Item 1.01 - Entry into a Material Definitive Agreement.
On June 23, 2021, Bank of Commerce Holdings, a California corporation (the
"Company"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Columbia Banking System, Inc., a Washington corporation
("Columbia"). Under the terms of the Merger Agreement, the Company will merge
with and into Columbia, with Columbia as the surviving entity (the "Holding
Company Merger"). Promptly thereafter, Merchants Bank of Commerce, a wholly
owned subsidiary of the Company, will merge with and into Columbia State Bank, a
wholly owned subsidiary of Columbia, with Columbia State Bank surviving as a
wholly owned subsidiary of Columbia (the "Bank Merger" and together with the
Holding Company Merger, the "Mergers"). The Merger Agreement was unanimously
adopted by the Company's board of directors and the board of directors of
Columbia.
Subject to the terms and conditions of the Merger Agreement, at the date and
time when the Holding Company Merger becomes effective (the "Effective Time"),
each share of the Company's common stock, no par value, issued and outstanding
will be converted into the right to receive from Columbia 0.40 of a share of
Columbia common stock, no par value (the "Exchange Ratio"). The Exchange Ratio
is subject to adjustment to the extent that specified expenses incurred by the
Company in connection with the transaction total in excess of $10,500,000
($10,750,000 if the Effective Time occurs in 2022). Also, the Company may elect
to terminate the Merger Agreement if (a) the average closing price of a share of
Columbia common stock, calculated in accordance with the Merger Agreement as of
a specified date shortly before the intended Effective Time (the "Determination
Date"), is less than $35.48 per share and (b) the percentage decline in the
average closing price of a share of Columbia common stock underperforms the KBW
Regional Banking Index over the same time period by greater than 15%; provided
that (i) the Company has given notice of its election to exercise its right to
terminate the Merger Agreement within one business day following the
Determination Date and (ii) Columbia does not, within two business days
following such notice, agree to adjust the Exchange Ratio so that the
termination above does not occur.
The Columbia common stock received by the Company's shareholders in exchange for
shares of the Company's common stock in the Holding Company Merger, together
with cash paid in lieu of fractional shares, is hereinafter referred to as the
"Merger Consideration." As of the date of this report, the Merger Consideration
has a total aggregate value of approximately $266.0 million (based on the
closing price of $39.30for Columbia common stock on June 23, 2021).
The Merger Agreement provides that each share of restricted stock outstanding
under the Company's stock plans (the "Company Stock Plans") will automatically
vest and entitle the holder to receive the Merger Consideration at the Effective
Time. Outstanding options to purchase shares of the Company's common stock (the
"Company Options") under the Company Stock Plans, whether vested or unvested,
will be canceled, and the holders of Company Options will be paid in cash an
amount equal to the spread between the value of the Merger Consideration per
share and the per share exercise price of such Company Option, multiplied by the
shares subject to the Company Option, net of any cash required to be withheld
under applicable tax laws.
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The Merger Agreement contains customary representations and warranties by each
of the Company and Columbia, and the Company has agreed to customary pre-closing
covenants, including covenants to operate its business in the ordinary course in
all material respects and to refrain from taking certain actions without
Columbia's consent. In addition, the Company has agreed to certain additional
covenants, including, among others, covenants relating to its obligation to call
a meeting of its shareholders to vote on the Merger Agreement, non-solicitation
obligations related to alternative acquisition proposals, and, subject to
certain exceptions, the obligation of its Board of Directors to recommend that
its shareholders approve the Merger Agreement.
The closing of the transaction is expected to occur during the fourth quarter of
2021, subject to the fulfillment of customary closing conditions, including
approval by holders of a majority of the outstanding shares of Company common
stock at a special meeting of shareholders and the receipt of required
regulatory approvals. See "Additional Information and Where to Find It" below
for information regarding the prospectus/proxy statement to be distributed to
the Company's shareholders in connection with the shareholder meeting.
Either the Company or Columbia may terminate the Merger Agreement under certain
circumstances, including if the Holding Company Merger is not completed by March
31, 2022, or a closing condition is not met. The Company will be required to pay
Columbia a $12,000,000 termination fee if the Merger Agreement is terminated
under specified circumstances relating to, among others, a change in the Board's
recommendation to shareholders to approve the Holding Company Merger.
The foregoing description 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 hereto as Exhibit 2.1 and is incorporated
herein by reference. The Merger Agreement has been included to provide investors
with information regarding its terms. The Merger Agreement should not be read
alone, but should instead be read in conjunction with the other information
regarding the Company, Columbia, their respective affiliates and businesses, and
the Merger Agreement and related transactions that will be contained in, or
incorporated by reference into, the Registration Statement on Form S-4 to be
filed by Columbia that will include a Proxy Statement of the Company and a
Prospectus of Columbia, as well as in the Forms 10-K, Forms 10-Q and other
filings that each of the Company and Columbia make with the Securities and
Exchange Commission (the "SEC").
Voting Agreements
Concurrently with the execution of the Merger Agreement, each of the Company's
directors entered into a Voting Support Agreement (each, a "Voting Agreement")
pursuant to which the directors, in their capacity as shareholders of the
Company, have agreed, among other things, to vote their shares of Company common
stock at the special shareholder meeting in favor of the Merger Agreement and
the transactions contemplated thereby. The Voting Agreements also include
customary nonsolicitation and confidentiality provisions.
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The foregoing description of the Voting Agreements does not purport to be
complete and is qualified in its entirety by reference to the full text of the
form of Voting Agreement, which is attached hereto as Exhibit 10.1 and is
incorporated herein by reference.
Forward-Looking Statements
This current report on Form 8-K contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as "estimate," "expect," "will," and
similar references to future periods. Such forward-looking statements include
but are not limited to statements regarding the expected closing and potential
benefits of the business combination transaction involving the Company and
Columbia, including future financial and operating results, the combined
company's plans, objectives, expectations and intentions, and other statements
that are not historical facts regarding either company or the proposed
combination of the companies. These forward-looking statements are subject to
risks and uncertainties, many of which are outside of our control, that may
cause actual results or events to differ materially from those projected,
including but not limited to the following: risks that the merger transaction
will not close when expected or at all because required regulatory, shareholder
or other approvals or conditions to closing are delayed or not received or
satisfied on a timely basis or at all; risks that the benefits from the
transaction may not be fully realized or may take longer to realize than
expected, including as a result of changes in general economic and market
conditions, interest and exchange rates, monetary policy, laws and regulations
and their enforcement, and the degree of competition in the geographic and
business areas in which the Company and Columbia operate; uncertainties
regarding the ability of Merchants Bank of Commerce and Columbia State Bank to
promptly and effectively integrate their businesses; changes in business and
operational strategies that may occur between signing and closing; uncertainties
regarding the reaction to the transaction of the companies' respective
customers, employees, shareholders, and counterparties; and risks relating to
the diversion of management time on merger-related issues. Readers are cautioned
not to place undue reliance on the forward-looking statements, which speak only
as of the date on which they are made and reflect management's current
estimates, projections, expectations and beliefs. The Company undertakes no
obligation to publicly revise or update the forward-looking statements to
reflect events or circumstances that arise after the date of this report other
. . .
Item 7.01 - Regulation FD Disclosure
A copy of the press release jointly issued by the Company and Columbia regarding
the proposed Mergers reported in Item 1.01 is attached hereto as Exhibit 99.1
and incorporated herein by reference. The Company and Columbia intend to provide
supplemental information in presentations to analysts and investors. A copy of
the investor presentation is attached hereto as Exhibit 99.2 and is incorporated
herein by reference.
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The information in this Item 7.01 and Exhibits 99.1 and 99.2 attached hereto is
being furnished, and shall not be deemed "filed" for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, nor shall it be deemed
incorporated by reference in any filing of the Company under the Securities Act
of 1933, as amended, except as shall be expressly set forth by specific
reference in such document or filing.
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