|
Item
1.01.
|
Entry
Into a Material Definitive Agreement.
|
On
April 16, 2021, American River Bankshares, a California corporation (the “Company”), entered into an Agreement to
Merge and Plan of Reorganization (the “Merger Agreement”) with Bank of Marin Bancorp, a California corporation (“Marin
Bancorp”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company
will merge with and into Marin Bancorp (the “Merger”) with Marin Bancorp surviving, followed immediately thereafter
by the merger (the “Bank Merger”) of American River Bank, a California state-chartered bank and wholly-owned subsidiary
of the Company, with and into Bank of Marin, a California corporation and wholly-owned subsidiary of Marin Bancorp, with Bank
of Marin surviving. The Merger Agreement was approved by the Board of Directors of each of the Company and Marin Bancorp.
Subject
to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each
outstanding share of the Company’s common stock, excluding certain specified shares, will be converted into the right to
receive 0.575 (the “Exchange Ratio”) of a share of Marin Bancorp common stock (the “Merger Consideration”).
In addition, at the Effective Time, (i) each option to purchase shares of Company common stock, whether vested or unvested, 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 Company common stock subject to such option and (y) the excess, if any,
of (A) the product of (1) the volume weighted average price of Marin Bancorp 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; and (ii) any vesting
conditions applicable to each outstanding restricted stock award and each outstanding restricted stock unit will accelerate in
full, and each such restricted stock award and restricted stock unit will be treated as any other outstanding share of Company
common stock entitled to receive the Merger Consideration. Based on Marin Bancorp’s closing stock
price of $39.06 on April 16, 2021, the transaction is valued at $134.5 million, or $22.46 per share of the Company’s common
stock. Such value will fluctuate with changes in the stock price of Marin Bancorp. The total transaction value includes the value
of the Company’s options being paid in cash by Marin Bancorp.
The
Merger Agreement contains customary representations and warranties from each of the Company and Marin Bancorp, and each party
has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of such party’s businesses
during the interim period between the execution of the Merger Agreement and the Effective Time, (2) the obligation of the Company
to call a special meeting of its shareholders to approve the principal terms of the Merger Agreement, and, subject to certain
exceptions, to recommend that its shareholders approve the principal terms of the Merger Agreement, (3) the obligation of Marin
Bancorp to call a special meeting for its shareholders to approve the principal terms of the Merger Agreement and
in favor of the issuance of Marin Bancorp common stock in the Merger, and (4) the Company’s
non-solicitation obligations relating to alternative acquisition proposals. The Company and Marin Bancorp have agreed to use their
respective reasonable best efforts to prepare and file all applications, notices, and other documents to obtain all necessary
consents and approvals for consummation of the transactions contemplated by the Merger Agreement.
Completion
of the Merger is subject to certain customary conditions, including (i) approval by the Company’s shareholders, (ii) approval
by Marin Bancorp’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 Marin Bancorp 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 Marin Bancorp to consummate the Merger is further conditioned upon the
Company’s adjusted stockholders’ equity, as defined in the 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 be likely to have a material adverse
effect on Marin Bancorp after consummation of the Merger.
The
Merger Agreement contains certain termination rights for both the Company and Marin Bancorp, 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 the Company’s shareholders or Marin’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, the Company may also terminate the Merger Agreement in the event that (a) (i) the Company is not in material
breach of the Agreement; (ii) the Board of the Company receives an alternative acquisition approval which is deemed superior to
the proposal by Marin Bancorp; (iii) Marin Bancorp does not amend its offer to acquire the Company in a manner that would be superior
to the alternative acquisition proposal and (iv) the Company pays a termination fee of $5.38 million (the “Termination Fee”)
to Marin Bancorp, or (b) one or more members of Marin Bancorp’s Board breaches their obligation to vote in favor of the
Merger Agreement and such breach results in failure of the Marin shareholders to approve the Merger Agreement.
In
addition, in certain circumstances, Marin Bancorp may terminate the Merger Agreement in the event that (A) the Company materially
breaches its non-solicitation obligations relating to an alternative business combination, (B) the Company’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) the Company’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 the Company will be obligated to pay the Termination Fee if the Merger Agreement (i) is terminated by Marin Bancorp in the
circumstances described in the preceding sentence or (ii) (A) if certain acquisition proposals are made to the Company 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 the Company and the approval of the Company’s shareholders has not been
obtained, and (C) the Company consummates such acquisition proposal within 12 months of termination of the Merger Agreement. In
addition, Marin Bancorp may terminate the Merger Agreement in the event one or more members of the Company’s Board breaches
their obligation to vote in favor of the Merger Agreement and such breach results in failure of the Company’s shareholders
to approve the Merger Agreement.
Pursuant
to the Merger Agreement, Marin Bancorp has agreed to appoint two of the Company’s directors to the Board of Directors of
Marin Bancorp and Bank of Marin and to nominate such directors for reelection at the first annual shareholder meeting Marin Bancorp
holds following consummation 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
full text of the Merger Agreement, which is attached as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein
by reference in its entirety. The Merger Agreement and the above description of the Merger Agreement have been included to provide
investors and security holders with information regarding the terms of the Merger Agreement. The Merger Agreement and the above
description are not intended to provide any other factual information about the Company, Marin Bancorp or their respective subsidiaries
or affiliates. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of
the Merger Agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject
to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each contracting party
to the other for the purposes of allocating contractual risk between them rather than 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.
Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of
the actual state of facts or condition of the Company, Marin Bancorp, or any of their respective subsidiaries, affiliates or businesses.
Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date
of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by the Company or
Marin Bancorp.
Shareholder
Agreements and Non-Competition/Non-Solicitation Agreements
On
April 16, 2021, concurrently with the execution of the Merger Agreement and as a material inducement and as additional consideration
to the parties to enter into the Merger Agreement, Marin Bancorp entered into agreements with the directors of the Company. The
shareholder agreements generally require that prior to termination of the Merger Agreement each member of the Company’s
board of directors agrees to vote in favor of the approval of the principal terms of the Merger Agreement and certain related
matters as applicable and against alternative transactions. In addition, the directors of Marin Bancorp similarly entered into
shareholder agreements with the Company which generally require that prior to termination of the Merger Agreement, each member
of Marin Bancorp’s board of directors agrees to vote in favor of the approval of the principal terms of the Merger Agreement
and certain related matters and against alternative transactions.
Also
on April 16, 2021, concurrently with the execution of the Merger Agreement and as a material inducement and as additional consideration
to Marin Bancorp to enter into the Merger Agreement, (i) certain officers of the Company entered into a customary non-solicitation
agreement with Marin Bancorp and (ii) the non-executive directors of the Company entered into customary non-competition/non-solicitation
agreements with Marin Bancorp.
The
shareholder agreements, non-solicitation agreements and non-competition/non-solicitation agreements will terminate automatically
in the event that the Merger Agreement is terminated for any reason in accordance with its terms. The foregoing summary of the
shareholder agreement, non-solicitation agreement and non-competition/non-solicitation agreement do not purport to be complete
and are qualified in their entirety by reference to the full text of each of the Company shareholder agreements, Marin Bancorp
shareholder agreements, non-solicitation agreement and non-competition/non-solicitation agreement, which is substantially in the
forms included as Exhibit A-1, Exhibit A-2, Exhibit B-1 and Exhibit B-2, respectively, to the Merger Agreement attached as Exhibit
2.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.