval identified in the foregoing items (i) or (ii) shall
have imposed any condition or requirement that, in the reasonable
opinion of the board of directors of OLB, would constitute a
Burdensome Condition or otherwise so materially and adversely
impact the economic or business benefits to OLB of the Contemplated
Transactions as to render consummation of the Merger
inadvisable.
(d)
No Injunction or Restraints
. No
temporary restraining order, preliminary or permanent injunction or
other judgment, order or decree issued by a Regulatory Authority of
competent jurisdiction located in the United States that enjoins or
prohibits the consummation of the Contemplated Transactions shall
have been issued and remain in effect.
(e)
Officer’s Certificate
.
DCB shall have delivered to OLB a certificate, dated the Closing
Date and signed, without personal liability, by both of its
Co-Chief Executive Officers, to the effect that, to the best of
their knowledge, information and belief, the conditions set forth
in subsections (a), (b), (c)(ii) and (iii) (but only with respect
to waiting periods applicable to DCB), (d), (h) and (l) of this
Section 6.2 have been satisfied.
(f)
Registration Statement
. The
Registration Statement shall be effective under the Securities Act,
and no proceedings shall be pending or threatened by the SEC to
suspend the effectiveness of the Registration Statement; and all
approvals deemed necessary by OLB’s counsel from state
securities or “blue sky” authorities with respect to
the Contemplated Transactions shall have been
obtained.
(g)
Tax Opinion
. OLB shall have
received an opinion of Baker, Donelson, Bearman, Caldwell &
Berkowitz, PC, counsel to OLB dated the Closing Date, to the effect
that on the basis of the facts, representations and assumptions set
forth in such opinion the Merger constitutes a tax-free
reorganization under Section 368(a) of the IRC; in rendering
their opinion, such counsel may require and rely upon
representations and reasonable assumptions, including those
contained in certificates of officers of DCB, OLB and
others.
(h)
Approval by DCB’s
Stockholders
. The Agreement and the Merger shall have been
approved by the stockholders of DCB by such vote as is required by
the MGCL and the articles of incorporation and bylaws of
DCB.
(i)
Limitation on
Objecting DCB Shares
.
As of the Effective Date, the
holders of no more than ten percent of the shares
of DCB
Common
Stock that are
issued and outstanding as of the record date for the DCB Common
Stockholders’ Meeting shall have taken the actions required
by Section 3-203 of the MGCL to qualify their shares of DCB
Common Stock as Objecting DCB Shares.
(j)
Other Documents
. OLB shall have
received such other certificates, documents or instruments from DCB
or its officers or others as OLB shall have reasonably requested in
connection with the accounting or income tax treatment of the
Contemplated Transactions, related Securities Laws compliance or to
evidence fulfillment of the conditions set forth in Section 6.2 as
OLB may reasonably request.
(k)
Environmental Assessment
Results
. The recognized environmental conditions of any
Environmental Assessments conducted pursuant to
Section 5.7(a)(iii) hereof shall not result in a Material
Adverse Effect on DCB. OLB shall be fully satisfied, in its
reasonable discretion, with the findings of the Environmental
Assessments and any other environmental reports undertaken pursuant
to Section 5.7 of this Agreement.
(l)
No Material Adverse Effect
. No
change in the business, property, assets (including loan
portfolios), liabilities (whether absolute, contingent or
otherwise), operations, business prospects, liquidity, income, or
financial condition of DCB or any of the DCB Subsidiaries shall
have occurred since the date of this Agreement, and no information
shall have been provided in an updated DCB Disclosure Schedule
pursuant to Section 5.6 of this Agreement, that has had, or would
reasonably be likely to have, a Material Adverse Effect on
DCB.
(m)
Third Party Consents
. OLB shall
have received all consents and authorizations of landlords and
other persons that are necessary to permit the Contemplated
Transactions to be consummated without the violation of any lease
or other material agreement to which any of the DCB Companies is a
party or by which any of their properties are bound, except where
failure to obtain such consent or authorization would be reasonably
expected not to have a Material Adverse Effect subsequent to the
Merger.
(n)
Illegality
. No Law shall have
been enacted, entered, promulgated or enforced by any Regulatory
Authority that prohibits, restricts or makes illegal the
consummation of the Contemplated Transactions.
(o)
Nasdaq Listing
. To the extent
required, and provided that OLB has complied with its obligations
set forth in Section 5.7(c)(v) hereof, NASDAQ shall have completed
its review of the
“Listing of
Additional Shares Notification Form” filed by OLB with
NASDAQ
with respect to the shares of
OLB Common Stock to be issued in the Merger.
Section
6.3
Frustration of Closing Conditions.
Neither
OLB nor DCB may rely on the failure of any condition set forth in
Section 6.1 or 6.2, as the case may be, to be satisfied if such
failure was caused by such party’s failure to use its
commercially reasonable best efforts to consummate and to make
effective the Contemplated Transactions, as required by and subject
to Section 5.5.
ARTICLE VII.
TERMINATION
Notwithstanding any
other provision of this Agreement, and notwithstanding receipt of
the approval by the stockholders of DCB of the Agreement and the
Merger, this Agreement may be terminated on or at any time prior to
the Closing Date:
(a)
By the mutual
written agreement of DCB and OLB;
(b)
By either DCB or
OLB (provided that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein in a manner that would entitle the other party not
to consummate the Contemplated Transactions) in the event of a
material breach of any representation, warranty, covenant or other
agreement of the other party hereto contained in this Agreement
such that (i) with respect to a representation or warranty, the
condition set forth in the second clause of Section 6.1(b) or
Section 6.2(b), as the case may be, would not be satisfied, and
(ii) with respect to a covenant or other agreement, the condition
set forth in the first clause of Section 6.1(b) or Section 6.2(b),
as the case may be, would not be satisfied, and in each case such
breach cannot be, or shall not have been, remedied within 30 days
after receipt by such party of written notice specifying the nature
of such breach and requesting that it be remedied or which, by its
nature, cannot be cured prior to the Closing; provided
,
that if such breach cannot reasonably
be cured within such 30-day period but may reasonably be cured
within 60 days, and such cure is being diligently pursued, no such
termination shall occur prior to the expiration of such 60-day
period;
(c)
By either DCB or
OLB if the Closing Date shall not have occurred prior to October
31, 2017 (except that if the Closing Date shall not have occurred
by October 31, 2017 because of a failure to obtain any required
approval or consent of a Regulatory Authority, such date shall be
November 30, 2017 unless the conditions of any such required
regulatory approval or consent cannot be satisfied by November 30,
2017), except that if the Closing Date shall not have occurred by
such date because of a material breach of this Agreement by a party
hereto, such breaching party shall not be entitled to terminate
this Agreement in accordance with this provision;
(d)
By either DCB or
OLB in the event any Regulatory Authority whose approval or consent
is required for consummation of the Contemplated Transactions shall
issue a definitive written denial of such approval or consent and
any appeals and requests for reconsideration have also received a
definitive written denial or an application therefor has been
permanently withdrawn at the request of a Regulatory
Authority;
(e)
By either DCB or
OLB if the stockholders of DCB vote, but fail to approve the
Agreement and the Merger at the DCB Common Stockholders’
Meeting;
(f)
By OLB if DCB or
any DCB Subsidiary enters into any agreement, agreement in
principle, letter of intent or similar instrument with respect to
any Superior Proposal or approves or resolves to approve any
agreement, agreement in principle, letter of intent or similar
instrument with respect to a Superior Proposal;
(g)
By DCB if at any
time after the date of this Agreement and prior to obtaining the
approval of the Agreement and the Merger by DCB’s
stockholders at the DCB Common Stockholders’ Meeting, DCB
receives a Superior Proposal; provided, however, that DCB shall not
terminate this Agreement pursuant to the foregoing clause
unless:
(i)
DCB shall have
complied in all material respects with Section 5.7(a)(ii) of this
Agreement;
(ii)
DCB
concurrently pays the DCB Termination Fee payable pursuant to
Section 8.1(b); and
(iii)
the
board of directors of DCB concurrently approves, and DCB
concurrently enters into, a definitive agreement with respect to
such Superior Proposal;
(h)
By DCB if OLB or
any OLB Subsidiary enters into any definitive term sheet, letter of
intent, agreement or similar type of agreement with a view to being
acquired by, or effecting a business combination, as a result of
which OLB is not the surviving Entity or OLB’s directors, as
of the date of this Agreement, do not comprise the majority of the
surviving Entity’s board of directors, with any person other
than DCB, and the DCB board of directors determines that, after
considering the advice of counsel and R.P. Financial LC., such
transaction is not in the best interests of the DCB Common
Stockholders; provided, however
,
that DCB must exercise the
termination option under this Section 7.1(h) within 30
calendar days after the date on which OLB is required to file a
Current Report on Form 8-K with the SEC regarding events triggering
the termination option;
(i)
By OLB if the DCB
board of directors withdraws, changes or modifies its
recommendation to its stockholders in any manner adverse to OLB
regarding this Agreement or the Merger, or the DCB board of
directors authorizes, recommends or publicly proposes, or publicly
announces an intention to authorize, recommend or propose, an
agreement to enter into an Acquisition Proposal that constitutes a
Superior Proposal; or
(j)
By
DCB if (i) the Closing Market Price is less than $16.68 and (ii)
the OLB Price Ratio is less than the Index Ratio by more than
20%.
If DCB
elects to exercise its termination right pursuant to this Section
7.1(j), it shall give prompt (but in any case within 24 hours of
such determination) written notice thereof to OLB. During the five
Business Day period commencing with its receipt of such notice, OLB
may, at its option, increase the Merger Consideration to an amount
to be calculated as if the Average Price were equal to $16.68. If
OLB makes the election contemplated by the preceding sentence
within such five Business Day period, it shall give prompt written
notice to DCB of such election and the revised Per Share
Consideration, whereupon no termination shall have occurred
pursuant to this Section 7.1(j) and this Agreement shall remain in
effect in accordance with its terms (except as the Per Share Common
Stock Consideration shall have been so modified), and any
references in this Agreement to the Per Share Consideration and the
amount thereof shall thereafter be deemed to refer to the Per Share
Consideration and the amount thereof as adjusted pursuant to this
Section 7.1(j).
If the
outstanding shares of OLB Common Stock or any company belonging to
the NASDAQ Bank Stock Index shall be changed into a different
number of shares by reason of any stock dividend, reclassification,
split-up, combination, exchange of shares or similar transaction
between the date of the Agreement and the end of the Price
Determination Period, the Starting Price, the Closing Market Price
and the other amounts in this Section 7.1(j) shall be appropriately
adjusted.
For
purposes of this Section 7.1(j), the following terms shall have the
meanings set forth below:
“
Starting Price
” shall
mean $27.21, which was the volume weighted average of the closing
prices of OLB Common Stock for the ten Trading Days ending Two
Trading Days prior to the date of this Agreement.
“
Closing Market Price
”
shall be the volume weighted average of the closing prices of OLB
Common Stock, calculated to two decimal places, for the Price
Determination Period, as reported on the NASDAQ Capital
Market.
“
OLB Price Ratio
” shall
mean the quotient (multiplied by 100 to express such quotient as a
percentage) obtained by dividing the Closing Market Price by the
Starting Price, calculated to four decimal places.
“
Index Ratio
” shall mean
the quotient (multiplied by 100 to express such quotient as a
percentage) obtained by dividing the Average NASDAQ Bank Stock
Index Value For The Price Determination Period by $3,783.767, which
was the closing index value of the NASDAQ Bank Index on that date
that was two Trading Days prior to the date of this Agreement, as
quoted by NASDAQ, calculated to three decimal places.
“
Average NASDAQ Bank Stock Index Value
For The Price Determination Period
” shall mean the
average closing index value of the NASDAQ Bank Index for the Price
Determination Period, as quoted by NASDAQ.
“
Price Determination
Period
” means the ten consecutive Trading Days
immediately preceding the date that is five Trading Days before the
Closing Date.
“NASDAQ Bank
Index” shall mean the NASDAQ Market Index Sector, having the
trading symbol “IXBK,” for certain bank stocks grouped
by NASDAQ.
Section
7.2
Effect of
Termination.
If this
Agreement is terminated pursuant to Section 7.1 hereof or
otherwise, this Agreement shall forthwith become void, other than
Sections 5.3(b), 5.7(b)(i), 8.1, 8.2, 8.4, 8.5, 8.6, 8.9, 8.10,
8.11, 8.12 and 8.13 hereof and this Section 7.2, which shall remain
in full force and effect, and there shall be no further liability
on the part of OLB or DCB to the other with respect to the
Contemplated Transactions, except for any liability of OLB or DCB
under such applicable sections of this Agreement.
ARTICLE VIII.
MISCELLANEOUS
Section
8.1
Expenses and Other
Fees.
(a)
General Expenses
. Whether or
not the Contemplated Transactions are consummated, each party to
this Agreement will pay its respective expenses incurred in
connection with the preparation and performance of its obligations
under this Agreement. Each party agrees to indemnify the other
party against any cost, expense or liability (including reasonable
attorneys’ fees and including those costs of any
party’s enforcement of the rights afforded under this Section
8.1) in respect of any claim made by any party for a broker’s
or finder’s fee in connection with the Merger other than one
based on communications between the party and the claimant seeking
indemnification. OLB shall be responsible for and shall pay all
filing fees, trustee or exchange agent fees and expenses, and blue
sky fees and expenses, if any. The expenses of separate counsel to
any stockholder of DCB shall be borne by such stockholder and not
borne or reimbursed by the DCB Companies or OLB.
(b)
DCB Termination Fee
. In
recognition of the efforts, expenses and other opportunities
foregone by OLB while structuring and pursuing the Merger, DCB
shall pay to OLB by wire transfer of immediately available funds a
termination fee equal to the amount determined by multiplying 0.052
(
i.e.
, 3.25% of 1.6) by the
DCB Tangible Equity (the “
DCB Termination Fee
”) as
follows:
(i) if
OLB terminates this Agreement pursuant to: (A) Section 7.1(b); (B)
Section 7.1(c) because the Closing failed to occur prior to
October, 31, 2017 or November 30, 2017, as applicable and such
failure resulted from the knowing, willful and intentional actions
or inactions of DCB or Damascus (provided that OLB is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement); (C) Section 7.1(d) because
a Regulatory Authority refused to issue a consent or approval
required for the consummation of any of the Contemplated
Transactions and such refusal resulted from the knowing, willful
and intentional actions or inactions of DCB or Damascus (provided
that OLB is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this
Agreement); or (D) Section 7.1(i) (provided that OLB is not then in
material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement), DCB shall pay the DCB
Termination Fee as promptly as practicable (but in any event within
three Business Days) after termination of the Agreement;
or
(ii) if
OLB or DCB terminates this Agreement pursuant to Sections 7.1(f) or
7.1(g), DCB shall pay the DCB Termination Fee at or prior to the
time of such termination.
If
payment of the DCB Termination Fee is timely made, then OLB will
have no other rights or claims against DCB and its officers,
directors, attorneys and financial advisors under this Agreement,
it being agreed that the acceptance of the DCB Termination Fee
under this Section 8.1 will constitute the sole and exclusive
remedy of OLB against DCB and its officers, directors, attorneys
and financial advisors.
(c)
OLB Termination Fee
. In
recognition of the efforts, expenses and other opportunities
foregone by DCB while structuring and pursuing the Merger, OLB
shall pay to DCB by wire transfer of immediately available funds a
termination fee equal to the amount determined by multiplying 0.052
(
i.e.
, 3.25% of 1.6) by the
DCB Tangible Equity (the “
OLB Termination Fee
”),
such OLB Termination Fee to be paid as promptly as practicable (but
in any event within three Business Days) after termination of the
Agreement, if this Agreement is terminated by DCB pursuant to: (i)
Section 7.1(b); (ii) Section 7.1(c) because the Closing failed to
occur prior to October 31, 2017 or November 30, 2017, as
applicable, and such failure resulted from the knowing, willful and
intentional actions or inactions of OLB or Old Line (provided that
DCB is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement); or (iii)
Section 7.1(d) because a Regulatory Authority refused to issue a
consent or approval required for the consummation of any of the
Contemplated Transactions and such refusal resulted from the
knowing, willful and intentional actions or inactions of OLB or Old
Line (provided that DCB is not then in material breach of any
representation, warranty, covenant, or other agreement contained in
this Agreement).
If
payment of the OLB Termination Fee is timely made, then DCB will
have no other rights or claims against OLB and its officers,
directors, attorneys and financial advisors under this Agreement,
it being agreed that the acceptance of the OLB Termination Fee
under this Section 8.1 will constitute the sole and exclusive
remedy of DCB against OLB and its officers, directors, attorneys
and financial advisors.
Section
8.2
Non-Survival.
All
representations, warranties and, except to the extent specifically
provided otherwise herein, agreements and covenants shall terminate
as of the Closing. Notwithstanding the foregoing, Sections 1.3(b),
1.3(c), 1.3(d), 1.5, 1.6, 2.5(b) through (i), 5.3(b) and 5.7(c)(i)
through (iv) and (vi) shall survive the Closing.
Section
8.3
Amendment,
Extension and Waiver.
(a)
Subject to
applicable Law, at any time prior to the Closing, the parties
may:
(i) Amend
this Agreement;
(ii)
Extend the time for the performance of any of the obligations or
other acts of either party hereto;
(iii)
Waive any term or condition of this Agreement, any inaccuracies in
the representations and warranties contained herein or in any
document delivered pursuant hereto; or
(iv)
Waive compliance with any of the agreements or conditions contained
in Articles V and VI hereof or otherwise.
(b)
This Agreement may
not be amended except by an instrument in writing signed, by
authorized officers, on behalf of the parties hereto. Any agreement
on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed by a
duly authorized officer on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other
failure.
Section
8.4
Entire
Agreement.
This
Agreement, the schedules and exhibits hereto, and any other
documents to be executed in connection herewith, including, without
limitation, the Bank Merger Agreement, and the Confidentiality
Agreement, contain the entire, complete, and integrated agreement
between the parties with respect to the subject matter hereof, and
supersede any prior or contemporaneous arrangements, agreements or
understandings between the parties, written or oral, express or
implied, that may have related to the subject matter hereof in any
way other than the Confidentiality Agreement.
Section
8.5
Binding
Agreement.
This
Agreement shall inure to the benefit of and be binding upon the
parties hereto and their successors; provided, however, that,
except for (a) the Indemnified Parties’ rights under Section
5.7(c)(iv), and (b) the Insured Person’s rights with respect
to the Tail Policy under Section 5.7(c)(vi), which are expressly
intended to be for the irrevocable benefit of, and shall be
enforceable by, each Indemnified Party and Insured Person,
respectively, and his or her heirs and Representatives, nothing in
this Agreement, expressed or implied, is intended to confer upon
any party, other than the parties hereto and their respective
successors, any rights, remedies, obligations or
liabilities.
All
notices under this Agreement shall be in writing and shall be
deemed sufficient and duly given: (a) when delivered personally to
the recipient; (b) upon confirmation of good transmission if sent
by facsimile; or (c) when delivered to the last known address of
the recipient (i) one Business Day after delivery to a reputable
express courier service for next-day delivery (charges prepaid), or
(ii) three days after being sent to the recipient by certified
mail, return receipt requested and postage prepaid, addressed as
follows:
(a)
If to OLB,
to:
James
W. Cornelsen
President and Chief
Executive Officer
Old
Line Bancshares, Inc.
1525
Pointer Ridge Place
Bowie,
MD 20716
Fax:
(301) 430-2531
with a
copy to:
Frank
C. Bonaventure, Jr., Esquire
Baker,
Donelson, Bearman, Caldwell & Berkowitz, PC
100
Light Street
Baltimore, Maryland
21202
Fax:
(443) 263-7505
(b)
If to DCB,
to:
Stephen
J. Deadrick
Chairman of the
Board
DCB
Bancshares, Inc.
26500
Ridge Road
Damascus, Maryland
20872
E-mail:
steve@ddminsurance.com
with a
copy to:
Andrew
D. Bulgin, Esquire
Gordon
Feinblatt LLC
233
East Redwood Street
Baltimore, MD
21202
Fax:
(410) 576-4196
Section
8.7
Disclosure
Schedules.
Information
contained on either the DCB Disclosure Schedule or the OLB
Disclosure Schedule shall be deemed to cover the express disclosure
requirement contained in a representation or warranty of this
Agreement and any other representation or warranty of this
Agreement of such party where it is readily apparent it applies to
such provision. The mere inclusion of an item in a Disclosure
Schedule as an exception to a representation or warranty shall not
be deemed an admission by a party that such item represents a
material exception or fact, event or circumstance or that such item
is or could result in a Material Adverse Effect.
Section
8.8
Tax
Disclosure.
Notwithstanding
anything else in this Agreement to the contrary, each party hereto
(and its Representatives) may disclose to any and all Persons,
without limitation of any kind, the federal income tax treatment
and federal income tax structure of any and all Contemplated
Transactions and all materials of any kind (including opinions or
other tax analyses) that are or have been provided to any party (or
to any Representative of any party) relating to such tax treatment
or tax structure;
provided,
however
, that this authorization of disclosure shall not
apply to restrictions reasonably necessary to comply with
Securities Laws. This authorization of disclosure is not effective
until the earlier of (a) the date of the public announcement of
discussions relating to the Contemplated Transactions, (b) the date
of the public announcement of the Contemplated Transactions, or (c)
the date of execution of an agreement (with or without conditions)
to enter into the Contemplated Transactions.
Section
8.9
No
Assignment.
Neither
party hereto may assign any of its rights or obligations hereunder
to any other person, without the prior written consent of the other
party hereto.
Section
8.10
Captions;
Interpretation.
When a
reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of or Exhibit to this Agreement
unless otherwise indicated. The Background Section hereof
constitutes an integral part of this Agreement. References to
Sections include subsections, which are part of the related
Section. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever
the words “include,” “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.” The phrases “the date of this
Agreement,” “the date hereof” and terms of
similar import, unless the context otherwise requires, shall be
deemed to refer to the date set forth in the Recitals to this
Agreement. All words used in this Agreement shall be construed to
be of such gender or number as the circumstances require. Unless
otherwise specifically noted, the words “herein,”
“hereof,” “hereby,” “hereunder”
and words of similar import refer to this Agreement as a whole and
not to any particular Section, subsection, paragraph, clause or
other subdivision of this Agreement. The parties have participated
jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises,
this Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
Section
8.11
Counterparts;
Electronic Signatures.
This
Agreement may be executed simultaneously in counterparts, each of
which shall be deemed to be an original copy of this Agreement and
all of which together will be deemed to constitute one and the same
agreement. The exchange of copies of this Agreement and of
signature pages by facsimile or other electronic transmission shall
constitute effective execution and delivery of this Agreement as to
the parties and may be used in lieu of the original Agreement for
all purposes. Signatures of the parties transmitted by facsimile or
other electronic transmission shall be deemed to be their original
signatures for all purposes.
Section
8.12
Severability.
The
parties agree that the provisions and covenants contained in each
of the Sections of this Agreement, and within the Sections
themselves, are intended to be separate and divisible provisions
and covenants and if, for any reason, any one or more of them shall
be held to be invalid or unenforceable, in whole or in part, by a
court of competent jurisdiction, then (a) the same shall not be
held to affect the validity of any other provision or covenant
contained in this Agreement and (b) the same shall be deemed to be
modified to the minimum extent necessary for it to be legally
enforceable. The parties hereby expressly request any court of
competent jurisdiction to enforce any such provision or covenant or
to modify any provision thereof so that it shall be enforced by
such court to the fullest extent permitted by applicable
Law.
Section
8.13
Governing Law;
Venue; No Jury Trial.
(a)
The laws of the
State of Maryland (without regard to any conflict of laws principle
that would apply the law of another jurisdiction) shall govern this
Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.
(b)
The parties agree
that any judicial proceeding arising out of or relating to this
Agreement (including any declaratory judgments) shall be filed
exclusively in the State and Federal courts located in Prince
George’s County, Maryland or in Montgomery County, Maryland
and the District of Maryland, respectively, and each party hereby
consents to, and will submit to, the personal and subject matter
jurisdiction of such courts in any proceeding to enforce any of
their obligations under this Agreement and shall not contend that
any such court is an improper or inconvenient venue. The foregoing
shall not limit the right of any party to obtain execution of
judgment in any other jurisdiction. The prevailing party in any
judicial proceeding arising out of or relating to this Agreement
shall be entitled to recover all costs and attorneys’ fees
from the non-prevailing party.
(c)
EACH OF THE PARTIES
HERETO EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OR RIGHT TO
DEMAND TRIAL BY JURY IN ANY ACTION BROUGHT TO ENFORCE THIS
AGREEMENT, OR ANY PROVISION HEREOF, OR FOR DAMAGES DUE AS A RESULT
OF AN ALLEGED BREACH OF THIS AGREEMENT.
Section
8.14
Time of
Essence.
With
regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
[
Signatures
appear on the following page
.]
IN WITNESS WHEREOF
, the parties have
caused this Agreement to be executed by their duly authorized
officers as of the day and year first above written.
TEST:
|
OLD LINE
BANCSHARES, INC.
|
|
|
|
|
By:____________________________________
|
By:
____________________________________
|
Name: Elise
Hubbard
|
Name: James W.
Cornelsen
|
Title: Assistant
Secretary
|
Title: President
and Chief Executive Officer
|
|
|
|
|
ATTEST:
|
DCB BANCSHARES,
INC.
|
|
|
|
|
By:
____________________________________
|
By:
____________________________________
|
Name: Terry
Hollinger
|
Name: Stephen J.
Deadrick
|
Title:
Secretary
|
Title: Chairman of
the Board
|
|
|
EXHIBIT INDEX
Exhibit A
– List of Stockholders to Execute Support
Agreements
Exhibit B
– Support Agreement
Exhibit C
– Bank Merger Agreement
Exhibit D
– Spreadsheet
Exhibit A
List of
Stockholders to Execute Support Agreements
Robert
Carpenter
William
Lindlaw
Donald
W. Burdette
James
R. Clifford, Sr.
George
C. Cramer
Stephen
J. Deadrick
Bernard
L. Moxley, Jr.
Gary L.
Smith, Sr.
Theresa
J. Tomasini
John E.
Tregoning
William
F. Willard, Jr.
Exhibit B
Support
Agreement
[Attached]
SUPPORT AGREEMENT
This
Support Agreement, dated as of February ___, 2017 (this
“
Agreemen
t”), is made and
entered into by and between Old Line Bancshares, Inc., a Maryland
corporation (“OLB”), and _________________ (the
“
Stockholder
”), as an
individual stockholder of DCB Bancshares, Inc. (“DCB”),
a Maryland corporation.
WHEREAS,
concurrently herewith, OLB and DCB are entering into an Agreement
and Plan of Merger (as such agreement may hereafter be amended and
supplemented from time to time, the “
Merger Agreement
”),
pursuant to which, among other things, DCB will be merged with and
into OLB, with OLB continuing as the surviving company (the
“
Merger
”);
and
WHEREAS, the
Stockholder is a member of the board of directors of DCB and its
subsidiary, Damascus Community Bank
(“DCBank”);
WHEREAS, as a
stockholder of DCB, the Stockholder will receive a significant
benefit from the transaction described in the Merger Agreement;
and
WHEREAS, to induce
OLB to enter into the Merger Agreement, and as a condition to the
transactions contemplated thereby, the Stockholder has agreed to
enter into this Agreement.
NOW,
THEREFORE, in consideration of the premises and mutual covenants,
agreements, representations and warranties contained herein, and
other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows:
1.
Definitions
. Capitalized terms
used but not defined herein and defined in the Merger Agreement
have the respective meanings ascribed to them in the Merger
Agreement. In addition, for purposes of this
Agreement:
(a)
“
Affiliate
” of a specified Person
means a Person that directly or indirectly, through one or more
intermediaries, Controls, is Controlled by or is under common
Control with, such specified Person.
(b)
“
Beneficially Own
” or
“
Beneficial
Ownership
” with respect to any securities shall mean
having “beneficial ownership” of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the “
Exchange Act
”)),
including pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting of the same
securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other
Persons who together with such Person would constitute a
“group” within the meaning of Section 13(d)(3) of the
Exchange Act.
(c)
“
Control
”
and
“
Controlled
,”
as used within the definition of
Affiliate, shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities or by contract.
(d)
“
Effective Time,
” means the time
when the Merger becomes effective in accordance as defined with the
Merger Agreement.
(e)
“
knowledge
” or “
known
” means, with respect to the
Stockholder, the actual knowledge of such Stockholder as to the
fact or other matter, however obtained;
provided
that no Stockholder who serves
as a director or officer of DCB or DCBank may deny having actual
knowledge of a fact or other matter if a reasonably prudent
individual possessing the knowledge and experience of the
Stockholder and serving in such capacity could be expected to
discover or otherwise become aware of such fact or other matter in
the ordinary course of performing his, her or its duties as a
director or officer. Without limiting the scope of the foregoing
proviso, no Stockholder who serves as a director or officer of DCB
or DCBank may deny having actual knowledge of a fact or other
matter by reason of such Stockholder having failed to review
information available to such Stockholder that such Stockholder
would normally review in the ordinary course of business in his,
her or its capacity as a director or officer of DCB or
DCBank.
(f)
“OLB Applications
” means
all applications, notices and filings that OLB is required to file
with any Regulatory Authority (as defined in the Merger Agreement)
in connection with the Merger.
(g)
“Superior Proposal”
shall
have the meaning set forth in the Merger Agreement.
(h)
“
DCB Companies”
shall mean
collectively DCB and any subsidiaries thereof.
(i)
“
Person
” shall mean an individual,
corporation, limited liability company, partnership, joint venture,
association, trust, unincorporated organization or other
entity.
(j)
“Shares”
shall mean shares
of the common stock, $0.01 par value per share, of
DCB.
(k)
“
Stockholder’s Shares
” shall
mean all Shares held of record or Beneficially Owned by the
Stockholder, whether currently issued and outstanding or hereafter
acquired by purchase, or by exercise of any options, warrants or
other securities convertible into or exchangeable or exercisable
for Shares.
(l)
“
Termination Date
” shall mean the
date that the Merger Agreement has been terminated in accordance
with its terms.
2.
Voting of Shares
.
(a)
From and after the
date of this Agreement and ending as of the first to occur of the
Effective Time or the Termination Date, at any meeting of the
holders of Shares, however called, or in any other circumstance
upon which the vote, consent or other approval of holders of Shares
is sought, the Stockholder shall vote or cause to be voted
(including by written consent, if applicable) all of the
Stockholder’s Shares entitled to vote thereon, (i) in favor
of approval of the Merger and the execution and delivery by DCB of
the Merger Agreement (ii) against any action or agreement that
would result in a material breach of any covenant, representation
or warranty or any other obligation or agreement of DCB under the
Merger Agreement and (iii) against the following actions:
(A) any Superior Proposal; and (B) to the extent that such are
intended to, or could reasonably be expected to, impede, interfere
with, delay, postpone or materially adversely affect the Merger or
the transactions contemplated by the Merger Agreement, or implement
or lead to: (1) any change in a majority of the persons who
constitute the board of directors of DCB; (2) any change in the
present capitalization of DCB or any amendment of DCB’s
Articles of Incorporation or Bylaws; or (3) any other material
change in DCB’s corporate structure. In addition to the other
covenants and agreements of the Stockholder provided for elsewhere
in this Agreement, during the above-described period, the
Stockholder shall not enter into any agreement or understanding
with any Person or entity the effect of which would be inconsistent
with or violate the provisions and agreements contained in this
Section 2.
(b)
It is understood
and hereby agreed that this Agreement relates solely to the
capacity of the Stockholder as a holder of the Shares and is not in
any way intended to affect the exercise of the Stockholder’s
responsibilities and fiduciary duties as a director or officer of
DCB or DCBank, including, without limitation, the exercise or
performance of any of the Stockholder’s rights or obligations
as a director with respect to any matter that comes before the
board of directors of DCB or DCBank.
(c)
The Stockholder
hereby authorizes disclosure of his, her or its identity and
ownership of the Stockholder’s Shares and the nature of his,
her or its commitments, arrangements and understandings under this
Agreement in any proxy statement and regulatory filing of DCB, and
in any regulatory filing by OLB related to the Merger.
3.
Representations and Warranties of the
Stockholder
. The Stockholder hereby makes the following
representations and warranties to OLB, which are true and correct
as of the date hereof and shall be true and correct as of the
Effective Date:
(a)
Ownership
. As of the date of
this Agreement, the Shares set forth on
Exhibit A
hereto constitute all
of the Stockholder’s Shares owned of record or Beneficially
Owned by the Stockholder. Except for Shares with respect to which
the Stockholder shares investment or dispositive power or that are
owned together with others, the Stockholder has sole power of
disposition, sole power to demand appraisal rights and sole power
to vote upon and agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Shares set forth
on
Exhibit A
hereto, with no material limitations, qualifications or
restrictions on such rights, subject to applicable securities laws
and the terms of this Agreement.
(b)
Power; Binding Agreement
. The
Stockholder has the legal capacity, power and authority to enter
into and perform all of the Stockholder’s obligations under
this Agreement. This Agreement has been or will be duly and validly
executed and delivered by the Stockholder and (assuming the due
authorization, execution and delivery by the counterparties hereto
and thereto) constitutes or will constitute the legal, valid and
binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors’ rights generally and general
equitable principles. There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the
Stockholder is trustee whose consent is required for (i) the
execution and delivery of this Agreement or any other agreements,
documents or instruments contemplated hereby to which the
Stockholder is a party or (ii) the consummation by the Stockholder
of the transactions contemplated hereby. If the Stockholder is
married and the Stockholder’s Shares constitute community
property, this Agreement has been duly authorized, executed and
delivered by, and (assuming the due authorization, execution and
delivery by the Stockholder and Hopkins) constitutes a valid and
binding agreement of, the Stockholder’s spouse, enforceable
against such person in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors’ rights generally
and general equitable principles.
(c)
No Conflicts
. No filing with,
and no permit, authorization, consent or approval of, any state or
federal public body or authority or any Person is necessary for the
execution of this Agreement by the Stockholder and the consummation
by the Stockholder of the transactions contemplated hereby, and
none of the execution and delivery of this Agreement by the
Stockholder, the consummation by the Stockholder of the
transactions contemplated hereby or compliance by the Stockholder
with any of the provisions hereof shall (i) result in a violation
or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any
kind to which the Stockholder is a party or by which the
Stockholder or any of his, her or its properties or assets may be
bound, or (ii) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to the
Stockholder or any of his, her or its properties or assets, in each
such case except to the extent that any conflict, breach, default
or violation would not interfere in any material respect with the
ability of the Stockholder to perform his, her or its obligations
hereunder.
(d)
Voting Agreements or
Arrangements
. Stockholder is not a party to any voting
trusts, voting agreements, buy-sell agreements or other agreements
or arrangements affecting the Stockholder’s Shares, other
than this Agreement.
4.
Covenants of the Stockholder
.
The Stockholder hereby covenants and agrees with OLB as
follows:
(a)
No Encumbrances
. At all times
hereafter during the term hereof, all of the Stockholder’s
Shares will be held free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever, except for any
liens, claims, understandings or arrangements that do not limit or
impair in any material respect Stockholder’s ability to
perform his, her or its obligations under this Agreement, and
subject to applicable securities laws and the terms of this
Agreement.
(b)
Actions; Information for
Applications
.
(i)
Subject to Section
2(b) of this Agreement, the Stockholder will take all reasonable
actions to and assist in the consummation of the Merger and the
transactions contemplated by the Merger Agreement, and will use
his, her or its best efforts to cause the DCB Companies to take the
actions that are described in the Merger Agreement.
(ii)
The
Stockholder will furnish OLB with all information concerning the
Stockholder required for inclusion in the OLB Applications. All
information provided by the Stockholder about the Stockholder for
inclusion in the OLB Applications, at the time such information is
provided, shall be true and correct in all material respects and
will not omit any material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(c)
Confidentiality
. The
Stockholder shall not disclose or use for his, her or its own
purpose or the benefit of others any information that the DCB
Companies are prohibited from disclosing or using for their own
purposes or for the benefit of others under Section 5.3 of the
Merger Agreement. The Stockholder shall use his, her or its
commercially reasonable best efforts to keep confidential all such
information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The
obligation to keep such information confidential shall continue for
one year from the date of this Agreement, or the Termination Date
or the date such information becomes publically known other than as
a result of a breach of this Agreement, whichever is
earlier.
(i)
No Solicitation
. The
Stockholder shall not take any action that is described in
Section 5.1 of the Merger Agreement as an action of which the
DCB Companies are prohibited from authorizing or permitting their
respective officers, directors or employees to take.
(d)
Press Releases
. The Stockholder
will not, directly or indirectly, without the prior approval of
OLB, issue any press release or written statement for general
circulation relating to the Merger Agreement or the Merger except
as otherwise required by applicable law or regulation, and then
only after making reasonable efforts to notify OLB in
advance.
(e)
Restriction on Transfer and Proxies;
Non-Interference
. From and after the date of this Agreement
and ending as of the first to occur of the Effective Time or the
date DCB Stockholders approve the Merger Agreement, the Stockholder
shall not, and shall cause each of his, her or its Affiliates who
Beneficially Own any of the Stockholder’s Shares not to,
directly or indirectly, without the consent of OLB: (i) offer
for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of the
Stockholder’s Shares, or any interest therein; (ii) grant any
proxies or powers of attorney, deposit any of Stockholder’s
Shares into a voting trust or enter into a voting agreement with
respect to any of Stockholder’s Shares; (iii) enter into
any agreement or arrangement providing for any of the actions
described in clause (i) or (ii) above; or (iv) take any action that
could reasonably be expected to have the effect of preventing or
disabling the Stockholder from performing the Stockholder’s
obligations under this Agreement.
(f)
Waiver of and Agreement Not to Assert
Appraisal Rights
. The Stockholder hereby confirms (i) his or
her knowledge of the availability of the rights of objecting
stockholders under Subtitle 2 of Title 3 of the Corporations and
Associations Article of the Annotated Code of Maryland (the
“Appraisal Statute”) with respect to the Merger, and
(ii) receipt of a copy of the provisions of the Appraisal Statute
related to the rights of objecting stockholders. The Stockholder
hereby waives and agrees not to assert, and shall cause any of his
or her Affiliates who hold of record any of the Stockholder’s
Shares to waive and not to assert, any appraisal rights with
respect to the Merger that the Stockholder or such Affiliate may
now or hereafter have with respect to any of the
Stockholder’s Shares (or any other shares of capital stock of
Hopkins that the Stockholder shall hold of record at the time that
the Stockholder may be entitled to assert appraisal rights with
respect to the Merger), whether pursuant to the Appraisal Statue or
otherwise.
(g)
Further Assurances
. From time
to time, at OLB’s request and without further consideration,
the Stockholder shall execute and deliver such additional documents
reasonably requested by OLB as may be necessary or desirable to
consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this
Agreement.
5.
Representations and Warranties of
OLB
. OLB hereby represents and warrants to the Stockholder
that:
(a)
Organization, Standing and Corporate
Power
. OLB is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland, with
full corporate power and authority to carry on its business as
proposed and currently conducted. Except as described in the Merger
Agreement, OLB has the corporate power and authority to enter into
and perform all of its obligations under this Agreement and to
consummate the transactions contemplated hereby.
(b)
Execution, Delivery and Performance by
OLB
. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of OLB.
Except as described in the Merger Agreement, OLB has taken all
actions required by law, its Articles of Incorporation, as amended,
and its Amended and Restated By-Laws to consummate the transactions
contemplated by this Agreement. This Agreement constitutes the
valid and binding obligation of OLB and is enforceable against OLB
in accordance with its terms, except as enforceability may be
subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors’ rights
generally and general equitable principles.
6.
Stop Transfer
. From and after
the date of this Agreement and ending as of the first to occur of
the Effective Time or the Termination Date, the Stockholder will
not request that DCB register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest
representing any of the Stockholder’s Shares.
7.
Recapitalization
. In the event
of a stock dividend or distribution, or any change in the Shares
(or any class thereof) by reason of any split-up, recapitalization,
combination, exchange of shares or the like, the term
“Shares” shall include, without limitation, all such
stock dividends and distributions and any shares into which or for
which any or all of the Shares (or any class thereof) may be
changed or exchanged as may be appropriate to reflect such
event.
8.
Binding on Successors and Assigns;
Assignment
. Except as contemplated by Section 10(g) hereof,
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by operation of law or
otherwise, except that OLB may, without the approval of the
Stockholder, assign any or all of its rights, interests and
obligations hereunder to any wholly-owned subsidiary of OLB.
Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. The Stockholder agrees
that this Agreement, and the obligations of the Stockholder
hereunder, shall attach to the Stockholder’s Shares and shall
be binding upon any Person to which legal or beneficial ownership
of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, the Stockholder’s
heirs, guardians, administrators or successors.
9.
Termination
. This Agreement
shall terminate without any further action on the part of any party
hereto upon to occur of (a) the termination of the Merger Agreement
pursuant to the terms thereof or (b) the Effective Time. Upon such
termination, this Agreement shall forthwith become void and of no
further force or effect. The representations and warranties of the
parties contained herein shall not survive the termination of this
Agreement.
10.
Miscellaneous
.
(a)
Entire Agreement; Amendment
.
This Agreement, along with any agreements referenced herein,
contains the entire, complete, and integrated agreement among the
parties with respect to the subject matter hereof, and supersedes
any prior or contemporaneous arrangements, agreements or
understandings among the parties, written or oral, express or
implied, that may have related to the subject matter hereof. This
Agreement may be amended only by a written instrument duly executed
by the parties.
(b)
Governing Law
. This Agreement
shall in all respects be interpreted, enforced, and governed under
the laws of the State of Maryland, without regard to
Maryland’s conflict-of-laws provisions. The parties hereby
submit to the jurisdiction and venue of the courts of Maryland, and
any legal or equitable action to enforce this or any related
agreements may only be brought in the circuit courts
therein.
(c)
Captions
. The headings of
Sections and subsections contained in this Agreement are provided
for convenience only. They form no part of this Agreement and shall
not affect its construction or interpretation. All references to
Sections, subsections, paragraphs, clauses or other subdivisions in
this Agreement refer to the corresponding Sections, subsections,
paragraphs, clauses or other subdivisions of this Agreement. All
words used in this Agreement shall be construed to be of such
gender or number as the circumstances require. Unless otherwise
specifically noted, the words “herein”,
“hereof”, “hereby”, “hereunder”
and words of similar import refer to this Agreement as a whole and
not to any particular Section, subsection, paragraph, clause or
other subdivision of this Agreement.
(d)
Notices
. All notices, claims,
certificates, requests, demands and other communications hereunder
shall be in writing and shall be deemed sufficient and duly given:
(i) when delivered personally to the recipient; (ii) email upon
confirmation of good transmission if sent by facsimile; or (iii)
when delivered to the last known address of the recipient (A) one
business day after delivery to a reputable express courier service
for next-day delivery (charges prepaid), or (B) three days after
being sent to the recipient by certified mail, return receipt
requested and postage prepaid, addressed as follows:
(1) If
to
OLB:
James W. Cornelsen
President and Chief
Executive Officer
Old
Line Bancshares, Inc.
1525
Pointer Ridge Rd.
Bowie,
Maryland 20716
with copy
to:
Baker, Donelson, Bearman, Caldwell
&
Berkowitz
A
Professional Corporation
100
Light Street
Baltimore, Maryland
21202
Attn:
Frank C. Bonaventure, Jr., Esq.
(2)
If to the
Stockholder:
At the address(es) indicated on the
applicable
signature page hereto.
Addresses
may be changed by notice in writing signed by the
addressee.
(e)
Severability
. Whenever
possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in
any jurisdiction, then such invalidity, illegality or
unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
(f)
Remedies Cumulative
. All
rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any such right,
power or remedy by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such
party.
(g)
No Third Party Beneficiaries
.
This Agreement is not intended to be for the benefit of, and shall
not be enforceable by, any person or entity who or which is not a
party hereto;
provided
that
in the event of the Stockholder’s death, the obligations of
the Stockholder hereunder shall attach to the Stockholder’s
Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by
operation of law or otherwise, including without limitation the
Stockholder’s heirs, guardians, administrators or
successors.
(h)
Counterparts; Facsimile
. This
Agreement may be executed simultaneously in several counterparts,
each of which shall be deemed to be an original copy of this
Agreement and all of which together will be deemed to constitute
one and the same agreement. The exchange of copies of this
Agreement and of signature pages by facsimile transmission shall
constitute effective execution and delivery of this Agreement as to
the parties and may be used in lieu of the original Agreement for
all purposes. Signatures of the parties transmitted by facsimile
shall be deemed to be their original signatures for all
purposes.
(i)
Construction
. This Agreement
has been prepared by all parties hereto, and the language used
herein shall not be construed in favor of or against any particular
party.
(j)
No Waiver
. The delay or failure
on the part of any party to (i) insist upon the strict
compliance with any of the terms of this Agreement or
(ii) exercise any rights or remedies hereunder shall not
operate as a waiver of, or estoppel with respect to, any subsequent
or other failure, nor shall any single or partial exercise of any
right or remedy hereunder preclude any subsequent exercise thereof
or the exercise of any other right or remedy at any later time or
times.
(k)
WAIVER OF JURY TRIAL
. EACH
PARTY HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH IT MAY BE A PARTY, ARISING OUT OF OR IN ANY WAY PERTAINING TO
THIS AGREEMENT. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL
PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES HERETO. THIS WAIVER IS KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY EACH PARTY, AND EACH HEREBY
REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN
MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO
IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH PARTY FURTHER
REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO BE REPRESENTED IN THE
EXECUTION OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT
IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.
[
Signatures
appear on the following page
.]
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
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OLD LINE
BANCSHARES, INC.
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By:
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James W.
Cornelsen
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President and Chief
Executive Officer
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STOCKHOLDER:
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Print
Name: _______________________________________
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EXHIBIT A
TO
SUPPORT AGREEMENT
CLASS OF
SHARES
|
CERTIFICATE
NO.
|
NUMBER OF
SHARES
|
RECORD
OWNER
|
BENEFICIAL
OWNER
|
Common
Stock
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Common
Stock
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Exhibit C
Bank
Merger Agreement
Exhibit D
Spreadsheet
|
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Change
|
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DCB
|
Per Share
|
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from
|
|
|
Tang. Equity
|
Consideration
|
|
Type of
|
Average
|
Starting
|
Consideration
|
|
Per Share
|
/DCB
|
Aggregate
|
Exchange
|
|
Price of
|
Offered Per
|
Exchange
|
as of
|
Tang. Book
|
Consideration
|
Ratio
|
Price
|
$27.21
|
DCB Share
|
Ratio
|
12/31/16
|
Per Share
|
(in thous.)
|
|
|
|
|
|
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Fixed Exch. Ratio
|
29.93
|
10.00%
|
27.74
|
0.9269
|
15.76
|
176%
|
44,746
|
28.57
|
5.00%
|
26.48
|
0.9269
|
15.76
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168%
|
42,712
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Floating
Exchange Ratio
|
27.21
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0.00%
|
25.22
|
0.9269
|
15.76
|
160%
|
40,678
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25.85
|
-5.00%
|
25.22
|
0.9756
|
15.76
|
160%
|
40,678
|
24.49
|
-10.00%
|
25.22
|
1.0298
|
15.76
|
160%
|
40,678
|
23.13
|
-15.00%
|
25.22
|
1.0904
|
15.76
|
160%
|
40,678
|
21.77
|
-20.00%
|
25.22
|
1.1585
|
15.76
|
160%
|
40,678
|
20.85
|
-23.37%
|
25.22
|
1.2096
|
15.76
|
160%
|
40,678
|
Fixed Exch. Ratio
|
20.41
|
-25.00%
|
24.69
|
1.2096
|
15.76
|
157%
|
39,839
|
19.05
|
-30.00%
|
23.04
|
1.2096
|
15.76
|
146%
|
37,169
|
16.68
|
-38.70%
|
20.18
|
1.2096
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15.76
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128%
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32,542
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Exhibit E
Damascus
Community Bank Employee Change in Control Plan
February 1,
2017
Board
of Directors
DCB
Bancshares, Inc.
26500 Ridge Road
Damascus, Maryland 20872
Members
of the Board:
You
have requested RP
®
Financial, LC.
(“RP Financial”) to provide you with its opinion as to
the fairness from a financial point of view to the shareholders of
DCB Bancshares, Inc. (“DCB”), the holding company for
Damascus Community Bank (“Damascus”), Damascus,
Maryland of the consideration pursuant to the Agreement and Plan of
Merger (the “Agreement”), dated February 1, 2017, by
and between DCB and Old Line Bancshares, Inc. (“OLB”),
Bowie Maryland. As detailed in the Agreement, DCB will merge with
and into OLB, and Damascus will merge with and into Old Line Bank,
the wholly-owned subsidiary of OLB. OLB and Old Line Bank will be
the surviving institutions (the “Merger”). The
Agreement, inclusive of exhibits, is incorporated herein by
reference. Unless otherwise defined, all capitalized terms
incorporated herein have the meanings ascribed to them in the
Agreement.
Summary Description of Merger Consideration
Within
three business days following the date on which the consolidated
financial statements of DCB for the year ended December 31, 2016
have been audited and finalized (the “Calculation
Date”), DCB shall calculate the DCB Tangible Equity, which
shall be DCB’s total stockholders’ equity at December
31, 2016 less its intangible assets, if any, at December 31, 2016,
as such amounts are set forth in DCB’s audited consolidated
balance sheet at the December 31, 2016. Within five business days
after the Calculation Date, DCB shall provide OLB with its
calculation of the DCB Tangible Equity and any supporting
documentation necessary for OLB to review such
calculation.
Each
share of DCB Common Stock that is issued and outstanding
immediately prior to the Effective Time shall, at the Effective
Time, by reason of the Merger and without any action on the part of
the holder thereof, cease to be outstanding and be automatically
cancelled, and shall be converted into the right to receive that
number of shares of OLB Common Stock equal to the Exchange Ratio
calculated in accordance with the following:
The
Exchange Ratio shall be the number determined by dividing the Per
Share Value by the Average Price, rounded to the nearest
ten-thousandth.
The
term “Per Share Value” shall mean the amount determined
by (a) multiplying the DCB Tangible Equity by 1.60 and (b) dividing
such product by the number of shares of DCB Common Stock that are
issued and outstanding immediately prior to the Effective
Time.
The
term “Average Price” shall mean the amount equal to the
volume weighted average of the closing prices of OLB Common Stock
for the 10 Trading Days immediately prior to the Closing Date;
provided, however, that in no event will the Average Price be less
than $20.85 nor greater than the Starting Price.
RP Financial Background and Experience
RP
Financial, as part of its financial institution valuation and
financial advisory practice, is regularly engaged in the valuation
of federally-insured depository institution securities in
connection with mergers and acquisitions, initial and secondary
stock offerings, and business valuations for financial institutions
for other purposes. As specialists in the valuation of securities
and providing financial advisory services to insured financial
institutions, RP Financial has experience in, and knowledge of, the
markets for the securities of such institutions
nationwide.
Materials Reviewed
In
rendering this opinion, RP Financial reviewed or considered the
following materials or information: (1) the Agreement, as reviewed
by the DCB Board of Directors on February 1, 2017, including the
exhibits; (2) the following financial information for DCB –
(a) audited consolidated financial statements, included in the
annual reports for the fiscal years ended December 31, 2012 through
December 31, 2015; (b) unaudited consolidated financial data,
including shareholder reports and financial statements through
December 31, 2016, (c) unaudited consolidated financial data
through December 31, 2016; (d) quarterly financial reports
submitted to the FDIC by the Bank through September 30, 2016; (e)
internal financial and other reports provided to DCB’s and
Damascus’ Board of Directors from the beginning of fiscal
2015 through December 31, 2016 with regard to balance sheet and
off-balance sheet composition, profitability and balance sheet
trends, certain risk factors and DCB’s and Damascus’
operations; (f) historical publicly-available financial information
as published by SNL Financial, Inc.; and (g) internally prepared
budget information; (3) the financial terms of certain other
recently completed and pending acquisitions of banks headquartered
in the Mid-Atlantic region of the United States with comparable
financial characteristics as DCB; (4) the financial terms of
certain other recently completed and pending acquisitions of banks
headquartered in the states of Maryland, Virginia and Delaware as
well as the District of Columbia with comparable financial
characteristics as DCB; (5) the estimated pro forma financial
benefits of the Merger to DCB shareholders; and (6) in person
interviews with senior executive officers of DCB.
In
addition, RP Financial reviewed or considered the following
materials or information for OLB and as further described below
certain peers of OLB: (1) the annual audited financial statements
for the fiscal years ended 2011 to 2015, as presented in
OLB’s 10K filings; (2) the quarterly financial report
submitted to the FDIC by Old Line Bank from March 31, 2015 through
December 31, 2016; (3) internally prepared budget information for
OLB for 2017; (4) stock price history for OLB during past twelve
months; (5) OLB financial information versus a peer group of
comparable publicly-traded institutions; and (6) in person
interviews with senior executives of OLB.
In
rendering its opinion, RP Financial relied, without independent
verification, on the accuracy and completeness of the information
concerning DCB and OLB furnished by the respective institutions to
RP Financial for review for purposes of its opinion, as well as
publicly-available information regarding other financial
institutions and competitive, economic and demographic data. We
have further relied on the assurances of management of DCB and OLB
as included in the Agreement. We have not been asked to and have
not undertaken an independent verification of any of such
information and we do not assume any such responsibility or
liability for the accuracy or completeness thereof. DCB did not
restrict RP Financial as to the material it was permitted to
review. RP Financial did not perform or obtain any independent
appraisals or evaluations of the assets and liabilities, the
collateral securing the assets or the liabilities (contingent or
otherwise) of DCB or OLB or the collectability of any such assets,
nor have we been furnished with any such evaluations or appraisals.
We did not make an independent evaluation of the adequacy of the
allowance for loan losses of DCB or OLB nor have we reviewed any
individual credit files relating to DCB or OLB.
RP
Financial, with your consent, has relied upon the advice DCB has
received from its legal, accounting and tax advisors as to all
legal, accounting and tax matters relating to the Agreement and
other transactions contemplated by the Agreement. In rendering its
opinion, RP Financial assumed that, in the course of obtaining the
necessary regulatory and governmental approvals for the proposed
Merger, no restriction will be imposed on OLB that would have a
material adverse effect on the ability of the Merger to be
consummated as set forth in the Agreement. We have also assumed
that there has been no material change in DCB or OLB’s
assets, financial condition, results of operations, business or
prospects since the date of the most recent financial statement
made available to us. We have assumed, in all respects material to
our analyses, that all of the representations and warranties
contained in the Agreement and all related agreements are true and
correct, that each party to such agreements will perform all of the
covenants required to be performed by such party under such
agreements and that the conditions precedent in the Agreement are
not waived.
Opinion
It is
understood that this letter is directed to the Board of Directors
of DCB in its consideration of the Agreement, and does not
constitute a recommendation to any shareholder of DCB as to any
action that such shareholder should take in connection with the
Agreement, or otherwise. Our opinion is directed only to the
fairness of the Merger Consideration to the current holders of DCB
Common Stock from a financial point of view as of the date of the
Agreement.
It is
understood that this opinion is based on market conditions and
other circumstances existing on the date hereof. Events occurring
after the date hereof could materially affect this opinion. We are
expressing no opinion herein as to the prices at which OLB Common
Stock may trade at any time.
We will
receive a fee for our fairness opinion services. DCB has agreed to
indemnify us against certain liabilities arising out of our
engagement.
It is
understood that this opinion may be included in its entirety in any
communication by DCB or its Board of Directors to the stockholders
of DCB. It is also understood that this opinion may be included in
its entirety in any regulatory filing by DCB, and that RP Financial
consents to the summary of this opinion in the proxy materials of
DCB, and any amendments thereto. Except as described above, this
opinion may not be summarized, excerpted from or otherwise publicly
referred to without RP Financial’s prior written
consent.
Based
upon and subject to the foregoing, and other such matters we
consider relevant, it is RP Financial’s opinion that, as of
the date hereof, the Merger Consideration to be received by the
holders of DCB Common Stock, as described in the Agreement, is fair
to such shareholders from a financial point of view.
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Respectfully
submitted,
RP
®
FINANCIAL,
LC.
|
|
|
ANNEX C
SECTIONS 3-201 THROUGH 3-213
OF THE MARYLAND GENERAL CORPORATION LAW
MARYLAND CORPORATIONS AND ASSOCIATIONS Code Ann (2014)
§ 3-201. Definitions.
(a) In general. -- In this subtitle the following words have
the meanings indicated.
(b) Affiliate. -- “Affiliate” has the meaning
stated in § 3-601 of this title.
(c) Associate. -- “Associate” has the meaning
stated in § 3-601 of this title.
(d) Beneficial owner. -- “Beneficial owner”, when
used with respect to any voting stock, means a person
that:
(1) Individually or with any of its
affiliates or associates, beneficially owns voting stock, directly
or indirectly;
(2) Individually or with any of its
affiliates or associates, has:
(i) The right to acquire
voting stock (whether the right is exercisable immediately or
within 60 days after the date on which beneficial ownership is
determined), in accordance with any agreement, arrangement, or
understanding, on the exercise of conversion rights, exchange
rights, warrants, or options, or otherwise; or
(ii) Except solely by
virtue of a revocable proxy, the right to vote voting stock in
accordance with any agreement, arrangement, or understanding;
or
(3) Except solely by virtue of a revocable
proxy, has any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting, or disposing of voting stock
with any other person that beneficially owns, or the affiliates or
associates of which beneficially own, directly or indirectly, the
voting stock.
(e) Executive officer. -- “Executive officer”
means a corporation’s president, any vice president in charge
of a principal business unit, division, or function, such as sales,
administration, or finance, any other person who performs a policy
making function for the corporation, or any executive officer of a
subsidiary of the corporation who performs a policy making function
for the corporation.
(f) Successor. --
(1) ”Successor”, except when
used with respect to a share exchange, includes a corporation which
amends its charter in a way which alters the contract rights, as
expressly set forth in the charter, of any outstanding stock,
unless the right to do so is reserved by the charter of the
corporation.
(2) ”Successor”, when used with
respect to a share exchange, means the corporation the stock of
which was acquired in the share exchange.
(g) Voting stock. -- “Voting stock” has the
meaning stated in § 3-601 of this title.
§ 3-202. Right to fair value of stock
(a) General rule. -- Except as provided in subsection (c) of
this section, a stockholder of a Maryland corporation has the right
to demand and receive payment of the fair value of the
stockholder’s stock from the successor if:
(1) The corporation consolidates or merges
with another corporation;
(2) The stockholder’s stock is to be
acquired in a share exchange;
(3) The corporation transfers its assets in
a manner requiring action under § 3-105(e) of this
title;
(4) The corporation amends its charter in a
way which alters the contract rights, as expressly set forth in the
charter, of any outstanding stock and substantially adversely
affects the stockholder’s rights, unless the right to do so
is reserved by the charter of the corporation;
(5) The transaction is governed by §
3-602 of this title or exempted by § 3-603(b) of this title;
or
(6) The corporation is converted in
accordance with § 3-901 of this title.
(b) Basis of fair value. --
(1) Fair value is determined as of the close
of business:
(i) With respect to a
merger under § 3-106 or § 3-106.1 of this title, on the
day notice is given or waived under § 3-106 or § 3-106.1
of this title; or
(ii) With respect to any
other transaction, on the day the stockholders voted on the
transaction objected to.
(2) Except as provided in paragraph (3) of
this subsection, fair value may not include any appreciation or
depreciation which directly or indirectly results from the
transaction objected to or from its proposal.
(3) In any transaction governed by §
3-602 of this title or exempted by § 3-603(b) of this title,
fair value shall be value determined in accordance with the
requirements of § 3-603(b) of this title.
(c) When right to fair value does not apply. -- Unless the
transaction is governed by § 3-602 of this title or is
exempted by § 3-603(b) of this title, a stockholder may not
demand the fair value of the stockholder’s stock and is bound
by the terms of the transaction if:
(1) Except as provided in subsection (d) of
this section, any shares of the class or series of the stock are
listed on a national securities exchange:
(i) With respect to a
merger under § 3-106 or § 3-106.1 of this title, on the
date notice is given or waived under § 3-106 or § 3-106.1
of this title; or
(ii) With respect to any
other transaction, on the record date for determining stockholders
entitled to vote on the transaction objected to;
(2) The stock is that of the successor in a
merger, unless:
(i) The merger alters the
contract rights of the stock as expressly set forth in the charter,
and the charter does not reserve the right to do so;
or
(ii) The stock is to be
changed or converted in whole or in part in the merger into
something other than either stock in the successor or cash, scrip,
or other rights or interests arising out of provisions for the
treatment of fractional shares of stock in the
successor;
(3) The stock is not entitled, other than
solely because of § 3-106 or § 3-106.1 of this title, to
be voted on the transaction or the stockholder did not own the
shares of stock on the record date for determining stockholders
entitled to vote on the transaction;
(4) The charter provides that the holders of
the stock are not entitled to exercise the rights of an objecting
stockholder under this subtitle; or
(5) The stock is that of an open-end
investment company registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 and the value
placed on the stock in the transaction is its net asset
value.
(d) Merger, consolidation, or share exchange. -- With respect
to a merger, consolidation, or share exchange, a stockholder of a
Maryland corporation who otherwise would be bound by the terms of
the transaction under subsection (c)(1) of this section may demand
the fair value of the stockholder’s stock if:
(1) In the transaction, stock of the
corporation is required to be converted into or exchanged for
anything of value except:
(i) Stock of the
corporation surviving or resulting from the merger, consolidation,
or share exchange, stock of any other corporation, or depositary
receipts for any stock described in this item;
(ii) Cash in lieu of
fractional shares of stock or fractional depositary receipts
described in item (i) of this item; or
(iii) Any combination of
the stock, depositary receipts, and cash in lieu of fractional
shares or fractional depositary receipts described in items (i) and
(ii) of this item;
(2) The directors and executive officers of
the corporation were the beneficial owners, in the aggregate, of 5
percent or more of the outstanding voting stock of the corporation
at any time within the 1-year period ending on:
(i) The day the
stockholders voted on the transaction objected to; or
(ii) With respect to a
merger under § 3-106 or § 3-106.1 of this title, the
effective date of the merger; and
(3) Unless the stock is held in accordance
with a compensatory plan or arrangement approved by the board of
directors of the corporation and the treatment of the stock in the
transaction is approved by the board of directors of the
corporation, any stock held by persons described in item (2) of
this subsection, as part of or in connection with the transaction
and within the 1-year period described in item (2) of this
subsection, will be or was converted into or exchanged for stock of
a person, or an affiliate of a person, who is a party to the
transaction on terms that are not available to all holders of stock
of the same class or series.
(e) Beneficial owners. -- If directors or executive officers
of the corporation are beneficial owners of stock in accordance
with § 3-201(d)(2)(i) of this subtitle, the stock is
considered outstanding for purposes of determining beneficial
ownership by a person under subsection (d)(2) of this
section.
§ 3-203. Procedure by stockholder
(a) Specific duties. -- A stockholder of a corporation who
desires to receive payment of the fair value of the
stockholder’s stock under this subtitle:
(1) Shall file with the corporation a
written objection to the proposed transaction:
(i) With respect to a
merger under § 3-106 or § 3-106.1 of this title, within
30 days after notice is given or waived under § 3-106 or
§ 3-106.1 of this title; or
(ii) With respect to any
other transaction, at or before the stockholders’ meeting at
which the transaction will be considered or, in the case of action
taken under § 2-505(b) of this article, within 10 days after
the corporation gives the notice required by § 2-505(b) of
this article;
(2) May not vote in favor of the
transaction; and
(3) Within 20 days after the Department
accepts the articles for record, shall make a written demand on the
successor for payment for the stockholder’s stock, stating
the number and class of shares for which the stockholder demands
payment.
(b) Failure to comply with section. -- A stockholder who fails
to comply with this section is bound by the terms of the
consolidation, merger, share exchange, transfer of assets, or
charter amendment.
§ 3-204. Effect of demand on dividend and other
rights
A stockholder who demands payment for his stock under this
subtitle:
(1) Has no right to receive any dividends or
distributions payable to holders of record of that stock on a
record date after the close of business on the day as at which fair
value is to be determined under § 3-202 of this subtitle;
and
(2) Ceases to have any rights of a
stockholder with respect to that stock, except the right to receive
payment of its fair value.
§ 3-205. Withdrawal of demand
A demand for payment may be withdrawn only with the consent of the
successor.
§ 3-206. Restoration of dividend and other rights
(a) When rights restored. -- The rights of a stockholder who
demands payment are restored in full, if:
(1) The demand for payment is
withdrawn;
(2) A petition for an appraisal is not filed
within the time required by this subtitle;
(3) A court determines that the stockholder
is not entitled to relief; or
(4) The transaction objected to is abandoned
or rescinded.
(b) Effect of restoration. -- The restoration of a
stockholder’s rights entitles him to receive the dividends,
distributions, and other rights he would have received if he had
not demanded payment for his stock. However, the restoration does
not prejudice any corporate proceedings taken before the
restoration.
3-207. Notice and offer to stockholders
(a) Duty of successor. --
(1) The successor promptly shall notify each
objecting stockholder in writing of the date the articles are
accepted for record by the Department.
(2) The successor also may send a written
offer to pay the objecting stockholder what it considers to be the
fair value of his stock. Each offer shall be accompanied by the
following information relating to the corporation which issued the
stock:
(i) A balance sheet as of
a date not more than six months before the date of the
offer;
(ii) A profit and loss
statement for the 12 months ending on the date of the balance
sheet; and
(iii) Any other
information the successor considers pertinent.
(b) Manner of sending notice. -- The successor shall deliver
the notice and offer to each objecting stockholder personally or
mail them to him by certified mail, return receipt requested,
bearing a postmark from the United States Postal Service, at the
address he gives the successor in writing, or, if none, at his
address as it appears on the records of the corporation which
issued the stock.
§ 3-208. Petition for appraisal; consolidation of proceedings;
joinder of objectors
(a) Petition for appraisal. -- Within 50 days after the
Department accepts the articles for record, the successor or an
objecting stockholder who has not received payment for his stock
may petition a court of equity in the county where the principal
office of the successor is located or, if it does not have a
principal office in this State, where the resident agent of the
successor is located, for an appraisal to determine the fair value
of the stock.
(b) Consolidation of suits; joinder of objectors.
--
(1) If more than one appraisal proceeding is
instituted, the court shall direct the consolidation of all the
proceedings on terms and conditions it considers
proper.
(2) Two or more objecting stockholders may
join or be joined in an appraisal proceeding.
§ 3-209. Notation on stock certificate
(a) Submission of certificate. -- At any time after a petition
for appraisal is filed, the court may require the objecting
stockholders parties to the proceeding to submit their stock
certificates to the clerk of the court for notation on them that
the appraisal proceeding is pending. If a stockholder fails to
comply with the order, the court may dismiss the proceeding as to
him or grant other appropriate relief.
(b) Transfer of stock bearing notation. -- If any stock
represented by a certificate which bears a notation is subsequently
transferred, the new certificate issued for the stock shall bear a
similar notation and the name of the original objecting
stockholder. The transferee of this stock does not acquire rights
of any character with respect to the stock other than the rights of
the original objecting stockholder.
§ 3-210. Appraisal of fair value
(a) Court to appoint appraisers. -- If the court finds that
the objecting stockholder is entitled to an appraisal of his stock,
it shall appoint three disinterested appraisers to determine the
fair value of the stock on terms and conditions the court considers
proper. Each appraiser shall take an oath to discharge his duties
honestly and faithfully.
(b) Report of appraisers -- Filing. -- Within 60 days after
their appointment, unless the court sets a longer time, the
appraisers shall determine the fair value of the stock as of the
appropriate date and file a report stating the conclusion of the
majority as to the fair value of the stock.
(c) Report of appraisers -- Contents. -- The report shall
state the reasons for the conclusion and shall include a transcript
of all testimony and exhibits offered.
(d) Report of appraisers -- Service; objection.
--
(1) On the same day that the report is
filed, the appraisers shall mail a copy of it to each party to the
proceedings.
(2) Within 15 days after the report is
filed, any party may object to it and request a
hearing.
§ 3-211. Action by court on appraisers’
report
(a) Order of court. -- The court shall consider the report
and, on motion of any party to the proceeding, enter an order
which:
(1) Confirms, modifies, or rejects it;
and
(2) If appropriate, sets the time for
payment to the stockholder.
(b) Procedure after order. --
(1) If the appraisers’ report is
confirmed or modified by the order, judgment shall be entered
against the successor and in favor of each objecting stockholder
party to the proceeding for the appraised fair value of his
stock.
(2) If the appraisers’ report is
rejected, the court may:
(i) Determine the fair
value of the stock and enter judgment for the stockholder;
or
(ii) Remit the proceedings
to the same or other appraisers on terms and conditions it
considers proper.
(c) Judgment includes interest. --
(1) Except as provided in paragraph (2) of
this subsection, a judgment for the stockholder shall award the
value of the stock and interest from the date as at which fair
value is to be determined under § 3-202 of this
subtitle.
§ 3-212. Surrender of stock
The successor is not required to pay for the stock of an objecting
stockholder or to pay a judgment rendered against it in a
proceeding for an appraisal unless, simultaneously with
payment:
(1) The certificates representing the stock
are surrendered to it, indorsed in blank, and in proper form for
transfer; or
(2) Satisfactory evidence of the loss or
destruction of the certificates and sufficient indemnity bond are
furnished.
§ 3-213. Rights of successor with respect to
stock
(a) General rule. -- A successor which acquires the stock of
an objecting stockholder is entitled to any dividends or
distributions payable to holders of record of that stock on a
record date after the close of business on the day as at which fair
value is to be determined under § 3-202 of this
subtitle.
(b) Successor in transfer of assets. -- After acquiring the
stock of an objecting stockholder, a successor in a transfer of
assets may exercise all the rights of an owner of the
stock.
(c) Successor in consolidation, merger, or share exchange. --
Unless the articles provide otherwise, stock in the successor of a
consolidation, merger, or share exchange otherwise deliverable in
exchange for the stock of an objecting stockholder has the status
of authorized but unissued stock of the successor. However, a
proceeding for reduction of the capital of the successor is not
necessary to retire the stock or to reduce the capital of the
successor represented by the stock.
PART II – INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section
2-418 of the Maryland General Corporation Law establishes
provisions that a corporation may (and, unless otherwise provided
in the corporation’s charter, if the party to be indemnified
is successful on the merits or otherwise, must) indemnify any
director or officer made party to any threatened, pending or
completed civil, criminal, administrative or investigative action,
suit or proceeding by reason of service in the capacity of a
director or officer, against judgments, penalties, fines,
settlements and reasonable expenses incurred in connection with
such proceeding, unless it is proved that (a) the act or omission
for which the director or officer seeks indemnification was
material to the matter giving rise to the action, suit or
proceeding and either was committed in bad faith or was the result
of active and deliberate dishonesty, (b) the director or officer
actually received an improper personal benefit in money, property
or services or (c) in the case of a criminal proceeding, the
director or officer had reasonable cause to believe that the act or
omission was unlawful. If the proceeding is a derivative suit in
favor of the corporation, indemnification may not be made in any
proceeding in which the director or officer is adjudged to be
liable to the corporation. The statute also provides for
indemnification of directors and officers by court
order.
The
Registrant’s Articles of Amendment and Restatement (the
“Charter”) provide for indemnification and the
advancement of expenses for any person who is serving or has served
as a director or officer of the Registrant to the fullest extent
permitted under the Maryland General Corporation Law.
The
rights of indemnification provided in the Registrant’s
Charter are not exclusive of any other rights which may be
available under any insurance or other agreement, by resolution of
stockholders or disinterested directors or otherwise.
The
Registrant maintains officers’ and directors’ liability
insurance in the amount of $16 million.
Item 21. Exhibits
(a)
Exhibits
. The
following exhibits are filed or furnished herewith or incorporated
by reference:
Exhibit No.
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Description of Exhibits
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2.1
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Agreement
and Plan of Merger, dated as of February 1, 2017, by and between
Old Line Bancshares, Inc. and DCB Bancshares, Inc., and Amendment
No. 1 thereto (the schedules and certain exhibits have been omitted
pursuant to Item 601(b)(2) of Regulation S-K. Old Line Bancshares
undertakes to furnish supplemental copies of any of the omitted
schedules or exhibits upon request by the Securities and Exchange
Commission.) (Attached as Annex A to the proxy statement/prospectus
that is part of this Registration Statement)
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2.2(V)
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Agreement
and Plan of Merger by and between Old Line Bancshares, Inc.
and Maryland Bankcorp, Inc., dated as of September 1,
2010, and Amendment No. 1 thereto
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2.3(R)
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Agreement
and Plan of Merger by and between Old Line Bancshares, Inc.
and WSB Holdings, Inc., dated as of September 10, 2012,
and Amendment No. 1 thereto
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2.4(EE)
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Agreement
and Plan of Merger, dated as of August 5, 2015, by and between Old
Line Bancshares, Inc. and Regal
Bancorp, Inc.
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3.1(A)
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Articles
of Amendment and Restatement of Old Line
Bancshares, Inc.
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3.1.1(L)
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Articles
of Amendment of Old Line Bancshares, Inc.
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3.1.2(L)
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Articles
of Amendment of Old Line Bancshares, Inc.
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3.1.3(AA)
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Articles
of Amendment of Old Line Bancshares, Inc.
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3.2(A)
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Amended
and Restated Bylaws of Old Line Bancshares, Inc.
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3.2.1(B)
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Amendment
to the Amended and Restated Bylaws of Old Line
Bancshares, Inc.
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3.2.2(C)
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Second
Amendment to the Amended and Restated Bylaws of Old Line
Bancshares, Inc.
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4(Y)
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Specimen
Stock Certificate for Old Line Bancshares, Inc.
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5.1
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Opinion
of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, as to
the legality of the Common Stock
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8.1
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Opinion
of Gordon Feinblatt LLC regarding certain U.S. tax consequences of
the merger
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10.1(GG)*
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Second
Amended and Restated Executive Employment Agreement between Old
Line Bank and James W. Cornelsen dated December 10,
2015
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10.2(FF)*
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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
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10.3(K)*
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Salary
Continuation Agreement dated January 3, 2006 between Old Line
Bank and James W. Cornelsen
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10.4(O)*
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First
Amendment dated December 31, 2007 to the Salary Continuation
Agreement between Old Line Bank and James W. Cornelsen
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10.5(K)*
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Supplemental
Life Insurance Agreement dated January 3, 2006 between Old
Line Bank and James W. Cornelsen
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10.6(O)*
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First
Amendment dated December 31, 2007 to the Supplemental Life
Insurance Agreement between Old Line Bank and James W.
Cornelsen
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10.7(W)*
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Amended
and Restated Executive Employment Agreement dated January 28,
2011 between Old Line Bank and Joseph Burnett
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10.8(I)*
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Second
Amendment to Amended and Restated Employment Agreement between Old
Line Bank and Joseph Burnett dated as of May 9,
2013
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10.9(K)*
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Salary
Continuation Agreement dated January 3, 2006 between Old Line
Bank and Joseph Burnett
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10.10(O)*
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First
Amendment dated December 31, 2007 to the Salary Continuation
Agreement between Old Line Bank and Joseph Burnett
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10.11(K)*
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Supplemental
Life Insurance Agreement dated January 3, 2006 between Old
Line Bank and Joseph Burnett
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10.12(O)*
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First
Amendment dated December 31, 2007 to the Supplemental Life
Insurance Agreement between Old Line Bank and Joseph
Burnett
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10.13(DD)*
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Salary
Continuation Plan Agreement (2014) by and between Old Line Bank and
Mark Semanie dated as of March 27, 2014
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10.18(O)*
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First
Amendment dated December 31, 2007 to the Supplemental Life
Insurance Agreement between Old Line Bank and Christine
Rush
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10.19(E)*
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2004
Equity Incentive Plan
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10.20(G)*
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Form of
Incentive Stock Option Agreement for 2004 Equity Incentive
Plan
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10.21(X)*
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Form of
Nonqualified Stock Option Agreement for 2004 Equity Incentive
Plan
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10.22(U)*
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Form of
Restricted Stock Agreement for the 2004 Equity Incentive
Plan
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10.23(G)*
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Old
Line Bancshares, Inc. and Old Line Bank Director Compensation
Policy
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10.24(F)
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Operating
Agreement for Pointer Ridge Office Investment, LLC among J.
Webb Group, Inc., Michael M. Webb, Lucente
Enterprises, Inc., Chesapeake Custom Homes, L.L.C. and Old
Line Bancshares, Inc., all as Members and Chesapeake Pointer
Ridge Manager, LLC.
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10.25(H)*
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Incentive
Plan Model and Stock Option Model
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10.26(N)
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Deed of
Trust note dated November 3, 2005 between Pointer Ridge Office
Investment, LLC and Manufacturers and Traders Trust
Company
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10.27(N)
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Completion
Guaranty Agreement dated November 3, 2005 between Pointer
Ridge Office Investment, LLC and Manufacturers and Traders
Trust Company
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10.28(L)
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Indemnity
Agreement between Old Line Bancshares, Inc. and Prudential
Mortgage Capital Company, LLC dated August 25,
2006
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10.29(S)
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Third
Amendment to Operating Agreement For Pointer Ridge Office
Investment, LLC by and between Old Line Bancshares, Inc.
J. Webb, Inc., Michael M. Webb Revocable Trust, and Lucente
Enterprises, Inc. dated as of November 1,
2008
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10.30(BB)*
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Old
Line Bancshares, Inc. 2010 Equity Incentive Plan
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10.31(Z)*
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Form of
Restricted Stock Agreement under 2010 Equity Incentive
Plan
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10.32(Z)*
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Form of
Non-Qualified Stock Option Grant Agreement under 2010 Equity
Incentive Plan
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10.33(Z)*
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Form of
Incentive Stock Option Grant Agreement under 2010 Equity Incentive
Plan
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10.34(W)*
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Employment
Agreement dated January 28, 2011 between Old Line Bank and
Sandra F. Burnett
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10.35(D)*
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First
Amendment to Amended and Restated Employment Agreement between Old
Line Bank and Sandra F. Burnett dated as of January 1,
2012
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10.36(W)*
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Salary
Continuation Plan Agreement (2010 Plan) by and between Old Line
Bank and Sandra Burnett dated as of February 14,
2011
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10.37(P)*
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Non-Compete
Agreement by and between Old Line Bancshares, Inc. and G.
Thomas Daugherty dated April 11, 2011
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10.38(J)
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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)
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10.39(J)
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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)
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10.40(M)*
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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
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|
|
|
10.41(M)*
|
|
Salary
Continuation Plan Agreement (2012-B Plan) by and between Old Line
Bank and James W. Cornelsen dated as of October 1, 2012, and
form of Change in Control Benefit Election Form
thereunder
|
|
|
|
10.42(T)*
|
|
Salary
Continuation Plan Agreement (2010 Plan) by and between Old Line
Bank and James W. Cornelsen dated as of February 26,
2010
|
|
|
|
10.43(T)*
|
|
Salary
Continuation Plan Agreement (2010 Plan) by and between Old Line
Bank and Joseph E.
Burnett
dated as of February 26, 2010
|
|
|
|
10.45(CC)*
|
|
Employment
Agreement between Old Line Bank and Mark A. Semanie dated as of
May 13, 2013
|
|
|
|
10.46(Q)*
|
|
Employment
Agreement between Old Line Bank and Martin John Miller dated as of
February 26, 2014
|
|
|
|
21(HH)
|
|
Subsidiaries
of Registrant
|
|
|
|
23.1
|
|
Consent
of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
(contained in the opinion filed as Exhibit 5.1)
|
|
|
|
23.2
|
|
Consent
of Dixon Hughes Goodman LLP
|
|
|
|
23.3
|
|
Consent
of Gordon Feinblatt LLC (contained in the opinion filed as Exhibit
8.1)
|
|
|
|
24.1
|
|
Power
of Attorney (included on signature page)
|
|
|
|
99.1
|
|
Consent
of RP Financial Advisors, Inc.
|
|
|
|
99.2#
|
|
Form of
DCB Bancshares, Inc. Proxy Card
|
|
|
|
99.3(A)
|
|
Agreement
and Plan of Reorganization between Old Line Bank and Old Line
Bancshares, Inc., including form of Articles of Share Exchange
attached as Exhibit A thereto
|
*
Management
compensatory plan, contract or arrangement.
#
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, 2012,
filed on March 30, 2012.
(E)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Registration
Statement on Form S-8, under the Securities Act of 1933, as
amended (File Number 333-116845).
(F)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-QSB filed on November 8,
2004.
(G)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 5, 2005.
(H)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-QSB filed on August 10,
2005.
(I)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-Q filed on August 14,
2013.
(J)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 4, 2012.
(K)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 6, 2006.
(L)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-QSB filed on November 9,
2006.
(M)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on October 4, 2012.
(N)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Annual Report
on Form 10-KSB filed on March 28, 2006.
(O)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 7, 2008.
(P)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-Q filed on August 15,
2011.
(Q)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Annual Report
on Form 10-K for the year ended December 31, 2014, filed
on March 11, 2015.
(R)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from, Annex A to Old Line
Bancshares, Inc.’s Registration Statement on
Form S-4 under the Securities Act of 1933, as amended (File
Number 333-184924).
(S)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on November 19,
2008.
(T)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Amendment No. 1 to Old Line
Bancshares, Inc.’s Registration Statement on
Form S-4 under the Securities Act of 1933, as amended (File
Number 333-184924).
(U)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on January 28,
2010.
(V)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Annex A to Old Line
Bancshares, Inc.’s Registration Statement on
Form S-4 under the Securities Act of 1933, as amended (File
Number 333-170464).
(W)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Annual Report
on Form 10-K for the year ended December 31, 2010 filed
on March 30, 2011.
(X)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Annual Report
on Form 10-K for the year ended December 31, 2009, filed
on March 27, 2010.
(Y)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Pre-Effective
Amendment No. 1 on Form S-8 to Registration Statement on
Form S-4 (File Number 333-184924) filed on May 20,
2013.
(Z)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Appendix A of Old Line
Bancshares, Inc.’s Proxy Statement on Schedule 14A,
filed with the Commission on April 19, 2010.
(AA)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Quarterly
Report on Form 10-Q, filed with the Commission on
November 14, 2013.
(BB)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Appendix B of Old Line
Bancshares, Inc.’s Proxy Statement on Schedule 14A,
filed with the Commission on July 12, 2013.
(CC)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed with the Commission on May 13,
2013.
(DD)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by reference
from Old Line Bancshares, Inc.’s Quarterly Report on Form
10-Q filed with the Commission on May 9, 2014.
(EE)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Amendment No.
1 to Current Report on Form 8-K filed with the Commission on
August 5, 2015.
(FF)
Previously filed by
Old Line Bancshares, Inc. as part of, and incorporated by
reference from Old Line Bancshares, Inc.’s Current
Report on Form 8-K filed on August 15, 2016.
(GG)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2015,
filed on March 11, 2016.
(HH)
Previously filed by
Old Line Bancshares, Inc. as a part of, and incorporated by
reference from, Old Line Bancshares, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2016,
filed on March 15, 2017.
(b)
Financial
Statement Schedules
.
None.
(c)
Reports,
Opinions and Appraisals
.
Not
applicable.
Item 22. Undertakings
(a) The
undersigned registrant hereby undertakes:
1.
To file, during any
period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i)
To include any
prospectus required by section 10(a)(3) of the Securities Act of
1933.
(ii)
To reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the
effective registration statement.
(iii)
To include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration
statement.
2.
That, for the
purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3.
To remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
4.
That, for the
purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution
of the securities: The undersigned registrant undertakes that in a
primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant
will be a seller to the purchaser and will be considered to offer
or sell such securities to such purchaser:
(i)
Any preliminary
prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule
424;
(ii)
Any free writing
prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii)
The portion of any
other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
(iv)
Any other
communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
5.
That, for purposes
of determining any liability under the Securities Act of 1933, each
filing of the registrant’s annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan’s
annual report pursuant to section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
6.
That prior to any
public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by
the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable
form.
7.
The registrant
undertakes that every prospectus (i) that is filed pursuant to the
paragraph immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The
undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The
undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it
became effective.
Insofar
as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the
requirements of the Securities Act, the registrant has duly caused
this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Bowie, State of Maryland, on March 20, 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
|
|
March
20, 2017
|
James
W. Cornelsen
|
|
Executive
Officer)
|
|
|
|
|
|
|
|
/s/
Elise M.
Hubbard
|
|
Chief
Financial Officer (Principal Accounting and Financial
|
|
March
20, 2017
|
Elise
M. Hubbard
|
|
Officer)
|
|
|
|
|
|
|
|
/s/
Craig E.
Clark
|
|
Director
and Chairman of the Board
|
|
March
16, 2017
|
Craig
E. Clark
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
March
_ , 2017
|
G.
Thomas Daugherty
|
|
|
|
|
|
|
|
|
|
/s/
James F.
Dent
|
|
Director
|
|
March
16, 2017
|
James
F. Dent
|
|
|
|
|
|
|
|
|
|
/s/
Andre’ J.
Gingles
|
|
Director
|
|
March
16, 2017
|
Andre’ J.
Gingles
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
March _
, 2017
|
Thomas
H. Graham
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
William
J. Harnett
|
|
|
|
|
|
|
|
|
|
/s/
Frank Lucente,
Jr.
|
|
Director
|
|
March
16, 2017
|
Frank
Lucente, Jr.
|
|
|
|
|
|
|
|
|
|
/s/
Gail D.
Manuel
|
|
Director
|
|
March
16, 2017
|
Gail D.
Manuel
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
March
__, 2017
|
Carla
Hargrove McGill
|
|
|
|
|
|
|
|
|
|
/s/
Gregory S. Proctor,
Jr.
|
|
Director
|
|
March
16, 2017
|
Gregory
S. Proctor, Jr.
|
|
|
|
|
|
|
|
|
|
/s/
Jeffrey A.
Rivest
|
|
Director
|
|
March
16, 2017
|
Jeffrey
A. Rivest
|
|
|
|
|
|
|
|
|
|
/s/
Suhas R.
Shah
|
|
Director
|
|
March
16, 2017
|
Suhas
R. Shah
|
|
|
|
|
|
|
|
|
|
/s/
John M. Suit,
II
|
|
Director
|
|
March
16, 2017
|
John M.
Suit, II
|
|
|
|
|
|
|
|
|
|
/s/
Frank E.
Taylor
|
|
Director
|
|
March
16, 2017
|
Frank
E. Taylor
|
|
|
|
|
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