Item 1.01 Entry Into a Material Definitive Agreement
On April 16, 2021, Bank of Marin Bancorp, (“BMRC”) (Nasdaq: BMRC), parent company of Bank of Marin (the "Bank"), and American River Bankshares, (“AMRB”) (Nasdaq: AMRB), parent company of American River Bank, entered into an Agreement to Merge and Plan of Reorganization (the "Merger Agreement"), pursuant to which, and upon the terms and subject to the conditions set forth therein, AMRB will merge with and into BMRC (the “Merger”) with BMRC surviving, followed immediately thereafter by the merger (the “Bank Merger”) of American River Bank with and into Bank, with Bank surviving. The Merger is expected to be completed in the third quarter of 2021, subject to approval of the Merger by shareholders of BMRC and AMRB, receipt of required regulatory and other approvals and satisfaction of customary closing conditions.
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of AMRB’s common stock, excluding certain specified shares, will be converted into the right to receive 0.575 of a share of BMRC common stock. The Merger is expected to qualify as a tax-free reorganization for shareholders of AMRB who receive BMRC common stock.
At the Effective Time of the Merger, each unvested restricted stock award outstanding will vest, be treated as any other outstanding share of AMRB common stock, and be entitled to receive the merger consideration. In addition, each AMRB stock option, whether or not then exercisable, that is outstanding immediately prior to the Effective Time will be canceled and exchanged for the right to receive an amount of cash equal to the product of (x) the total number of shares of AMRB common stock subject to such option and (y) the excess, if any, of (A) the product of (1) the volume weighted average price of BMRC common stock on each of the last fifteen trading days ending on the second trading day immediately prior to the Effective Time, and (2) the Exchange Ratio, over (B) the exercise price per share under such option, less applicable taxes required to be withheld with respect to such payment.
The Merger Agreement contains various customary representations, warranties and covenants by BMRC and AMRB. AMRB agreed to conduct its business in the ordinary course and forbear from taking certain actions while the acquisition is pending. In addition, AMRB agreed that it will not initiate, solicit or encourage proposals for an alternative business combination transaction or, subject to certain exceptions, enter into discussions or furnish information in connection with any proposals for alternative business combination transactions.
Completion of the Merger is subject to certain customary conditions, including (i) approval by AMRB’s shareholders, (ii) approval by BMRC’s shareholders, (iii) receipt of required regulatory approvals, (iv) the absence of any governmental order or law prohibiting the consummation of the Merger or the Bank Merger, and (v) effectiveness of the registration statement for the BMRC common stock to be issued as consideration in the Merger. The obligation of each party to consummate the Merger is also conditioned upon (a) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (b) performance in all material respects by the other party of its obligations under the Merger Agreement, (c) receipt by each party of a tax opinion to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and (d) the absence of a material adverse effect with respect to the other party since the date of the Merger Agreement. The obligation of BMRC to consummate the Merger is further conditioned upon AMRB’s adjusted stockholders’ equity, as defined in the Merger Agreement, not being less than $93.1 million as of the month-end prior to the Effective Time and the required regulatory approvals not reasonably being likely to have a material adverse effect on BMRC after consummation of the Merger.
The Merger Agreement contains certain termination rights for both BMRC and AMRB, including if (i) the Merger is not consummated by December 31, 2021 (the “End Date”), (ii) the required regulatory approvals are not obtained, (iii) the approval of BMRC’s shareholders or AMRB’s shareholders is not obtained, or (iv) there has been a breach by the other party that is not cured such that the applicable closing conditions are not satisfied.
In certain circumstances, AMRB may also terminate the Merger Agreement in the event that (a) (i) AMRB is not in material breach of the Agreement; (ii) the Board of AMRB receives an alternative acquisition approval which is deemed superior to the proposal by BMRC; (iii) BMRC does not amend its offer to acquire AMRB in a manner that would be superior to the alternative acquisition proposal and (iv) AMRB pays a termination fee of $5.38 million (the “Termination Fee”) to BMRC, or (b) one or more members of BMRC’s Board breaches their obligation to vote in
favor of the Merger Agreement and such breach results in failure of the BMRC shareholders to approve the Merger Agreement.
In addition, in certain circumstances, BMRC may terminate the Merger Agreement in the event that (A) AMRB materially breaches its non-solicitation obligations relating to an alternative business combination, (B) AMRB’s board withdraws or adversely modifies its recommendation to shareholders or fails to affirm its recommendation within the required time period after an acquisition proposal is made or (C) AMRB’s board recommends a tender offer or exchange offer or fails to recommend against such tender offer or exchange offer within ten business days after commencement. The Merger Agreement also provides that AMRB will be obligated to pay the Termination Fee if the Merger Agreement (i) is terminated by BMRC in the circumstances described in the preceding sentence or (ii) (A) if certain acquisition proposals are made to AMRB or to its shareholders publicly, (B) the Merger Agreement is terminated for failure to consummate the Merger by the End Date and such failure is the result of the knowing action or inaction by AMRB and the approval of AMRB’s shareholders has not been obtained, and (C) AMRB consummates such acquisition proposal within 12 months of termination of the Merger Agreement. In addition, BMRC may terminate the Merger Agreement in the event one or more members of AMRB’s Board breaches their obligation to vote in favor of the Merger Agreement and such breach results in failure of AMRB’s shareholders to approve the Merger Agreement.
Pursuant to the Merger Agreement, BMRC has agreed to appoint two of AMRB’s directors to the Board of Directors of BMRC and Bank and to nominate such directors for reelection at the first annual shareholder meeting BMRC holds following consummation of the Merger.
In connection with the Merger Agreement, each of the persons currently serving as a director of AMRB entered into a voting agreement with BMRC in which they agreed, among other things, to vote their shares of AMRB common stock in favor of the Merger. Similarly, in connection with the Merger Agreement, each of the persons currently serving as a director of BMRC entered into a voting agreement with BMRC in which they agreed, among other things, to vote their shares of BMRC common stock in favor of the Merger. The foregoing summary of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Agreement to Merge and Plan of Reorganization, which is attached hereto as Exhibit 2.1, and is incorporated herein by reference.
The representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for purposes of, were and are solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. In addition, the representations and warranties in the Merger Agreement (i) will not survive consummation of the Merger, unless otherwise specified therein, and cannot be the basis for any claims under the Merger Agreement by the other party after termination of the Merger Agreement, except as the result of a willful breach, and (ii) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties' public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding BMRC, Bank, or AMRB or their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding BMRC, Bank , AMRB, and their respective businesses, the Merger Agreement and the Merger that will be contained in, or incorporated by reference into, the registration statement on Form S-4 of BMRC that will include a joint proxy statement of BMRC and AMRB and a prospectus of BMRC, as well as in the Forms 10-K, Forms 10-Q and other filings that BMRC makes with the Securities and Exchange Commission (the “SEC”).