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[Suburban Bancshares, Inc. Logo] [Columbia Bancorp Logo]
S u b u r b a n B a n c s h a r e s , I n c . C o l u m b i a B a n c o r p
YOUR VOTE ON OUR PROPOSED MERGER IS VERY IMPORTANT
Dear Stockholders:
The directors of Columbia Bancorp and Suburban Bancshares, Inc. have approved
a proposal to merge Suburban Bancshares into Columbia Bancorp. In the merger,
each share of Suburban Bancshares common stock will be exchanged for shares of
Columbia Bancorp common stock. At the time of the announcement of the merger
the value to Suburban Bancshares stockholders was $3.00 per share based on a
conversion ratio of 0.2338 and a market value for Columbia Bancorp common stock
of $12.81 per share. On January 4, 2000 the value to Suburban Bancshares
stockholders was $2.51 per share based on a conversion ratio of 0.2338 and a
market value for Columbia Bancorp common stock of $10.75 per share. The market
value of Columbia Bancorp common stock received at the time of the merger may
differ due to a fluctuation in the market value of Columbia Bancorp common
stock and, possibly, in the conversion ratio. In addition, exchange of your
shares of Suburban Bancshares common stock generally will not be taxable.
The merger will provide Columbia Bancorp and Suburban Bancshares stockholders
with the opportunity to participate in a premier community banking institution
in the Baltimore-Washington area that will result from the combination of our
two companies. Columbia Bancorp stockholders immediately prior to the merger
initially will own approximately 63.0%, and Suburban Bancshares stockholders
immediately prior to the merger initially will own approximately 37.0%, of
Columbia Bancorp common stock to be outstanding immediately after the merger.
Columbia Bancorp common stock is listed on The Nasdaq Stock Market's National
Market under the symbol "CBMD." Suburban Bancshares common stock is listed on
The Nasdaq Stock Market's SmallCap Market under the symbol "SBNK."
We believe the merger is a very positive development for both Suburban
Bancshares and Columbia Bancorp. We are therefore asking for your support in
voting for the merger. Please take the time to vote by completing and mailing
the enclosed proxy card. If you do not vote, the effect will be the same as
voting against the merger.
This proxy statement/prospectus provides you with detailed information about
the proposed merger and the scheduled stockholders' meetings. We encourage you
to read this entire proxy statement/prospectus carefully. In particular, please
see the section entitled "Risk Factors" on page 20 of this proxy
statement/prospectus for a discussion of risks associated with the merger.
Very truly yours,
John M. Bond, Jr. Winfield M. Kelly, Jr.
President and Chief Executive Chairman of the Board and
Officer Chief Executive Officer
Columbia Bancorp Suburban Bancshares, Inc.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under
this proxy statement/prospectus or determined if this proxy
statement/prospectus is accurate or complete. Any representation to the
contrary is a criminal offense. The shares of Columbia Bancorp common stock
are not savings or deposit accounts or other obligations of any bank or
savings association, and are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
The date of this proxy statement/prospectus is January 5, 2000, and it is
being mailed or otherwise delivered to stockholders on or about January 11,
2000.
<PAGE>
COLUMBIA BANCORP
10480 LITTLE PATUXENT PARKWAY
COLUMBIA, MARYLAND 21044
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 23, 2000
----------------
A special meeting of stockholders of Columbia Bancorp will be held on
Wednesday, February 23, 2000, at the Turf Valley Resort & Conference Center,
2700 Turf Valley Road, Ellicott City, Maryland, beginning at 10:00 a.m. local
time, for the following purposes:
1. To approve the Plan and Agreement to Merge dated September 28, 1999, as
amended, between Suburban Bancshares, Inc. and Columbia Bancorp and to
approve the merger of Suburban Bancshares with and into Columbia Bancorp
as described in the proxy statement/prospectus in which:
. Suburban Bancshares will be merged with and into Columbia Bancorp,
with Columbia Bancorp being the surviving corporation;
. each share of Suburban Bancshares common stock will be exchanged for
between 0.2338 and 0.2196 shares of Columbia Bancorp common stock.
The conversion ratio is based upon a formula which causes the average
market value of shares of Columbia Bancorp common stock exchanged for
each share of Suburban Bancshares common stock to be $3.00 per share
when the average market value of Columbia Bancorp common stock is
between $12.81 and $13.68 per share. The conversion ratio is fixed at
0.2196 if the average market value is above $13.68 per share and at
0.2338 if it is below $12.81 per share; and
. Suburban Bank of Maryland will be merged with and into The Columbia
Bank, with The Columbia Bank being the surviving bank.
2. To transact such other business as may properly be brought before the
meeting or any adjournment or postponement of the meeting including
potential adjournments for the purpose of soliciting additional proxies
in order to approve and adopt the merger.
The members of Columbia Bancorp's board of directors have adopted a
resolution unanimously declaring the merger advisable and recommend that
stockholders vote "FOR" approval of the merger.
We have described the merger in more detail in the proxy
statement/prospectus, which you should read in its entirety before voting. A
copy of the amended merger agreement is attached as Appendix A to the
accompanying proxy statement/prospectus. Only stockholders of record at the
close of business on January 4, 2000 are entitled to notice of and to vote at
the meeting or any adjournments or postponements of the meeting. The
affirmative vote of holders of two-thirds of the Columbia Bancorp common stock
outstanding on January 4, 2000 is necessary to approve the merger. If that vote
is not obtained, the merger cannot be completed.
All stockholders are cordially invited to attend the special meeting. To
ensure your representation at the special meeting please complete and promptly
mail your proxy in the return envelope enclosed. This will not prevent you from
voting in person, but will help to secure a quorum and avoid added solicitation
costs. Your proxy may be revoked at any time before it is voted. If your shares
are not registered in your own name, you will need additional documentation
from the record holder in order to vote personally at the meeting.
Your vote is important.
Whether or not you plan to attend the meeting, please complete, sign, date and
promptly return the enclosed proxy card in the enclosed envelope.
By Order of the Board of Directors
John A. Scaldara, Jr.
Secretary
Columbia, Maryland
January 5, 2000
<PAGE>
SUBURBAN BANCSHARES, INC.
7505 Greenway Center Drive
Greenbelt, Maryland 20768
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 23, 2000
----------------
A special meeting of stockholders of Suburban Bancshares, Inc. will be held
on Wednesday, February 23, 2000 at the Marriott Hotel, 6400 Ivy Lane,
Greenbelt, Maryland, beginning at 10:00 a.m., local time, for the following
purposes:
1. To approve the Plan and Agreement to Merge dated September 28, 1999, as
amended, between Suburban Bancshares and Columbia Bancorp and to approve
the merger of Suburban Bancshares with and into Columbia Bancorp as
described in the proxy statement/prospectus in which:
. Suburban Bancshares will be merged with and into Columbia Bancorp,
with Columbia Bancorp being the surviving corporation;
. each share of Suburban Bancshares common stock will be exchanged for
between 0.2338 and 0.2196 shares of Columbia Bancorp common stock.
The conversion ratio is based upon a formula which causes the average
market value of shares of Columbia Bancorp common stock exchanged for
each share of Suburban Bancshares common stock to be $3.00 per share
when the average market value of Columbia Bancorp common stock is
between $12.81 and $13.68 per share. The conversion ratio is fixed at
0.2196 if the average market value is above $13.68 per share and at
0.2338 if it is below $12.81 per share; and
. Suburban Bank of Maryland will be merged with and into The Columbia
Bank, with The Columbia Bank being the surviving bank.
2. To transact such other business as may properly come before the meeting
or any adjournment or postponement of the meeting including potential
adjournments for the purpose of soliciting additional proxies in order
to approve and adopt the merger.
The members of the Suburban Bancshares' board of directors have unanimously
adopted a resolution declaring the merger advisable and recommend that
stockholders vote "FOR" approval of the merger.
We have described the merger in more detail in the accompanying proxy
statement/prospectus, which you should read in its entirety before voting. A
copy of the amended merger agreement is attached as Appendix A to the proxy
statement/prospectus. Only stockholders of record at the close of business on
January 4, 2000 are entitled to notice of and to vote at the meeting or any
adjournment or postponement of the meeting. The affirmative vote of holders of
a majority of the Suburban Bancshares common stock outstanding on January 4,
2000 is necessary to approve the merger. If that vote is not obtained, the
merger cannot be completed.
All stockholders are cordially invited to attend the special meeting. To
ensure your representation at the special meeting please complete and promptly
mail your proxy in the return envelope enclosed. This will not prevent you from
voting in person, but will help to secure a quorum and avoid added solicitation
costs. Your proxy may be revoked at any time before it is voted. If your shares
are not registered in your own name, you will need additional documentation
from the record holder in order to vote personally at the meeting.
Your vote is important.
Whether or not you expect to attend the meeting in person, please complete,
sign, date and promptly return the enclosed proxy card in the enclosed postage-
paid envelope.
By Order of the Board of Directors
Susan J. Hansen
Secretary
Greenbelt, Maryland
January 5, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................................... 1
SUMMARY..................................................................... 3
Selected Historical and Pro Forma Consolidated Financial Data............. 10
Comparative Per Share Data................................................ 17
FORWARD-LOOKING STATEMENTS.................................................. 19
RISK FACTORS................................................................ 20
GENERAL INFORMATION ABOUT THE MEETINGS...................................... 25
Date, Time and Place of the Meetings...................................... 25
Record Date and Outstanding Shares........................................ 25
Purpose of the Meetings................................................... 25
Vote Required............................................................. 26
Voting of Proxies......................................................... 27
Authorization to Vote on Adjournment and Other Matters.................... 28
Revocation of Proxies..................................................... 29
Solicitation of Proxies................................................... 29
PARTIES TO THE MERGER....................................................... 30
Columbia Bancorp.......................................................... 30
Suburban Bancshares....................................................... 31
THE MERGER.................................................................. 32
Background of the Merger.................................................. 32
Suburban Bancshares Reasons for the Merger................................ 34
Opinion of Suburban Bancshares' Financial Advisor......................... 35
Columbia Bancorp Reasons for the Merger................................... 38
Opinion of Columbia Bancorp's Financial Advisor........................... 39
Interests of Persons in the Merger Other Than as Stockholders............. 42
Form of the Merger........................................................ 43
Consideration for the Merger.............................................. 43
Effective Time of the Merger.............................................. 44
Procedures for Exchange of Suburban Bancshares Stock Certificates......... 44
Exchange of Suburban Bancshares Stock Options............................. 45
Anticipated Accounting Treatment.......................................... 45
Material Federal Income Tax Considerations................................ 45
Regulatory Approvals Required............................................. 47
Nasdaq Stock Market Listing............................................... 48
Appraisal Rights.......................................................... 49
Resale of Columbia Bancorp Common Shares After the Merger................. 51
THE MERGER AGREEMENT........................................................ 52
General................................................................... 52
Conversion Ratios; Fractional Shares...................................... 52
Certain Representations and Warranties.................................... 52
Certain Covenants and Agreements.......................................... 53
Conditions to the Merger.................................................. 55
Termination............................................................... 56
Amendment; Waiver......................................................... 57
Expenses.................................................................. 58
</TABLE>
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<TABLE>
<S> <C>
STOCK OPTION AGREEMENTS................................................... 59
General................................................................. 59
Exercise; Expiration.................................................... 59
Registration Rights..................................................... 60
Purpose of the Agreements............................................... 60
SUPPORT AGREEMENTS........................................................ 60
CERTAIN INFORMATION INCORPORATED BY REFERENCE............................. 61
COMPARISON OF THE RIGHTS OF HOLDERS OF COLUMBIA BANCORP CAPITAL STOCK AND
SUBURBAN BANCSHARES CAPITAL STOCK........................................ 62
DESCRIPTION OF COLUMBIA BANCORP CAPITAL STOCK............................. 78
General................................................................. 78
Common Stock............................................................ 78
Preferred Stock......................................................... 78
FUTURE STOCKHOLDER PROPOSALS.............................................. 78
OTHER MATTERS............................................................. 79
LEGAL MATTERS............................................................. 80
EXPERTS................................................................... 80
WHERE YOU CAN FIND MORE INFORMATION....................................... 80
APPENDIX A AGREEMENT AND PLAN OF MERGER................................... A-1
APPENDIX B SUPPORT AGREEMENT OF COLUMBIA BANCORP.......................... B-1
APPENDIX C SUPPORT AGREEMENT OF SUBURBAN BANCSHARES....................... C-1
APPENDIX D COLUMBIA BANCORP STOCK OPTION AGREEMENT........................ D-1
APPENDIX E SUBURBAN BANCSHARES STOCK OPTION AGREEMENT..................... E-1
APPENDIX F OPINION OF AUSTIN FINANCIAL SERVICES, INC...................... F-1
APPENDIX G OPINION OF DANIELSON ASSOCIATES INC............................ G-1
APPENDIX H SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW............ H-1
</TABLE>
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why did the companies decide to merge?
A. The members of the boards of directors of both companies believe that the
merger is advisable and in the best interests of their respective
stockholders. In reaching their decision, they relied on a number of
factors which are more fully described in this proxy statement/ prospectus.
See "Suburban Bancshares' Reasons for the Merger" on page 34 and "Columbia
Bancorp's Reasons for the Merger" on page 38.
Q: What should I do?
A: After you have carefully read this proxy statement/prospectus, mail your
signed proxy card in the enclosed envelope. The instructions on the
accompanying proxy card will give you more information on how to vote by
mail. This will enable your shares to be represented at the Columbia
Bancorp special meeting or the Suburban Bancshares special meeting, as
applicable. If you fail to return a proxy card or abstain from voting, the
effect will be a vote against the merger.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Maybe. Your broker will not be able to vote your shares without
instructions from you. You should instruct your broker to vote your shares,
following the directions your broker provides. Your failure to instruct
your broker to vote your shares will result in your shares not being voted,
and the affect will be a vote against the merger.
Q: Can I change my vote after I have submitted my proxy with voting
instructions?
A: Yes. There are three ways you can change your vote. First, you may send a
written notice to the person to whom you submitted your proxy stating that
you would like to revoke your proxy. Second, you may complete and submit a
new proxy card by mail or submit your proxy with new voting instructions.
The vote dated latest and actually received by Suburban Bancshares or
Columbia Bancorp prior to the stockholders' meeting will be your vote. Any
earlier votes will be revoked. Third, you may attend the Columbia Bancorp
special meeting or the Suburban Bancshares special meeting, as applicable,
and vote in person. Any earlier votes will be revoked. Simply attending the
meeting without voting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions you
will receive from your broker to change or revoke your proxy.
Q: What will I receive in the merger?
A: Each share of Suburban Bancshares common stock will be exchanged for
between 0.2338 and 0.2196 shares of Columbia Bancorp common stock. The
conversion ratio is based upon a formula which causes the average market
value of shares of Columbia Bancorp common stock exchanged for each share
of Suburban Bancshares common stock to be $3.00 per share when the average
market value of Columbia Bancorp common stock is between $12.81 and $13.68
per share. The conversion ratio is fixed at 0.2196 if the average market
value is above $13.68 per share and at 0.2338 if it is below $12.81 per
share. The conversion ratio at the time of the announcement of the merger
was 0.2338, representing a value to Suburban Bancshares stockholders of
$3.00 per share, and on January 4, 2000 was 0.2338, representing a value to
Suburban Bancshares stockholders of $2.51 per share. The average market
value of Columbia Bancorp common stock will fluctuate prior to the merger,
and the conversion ratio may fluctuate within the range of 0.2338 and
0.2196 prior to the merger. If you have options to purchase shares of
Suburban Bancshares common stock, whether vested or unvested, they will be
converted into an option to purchase shares of Columbia Bancorp common
stock and will no longer represent a right to acquire shares of Suburban
Bancshares common stock. Columbia Bancorp common stock is publicly traded
on the Nasdaq National Market under the symbol "CBMD." The merger will not
have an effect on the Columbia Bancorp common stock. Of course, the number
of shares of Columbia Bancorp common stock outstanding will increase from
approximately 4.5 million shares to approximately 7.2 million shares.
1
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Q: Should I send in my stock certificates?
A: No. You should not send in your stock certificates at this time. Columbia
Bancorp stockholders will not exchange their certificates in the merger.
The certificates currently representing the shares of Columbia Bancorp
common stock will continue to represent the same number of shares of
Columbia Bancorp common stock after the merger.
Suburban Bancshares stockholders will exchange their Suburban Bancshares
common stock certificates for Columbia Bancorp common stock certificates
after we complete the merger. Instructions for exchanging Suburban
Bancshares common stock certificates will be sent to you promptly after the
merger is completed.
Q: Who should I call if I have questions?
A: Columbia Bancorp stockholders should call John A. Scaldara, Jr., at (410)
465-4800 with any questions about the merger and the related transactions.
Suburban Bancshares stockholders should call Stephen A. Horvath at (301)
474-6694.
Q: What vote is required to approve the merger?
A: In order to complete the merger, holders of two-thirds of the outstanding
shares of Columbia Bancorp common stock and holders of a majority of the
outstanding shares of Suburban Bancshares common stock must approve the
merger.
Q: May dissenting stockholders seek appraisal rights in the merger?
A. Columbia Bancorp stockholders do not have appraisal rights under Maryland
law in the merger. Suburban Bancshares stockholders do have appraisal
rights under Delaware law in the merger. To perfect their appraisal rights,
Suburban Bancshares stockholders must strictly comply with the procedures
in Section 262. Failure to strictly comply with these procedures will
result in the loss of appraisal rights. We have attached a copy of Section
262 of the Delaware General Corporation Law as Appendix H. See "Appraisal
Rights" on page 49.
Q: When do you expect to complete the merger?
A. We are working toward completing the merger as quickly as possible. We must
first obtain the approval of Suburban Bancshares common stockholders at the
Suburban Bancshares special meeting, the approval of Columbia Bancorp
common stockholders at the Columbia Bancorp special meeting and approvals
from state and federal bank regulators. We will file applications with the
Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board
and the Maryland Commissioner of Financial Regulation. The stockholder
meetings are scheduled for February 23, 2000. We hope to complete the
merger shortly after that date.
Q: Will I receive dividends on my Columbia Bancorp shares before the merger?
A. The merger agreements permits Columbia Bancorp to pay, prior to the
closing, regular quarterly cash dividends to its stockholders.
Q: Where can I find more information about the companies?
A. Both companies file reports and other information with the Securities and
Exchange Commission ("SEC"). You may read and copy this information at the
SEC's public reference facilities. Please call the SEC at 1-800-SEC-0330
for information about these facilities. This information is also available
at the Internet site the SEC maintains at www.sec.gov. You can also request
copies of these documents from us. See "Where You Can Find More
Information" on page 80.
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SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully, you should read carefully the
entire proxy statement and the other documents attached to this proxy
statement. The amended merger agreement is attached as Appendix A to this proxy
statement. For more information about the two companies, see "Where You Can
Find More Information" (page 80). For your reference, we have included page
references to direct you to more complete descriptions of the topics presented
in this summary.
The Companies
Columbia Bancorp
10480 Little Patuxent Parkway
Columbia, Maryland 21044
(410) 465-4800
Columbia Bancorp is a registered bank holding company organized in 1987 as a
Maryland corporation that began its operations in 1988. Columbia Bancorp's
principal subsidiary is Columbia Bank, a commercial bank headquartered in
Columbia, Maryland. On September 30, 1999, Columbia Bancorp had total
consolidated assets of $460.1 million, total consolidated deposits of $354.0
million, stockholders' equity of $39.9 million and net income of $3.9 million
for the first nine months of 1999. Columbia Bancorp offers a broad range of
bank and bank-related services through Columbia Bank, which constitutes
approximately 100% of the consolidated assets of Columbia Bancorp.
Columbia Bank is a commercial bank organized under the laws of the State of
Maryland. Columbia Bank has banking branches in Howard and Baltimore Counties
and Baltimore City.
As of December 31, 1999, there were 4,508,625 shares of Columbia Bancorp
common stock issued and outstanding. Columbia Bancorp common stock is quoted on
the Nasdaq National Market under the symbol "CBMD." For additional information
about Columbia Bancorp, its business, financial condition, and operations see
page 30.
Suburban Bancshares, Inc.
7505 Greenway Center Drive
P.O. Box 298
Greenbelt, Maryland 20768
(301) 474-6694
Suburban Bancshares is a registered bank holding company organized in 1985 as
a Delaware corporation. Suburban Bancshares' sole subsidiary is Suburban Bank,
a commercial bank headquartered in Greenbelt, Maryland. As of and for the nine
months ended September 30, 1999, Suburban Bancshares had total consolidated
assets of $222.8 million, total deposits of $187.7 million, stockholders'
equity of $20.4 million, and net income of $710,000. Suburban Bancshares offers
a broad range of bank and bank-related services through Suburban Bank.
Suburban Bank is a commercial bank organized under the laws of the State of
Maryland. Suburban Bank has branches in Montgomery and Prince George's
Counties.
As of December 31, 1999, there were 11,301,218 shares of Suburban Bancshares
common stock issued and outstanding. Suburban Bancshares common stock is quoted
on the Nasdaq SmallCap Market under the symbol "SBNK." For additional
information about Suburban Bancshares, its business, financial condition, and
operations see page 31.
3
<PAGE>
The Merger
The amended merger agreement is attached to this proxy statement/prospectus as
Appendix A. We encourage you to read the merger agreement as it is the legal
document that governs the merger between Columbia Bancorp and Suburban
Bancshares.
Upon completion of the merger, Suburban Bancshares will merge into Columbia
Bancorp, and Suburban Bancshares will cease to exist as a separate company. As
part of the merger, Columbia Bancorp and Suburban Bancshares will cause
Suburban Bank to merge into Columbia Bank pursuant to a plan of bank merger. We
expect to complete the bank merger concurrently with the completion of the
merger.
Shares of Suburban Bancshares Common Stock Will Be Exchanged for Shares of
Columbia Bancorp Common Stock (page 43)
If the merger is completed, you will receive the number of shares of Columbia
Bancorp common stock for each share of Suburban Bancshares common stock you
own, plus cash instead of any fractional share, based on a conversion ratio.
Each share of Suburban Bancshares common stock will be exchanged for between
0.2338 and 0.2196 shares of Columbia Bancorp common stock. The conversion ratio
is based upon a formula which causes the average market value of shares of
Columbia Bancorp common stock exchanged for each share of Suburban Bancshares
common stock to be $3.00 per share when the average market value of Columbia
Bancorp common stock is between $12.81 and $13.68 per share. The conversion
ratio is fixed at 0.2196 if the average market value is above $13.68 per share
and at 0.2338 if it is below $12.81 per share. On January 4, 2000, the closing
price of Columbia Bancorp common stock was $10.75, making the value of
11,301,218 shares of Suburban Bancshares common stock equal to $2.51 per share
on that date based on a conversion ratio of 0.2338. Because the market price of
Columbia Bancorp common stock fluctuates, you will not know when you vote what
the shares issued in the merger will be worth.
Meetings to be Held February 23, 2000; Record Dates (page 25)
The Columbia Bancorp meeting will be held at 10:00 a.m. on February 23, 2000
at the Turf Valley Resort & Conference Center in Ellicott City, Maryland. At
the Columbia Bancorp meeting, Columbia Bancorp stockholders will be asked to
consider and vote on a proposal to approve the merger by approving and adopting
the merger agreement. If you held shares of Columbia Bancorp common stock at
the close of business on January 4, 2000, you are entitled to vote on the
merger, and any other matters considered at the Columbia Bancorp meeting or any
adjournment or postponement of the meeting.
The Suburban Bancshares meeting will be held at 10:00 a.m. on February 23,
2000 at the Marriott Hotel, 6400 Ivy Lane, Greenbelt, Maryland. At the Suburban
Bancshares meeting, Suburban Bancshares stockholders will be asked to consider
approving the merger by approving and adopting the merger agreement. If you
held shares of Suburban Bancshares common stock at the close of business on
January 4, 2000, you are entitled to vote on the merger and any other matters
considered at the Suburban Bancshares meeting or any adjournment or
postponement of the meeting.
Required Vote (page 26)
Two-thirds of the outstanding shares of Columbia Bancorp common stock
entitled to be voted at the Columbia Bancorp meeting must vote in favor of the
proposal to approve the merger by approving and adopting the merger agreement
in order for the merger to be approved. Each share is entitled to one vote on
each matter to be voted on at the Columbia Bancorp meeting. All directors and
executive officers of Columbia Bancorp have executed a support agreement to
vote all of the shares of Columbia Bancorp common stock which they beneficially
own in favor of the merger. As of September 30, 1999, directors and executive
officers of Columbia Bancorp and their affiliates beneficially owned 979,698
shares of Columbia Bancorp common stock, which represented 21.7% of the
4,506,035 Columbia Bancorp common stock outstanding on that date.
4
<PAGE>
A majority of the outstanding shares of Suburban Bancshares common stock
entitled to be voted at the Suburban Bancshares meeting must vote in favor of
the proposal to approve the merger by approving and adopting the merger
agreement in order for the merger to be approved. Each share is entitled to one
vote on each matter to be voted on at the Suburban Bancshares meeting. All
directors and executive officers of Suburban Bancshares have executed a support
agreement to vote all of the shares of Suburban Bancshares common stock which
they beneficially own in favor of the merger. As of September 30, 1999,
directors and executive officers of Suburban Bancshares and their affiliates
beneficially owned 2,263,091 shares of Suburban Bancshares common stock, which
represented 20.0% of the outstanding Suburban Bancshares common stock
outstanding at that date.
Columbia Bancorp and Suburban Bancshares Boards Recommend Stockholder Approval
(page 34 and page 38)
The Columbia Bancorp board of directors is of the opinion that the merger is
advisable and in the best interests of Columbia Bancorp and the Columbia
Bancorp stockholders. The members of the Columbia Bancorp board of directors
unanimously approved the merger agreement and the merger and recommend that
Columbia Bancorp stockholders vote FOR the proposal to approve the merger
agreement and the merger.
The Suburban Bancshares board of directors has determined that the merger is
advisable and in the best interests of Suburban Bancshares and its
stockholders. The members of the Suburban Bancshares board of directors
unanimously approved the merger agreement and the merger and recommend that
Suburban Bancshares stockholders vote FOR approval of the merger agreement and
the merger.
Consideration to be Paid by Columbia Bancorp Fair to Stockholders, According to
Financial Advisors (page 35 and page 39)
In deciding to approve the merger, the Columbia Bancorp board of directors
received and considered the opinion dated September 24, 1999 of Austin
Financial Services, Inc., its financial advisor, as to the fairness to the
Columbia Bancorp stockholders of the share conversion ratio from a financial
point of view as of that date. The opinion of Austin Financial does not
constitute a recommendation as to how any Columbia Bancorp stockholder should
vote with respect to the proposal to approve the merger. You should read the
opinion in its entirety to understand the assumptions made, matters considered
and limitations of the review undertaken by Austin Financial in providing its
opinion. A copy of Austin Financial's opinion is attached to the proxy
statement/prospectus as Appendix F. Austin Financial will receive total fees of
approximately $17,500 for its services as financial advisor to Columbia Bancorp
in connection with the merger.
In deciding to approve the merger, the Suburban Bancshares board of directors
received and considered the opinion dated September 28, 1999 of Danielson
Associates, Inc., its financial advisor, as to the fairness to the Suburban
Bancshares stockholders of the share conversion ratio from a financial point of
view as of that date. The opinion of Danielson Associates does not constitute a
recommendation as to how any Suburban Bancshares stockholder should vote with
respect to the proposal to approve the merger. You should read the opinion in
its entirety to understand the assumptions made, matters considered and
limitations of the review undertaken by Danielson Associates in providing its
opinion. A copy of Danielson Associates' opinion is attached to the proxy
statement/prospectus as Appendix G. Danielson Associates will receive total
fees of approximately $169,500 for its services as financial advisor to
Suburban Bancshares in connection with the merger.
Benefits to Certain Suburban Bancshares Officers and Directors in the Merger
(page 42)
Suburban Bancshares' directors and certain officers have interests in the
merger that are different from your and their interests as stockholders.
5
<PAGE>
These interests include, among other things:
. Columbia Bancorp will enter into an employment agreement with Mr.
Horvath;
. five directors of Suburban Bancshares will be appointed to the Columbia
Bancorp board of directors;
. Columbia Bancorp will enter into a services agreement with Mr. Kelly
which is similar to his current services agreement with Suburban
Bancshares and provides for Mr. Kelly to serve as the Chairman of the
Board of the Columbia Bancorp board of directors and to receive a
payment of additional compensation of $200,000 upon the earlier of five
years from the date of his services agreement or upon a change in
control.
Conditions to the Merger (page 55)
The merger will not be completed unless we satisfy several conditions,
including:
. approval of the merger by Columbia Bancorp stockholders and Suburban
Bancshares stockholders;
. the absence of legal restraints that prevent the completion of the
merger;
. receipt of a legal opinion from Columbia Bancorp's legal counsel that
the merger will be tax-free, except for any cash received in lieu of
fractional shares or by dissenters;
. the continuing accuracy of our representations in the merger agreement;
. the continuing effectiveness of the registration statement filed with
the SEC; and
. the receipt of certain bank regulatory approvals.
In addition, the merger will not be completed unless Columbia Bancorp
receives a letter from KPMG LLP that the merger will qualify for pooling-of-
interests accounting treatment.
We may not waive any conditions that are required by law to complete the
merger, including the requirements for stockholder approval, the requirements
for regulatory approval and that the registration statement be effective on the
closing date of the merger. Unless prohibited by law, either Columbia Bancorp
or Suburban Bancshares could waive a condition that has not been satisfied and
complete the merger. Neither Columbia Bancorp nor Suburban Bancshares intends
to waive any material condition to the merger.
Termination and Amendment of the Merger Agreement (page 56 and page 57)
We can mutually agree at any time to terminate the merger agreement without
completing the merger. Either company can also terminate the merger agreement
if, among other reasons:
. any government or court issues an order or takes another action
enjoining or prohibiting the merger;
. any required approval, consent or waiver is denied;
. the other party materially breaches any of its representations,
warranties or agreements under the merger agreement or the merger, and
such breach is not cured within 60 days or cannot be cured by June 30,
2000;
. if any government's or court's approval, consent or waiver is
conditioned on a requirement that would have a material adverse effect
on Columbia Bancorp or Suburban Bancshares or would materially adversely
affect the benefits of the merger; or
. either company fails to obtain stockholder approval.
6
<PAGE>
At any time prior to the completion of the merger, we may amend the merger
agreement in any way. On November 24, 1999, we amended the merger agreement to
provide for the effects of dissenting stockholders. Once the merger agreement
is approved by stockholders of either company, any amendment must be approved
by Columbia Bancorp stockholders if this approval is required under Maryland
law and by Suburban Bancshares stockholders if this approval is required under
Delaware law.
Regulatory Approvals We Must Obtain for the Merger (see page 47)
We cannot complete the merger unless it is approved by the FDIC. We will file
applications with the FDIC seeking its approval. In addition, the merger is
subject to the approval of or notice to certain other federal and state and
other regulatory authorities. We will also make the necessary filings with
these other regulatory authorities.
Although we do not know of any reason why we cannot obtain these regulatory
approvals in a timely manner, we cannot be certain that we will obtain them, or
when we will obtain them.
Columbia Bancorp Will Be Required to Issue 497,140 Shares of Columbia Bancorp
Common Stock to Suburban Bancshares Under Certain Circumstances if the Merger
Is Not Completed (see page 59)
In connection with the merger agreement, Columbia Bancorp granted Suburban
Bancshares an option to purchase 497,140 shares of Columbia Bancorp common
stock. Under this option, Suburban Bancshares may purchase up to the equivalent
of 9.9% of the outstanding shares of Columbia Bancorp common stock, assuming
the option is exercised, at a price per share of $13.063.
Suburban Bancshares cannot exercise this option unless certain events occur
within a specified time period. These events can generally be described as
business combinations or acquisition transactions relating to Columbia Bancorp
and certain related events (other than the merger we are proposing in this
proxy statement/prospectus). We do not know of any event that has occurred as
of the date of this proxy statement/prospectus that would allow Suburban
Bancshares to exercise this option.
Columbia Bancorp agreed to grant this option to Suburban Bancshares in order
to induce Suburban Bancshares to enter into the merger agreement. This option
could have the effect of discouraging other companies from trying to acquire
Columbia Bancorp until the merger is completed.
This option agreement is attached to this proxy statement/prospectus as
Appendix D.
Suburban Bancshares Will Be Required to Issue 2,807,668 Shares of Suburban
Bancshares Common Stock to Columbia Bancorp Under Certain Circumstances if the
Merger Is Not Completed (see page 59)
In connection with the merger agreement, Suburban Bancshares granted Columbia
Bancorp an option to purchase 2,807,668 shares of Suburban Bancshares common
stock. Under this option, Columbia Bancorp may purchase up to the equivalent of
19.9% of the outstanding shares of Suburban Bancshares common stock, assuming
the option is exercised, at a price per share of $2.313.
Columbia Bancorp cannot exercise this option unless certain events occur
within a specified time period. These events can generally be described as
business combinations or acquisition transactions relating to Suburban
Bancshares and certain related events (other than the merger we are proposing
in this proxy statement/prospectus). We do not know of any event that has
occurred as of the date of this proxy statement/prospectus that would allow
Columbia Bancorp to exercise this option.
7
<PAGE>
Suburban Bancshares agreed to grant this option to Columbia Bancorp in order to
induce Columbia Bancorp to enter into the merger agreement. This option could
have the effect of discouraging other companies from trying to acquire Suburban
Bancshares.
This option agreement is attached to this proxy statement/prospectus as
Appendix E.
Columbia Bancorp to Use Pooling-of-Interests Accounting Treatment (page 45)
We expect the merger to qualify as a pooling-of-interests, which means that
both companies will be treated as if they had always been combined for
accounting and financial reporting purposes. Generally, pooling-of-interests
accounting treatment enhances future earnings by avoiding the creation of
goodwill relating to the merger. Therefore, Columbia Bancorp should be able to
avoid charges against future earnings resulting from the amortization of
goodwill which would have been created if this accounting treatment were not
used. We have conditioned the merger upon the receipt of a letter from KPMG
LLP, the independent public accountants of Columbia Bancorp, stating their
opinion that the merger will qualify for pooling-of-interests accounting
treatment. Columbia Bancorp has the right to terminate the merger agreement and
be released from all obligations if, immediately prior to the effective date,
the number of Suburban Bancshares stockholders who have demanded appraisal
rights and not withdrawn those demands jeopardizes the qualification of the
merger for pooling-of-interests accounting treatment and KPMG LLP fails or
refuses to deliver a letter to Columbia Bancorp to that effect.
Dissenters' Rights of Appraisal (page 49)
If the merger is completed, Suburban Bancshares stockholders who do not vote
for the adoption of the merger agreement and who otherwise comply with Section
262 of the Delaware General Corporation Law will be entitled to appraisal
rights under Delaware law. Columbia Bancorp has the right to terminate the
merger agreement and be released from all obligations if, immediately prior to
the effective date, the number of Suburban Bancshares stockholders who have
demanded appraisal rights and not withdrawn those demands jeopardizes the
qualification of the merger for pooling-of-interests accounting treatment and
KPMG LLP fails or refuses to deliver a letter to Columbia Bancorp to that
effect. A copy of Section 262 of the Delaware General Corporation Law is
attached as Appendix H.
Columbia Bancorp stockholders do not have appraisal rights in connection with
the merger.
Listing of Columbia Bancorp Common Shares (page 48)
Columbia Bancorp common stock is traded on The Nasdaq National Market under
the symbol "CBMD." Columbia Bancorp will list the additional shares of common
stock to be issued in the merger on The Nasdaq National Market.
No Federal Income Tax on Shares Received in the Merger (page 45)
As a condition to the merger, we will receive an opinion of Columbia
Bancorp's tax counsel concluding, among other things, that no gain or loss
generally will be recognized by a Suburban Bancshares stockholder for federal
income tax purposes on the exchange of shares of Suburban Bancshares common
stock for shares of Columbia Bancorp common stock, except in connection with
any cash received in lieu of fractional shares or by dissenting stockholders.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on your personal circumstances. We urge you to consult your own
tax advisors to understand fully the tax consequences to you.
8
<PAGE>
A Warning About Forward-Looking Statements (page 19)
We make statements in this proxy statement/prospectus and in the documents
delivered and incorporated by reference that are forward-looking. You can
identify these statements by our use of words like "may," "will," "expect,"
"anticipate," "estimate," or "continue," or similar expressions. Forward-
looking statements represent our judgment about the future and are not
guarantees of our future performance. Certain risks and uncertainties could
cause our actual operating results and financial position to differ materially
from our projections. We caution you not to place undue reliance on forward-
looking statements. Such forward-looking statements represent our estimates and
assumptions only as of the date of this proxy statement/prospectus.
Share Information and Market Prices
Columbia Bancorp common stock is traded on The Nasdaq National Market under
the symbol "CBMD." Suburban Bancshares common stock is traded on The Nasdaq
SmallCap Market under the symbol "SBNK". The following table shows, for the
periods indicated, the last sale prices per share of Columbia Bancorp and
Suburban Bancshares common stock, and the equivalent merger consideration per
share of Suburban Bancshares common stock on September 28, 1999, the last
trading day before we announced merger, and on January 4, 2000, the latest
practicable date before we mailed this proxy statement/prospectus.
<TABLE>
<CAPTION>
Value of
Merger
Consideration
Columbia Suburban Per Share of
Bancorp Bancshares Suburban Bancshares
Common Stock Common Stock Common Stock
------------ ------------ -------------------
<S> <C> <C> <C>
September 28, 1999.......... $12.81 $2.19 $3.00(1)
January 4, 2000............. $10.75 $2.25 $2.51(2)
</TABLE>
- --------
(1) If the average market value of the Columbia Bancorp common stock was
$12.81, the conversion ratio would be 0.2338.
(2) If the average market value of the Columbia Bancorp common stock was
$10.75, the conversion ratio would be 0.2338.
The market prices of both Columbia Bancorp and Suburban Bancshares common
stock will fluctuate prior to the merger. You should obtain current market
quotations for Columbia Bancorp common stock and Suburban Bancshares common
stock. Following the merger, shares of Columbia Bancorp common stock will
continue to be traded on The Nasdaq National Market.
As of January 4, 2000, there were approximately 1,900 beneficial owners of
shares of Columbia Bancorp common stock, including 306 holders of record. As of
January 4, 2000, there were approximately 2,400 beneficial owners of Suburban
Bancshares common stock, including 876 holders of record.
9
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
Columbia Bancorp
Columbia Bancorp's selected historical data is based on its Annual Report on
Form 10-K for the year ended December 31, 1998, its Quarterly Report on Form
10-Q for the quarter ended September 30, 1999 and other financial information
incorporated by reference in and delivered with this proxy
statement/prospectus. You should read this financial information in conjunction
with the information in those Columbia Bancorp reports and other information
incorporated by reference in this proxy statement/prospectus. See "Where You
Can Find More Information" on page 80.
10
<PAGE>
COLUMBIA BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
As of or for
the Nine Months
As of or for the Year Ended December 31, Ended September 30,
------------------------------------------------ --------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- --------- ---------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Income
Statement:
Interest income........ $ 17,031 $ 22,210 $ 25,822 $ 30,194 $ 32,928 $ 24,708 $ 25,195
Interest expense....... 5,705 7,892 8,769 11,473 13,018 9,706 9,492
-------- -------- -------- -------- -------- --------- ---------
Net interest income.... 11,326 14,318 17,053 18,721 19,910 15,002 15,703
Provision for credit
losses................ 242 559 621 663 659 517 290
-------- -------- -------- -------- -------- --------- ---------
Net interest income
after provision for
credit losses......... 11,084 13,759 16,432 18,058 19,251 14,485 15,413
Noninterest income..... 1,504 1,300 1,788 2,182 3,424 2,421 2,569
Noninterest expense.... 8,649 9,472 12,081 13,722 15,384 11,455 12,073
-------- -------- -------- -------- -------- --------- ---------
Income before income
taxes................. 3,939 5,587 6,139 6,518 7,291 5,451 5,909
Income taxes........... 1,523 2,158 2,387 2,350 2,545 1,910 2,042
-------- -------- -------- -------- -------- --------- ---------
Net income............. $ 2,416 $ 3,429 $ 3,752 $ 4,168 $ 4,746 $ 3,541 $ 3,867
======== ======== ======== ======== ======== ========= =========
Consolidated Balance
Sheet (at period-end):
Assets:
Cash and cash
equivalents........... $ 13,527 $ 28,092 $ 21,231 $ 15,511 $ 32,529 $ 39,068 $ 24,380
Securities, including
those available-for-
sale.................. 38,279 35,341 44,149 66,645 84,016 76,721 109,719
Loans originated for
sale.................. 460 1,045 1,551 6,557 17,387 11,732 2,994
Loans, net of unearned
income................ 162,253 190,691 237,875 265,194 274,413 268,215 305,339
Allowance for credit
losses................ (2,578) (2,929) (3,293) (3,632) (3,965) (3,907) (4,227)
Other assets........... 12,267 10,785 15,721 23,176 22,955 23,260 21,882
-------- -------- -------- -------- -------- --------- ---------
Total assets......... $224,208 $263,025 $317,234 $373,451 $427,335 $ 415,089 $ 460,087
======== ======== ======== ======== ======== ========= =========
Liabilities and Equity:
Deposits............... $189,463 $218,162 $254,640 $313,357 $339,336 $ 330,672 $ 354,024
Short-term
borrowings............ 16,896 15,299 30,127 23,725 27,012 29,088 43,660
Long-term borrowings... -- -- -- -- 20,000 15,000 20,000
Other liabilities...... 976 1,500 1,492 1,984 2,633 2,579 2,492
Stockholders' equity... 16,873 28,064 30,975 34,385 38,354 37,750 39,911
-------- -------- -------- -------- -------- --------- ---------
Total liabilities and
equity.............. $224,208 $263,025 $317,234 $373,451 $427,335 $ 415,089 $ 460,087
======== ======== ======== ======== ======== ========= =========
Per Share Data (a):
Number of shares of
common stock
outstanding (in
thousands)............ 2,080 4,292 4,296 4,400 4,562 4,572 4,506
Net income:
Basic.................. $ 0.90 $ 1.03 $ 0.87 $ 0.96 $ 1.05 $ 0.78 $ 0.86
Diluted................ 0.79 0.90 0.83 0.91 1.03 0.77 0.84
Cash dividends
declared:
Common................. 0.07 0.13 0.21 0.25 0.29 0.21 0.24
Preferred.............. 1.20 1.30 -- -- -- -- --
Tangible book value.... 5.81 6.46 7.15 7.77 8.39 8.23 8.85
Performance and Capital
Ratios:
Return on average
assets................ 1.13% 1.42% 1.34% 1.21% 1.18% 1.20% 1.17%
Return on average
stockholders' equity.. 15.01 15.60 12.71 12.78 12.94 13.09 13.24
Net interest margin
(b)................... 5.90 6.46 6.60 5.99 5.40 5.55 5.15
Average stockholders'
equity to average
total assets.......... 7.53 9.07 10.53 9.44 9.09 9.14 8.82
Period-end capital to
period-end risk-
weighted assets:
Tier 1................. 9.28 12.97 11.91 11.31 11.49 11.82 11.29
Total.................. 10.56 14.12 13.16 12.51 12.68 13.05 12.49
Period-end tier 1
leverage ratio........ 7.39 10.67 10.11 9.25 9.00 9.54 8.77
Cash dividends declared
to net income......... 28.38 25.66 24.05 26.05 27.88 27.03 28.01
Asset Quality Ratios:
Allowance for credit
losses, at period-end,
to:
Total loans, net of
unearned income....... 1.59% 1.54% 1.38% 1.37% 1.45% 1.46% 1.38%
Nonperforming and
past-due loans........ 222.62 245.72 84.23 548.35 129.66 461.82 1,304.63
Annualized net charge-
offs to average total
loans, net of unearned
income................ 0.02 0.12 0.12 0.13 0.12 0.12 0.01
Nonperforming and past-
due loans to total
loans, net of unearned
income................ 0.71 0.63 1.64 0.25 1.11 0.32 0.11
Nonperforming assets
and past-due loans to
total assets, at
period-end............ 1.29 0.49 1.37 1.41 1.66 1.20 0.74
</TABLE>
- -------
(a) Per common share data for 1997, 1996, 1995 and 1994 have been adjusted to
reflect the two-for-one stock split-up in the form of a 100% stock dividend
paid in June 1998.
(b) Net interest margin is the ratio of net interest income, determined on a
taxable equivalent basis for items exempt from federal tax, to average
earning assets.
11
<PAGE>
Suburban Bancshares
Suburban Bancshares' selected historical data is based on its Annual Report
on Form 10-K for the year ended December 31, 1998, its Quarterly Report on Form
10-Q for the quarter ended September 30, 1999 and other financial information
incorporated by reference in and delivered with this proxy
statement/prospectus. You should read this financial information in conjunction
with the information in those Suburban Bancshares reports and other information
incorporated by reference in this proxy statement/prospectus. See "Where You
Can Find More Information" on page 80.
12
<PAGE>
SUBURBAN BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
As of or for
the Nine Months
As of or for the Year Ended December 31, Ended September 30,
------------------------------------------------ -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- --------- ---------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Income
Statement:
Interest income........ $ 7,156 $ 8,358 $ 9,176 $ 11,363 $ 14,246 $ 10,391 $ 10,810
Interest expense....... 2,377 3,119 3,362 4,570 6,337 4,599 4,839
-------- -------- -------- -------- -------- --------- ---------
Net interest income.... 4,779 5,239 5,814 6,793 7,909 5,792 5,971
Provision (recovery)
for credit losses..... 39 (260) (227) 254 415 315 369
-------- -------- -------- -------- -------- --------- ---------
Net interest income
after provision for
credit losses......... 4,740 5,499 6,041 6,539 7,494 5,477 5,602
Noninterest income..... 787 1,599 517 774 1,088 722 795
Noninterest expense.... 5,308 5,551 5,614 5,511 6,359 4,652 5,330
-------- -------- -------- -------- -------- --------- ---------
Income before income
taxes................. 219 1,547 944 1,802 2,223 1,547 1,067
Income tax expense
(benefit)............. -- 6 (4,058) 671 797 554 357
-------- -------- -------- -------- -------- --------- ---------
Net income............. $ 219 $ 1,541 $ 5,002 $ 1,131 $ 1,426 $ 993 $ 710
======== ======== ======== ======== ======== ========= =========
Consolidated Balance
Sheet (at period-end):
Assets:
Cash and cash
equivalents........... $ 20,810 $ 28,641 $ 20,063 $ 26,328 $ 55,373 $ 66,054 $ 33,033
Securities, including
those available-for-
sale.................. 24,073 18,067 21,290 30,360 45,843 34,699 46,444
Loans originated for
sale.................. 2,044 3,292 5,933 -- 1,814 774 259
Loans, net of unearned
income................ 64,525 63,022 73,448 113,543 129,885 122,778 136,776
Allowance for credit
losses................ (2,750) (1,467) (1,508) (1,473) (1,524) (1,452) (1,646)
Other assets........... 5,527 3,876 6,859 6,908 7,175 6,957 7,936
-------- -------- -------- -------- -------- --------- ---------
Total assets......... $114,229 $115,431 $126,085 $175,666 $238,566 $ 229,810 $ 222,802
======== ======== ======== ======== ======== ========= =========
Liabilities and Equity:
Deposits............... $104,402 $101,889 $107,573 $152,802 $207,380 $ 196,132 $ 187,692
Short-term
borrowings............ 691 -- -- 3,049 9,523 11,627 12,952
Long-term borrowings... -- -- -- -- -- -- --
Other liabilities...... 549 446 681 633 951 1,637 1,729
Stockholders' equity... 8,587 13,096 17,831 19,182 20,712 20,414 20,429
-------- -------- -------- -------- -------- --------- ---------
Total liabilities and
equity.............. $114,229 $115,431 $126,085 $175,666 $238,566 $ 229,810 $ 222,802
======== ======== ======== ======== ======== ========= =========
Per Share Data:
Number of shares of
common stock
outstanding
(in thousands)........ 9,054 10,951 10,951 10,951 10,951 10,951 11,301
Net income:
Basic.................. $ 0.02 $ 0.17 $ 0.46 $ 0.10 $ 0.13 $ 0.09 $ 0.06
Diluted................ 0.02 0.15 0.44 0.10 0.13 0.09 0.06
Cash dividends
declared:
Common................. -- -- -- -- -- -- --
Preferred.............. -- -- -- -- -- -- --
Tangible book value.... 0.95 1.20 1.63 1.75 1.89 1.86 1.81
Performance and Capital
Ratios:
Return on average
assets................ 0.21% 1.49% 4.42% 0.76% 0.72% 0.70% 0.44%
Return on average
stockholders' equity.. 2.51 15.29 36.35 6.14 7.14 6.73 4.60
Net interest margin
(a)................... 5.05 5.50 5.57 5.02 4.33 4.42 4.02
Average stockholders'
equity to average
total assets.......... 8.31 9.75 12.15 12.42 10.06 10.35 9.63
Period-end capital to
period-end risk-
weighted assets:
Tier 1................. 12.56 16.17 19.19 17.49 15.47 16.06 15.78
Total.................. 13.85 17.43 20.45 18.74 16.65 17.27 17.01
Period-end tier 1
leverage ratio........ 8.29 12.21 12.75 10.82 9.13 9.52 9.73
Cash dividends declared
to net income......... -- -- -- -- -- -- --
Asset Quality Ratios:
Allowance for credit
losses, at period-end,
to:
Total loans, net of
unearned income....... 4.26% 2.33% 2.05% 1.30% 1.17% 1.18% 1.20%
Nonperforming and
past-due loans........ 73.92 92.15 187.10 76.60 113.82 101.61 105.51
Annualized net charge-
offs to average total
loans, net of unearned
income................ (0.37) 1.58 (0.36) 0.31 0.30 0.38 0.25
Nonperforming and past-
due loans to total
loans, net of unearned
income................ 5.77 2.53 1.10 1.69 1.03 1.16 1.14
Nonperforming assets
and past-due loans to
total assets, at
period-end............ 5.90 2.38 0.81 1.29 0.79 0.80 0.91
</TABLE>
- -------
(a) Net interest margin is the ratio of net interest income, determined on a
taxable equivalent basis for items exempt from federal tax, to average
earning assets.
13
<PAGE>
Unaudited Pro Forma Condensed Combined Selected Financial Data
We have included this unaudited pro forma condensed combined summary
information only for the purposes of illustration. It does not necessarily
indicate what the operating results or financial position of the combined
company would have been if the merger had been completed at the dates
indicated. Moreover, this information does not necessarily indicate what the
future operating results or financial position of the combined company will be.
This unaudited pro forma condensed combined summary financial information
reflects treatment of the merger as a pooling of interests and does not reflect
any adjustments to conform accounting practices or any cost savings or other
synergies which may result from the merger or any future merger-related
expenses. The unaudited pro forma balance sheet data gives effect to the merger
as if it had occurred on the date of each balance sheet presented. The
unaudited pro forma results of operations data gives the effect to the merger
as if it occurred at the beginning of each period presented.
14
<PAGE>
PRO-FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
As of or for
the Nine Months
As of or for the Year Ended December 31, Ended September 30,
------------------------------------------------ --------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- --------- ---------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Income
Statement (a):
Interest income........ $ 24,187 $ 30,568 $ 34,998 $ 41,557 $ 47,174 $ 35,099 $ 36,005
Interest expense....... 8,082 11,011 12,131 16,043 19,355 14,305 14,331
-------- -------- -------- -------- -------- --------- ---------
Net interest income.... 16,105 19,557 22,867 25,514 27,819 20,794 21,674
Provision for credit
losses................ 281 299 394 917 1,074 832 659
-------- -------- -------- -------- -------- --------- ---------
Net interest income
after provision for
credit losses......... 15,824 19,258 22,473 24,597 26,745 19,962 21,015
Noninterest income..... 2,291 2,899 2,305 2,956 4,512 3,143 3,364
Noninterest expense.... 13,957 15,023 17,695 19,233 21,743 16,107 17,403
-------- -------- -------- -------- -------- --------- ---------
Income before income
taxes................. 4,158 7,134 7,083 8,320 9,514 6,998 6,976
Income tax expense
(benefit)............. 1,523 2,164 (1,671) 3,021 3,342 2,464 2,399
-------- -------- -------- -------- -------- --------- ---------
Net income............. $ 2,635 $ 4,970 $ 8,754 $ 5,299 $ 6,172 $ 4,534 $ 4,577
======== ======== ======== ======== ======== ========= =========
Consolidated Balance
Sheet (at period-end):
Assets:
Cash and cash
equivalents........... $ 34,337 $ 56,733 $ 41,294 $ 41,839 $ 87,902 $ 105,122 $ 57,413
Securities, including
those available-for-
sale.................. 62,352 53,408 65,439 97,005 129,859 111,420 156,163
Loans originated for
sale.................. 2,504 4,337 7,484 6,557 19,201 12,506 3,253
Loans, net of unearned
income................ 226,778 253,713 311,323 378,737 404,298 390,993 442,115
Allowance for credit
losses................ (5,328) (4,396) (4,801) (5,105) (5,489) (5,359) (5,873)
Other assets........... 17,794 14,661 22,580 30,084 30,130 30,217 29,818
-------- -------- -------- -------- -------- --------- ---------
Total assets......... $338,437 $378,456 $443,319 $549,117 $665,901 $ 644,899 $ 682,889
======== ======== ======== ======== ======== ========= =========
Liabilities and Equity:
Deposits............... $293,865 $320,051 $362,213 $466,159 $546,716 $ 526,804 $ 541,716
Short-term
borrowings............ 17,587 15,299 30,127 26,774 36,535 40,715 56,612
Long-term borrowings... -- -- -- -- 20,000 15,000 20,000
Other liabilities...... 1,525 1,946 2,173 2,617 3,584 4,216 4,221
Stockholders' equity... 25,460 41,160 48,806 53,567 59,066 58,164 60,340
-------- -------- -------- -------- -------- --------- ---------
Total liabilities and
equity.............. $338,437 $378,456 $443,319 $549,117 $665,901 $ 644,899 $ 682,889
======== ======== ======== ======== ======== ========= =========
Per Share Data (b):
Number of shares of
common stock
outstanding (in
thousands) Conversion
factor--.2338......... 4,197 6,852 6,856 6,961 7,122 7,133 7,148
Conversion factor--
.2196................. 4,069 6,696 6,701 6,805 6,967 6,977 6,988
Net income (c):
Basic
Conversion factor--
.2338................ $ 0.57 $ 0.94 $ 1.28 $ 0.77 $ 0.87 $ 0.64 $ 0.64
Conversion factor--
.2196................ 0.59 0.96 1.31 0.79 0.89 0.66 0.65
Diluted
Conversion factor--
.2338................ 0.47 0.80 1.22 0.73 0.85 0.62 0.63
Conversion factor--
.2196................ 0.48 0.82 1.25 0.75 0.87 0.64 0.65
Cash dividends declared
(d):
Common
Conversion factor--
.2338................ 0.04 0.06 0.13 0.16 0.19 0.13 0.15
Conversion factor--
.2196................ 0.04 0.06 0.13 0.16 0.19 0.14 0.15
Preferred.............. 1.20 1.30 -- -- -- -- --
Tangible book value
(e):
Conversion factor--
.2338................ 6.07 6.01 7.12 7.70 8.29 8.15 8.44
Conversion factor--
.2196................ 6.26 6.15 7.28 7.87 8.48 8.34 8.64
Performance and Capital
Ratios:
Return on average
assets................ 0.83% 1.44% 2.22% 1.07% 1.03% 1.03% 0.93%
Return on average
stockholders' equity.. 10.61 15.51 20.23 10.38 10.90 10.84 10.25
Net interest margin
(f)................... 5.62 6.17 6.31 5.65 5.04 5.18 4.78
Average stockholders'
equity to average
total assets.......... 7.79 9.28 10.99 10.33 9.41 9.54 9.08
Period-end capital to
period-end risk-
weighted assets:
Tier 1................. 10.22% 13.85% 13.66% 12.86% 12.61% 12.98% 12.53%
Total.................. 11.51 15.02 14.91 14.07 13.79 14.21 13.73
Period-end tier 1
leverage ratio........ 7.69 11.11 10.87 9.73 9.04 9.53 9.08
Cash dividends declared
to net income......... 5.58 8.57 10.32 20.49 21.44 21.11 23.66
</TABLE>
15
<PAGE>
- --------
(a) This unaudited pro-forma condensed consolidated income statement data does
not consider charges or credits which will result directly from the
transaction and which will be included in the income of the combined entity
within the 12 months succeeding the transaction. It is anticipated that, as
a result of the merger, the combined entity will incur approximately $2.5
million in merger related expenses for items such as legal, investment
advisory, accounting, penalties associated with contract terminations and
severance pay. These charges will be offset by approximately $850,000 for
the related tax effect at Columbia Bancorp's effective tax rate of 34%.
(b) Per common share data for 1997, 1996, 1995 and 1994 have been adjusted to
reflect the two-for-one stock split-up in the form of a 100% stock dividend
paid by Columbia Bancorp in June 1998.
(c) Pro-forma earnings per common share, basic and diluted, represents
historical net income divided by the number of shares of Columbia Bancorp
common stock which will be issued and outstanding following completion of
the Merger based on the appropriate conversion factor and including the
effects of dilutive securities in the case of diluted pro-forma income per
common share.
(d) Pro-forma cash dividends per share is calculated by dividing the historical
amount of dividends declared by Columbia Bancorp (no dividends were
declared by Suburban Bancshares during the periods presented) by the sum of
(1) the total number of shares of Columbia Bancorp common stock outstanding
at such date and (2) the total number of shares of Suburban Bancshares
common stock outstanding at such date multiplied by the appropriate
conversion factor.
(e) Pro-forma tangible book value per share is calculated by dividing total
pro-forma combined stockholders' equity as of the applicable date by the
sum of (1) the total number of shares of Columbia Bancorp common stock
outstanding at such date and (2) the total number of shares of Suburban
Bancshares common stock outstanding at such date multiplied by the
appropriate conversion factor.
(f) Net interest margin is the ratio of net interest income, determined on a
taxable equivalent basis for items exempt from federal tax, to average
earning assets.
16
<PAGE>
Comparative Per Share Data
The following table sets forth certain historical and unaudited pro forma per
share data of Columbia Bancorp and Suburban Bancshares as well as equivalent
per share data with respect to one share of Suburban Bancshares common stock on
a pro forma basis for the merger. You should read the data presented below in
conjunction with the unaudited pro forma combined condensed financial data, and
related notes, and historical financial statements, and related notes, of
Columbia Bancorp and Suburban Bancshares which are incorporated by reference in
this document or included elsewhere in this document. See "Where You Can Find
More Information."
<TABLE>
<CAPTION>
As of or for As of or for
the Year the Nine
Ended Months Ended
December 31, September 30,
----------------- -------------
1996 1997 1998 1998 1999
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Columbia Bancorp
Basic earnings per share:
Historical............................. $0.87 $0.96 $1.05 $ 0.78 $ 0.86
Pro-forma combined (a)
Conversion factor..................... 0.2338 1.28 0.77 0.87 0.64 0.64
Conversion factor..................... 0.2196 1.31 0.79 0.89 0.66 0.65
Diluted earnings per share:
Historical............................. 0.83 0.91 1.03 0.77 0.84
Pro-forma combined (a)
Conversion factor..................... 0.2338 1.22 0.73 0.85 0.62 0.63
Conversion factor..................... 0.2196 1.25 0.75 0.87 0.64 0.65
Cash dividends declared per share:
Historical............................. 0.21 0.25 0.29 0.21 0.24
Pro-forma combined (b)
Conversion factor..................... 0.2338 0.13 0.16 0.19 0.13 0.15
Conversion factor..................... 0.2196 0.13 0.16 0.19 0.14 0.15
Tangible book value per share:
Historical............................. 7.15 7.77 8.39 8.23 8.85
Pro-forma combined (c)
Conversion factor..................... 0.2338 7.12 7.70 8.29 8.15 8.44
Conversion factor..................... 0.2196 7.28 7.87 8.48 8.34 8.64
Suburban Bancshares
Basic earnings per share:
Historical............................. $0.46 $0.10 $0.13 $ 0.09 $ 0.06
Pro-forma equivalent (a)
Conversion factor..................... 0.2338 0.30 0.18 0.20 0.15 0.15
Conversion factor..................... 0.2196 0.29 0.17 0.20 0.14 0.14
Diluted earnings per share:
Historical............................. 0.44 0.10 0.13 0.09 0.06
Pro-forma equivalent (a)
Conversion factor..................... 0.2338 0.29 0.17 0.20 0.15 0.15
Conversion factor..................... 0.2196 0.27 0.16 0.19 0.14 0.14
Cash dividends declared per share:
Historical............................. -- -- -- -- --
Pro-forma equivalent (b)
Conversion factor..................... 0.2338 0.03 0.04 0.04 0.03 0.04
Conversion factor..................... 0.2196 0.03 0.04 0.04 0.03 0.03
Tangible book value per share:
Historical............................. 1.63 1.75 1.89 1.86 1.81
Pro-forma equivalent (c)
Conversion factor..................... 0.2338 1.66 1.80 1.94 1.91 1.97
Conversion factor..................... 0.2196 1.60 1.73 1.86 1.83 1.90
</TABLE>
17
<PAGE>
- --------
(a) Columbia Bancorp pro-forma earnings per common share, basic and diluted,
represents historical net income for Columbia Bancorp and Suburban combined
on the assumption that Columbia Bancorp and Suburban had been combined for
the periods presented on a pooling of interests basis, divided by the
number of shares of Columbia Bancorp common stock which will be issued and
outstanding following completion of the Merger based on the appropriate
conversion factor and including the effects of dilutive securities in the
case of diluted pro-forma income per common share. Suburban equivalent pro-
forma earnings per common share, basic and diluted, represents Columbia
Bancorp pro-forma earnings per common share multiplied by the appropriate
conversion factor.
(b) Pro-forma cash dividends per share of Columbia Bancorp common stock is
calculated by dividing the historical amount of dividends declared by
Columbia Bancorp (no dividends were declared by Suburban during the periods
presented) by the sum of (1) the total number of shares of Columbia Bancorp
common stock outstanding at such date and (2) the total number of shares of
Suburban common stock outstanding at such date multiplied by the
appropriate conversion factor. Pro-forma equivalent dividends per share of
Suburban common stock represents the pro-forma dividend declared per share
of Columbia Bancorp common stock multiplied by the appropriate conversion
factor.
(c) Pro-forma tangible book value per share of Columbia Bancorp common stock is
calculated by dividing total pro forma combined stockholders' equity as of
the applicable date by the sum of (1) the total number of shares of
Columbia Bancorp common stock outstanding at such date and (2) the total
number of shares of Suburban common stock outstanding at such date
multiplied by the appropriate conversion factor. Equivalent pro-forma book
value per share of Suburban common stock represents the pro-forma book
value per share of Columbia Bancorp common stock multiplied by the
appropriate conversion factor.
18
<PAGE>
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains and incorporates by reference
statements that constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements relate,
among other things, to information or assumptions about earnings per share,
capital and other expenditures, dividends, financing plans, capital structure,
cash flows, future economic performance, operating income improvements, cost
savings and management's plans, goals and objectives for future operations.
These forward-looking statements generally may be identified by their reference
to a future period or periods or by the use of forward-looking terminology such
as "may," "will," "intend," "should," "expect," "anticipate," "believe,"
"estimate," "continue," the negatives of those terms or similar expressions.
You should understand that forward-looking statements are estimates reflecting
the judgment of management of Columbia Bancorp and Suburban Bancshares, not
guarantees of future performance. Such statements are subject to risks,
uncertainties and assumptions, including, but not limited to:
. combining the businesses of Columbia Bancorp and Suburban Bancshares may
cost more than we expect;
. integrating the businesses of Columbia Bancorp and Suburban Bancshares
and retaining key personnel may be more difficult than we expect;
. our revenues after the merger may be lower than we expect, or our
operating costs may be higher than we expect;
. expected cost savings from the merger may not be fully realized or may
not be realized within the expected time frame;
. growth in business and/or customers after the merger may be different
than we expect;
. there may be increases in competitive pressure among financial
institutions;
. changes in the interest rate environment may reduce interest margins;
. general economic conditions, either nationally or in the region in which
the combined company will be doing business, or conditions in securities
markets, may be less favorable than we currently anticipate;
. legislation or regulatory changes may adversely affect our business;
. technological changes, including "Year 2000" data system compliance
issues, may be more difficult or expensive than anticipated; or
. other risks and uncertainties described in "Risk Factors" or in the
other SEC filings of Columbia Bancorp and Suburban Bancshares.
Should one or more of these risks or uncertainties affect the business of
Columbia Bancorp and Suburban Bancshares or should underlying assumptions prove
incorrect, actual results, performance or achievements in 2000 and beyond could
differ materially from those expressed in, or implied by, such forward-looking
statements.
19
<PAGE>
RISK FACTORS
In addition to the other information provided or incorporated by reference in
this proxy statement/prospectus, you should consider the following factors
carefully in evaluating whether to vote in favor of the merger. You should also
refer to "Forward-Looking Statements" on page 19.
Risks Related to the Merger
Columbia Bancorp may not successfully integrate and manage the operations of
Suburban Bancshares which could adversely effect future earnings. Columbia
Bancorp has agreed to acquire Suburban Bancshares and its wholly-owned
subsidiary Suburban Bank. Suburban Bancshares has an operating history, but not
under Columbia Bancorp's management. Columbia Bank, the surviving banking
entity, will hold substantially all of the assets and conduct substantially all
of the business of Columbia Bancorp. If Columbia Bancorp cannot manage the
combined bank successfully, it will reduce the operating results of Columbia
Bancorp. The risks of this acquisition include the following:
. management will have to divert time to integrate the businesses;
. Suburban Bancshares may have unexpected problems or risks in operations,
personnel, technology or credit;
. Columbia Bancorp may lose the customers and employees of Suburban
Bancshares;
. new management may not work smoothly with employees and customers;
. the assimilation of new operations, sites and personnel could divert
resources from regular banking operations; and
. Columbia Bancorp may have trouble instituting and maintaining uniform
standards, controls, procedures and policies.
Columbia Bancorp may not realize anticipated operating efficiencies, which
could hurt Columbia Bancorp's profitability. Columbia Bancorp's business plan
calls for Columbia Bancorp to increase profits by reducing costs, expanding
services and integrating administrative functions. Columbia Bancorp may not
realize these operating efficiencies, or may not realize them as soon as
anticipated. If Columbia Bancorp does not realize operating efficiencies as
anticipated, it could hurt profitability.
Unanticipated costs relating to the merger could reduce Columbia Bancorp's
future earnings per share. We believe that we have reasonably estimated the
likely costs of integrating the operations of Columbia Bancorp and Suburban
Bancshares, and the incremental costs of operating as a combined company.
However, it is possible that unexpected transaction costs such as taxes, fees
or professional expenses or unexpected future operating expenses such as
increased personnel costs or increased taxes, as well as other types of
unanticipated adverse developments, could have a material adverse effect on our
results of operations and financial condition. If unexpected costs are
incurred, the merger could adversely affect Columbia Bancorp's earnings per
share. In other words, if the merger is completed, it is possible that the
earnings per share of Columbia Bancorp common stock could be less than they
would have been if the merger had not been completed.
You may incur federal income tax on shares received in the merger if the
merger does not qualify as a tax-free reorganization. We have structured the
merger to qualify as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986. Although the Internal Revenue Service has not
provided a ruling on the matter, we will obtain a legal opinion that the merger
qualifies as tax-free. This opinion neither binds the IRS nor prevents the IRS
from adopting a contrary position. If the merger fails to qualify as a tax-free
reorganization, as a Suburban Bancshares stockholder, you would recognize gain
or loss on each share of Suburban Bancshares common stock surrendered in the
amount of the difference between your basis in such share and the fair market
value of the shares of Columbia Bancorp and cash for any fractional shares you
receive in exchange for it at the time of the merger.
20
<PAGE>
Risks Related to the Combined Companies
Failure to address year 2000 problems could impair operations and following
the merger could subject Columbia Bancorp to liability from its customers and
others. Columbia Bancorp and Suburban Bancshares, like all financial
institutions, face challenges posed by the century date change. Each
institution has taken the steps to make its own information and environmental
systems Year 2000 compliant, in accordance with regulatory requirements.
Preparations have included development of contingency plans to reduce the
impact of any failures which may occur. For more information on the specific
steps that we are taking, please refer to "Management's Discussion and Analysis
of Financial Condition and Results of Operations of Suburban Bancshares--Year
2000 Compliance" which is incorporated herein by reference to Suburban
Bancshares' Quarterly Report on Form 10-Q for the quarter ended September 30,
1999 which is delivered with this proxy statement/prospectus, "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Columbia Bancorp--Year 2000 Readiness Disclosure" which is incorporated herein
by reference to Columbia Bancorp's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 which is delivered with this proxy
statement/prospectus and "Management's' Discussion and Analysis of Financial
Condition and Results of Operations of Columbia Bancorp--Year 2000 Readiness
Disclosure" which is incorporated herein by reference to Columbia Bancorp's
quarterly report on Form 10-Q for the quarter ended September 30, 1999 and
delivered with this proxy statement/prospectus.
If Columbia Bancorp loses key employees subsequent to the merger Columbia
Bancorp's business may suffer. Following the merger, if Columbia Bancorp lost
key employees temporarily or permanently, it could hurt Columbia Bancorp's
business. Columbia Bancorp could be particularly hurt if Columbia Bancorp's key
employees went to work for competitors. Columbia Bancorp's future success
depends on the continued contributions of its existing senior management
personnel, some of whom have agreements with Columbia Bancorp which include
provisions that limit their ability to compete against Columbia Bancorp at
another company. Columbia Bancorp does not maintain key-person life insurance
on any of its personnel. However, in order to partially offset the costs
associated with its deferred compensation plan, Columbia Bank has purchased
life insurance contracts on the lives of the senior executive officers who
participate in the plan, with Columbia Bank as the beneficiary.
Following the merger, deterioration of economic conditions in the
Baltimore/Washington metropolitan area could adversely affect Columbia
Bancorp's loan portfolio and reduce the demand for our services. Both Columbia
Bancorp and Suburban Bancshares focus their business in the
Baltimore/Washington metropolitan area. An economic slow-down in the
Baltimore/Washington metropolitan area could have the following consequences,
any of which could reduce Columbia Bancorp's net income subsequent to the
merger:
. loan delinquencies may increase;
. problem assets and foreclosures may increase;
. claims and lawsuits may increase;
. demand for the banks' products and services may decline; and
. collateral for loans made by the banks, especially real estate, may
decline in value, in turn reducing customers' borrowing power, reducing
the value of assets associated with problem loans and reducing
collateral coverage of the banks' existing loans.
Changes in interest rates could reduce Columbia Bancorp's income and cash
flows subsequent to the merger. Columbia Bancorp's and Suburban Bancshares'
income and cash flows depend to a great extent on "interest rate differentials"
and the resulting net interest margins, i.e., the difference between the
interest rates earned on interest-earning assets such as loans and investment
securities, and the interest rates paid on interest-bearing liabilities such as
deposits and borrowings. These rates are highly sensitive to many factors which
are beyond our control, including general economic conditions and the policies
of various governmental and regulatory agencies, in particular, the Federal
Reserve Board. Changes in monetary policy, including changes in interest rates,
will influence the origination of loans, the purchase of investments, the
generation of deposits,
21
<PAGE>
and the rates received on loans and investment securities and paid on deposits.
Fluctuations in these areas may adversely affect Columbia Bancorp subsequent to
the merger.
A downturn in the real estate market could seriously impair Columbia
Bancorp's loan portfolio subsequent to the merger. As of September 30, 1999,
approximately 81% of Columbia Bank's loan portfolio and 51% of Suburban Bank's
loan portfolio (approximately 72% on a pro forma basis) consisted of loans
secured by various types of real estate primarily located in the
Baltimore/Washington metropolitan area. A more specific breakdown as of
September 30, 1999 is as follows:
<TABLE>
<CAPTION>
Columbia Suburban Pro
Bank Bank Forma
-------- -------- -----
<S> <C> <C> <C>
Construction and development:
Residential...................................... 28.2% 2.4% 20.2%
Commercial....................................... 2.7 2.2 2.6
Consumer loans secured by residential real estate.. 37.9 8.2 28.7
Commercial properties.............................. 12.9 37.9 20.7
Other.............................................. 0.1 -- --
---- ---- ----
Total real estate secured loans to total loans... 81.1% 50.7% 72.2%
==== ==== ====
</TABLE>
If real estate values decline significantly, especially in the
Baltimore/Washington metropolitan area, the collateral for these loans will
provide less security and Columbia Bancorp may suffer losses on defaulted
loans.
Environmental laws could force Columbia Bancorp to pay for environmental
problems subsequent to the merger. The cost of cleaning up or paying damages
and penalties associated with environmental problems could increase Columbia
Bancorp's operating expenses subsequent to the merger. If a borrower defaults
on a loan secured by real property, a bank may purchase the property in
foreclosure or accept a deed to the property surrendered by the borrower. We
may also take over the management of commercial properties whose owners have
defaulted on loans. We also own and lease premises where our branches and other
facilities are located. While Columbia Bancorp and Suburban Bancshares each
have lending, foreclosure and facilities guidelines intended to exclude
properties with an unreasonable risk of contamination, hazardous substances may
exist on some of the properties that we own, manage or occupy. We face the risk
that environmental laws could force us to clean the properties at our expense.
Columbia Bancorp's credit loss reserves may not cover actual loan losses
subsequent to the merger. If the actual credit losses exceed the amount
reserved, it will hurt Columbia Bancorp's business subsequent to the merger.
Columbia Bancorp and Suburban Bancshares attempt to limit the risk that
borrowers will fail to repay loans by carefully underwriting the loans. Losses
nevertheless occur. Columbia Bancorp and Suburban Bancshares creates reserves
for estimated credit losses in their accounting records. We base these
allowances on estimates of the following:
. industry standards;
. historical experience with our loans;
. evaluation of current economic conditions;
. regular reviews of the quality mix and size of the overall loan
portfolio;
. regular reviews of delinquencies; and
. the quality of the collateral underlying the loans.
An increase in non-performing assets would reduce Columbia Bancorp's income
and increase expenses subsequent to the merger. If the level of non-performing
assets rises in the future, it could adversely affect Columbia Bancorp's
operating results subsequent to the merger. Non-performing assets include real
estate that
22
<PAGE>
has been acquired through foreclosure of unpaid loans, loans on which the
borrowers are not making their required payments and loans that have been
restructured to permit the borrower to have smaller payments. To the extent
that assets are non-performing, the bank will have less cash available for
lending and other activities.
Governmental regulation may impair our operations or restrict our growth. If
Columbia Bancorp or Suburban Bancshares fails to comply with the federal and
state bank regulations, subsequent to the merger the regulators may limit the
activities or growth, fine Columbia Bancorp or ultimately put Columbia Bancorp
out of business. Banking laws and regulations change from time to time. Bank
regulation can hinder Columbia Bancorp's ability to compete with financial
services companies that are not regulated or are less regulated. In addition,
bank regulators impose material compliance costs on us.
Federal and state bank regulatory agencies regulate many aspects of Columbia
Bancorp's and Suburban Bancshares' operations. These areas include:
. the capital we must maintain;
. the kinds of activities we can do;
. the kinds and amounts of investments we can make;
. the locations of our offices;
. insurance of our deposits and the premiums we must pay for this
insurance; and
. how much cash we must set aside as reserves for deposits.
Provisions in Columbia Bancorp's charter documents and agreements will delay
or prevent changes in control of our corporation or our management. These
provisions make it more difficult for another company to acquire Columbia
Bancorp, which could reduce the market price of Columbia Bancorp's common stock
and the price that you will receive if you sell your shares of Columbia Bancorp
common stock in the future. These provisions include the following:
. a provision requiring that 80% of the stockholders approve a vote when
stockholders approve certain amendments to the charter and bylaws;
. a requirement that stockholders give advance notice of matters to be
raised at a meeting of stockholders; and
. staggered terms of office for members of the board of directors.
Columbia Bancorp also has contractual arrangements that impede changes in
control, including severance agreements for our senior officers and commitments
to issue options.
Columbia Bancorp's acquisition strategy could be dilutive to its stockholders
or adversely affect its profitability. Columbia Bancorp has grown through
acquisitions in past years and anticipates that it will make additional
acquisitions in the future. Columbia Bancorp evaluates strategic opportunities
not only in the banking industry but also in related financial service
industries. One or more future acquisitions could be material to Columbia
Bancorp. Columbia Bancorp may need to issue more common stock to pay for those
acquisitions, which would further dilute the percentage ownership interest of
all its stockholders at the time of the acquisition and could dilute earnings
or book value per share. Acquisitions also could require Columbia Bancorp to
use substantial cash or other liquid assets or to incur debt. In those events,
Columbia Bancorp could become more susceptible to economic downturns and
competitive pressures.
The banking industry is highly competitive and Columbia Bancorp cannot assure
you that it will be able to compete effectively subsequent to the
merger. Columbia Bancorp and Suburban Bancshares operate in a competitive
environment and compete for deposits and loans with commercial banks, thrift
institutions and other financial institutions that may have greater financial
resources than those available to Columbia Bancorp
23
<PAGE>
subsequent to the merger. These institutions may have substantially higher
lending limits than Columbia Bancorp and Suburban Bancshares and may provide
certain additional services for their customers, such as trust and investment
services, which Columbia Bancorp and Suburban Bancshares do not currently offer
directly to their customers. Columbia Bancorp and Suburban Bancshares also
compete for deposits with money market mutual funds.
24
<PAGE>
GENERAL INFORMATION ABOUT THE MEETINGS
Date, Time and Place of the Meetings
The meeting of the Columbia Bancorp stockholders will be held at 10:00 a.m.,
local time, on February 23, 2000, at the Turf Valley Resort & Conference
Center, 2700 Turf Valley Road, Ellicott City, Maryland.
The meeting of the Suburban Bancshares stockholders will be held on February
23, 2000 at 10:00 a.m., local time, at the Marriott Hotel, 6400 Ivy Lane,
Greenbelt, Maryland.
Record Date and Outstanding Shares
The Columbia Bancorp board of directors has fixed the close of business on
January 4, 2000 as the record date for the determination of the holders of
Columbia Bancorp common stock entitled to receive notice of and to vote at the
Columbia Bancorp meeting. Only stockholders of record on the record date are
entitled to receive notice of and to vote at the Columbia Bancorp meeting or
any adjournments or postponement of the meetings. As of the Columbia Bancorp
record date, there were 4,508,669 shares of Columbia Bancorp common stock
issued and outstanding and held by approximately 1,900 holders of record. Each
holder of shares of Columbia Bancorp common stock is entitled to one vote per
share held of record on the record date.
The Suburban Bancshares board of directors has fixed the close of business on
January 4, 2000, as the record date for the determination of the holders of
Suburban Bancshares common stock entitled to receive notice of and to vote at
the Suburban Bancshares meeting or any adjournments or postponement of the
meeting. Only stockholders of record on the record date will be entitled to
receive notice of and to vote at the Suburban Bancshares meeting. As of the
Suburban Bancshares record date, there were 11,301,218 shares of Suburban
Bancshares common stock issued and outstanding and held by approximately 2,400
holders of record. Each holder of shares of Suburban Bancshares common stock is
entitled to one vote per share held of record on the record date.
Purpose of the Meetings
Columbia Bancorp. Columbia Bancorp is furnishing this proxy
statement/prospectus to its stockholders in connection with the solicitation of
proxies by Columbia Bancorp's board of directors for use at the Columbia
Bancorp meeting. The purpose of the meeting is to consider and vote upon the
proposal to approve and adopt the merger agreement and to transact such other
business as may properly come before the meeting or any adjournments or
postponements thereof. Pursuant to the merger agreement, at the effective time,
the former stockholders of Suburban Bancshares will receive shares of Columbia
Bancorp common stock in exchange for their shares of Suburban Bancshares common
stock. Each share of Suburban Bancshares common stock will be exchanged for
between 0.2338 and 0.2196 shares of Columbia Bancorp common stock. The
conversion ratio is based upon a formula which causes the average market value
of shares of Columbia Bancorp common stock exchanged for each share of Suburban
Bancshares common stock to be $3.00 per share when the average market value of
Columbia Bancorp common stock is between $12.81 and $13.68 per share. The
conversion ratio is fixed at 0.2196 if the average market value is above $13.68
per share and at 0.2338 if it is below $12.81 per share. The average market
value of Columbia Bancorp common stock will fluctuate prior to the merger, and
the conversion ratio may fluctuate within the range of 0.2338 and 0.2196 prior
to the merger.
No fractional shares will be issued. Instead, stockholders will be paid in
cash the amount equal to the fractional share multiplied by the closing price
of one share of Columbia Bancorp common stock on the date the merger is
completed.
In unanimously approving the merger agreement and the transactions
contemplated in connection with the merger, the members of the Columbia Bancorp
board of directors have determined that the merger is advisable and in the best
interests of the Columbia Bancorp stockholders and recommend that the Columbia
Bancorp stockholders vote in favor of the approval and adoption of the merger
agreement and the merger.
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Suburban Bancshares. Suburban Bancshares is furnishing this proxy
statement/prospectus to its stockholders in connection with the solicitation of
proxies by Suburban Bancshares' board of directors for use at the Suburban
Bancshares meeting. The purpose of the meeting is to consider and vote upon the
proposal to approve and adopt the merger agreement and to transact such other
business as may properly come before the meeting or any adjournments or
postponements thereof. Pursuant to the merger agreement, at the effective time,
the former stockholders of Suburban Bancshares will receive shares of Colombia
Bancorp common stock in exchange for their shares of Suburban Bancshares common
stock. Each share of Suburban Bancshares common stock will be exchanged for
between 0.2338 and 0.2196 shares of Columbia Bancorp common stock. The
conversion ratio is based upon a formula which causes the average market value
of shares of Columbia Bancorp common stock exchanged for each share of Suburban
Bancshares common stock to be $3.00 per share when the average market value of
Columbia Bancorp common stock is between $12.81 and $13.68 per share. The
conversion ratio is fixed at 0.2196 if the average market value is above $13.68
per share and at 0.2338 if it is below $12.81 per share. The average market
value of Columbia Bancorp common stock will fluctuate prior to the merger, and
the conversion ratio may fluctuate within the range of 0.2338 and 0.2196 prior
to the merger.
No fractional shares will be issued. Instead, stockholders will be paid in
cash the amount equal to the fractional share multiplied by the average daily
high and low trade prices per share of Columbia Bancorp common stock for the 10
trading days ending three trading days before the effective date.
In unanimously approving the merger agreement and the transactions
contemplated in connection with the merger, the members of the Suburban
Bancshares board of directors have determined that the merger is advisable and
in the best interests of the Suburban Bancshares stockholders and recommended
that the Suburban Bancshares stockholders vote in favor of the approval and
adoption of the merger agreement and the merger.
Vote Required
Columbia Bancorp. Each share of Columbia Bancorp common stock is entitled to
one vote per share with respect to the merger agreement and other matters
properly submitted at the Columbia Bancorp meeting. Assuming that a quorum is
present at the Columbia Bancorp meeting, (1) approval and adoption of the
merger agreement and the merger requires the affirmative vote, in person or by
proxy, of two-thirds of the outstanding shares of Columbia Bancorp common stock
and (2) approval and adoption of other matters that come before the meeting
generally requires the affirmative vote, in person or by proxy, of a majority
of the votes cast on the matter at the Columbia Bancorp meeting. Stockholder
approval of the merger agreement is required under Maryland law, and such
approval is a condition to the merger.
Columbia Bancorp stockholders do not have dissenters' rights of appraisal
with respect to the issuance of shares of Columbia Bancorp common stock in the
merger.
The presence at the Columbia Bancorp meeting, either in person or by proxy,
of the holders of a majority of the votes entitled to vote at the meeting
constitutes a quorum for the transaction of business. For purposes of
determining whether there is a quorum at the Columbia Bancorp meeting,
abstentions and broker non-votes will be treated as shares that are present.
Under the rules of The Nasdaq Stock Market, brokers who hold shares in street
name for customers will not have the authority to vote on the proposed merger
unless they receive specific instructions from the beneficial owners.
Accordingly, the failure to provide brokers with specific instructions to vote
for the merger will have the same effect as a vote against the merger. As
required by Maryland law, abstentions and broker non-votes will not be counted
in determining whether Columbia Bancorp stockholders have approved the other
proposals.
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All directors and executive officers of Columbia Bancorp have executed a
support agreement to vote all of the shares of Columbia Bancorp common stock
which they beneficially own in favor of the merger. As of September 30, 1999,
directors and executive officers of Columbia Bancorp and their affiliates
beneficially owned and were entitled to vote 979,698 shares of Columbia Bancorp
common stock, which represented 21.7% of the 4,506,035 shares of the Columbia
Bancorp common stock outstanding.
Suburban Bancshares. Each share of Suburban Bancshares common stock is
entitled to one vote per share with respect to the merger agreement and other
matters properly submitted at the Suburban Bancshares meeting. Assuming that a
quorum is present at the Suburban Bancshares meeting, (1) approval and adoption
of the merger agreement and the merger requires the affirmative vote, in person
or by proxy, of a majority of the outstanding shares of Suburban Bancshares
common stock entitled to vote at the Suburban Bancshares meeting and (2)
approval and adoption of other matters that come before the meeting requires
the affirmative vote, in person or by proxy, of a majority of the votes cast on
the matter. Stockholder approval of the merger agreement is required under
Delaware law, and such approval is a condition to the merger.
If the merger is completed, Suburban Bancshares stockholders who do not vote
for the adoption of the merger agreement and who otherwise comply with Section
262 of the Delaware General Corporation Law will be entitled to appraisal
rights under Delaware law. We have attached a copy of Section 262 as Appendix
H.
The presence at the Suburban Bancshares meeting, in person or by properly
executed proxy, of the holders of a majority of the shares of Suburban
Bancshares common stock outstanding and entitled to vote at the Suburban
Bancshares meeting is necessary to constitute a quorum for the transaction of
business. For purposes of determining whether there is a quorum at the Suburban
Bancshares meeting, abstentions and broker non-votes will be treated as shares
that are present.
Under the rules of The Nasdaq Stock Market, brokers who hold shares in street
name for customers will not have the authority to vote on the proposed merger
unless they receive specific instructions from the beneficial owners.
Accordingly, the failure to provide brokers with specific instructions to vote
for the merger will have the same effect as votes against the merger. As
required under Delaware law, abstentions and broker non-votes will not be
counted in determining whether Suburban Bancshares stockholders have approved
the other proposals.
All directors and executive officers of Suburban Bancshares have executed a
support agreement to vote all of the shares of Suburban Bancshares common stock
which they beneficially own in favor of the merger. As of September 30, 1999,
directors and executive officers of Suburban Bancshares and their affiliates
beneficially owned and were entitled to vote 2,263,091 shares of Suburban
Bancshares common stock, which represented 20.0% of the 11,301,218 shares of
the Suburban Bancshares common stock outstanding.
Voting of Proxies
Columbia Bancorp. If the accompanying proxy card is properly signed and
returned to Columbia Bancorp and not revoked before a vote is taken at the
Columbia Bancorp meeting, it will be voted in accordance with the instructions
indicated on the proxy card. If the proxy card is signed and returned without
indicating any voting directions, the proxy will be voted FOR approval and
adoption. Brokers who hold shares in street name for customers do not have
authority to vote on the proposed merger unless they receive specific
instructions from the beneficial owners. If you hold your shares in street
name, please see the voting form provided by your broker for additional
information regarding the voting of your shares.
Columbia Bancorp is not aware of any business to be acted on at the Columbia
Bancorp meeting, except as described in this proxy statement/prospectus. If any
other matters are properly presented to the Columbia Bancorp meeting, or any
adjournments or postponements of the meeting, the persons appointed as proxies
or their substitutes will have discretion to vote or act on the matter
according to their best judgment and applicable law unless the proxy indicates
otherwise.
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Suburban Bancshares. If the accompanying proxy card is properly signed and
returned to Suburban Bancshares and not revoked before a vote is taken at the
Suburban Bancshares meeting, it will be voted in accordance with instructions
indicated on the proxy card. If a proxy card is signed and returned without
indicating any voting instructions, shares of Suburban Bancshares common stock,
represented by the proxy will be voted FOR approval and adoption of the merger
agreement and the merger. Brokers who hold shares in street name for customers
do not have authority to vote on the proposed merger unless they receive
specific instructions from the beneficial owners. If you hold your shares in
street name, please see the voting form provided by your broker for additional
information regarding the voting of your shares.
Suburban Bancshares is not aware of any business to be acted upon at the
Suburban Bancshares meeting, except as described in this proxy
statement/prospectus. If any other matters are properly presented to the
Suburban Bancshares meeting, or any adjournments or postponements of the
meeting, the persons appointed as proxies or their substitutes will have
discretion to vote or act on the matter according to their best judgment and
applicable law unless the proxy indicates otherwise.
Authorization to Vote on Adjournment and Other Matters
Columbia Bancorp. By signing the proxy, a Columbia Bancorp stockholder
authorizes the proxy holder to vote in his discretion regarding any procedural
motions which may come before the Columbia Bancorp meeting. For example, this
authority could be used to adjourn the meeting if Columbia Bancorp believes it
is desirable to do so. Adjournment or other procedural matters could be used to
obtain more time before a stockholder vote in order to solicit additional
proxies or to provide additional information to Columbia Bancorp stockholders.
To the extent a Columbia Bancorp stockholder intends to vote against the merger
agreement, such stockholder would have no incentive to vote in favor of
discretionary adjournment by the Columbia Bancorp board of directors, which
would allow Columbia Bancorp to adjourn the meeting in order to solicit
additional votes in favor of the merger agreement. Columbia Bancorp has no
plans to adjourn the meeting at this time, but it intends to attempt to do so
if it believes that doing so would promote stockholder interests.
The failure to return a proxy or to vote in person will have no effect on the
vote on adjournment, except to reduce the total number of votes counted.
Brokers who hold shares in street name for customers will not have the
authority to vote unless they receive specific instructions from beneficial
owners. Under Maryland law, an adjournment proposal requires the affirmative
vote of a majority of the votes cast by Columbia Bancorp stockholders present
or represented at the meeting. Therefore, broker non-votes and abstentions will
have no effect.
Suburban Bancshares. By signing the proxy, a Suburban Bancshares stockholder
authorizes the proxy holder to vote in his discretion regarding any procedural
motions which may come before the Suburban Bancshares meeting. For example,
this authority could be used to adjourn the meeting if Suburban Bancshares
believes it is desirable to do so. Adjournment or other procedural matters
could be used to obtain more time before a stockholder vote in order to solicit
additional proxies or to provide additional information to Suburban Bancshares
stockholders. To the extent a Suburban Bancshares stockholder intends to vote
against the merger agreement, such stockholder would have no incentive to vote
in favor of discretionary adjournment by the Suburban Bancshares board of
directors, which would allow Suburban Bancshares to adjourn the meeting in
order to solicit additional votes in favor of the merger agreement. Suburban
Bancshares has no plans to adjourn the meeting at this time, but it intends to
attempt to do so if it believes that doing so would promote stockholder
interests.
The failure to return a proxy or to vote in person will have no effect on the
vote on adjournment, except to reduce the total number of votes counted.
Brokers who hold shares in street name for customers will not have the
authority to vote unless they receive specific instructions from beneficial
owners. Under Delaware law, an adjournment proposal requires the affirmative
vote of a majority of the votes cast by Suburban Bancshares stockholders
present or represented at the meeting. Therefore, broker non-votes and
abstentions will have no effect.
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Revocation of Proxies
A stockholder of Columbia Bancorp or of Suburban Bancshares may revoke a
proxy at any time before it is voted by:
. filing written notice of revocation with the Secretary of Columbia
Bancorp or Suburban Bancshares (as applicable) which is actually
received prior to the vote of stockholders;
. following the instructions received from their broker for any shares
held by the broker in street name;
. filing a duly executed proxy bearing a later date; or
. attending the Columbia Bancorp or Suburban Bancshares meeting (as
applicable) and voting in person. Attendance at the meeting will not by
itself revoke the proxy.
A Columbia Bancorp stockholder should send any such filing to the Secretary
of Columbia Bancorp at Columbia Bancorp, 9171 Baltimore National Pike, Ellicott
City, Maryland 21042, Attn.: John A. Scaldara, Jr. A Suburban Bancshares
stockholder should send any such filing to the Secretary of Suburban Bancshares
at Suburban Bancshares, Inc., 7505 Greenway Center Drive, P. O. Box 298,
Greenbelt, Maryland 20768-0298, Attn.: Stephen A. Horvath.
If you hold your shares in street name, please see the instructions provided
by your broker regarding revocation of your proxy. If you vote your shares
through your broker, you may not change or revoke your vote by contacting
Columbia Bancorp or Suburban Bancshares directly. You will need additional
documentation from your broker to vote your shares in person at the meeting if
they are held in street name.
Solicitation of Proxies
We will each bear our own cost of soliciting proxies from our stockholders.
In addition to solicitation by mail, our directors, officers and employees may
solicit proxies from our stockholders by telephone or personal communication or
by other means. These persons will not receive additional compensation, but
they may be reimbursed for reasonable out-of-pocket expenses in connection with
this solicitation.
We will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of Columbia Bancorp and Suburban Bancshares stock held of record by such
persons, and we will each reimburse custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses in connection with this service.
We may engage one or more proxy solicitation firms to assist in obtaining
proxies from our stockholders on a timely basis. As of the date of this proxy
statement/prospectus, neither of us has engaged a proxy solicitation firm or
has committed itself to pay any fees related to this service.
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PARTIES TO THE MERGER
Columbia Bancorp
Columbia Bancorp, a bank holding company, was incorporated in November 1987
under the laws of Maryland and registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended. Columbia Bank was organized by
Columbia Bancorp as a Maryland commercial bank and began operations in May
1988. Columbia Bank currently accounts for substantially all of Columbia
Bancorp's assets. The deposits of Columbia Bank are insured by the FDIC.
Columbia Bank is headquartered in Columbia, Maryland and has nine branch
locations in Howard County, Maryland; three branch locations in Baltimore
County, Maryland; and two branch locations in Baltimore City, Maryland. An
additional branch location is scheduled to open before December 31, 1999 in
Baltimore County, Maryland. Columbia Bank also has three mortgage origination
offices in Howard, Montgomery and Baltimore Counties, Maryland. At September
30, 1999, Columbia Bancorp had total assets of $460.1 million, total loans, net
of unearned income, of $305.3 million, total deposits of $354.0 million and
stockholders' equity of $39.9 million.
Columbia Bank is an independent, community bank which seeks to provide
personal attention and professional financial services to its customers while
offering virtually all of the banking services of larger competitors. These
customers are primarily individuals and small- and medium-sized businesses.
Columbia Bank's business philosophy includes offering informed and courteous
service, local and timely decision-making, flexible and reasonable operating
procedures and consistently-applied credit policies. Columbia Bank does not
currently exercise general trust powers.
Columbia Bank offers the following types of services:
Commercial Services:
. loans, including working capital loans and lines of credit, a wide range
of demand, term, and time loans, loans for real estate acquisition,
development and construction and equipment, inventory and accounts
receivable financing
. lease financing
. cash management, including automatic overnight investment of funds
. certificates of deposit and other interest-bearing accounts
. direct deposit of payroll
. letters of credit
Retail Services:
. transaction accounts, including checking and NOW accounts
. savings accounts
. certificates of deposit
. individual retirement accounts
. 24-hour automated teller machines with access to major network systems
. 24-hour telephone banking
. PC--Banking
. installment and home equity loans and lines of credit
. residential construction and first mortgage loans
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. VISA(R) credit and debit cards
. travelers checks, money orders and safe deposit boxes
. internet banking (expected to be available prior to the end of the first
quarter of 2000)
At September 30, 1999, Columbia Bancorp's loan portfolio, net of unearned
income, totaled $305.3 million, representing approximately 66.4% of its total
assets of $460.1 million. The categories of loans in Columbia Bancorp's
portfolio are commercial, real estate development and construction, residential
real estate mortgage, commercial real estate mortgage and consumer.
The executive offices of Columbia Bancorp and the principal office of
Columbia Bank are located at 10480 Little Patuxent Parkway, Columbia, Maryland
21044, telephone number (410) 465-4800.
Suburban Bancshares
Suburban Bancshares, a bank holding company, was incorporated in 1985 under
the laws of the State of Delaware and registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended. Suburban Bank was
organized by Suburban Bancshares as a Maryland commercial bank and began
operations in 1980.
Suburban Bank currently accounts for substantially all of Suburban
Bancshares's assets. The deposits of Suburban Bank are insured by the FDIC.
Suburban Bank, headquartered in Greenbelt, Maryland, has a total of eight
branch locations and a mortgage lending office located in the Maryland suburbs
of Washington, D.C., in the communities of Greenbelt, Capitol Heights, Clinton,
Oxon Hill, Rockville, Bethesda, White Flint and Beltsville. Suburban
Bancshares' primary markets are the counties of Prince George's and Montgomery.
Suburban Bancshares also serves the surrounding counties in Maryland and the
District of Columbia. As of September 30, 1999, Suburban Bancshares had total
assets of $222.8 million, total deposits of $187.7 million, total loans, net of
unearned income of $136.8 million and total stockholders' equity of $20.4
million.
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THE MERGER
Background of the Merger
Management of each company has, over time, regularly considered the
possibility of acquisitions and strategic combinations with a variety of
financial institutions, and the potential strategic fit with institutions based
on their lines of business, their management and employee cultures and their
geographic locations. As part of our operations, Columbia Bancorp and Suburban
Bancshares also regularly scrutinize the financial services industry
environment, including the recent wave of consolidation in the industry, and
from time to time have informal discussions with the management of various
financial institutions.
In December 1998, Suburban Bancshares' board of directors appointed a
committee to evaluate any offers to merge with or acquire Suburban Bancshares
and to identify and analyze possible merger and acquisition opportunities for
Suburban Bancshares. Danielson Associates, Inc. was asked to review ways for
Suburban Bancshares to maximize stockholder value, which included the
possibility of a sale of Suburban Bancshares.
At a January 19, 1999 meeting of the committee, Danielson Associates
presented its analysis, which indicated that Suburban Bancshares could increase
stockholder value substantially faster through a sale and that the number of
potential acquirers that would be both compatible and pay a fair price was
rapidly diminishing as a result of consolidations in the banking industry. As a
result of that meeting, the committee decided to determine the interest of
several potential acquirers. In February 1999, Suburban Bancshares retained
Danielson Associates to assist it in exploring its merger opportunities.
In consultation with Danielson Associates, the committee determined that
there were three banks that might be interested in Suburban Bancshares and had
the ability to pay a fair price that would be attractive to stockholders. They
were all Maryland banks and included a bank with assets of over $5 billion,
another in the $1 to $2 billion asset range, and Columbia Bancorp, which was
considerably smaller than the other two. Other banks were considered, but the
committee did not feel that any of these were likely to make a competitive
offer.
On March 1, 1999, the committee met to consider responses from Columbia
Bancorp and one of the other potential acquirers. The third bank chose not to
submit a bid. At that time, the committee determined that the offers from the
two banks did not provide a sufficient premium over the prevailing market price
for Suburban Bancshares common stock.
In August 1999, the committee decided that in light of recent developments in
the banking industry and the downward pressure on the market price of bank
stocks, including Suburban Bancshares', the sale possibilities for Suburban
Bancshares merited reconsideration by the committee. In particular, there was
concern about increasing competition for loan and deposit customers and the
resulting pressures on margins and the growing cost of technology. In addition,
the likely elimination of pooling of interest accounting, which could have a
negative effect on the sale value of Suburban Bancshares, had become a greater
certainty. The committee then asked Danielson Associates to contact both of the
previous bidders to determine their present interest.
Both parties had a continued interest and on September 9, 1999, the committee
met to review updated offers. Danielson Associates presented its independent
analysis of the two offers. After a thorough review and discussion, the
committee determined that the Columbia Bancorp offer was more favorable and
voted unanimously to recommend to the Suburban Bancshares' board of directors
that they accept the Columbia Bancorp offer.
On September 11, 1999, the Suburban Bancshares board of directors met to
consider the two offers. Danielson Associates explained their analysis of both
offers and why the banks that were approached were considered to be the most
likely to meet the best interests of the Suburban Bancshares stockholders.
After due deliberation, the Suburban Bancshares board of directors voted
unanimously to accept the Columbia Bancorp offer. As a result, Suburban
Bancshares and Columbia Bancorp executed a confidentiality agreement regarding
the sharing of confidential information and began the due diligence process.
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In September 1999, senior executives of Columbia Bancorp arranged to receive
proposals from several investment banks to serve as financial advisor to
Columbia Bancorp in connection with a possible transaction with Suburban
Bancshares. On September 19, 1999, Columbia Bancorp and Austin Financial
executed an engagement letter for Austin Financial to conduct due diligence in
connection with the possible transaction and render a fairness opinion to the
Columbia Bancorp board of directors.
The two companies and their respective legal and financial advisors began
conducting mutual due diligence. Messrs. Bond and Kelly met to discuss the
results of the due diligence and each indicated his interest in continuing to
pursue a business combination between their companies. Over the next several
days, senior management of the two companies and their respective legal counsel
negotiated the terms of the proposed agreements.
On September 27, 1999, Columbia Bancorp's board of directors held a special
meeting to consider the proposed merger with Suburban Bancshares. At this
meeting, senior management of Columbia Bancorp, together with accounting and
legal advisors, reviewed the strategic investigation and due diligence Columbia
Bancorp had conducted, the discussions and contacts with Suburban Bancshares to
date, the historical performance and strategies of Suburban Bancshares and
Columbia Bancorp, the financial and other terms of the proposed transaction,
including the potential pro forma impact of the merger (taking into account
possible expense savings and operating efficiencies that might be generated by
the transaction) and the proposed numerical composition of the new Columbia
Bancorp board of directors, and the other terms of the proposed merger
agreement, the stock option agreement and other agreements.
Austin Financial, based on the financial analysis described under "Opinion of
Columbia Bancorp's Financial Advisor", gave its opinion to Columbia Bancorp's
board of directors that, as of the date of the meeting, the proposed conversion
ratio in the merger was fair, from a financial point of view, to Columbia
Bancorp and its stockholders. Columbia Bancorp's board of directors also
reviewed the proposed employment arrangements with members of Suburban
Bancshares' senior management in connection with the proposed merger. Twelve of
the 15 members of Columbia Bancorp's board of directors who were in attendance
voted to approve the proposed merger agreement and related transactions. Three
members of the Columbia Bancorp board of directors voted against the proposed
merger and related transactions; however, each of these directors has signed a
support agreement whereby they agreed to vote their shares of Columbia Bancorp
common stock in favor of the merger agreement and related transactions.
Subsequently, the three members of the Columbia Bancorp board of directors who
voted against the merger and related transactions as well as the director who
was absent from the board of directors' meeting indicated in writing that they
desired their vote to be recorded as in favor of the merger agreement and
related transactions, thus causing the vote to be unanimous.
On September 27, 1999, the Suburban Bancshares board of directors held a
special meeting at which senior management of Suburban Bancshares reviewed its
discussions and negotiations with Columbia Bancorp regarding a business
combination, as well as the results of its due diligence investigation of
Columbia Bancorp. Mr. Kelly reviewed Suburban Bancshares' board of directors'
prior discussions of possible strategic directions for Suburban Bancshares,
reviewed the course of discussions with Columbia Bancorp and outlined the
strategic rationale for the proposed merger. Danielson summarized certain
financial information with respect to Columbia Bancorp and the potential
transaction to the Suburban Bancshares board of directors, and Danielson
rendered an opinion that, as of September 27, 1999, the conversion ratio set
forth in the merger agreement was fair to Suburban Bancshares' stockholders
from a financial point of view. Also at this meeting the Suburban Bancshares
board of directors discussed with representatives of McNamee, Hosea, Jernigan &
Kim, P.A., Suburban Bancshares legal counsel, the terms of the merger and the
definitive agreements documenting the transaction, and the legal standards
applicable to its decision to approve these agreements and the transactions
contemplated by these agreements. After questions by, and discussion among, the
members of the Suburban Bancshares board of directors, and after consideration
of the factors described under "--Suburban Bancshares Reasons for the Merger"
the Suburban Bancshares board of directors voted unanimously to approve the
merger agreement and the transactions contemplated by that agreement.
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On September 28, 1999, representatives of Columbia Bancorp and Suburban
Bancshares executed and delivered the merger agreement and stock option
agreements. On September 28, 1999, Columbia Bancorp and Suburban Bancshares
issued a joint press release announcing the transaction.
As provided for in the merger agreement, representatives of the two companies
continued due diligence review of the loan portfolios of each company. Each
company was given full access to loan files and records of the other company.
Following completion of this due diligence, each company notified the other
that the due diligence requirements of Section 13(h) of the merger agreement
had been satisfied.
Suburban Bancshares Reasons for the Merger
The members of the board of directors of Suburban Bancshares have unanimously
approved the merger agreement and the merger and have determined that the
merger is advisable and fair to, and in the best interests of, Suburban
Bancshares and its stockholders. The Suburban Bancshares board of directors,
therefore, recommends that the holders of Suburban Bancshares common stock,
vote FOR the merger, the merger agreement and the transactions contemplated by
the merger agreement.
The Suburban Bancshares board of directors believes that the consummation of
the merger presents a unique opportunity to combine two of the
Baltimore/Washington metropolitan area's leading community banks to create a
premier community banking and financial services company that can offer a full
range of financial products and services in the Baltimore/Washington
metropolitan area's most attractive markets.
In reaching its decision to approve the merger agreement and the option
agreements, Suburban Bancshares' board of directors consulted with Suburban
Bancshares management, as well as with its financial and legal advisors, and
considered a number of factors, including the following:
. its knowledge of Suburban Bancshares' business, operations, financial
condition, earnings and earnings potential, including future dividend
payments and estimated stock value;
. the business, operations, financial condition and earnings of Columbia
Bancorp. In making its determination, the board of directors took into
account the results of Suburban Bancshares' due diligence review of
Columbia Bancorp;
. the consistency of the merger with Suburban Bancshares' long-term goals
of achieving superior financial performance and stockholder returns;
. its expectation that the combined company would benefit from
significantly greater economies of scale than either Suburban Bancshares
or Columbia Bancorp separately in its consumer banking, commercial
banking and other businesses;
. its view that the combination of Suburban Bancshares and Columbia
Bancorp presents manageable execution risk in view of the similar
markets and customer demographics served by Suburban Bancshares and
Columbia Bancorp, the complementary and contiguous geographic areas
served by our companies and assumptions regarding synergies;
. its belief, and that of Suburban Bancshares' senior management, that
Suburban Bancshares and Columbia Bancorp share a common vision about the
importance of delivering financial performance and stockholder value and
that management and employees of Suburban Bancshares and Columbia
Bancorp possess complementary skills and expertise;
. the structure of the merger and the terms of the merger agreement and
the stock option agreements, and the fact that the merger is intended to
qualify as a "reorganization" for federal income tax purposes and as a
"pooling-of-interests" for accounting and financial reporting purposes;
. the proposed arrangements with members of management of Columbia Bancorp
and Suburban Bancshares, including the fact that Mr. Bond would continue
as Columbia Bancorp's president and
34
<PAGE>
chief executive officer, that Mr. Kelly would enter into a services
agreement with Columbia Bancorp and would become chairman of the board
of directors of Columbia Bancorp; and that the board of directors of the
combined company would be comprised of 16 directors designated by
Columbia Bancorp and 5 directors designated by Suburban Bancshares,
including Mr. Kelly;
. the fact that directors and executive officers of Suburban Bancshares
could be expected to receive benefits in the merger beyond their
interests as stockholders of Suburban Bancshares, both under existing
arrangements with our company and, in the case of Mr. Kelly and one
other executive officer of Suburban Bancshares, as a result of new
employment agreements with Columbia Bancorp. See "--Interests of Persons
in the Merger Other Than as Stockholders";
. the opinion of Danielson Associates that, as of September 27, 1999, the
conversion ratio was fair from a financial point of view to Suburban
Bancshares stockholders. See "--Opinion of Suburban Bancshares'
Financial Advisor"; and
. the likelihood that the merger will be approved by the appropriate
regulatory authorities. See "The Merger Agreement--Regulatory Approvals
Required for the Merger."
The foregoing discussion of the information and factors considered by the
Suburban Bancshares board is not intended to be exhaustive but is believed to
include all material factors considered by the Suburban Bancshares board. In
view of the variety of factors considered in connection with its evaluation of
the merger, the Suburban Bancshares board did not find it practicable to and
did not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of
the Suburban Bancshares board may have given different weights to different
factors. However, after taking into account all of the factors set forth
above, the Suburban Bancshares board of directors unanimously agreed that the
merger agreement and the merger were fair to, and in the best interests of,
Suburban Bancshares and its stockholders and that Suburban Bancshares should
proceed with the merger agreement and the merger.
The members of Suburban Bancshares' board of directors unanimously recommend
that Suburban Bancshares stockholders vote FOR approval and adoption of the
merger agreement and the merger.
Opinion of Suburban Bancshares' Financial Advisor
Suburban Bancshares retained Danielson Associates, Inc. to advise the
Suburban Bancshares board of directors as to its "fair" sale value and the
fairness to its stockholders of the financial terms of the offer to be
acquired by Columbia Bancorp. Danielson Associates is regularly engaged in the
valuation of banks, bank holding companies, and thrifts in the connection with
mergers, acquisitions, and other securities transactions; and has knowledge
of, and experience with, Maryland banking markets and banking organizations
operating in those markets. Danielson Associates was selected by Suburban
Bancshares because of its knowledge of, expertise with, and reputation in the
financial services industry.
In this capacity, Danielson Associates reviewed the merger agreement with
respect to the pricing and other terms and conditions of the merger, but the
negotiation of the merger agreement and the decision as to accepting the offer
was ultimately made by the board of directors of Suburban Bancshares.
Danielson Associates rendered its oral opinion to the Suburban Bancshares
board of directors, which it subsequently confirmed in writing, that as of the
date of the opinion, the financial terms of the Columbia Bancorp offer were
"fair" to Suburban Bancshares and its stockholders. No limitations were
imposed by the Suburban Bancshares board of directors upon Danielson
Associates with respect to the investigation made or procedures followed by
Danielson Associates in arriving at its opinion.
In arriving at its opinion, Danielson Associates:
. reviewed certain business and financial information relating to Suburban
Bancshares and Columbia Bancorp, including annual reports for the fiscal
year ended December 31, 1998, call report data from 1990 to 1999, and
the Annual Reports on Form 10-K and the Quarterly Reports on Form 10-Q
for 1998 and 1999;
35
<PAGE>
. discussed the past and current operations, financial condition and
prospects of Columbia Bancorp with its senior executives;
. analyzed the pro forma impact of the merger on Columbia Bancorp's
earnings per share, capitalization, and financial ratios;
. reviewed the reported prices and trading activity for the Columbia
Bancorp common stock and compared them to those of similar bank holding
companies;
. reviewed and compared the financial terms, to the extent publicly
available, with comparable transactions;
. reviewed the merger agreement and certain related documents; and
. considered such other factors as Danielson Associates deemed
appropriate.
Danielson Associates did not obtain any independent appraisal of assets or
liabilities of Suburban Bancshares or Columbia Bancorp or their respective
subsidiaries. Further, Danielson Associates did not independently verify the
information provided by Suburban Bancshares or Columbia Bancorp and assumed the
accuracy and completeness of all such information.
In arriving at its opinion, Danielson Associates performed a variety of
financial analyses. Danielson Associates believes that its analyses must be
considered as a whole and that consideration of portions of such analyses could
create an incomplete view of Danielson Associates' opinion. The preparation of
a fairness opinion is a complex process involving subjective judgements and is
not necessarily susceptible to partial analysis or summary description.
In its analyses, Danielson Associates made certain assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which were beyond Suburban Bancshares' or Columbia Bancorp's control.
Any estimates contained in Danielson Associates analyses are not necessarily
indicative of the future results of value, which may be significantly more or
less favorable than such estimates. Estimates of the value of companies do not
purport to be appraisals or necessarily reflect the prices at which companies
or their securities may actually be sold.
The following is a summary of selected analyses considered by Danielson
Associates in connection with its opinion letter.
Pro Forma Merger Analyses. Danielson Associates analyzed the changes in the
amount of earnings and book value represented by the receipt of approximately
$34 million for all of the outstanding shares of Suburban Bancshares common
stock and options to purchase shares of Suburban Bancshares common stock, which
will be paid in shares of Columbia Bancorp common stock or options to purchase
shares of Columbia Bancorp common stock. The analysis evaluated, among other
things, possible dilution in earnings and capital per share for Columbia
Bancorp common stock.
Comparable Companies. Danielson Associates compared Columbia Bancorp to 12
publicly-traded bank holding companies. These comparable bank holding companies
had assets in the $300 million to $2 billion range, no extraordinary
characteristics and were located in urbanized portions of Maryland and eastern
Pennsylvania.
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<PAGE>
SUMMARY AND DESCRIPTION OF COMPARABLE BANK HOLDING COMPANIES
<TABLE>
<CAPTION>
Comparable Bank Holding Companies Assets(1) Headquarters
- --------------------------------- ------------- ------------
(In millions)
<S> <C> <C>
Bryn Mawr Bank Corp............................. $ 393 Bryn Mawr, Pa.
Carrollton Bancorp.............................. 346 Baltimore, Md.
Community Banks, Inc............................ 917 Millersburg, Pa.
Drovers Bancshares Corp......................... 643 York, Pa.
F&M Bank Corp................................... 1,462 Frederick, Md.
FCNB Corp....................................... 1,328 Frederick, Md.
First Colonial Group, Inc....................... 384 Nazareth, Pa.
Harleysville Savings Bank....................... 1,509 Harleysville, Pa.
Pennsylvania Commerce Bancorp................... 350 Camp Hill, Pa.
Sandy Springs Bancorp, Inc...................... 1,335 Olney, Md.
Sterling Bancorp................................ 1,031 Lancaster, Pa.
Union National Bancorp.......................... 300 Westminster, Md.
</TABLE>
- --------
(1) June 30, 1999.
Source: SNL Securities LC, Charlottesville, Virginia.
Danielson Associates compared the medians of the following ratios between
comparable bank holding companies and Columbia Bancorp, and also compared other
income, expense and balance sheet information of these companies with similar
information about Columbia Bancorp.
COLUMBIA BANCORP -- COMPARABLE BANK HOLDING COMPANIES SUMMARY
<TABLE>
<CAPTION>
Columbia Comparable Bank Holding
Bancorp Companies Median
Income Statement -------- -----------------------
<S> <C> <C>
Net income/Avg. Assets....................... 1.17% .99%
Net operating income(1)/Avg. Assets.......... 1.97 1.54
Return on average equity..................... 13.14 13.03
Balance Sheet
Equity/Assets................................ 8.53% 8.07%
NPAs(2)/Assets............................... .84 .37
Stock Price
Price/Earnings............................... 11.9X 14.2X
Price/Book................................... 149% 201%
Dividend yield............................... 2.48% 2.91%
Payout ratio................................. 28% 40%
Shares traded(3)............................. 6,870 2,204
</TABLE>
- --------
(1) Net interest income plus noninterest income less operating expense.
(2) Nonperforming assets including loans 90 days past due and still accruing.
(3) Average daily volume in 1999 through September 27, 1999.
Source: SNL Securities LC, Charlottesville, Virginia.
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<PAGE>
Comparable Transaction Analysis. Danielson Associates compared the
consideration to be paid in the merger to the latest 12 months' earnings and
equity capital of Suburban Bancshares with earnings and capital multiples paid
in acquisitions of banks through September 27, 1999 in Delaware, Washington
D.C., Maryland and Virginia. Of these, the most applicable recent transactions
(because of the similar size of the acquired bank) included BB&T Corporation's
purchase of Mason-Dixon Bancshares, Inc., F&M Bancorp's acquisition of Monocacy
Bancshares, Inc. and FCNB Corp.'s purchase of Capital Bank NA. At the time
Danielson Associates made its analysis, the consideration to be paid in the
merger was 166% of Suburban Bancshares' June 30, 1999 book value, 23.8 times
Suburban Bancshares' "normalized" earnings for the 12 months ending June 30,
1999, and 27.2 times reported earnings for the trailing four quarters as of
June 30, 1999. This compares to the median multiples of 265% of book value and
22.5 times earnings for the three most applicable recent transactions.
Discounted Future Earnings and Discounted Dividends Analysis. Danielson
Associates applied present value calculations to Suburban Bancshares' estimated
future earnings and dividend stream under several specific growth and earnings
scenarios. This analysis considered, among other things, scenarios for Suburban
Bancshares as an independent institution and as part of another banking
organization. The projected dividend streams and terminal values, which were
based on a range of earnings multiples, were then discounted to present value
using discount rates based on assumptions regarding the rates of return
required by holders or prospective buyers of shares or Suburban Bancshares
common stock.
Other Analysis. In addition to performing the analyses summarized above,
Danielson Associates also considered the general market for bank mergers, the
historical financial performance of Suburban Bancshares and Columbia Bancorp,
the market positions of both companies and the general economic conditions and
prospects of those companies.
No company or transaction used in this composite analysis is identical to
Suburban Bancshares or Columbia Bancorp. Accordingly, an analyses of the
results of the foregoing is not mathematical; rather it involves complex
considerations and judgements concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading values of the company or companies to which they are being compared.
The summary set forth above does not purport to be a complete description of
the analyses and procedures performed by Danielson Associates in the course of
arriving at its opinions. In payment for its services as the financial advisor
to Suburban Bancshares, Danielson Associates is to be paid an estimated fee of
approximately $169,500.
The full text of the opinion of Danielson Associates dated as of September
28, 1999, which sets forth assumptions made and matters considered, is attached
hereto as Appendix G of this proxy statement/prospectus. Suburban Bancshares
stockholders are urged to read this opinion in its entirety. Danielson
Associates' opinion is directed only to the consideration to be received by
Suburban Bancshares stockholders in the merger and does not constitute a
recommendation to any Suburban Bancshares stockholder as to how such
stockholder should vote at the Suburban Bancshares stockholder meeting.
Columbia Bancorp Reasons for the Merger
The Columbia Bancorp board of directors believes that the merger is advisable
and in the best interests of Columbia Bancorp and its stockholders and
unanimously approved the merger agreement and the merger. Columbia Bancorp's
board of directors believes that the opportunities created by the merger to
increase the value of the Columbia Bancorp common stock more than offset any
risks inherent in the merger. In reaching this decision, Columbia Bancorp's
board of directors evaluated the information at its disposal, consulted with
Columbia Bancorp's management and outside advisors, and considered certain
factors, including the following:
. the complementary and compatible nature of Columbia Bancorp's and
Suburban Bancshares' businesses in contiguous markets. The board of
directors of Columbia Bancorp specifically
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<PAGE>
considered the current businesses, operations, financial condition and
earnings of Suburban Bancshares, as well as the future prospects of
Suburban Bancshares. In making its determination, Columbia Bancorp's
board of directors took into account the results of its due diligence
investigation of Suburban Bancshares;
. an increase in the total assets of Columbia Bancorp of 48.4% to $682.9
million, reflecting 41,000 households and businesses served;
. expansion geographically of Columbia Bancorp's branch network to include
Prince George's County and Montgomery County, Maryland, representing
markets with strong business and retail demographics and markets with
which Columbia Bancorp is familiar as a result of existing lending
activities. Columbia Bancorp will operate 23 banking offices, inclusive
of its branch facility in Baltimore County, Maryland scheduled to open
in January 2000;
. the opportunity to provide customers and prospects of Columbia Bancorp
and Suburban Bancshares a broader array of financial services. In
particular, Columbia Bancorp's consumer banking capabilities will
greatly enhance the current consumer banking capabilities of Suburban
Bancshares. In addition, Suburban Bancshares is a Preferred Lender of
the Small Business Administration. Columbia Bancorp currently does not
have that status;
. diversification of Columbia Bancorp's revenue and earnings mix. In
particular, the merger will increase Columbia Bancorp's commercial loan
portfolio and decrease the relative level of concentration in real
estate development and construction loans. Commercial loans will
increase from 24.6% of total loans (Columbia Bancorp as of September 30,
1999) to 30.7% (pro forma as of September 30, 1999) and real estate
development and construction loans will decrease from 32.2% of total
loans to 23.7%;
. the expectation that the combined company could realize significant
operating synergies, estimated at $1.1 million (pre-tax) annually by the
end of the fiscal year 2000; and
. the opinion of its financial advisor, Austin Financial, which indicated
that the conversion ratio, as of September 24, 1999, was fair from a
financial point of view to Columbia Bancorp's stockholders.
The foregoing discussion of the information and factors considered and given
weight by Columbia Bancorp's board of directors is not intended to be
exhaustive. In reaching the determination to approve and recommend approval and
adoption of the merger agreement, in view of the wide variety of factors
considered in connection with its evaluation thereof, the board of directors of
Columbia Bancorp did not assign any relative or specific weights to the
foregoing or other factors, and individual directors may have given different
weights to the various factors. The terms of the merger were the result of
arm's-length negotiations between representatives of Suburban Bancshares and
representatives of Columbia Bancorp. Based upon the consideration of the
foregoing factors, the Columbia Bancorp board of directors approved the merger
agreement and the transactions contemplated thereby as being advisable and in
the best interests of Columbia Bancorp and its stockholders.
The members of Columbia Bancorp's board of directors have unanimously
declared the merger advisable and recommend that Columbia Bancorp stockholders
vote in favor of the merger agreement and the merger.
Opinion of Columbia Bancorp's Financial Advisor
At the request of the Columbia Bancorp board, Austin Financial delivered a
written opinion to the board of directors on September 24, 1999, that the
merger consideration was fair to Columbia Bancorp's stockholders from a
financial point of view. The terms of the merger were the result of arm's-
length negotiations between representatives of Suburban Bancshares and
representatives of Columbia Bancorp.
The full text of the Austin Financial opinion is attached to this proxy
statement/prospectus as Appendix F. The full text of the Austin Financial
opinion includes the assumptions made by Austin Financial in arriving at its
opinion as well as certain qualifications to the opinion of Austin Financial.
Furthermore, the full text of the
39
<PAGE>
Austin Financial opinion describes the information reviewed by Austin
Financial and briefly describes the qualifications of Austin Financial to
render an opinion as to the fairness, from a financial point of view, of the
merger to Columbia Bancorp's stockholders. This summary of the Austin Financial
opinion is qualified in its entirety by reference to the full text of the
Austin Financial opinion.
Austin Financial believes that its analyses must be considered as a whole and
that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create a misleading or
incomplete view of the processes underlying such analyses and its opinion. The
following is a summary of the written report prepared by Austin Financial for
Columbia Bancorp's board of directors:
In connection with its opinion, Austin Financial, among other things:
. reviewed the Annual Report of Suburban Bancshares for the year ending
1998;
. reviewed the Consolidated Reports of Condition and Income of Suburban
Bancshares for the years ending 1994-1998 and for June 30, 1999;
. reviewed the Quarterly report on Form 10-Q of Suburban Bancshares for
June 30, 1999;
. reviewed the Uniform Bank Performance Report of Suburban for June 30,
1999;
. reviewed the investment security portfolio of Suburban Bancshares as of
August 31, 1999;
. reviewed the statement of financial condition of Suburban Bancshares as
of August 31, 1999;
. reviewed the rate sensitivity analysis data of Suburban Bancshares' loan
portfolio as of August 31, 1999;
. reviewed the interest rate schedule for Suburban Bancshares as of
September 14, 1999;
. reviewed Suburban Bancshares' stock price history from July 1, 1999 to
September 16, 1999;
. reviewed the trial balance of Suburban Bancshares as of August 31, 1999;
. reviewed the classified assets and loan watch list of Suburban as of
August 31, 1999;
. reviewed the nonaccrual loan list of Suburban Bancshares as of August
31, 1999;
. reviewed the depreciation projections for Suburban Bancshares for the
years 2000-2004;
. reviewed other internal financial and operating information which was
provided by Suburban Bancshares;
. reviewed publicly available information concerning certain other banks
and thrifts and bank and thrift holding companies, the trading markets
for their securities and the nature and terms of certain other merger
and acquisition transactions believed relevant to its inquiry;
. reviewed the reported price and trading activity for Columbia Bancorp's
common stock;
. reviewed certain financial and stock market information for Columbia
Bancorp and Suburban Bancshares with similar information of certain
other financial institutions whose securities are publicly traded;
. held discussions regarding the foregoing, as well as other matters
relevant to Austin Financial's inquiry, including the past and current
business operations and acquisitions, results of regulatory
examinations, financial condition, current loan quality and trends, and
future prospects of Suburban Bancshares with certain officers and
representatives of Suburban Bancshares;
. reviewed the merger agreement; and
. performed such other studies and analyses as Austin Financial considered
appropriate.
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<PAGE>
Discounted Cash Flow Analysis. Austin Financial performed a discounted cash
flow analysis for the Suburban Bancshares common stock on a stand-alone basis
from August 31, 2000 through August 31, 2004, assuming a minimum equity capital
to asset ratio of 6%. Austin Financial estimated the residual value of Suburban
Bancshares' common equity as of August 31, 2004. The present value per share
currently outstanding of Suburban Bancshares' common stock resulting from this
analysis was $3.21 (assuming 11,301,218 shares outstanding).
Adjusted Book Value Analysis. Austin Financial determined the adjusted book
value of Suburban Bancshares as an alternative valuation method. This analysis
determined that the fair market value per share currently outstanding of
Suburban Bancshares common stock was $2.71.
Selected Merger and Acquisition Transactions. Austin Financial analyzed
certain other mergers and acquisitions that have been completed over the past
eight months in Maryland as well as other nearby states (including the states
of Delaware, West Virginia, New Jersey, Pennsylvania and Virginia) involving
target financial institutions with assets under $700 million. Austin Financial
compared the multiple produced by this reorganization to the mean multiples for
the transactions analyzed. The mean transaction multiples are in the table
below:
<TABLE>
<CAPTION>
Selected Bank/Thrift Suburban
Acquisitions Bancshares
-------------------- ----------
<S> <C> <C>
Price/Earnings Multiple...................... 27.73 28.61
Price/Book Value Multiple.................... 197.42 161.11
</TABLE>
In reaching its opinion as to the fairness, Austin Financial applied a 75%
weighting to the discounted cash flow value and a 25% weighting to the adjusted
book value analyses. The weightings were based on Austin Financial's review of
the financial position, history and recent performance of Suburban Bancshares.
The sum of the weighted values or $3.08 per share equates to the fair market
value of Suburban Bancshares. Based on the terms of the merger agreement, a
closing price per share of $13.0625 for Columbia Bancorp's common stock on
September 23, 1999, would result in a $3.00 per share value for Suburban
Bancshares' stockholders. As a result of its consideration of the aggregate of
all factors present and analyses performed, Austin Financial reached the
conclusion, and opined, that the conversion ratio pursuant to the merger
agreement was fair to the stockholders of Columbia Bancorp from a financial
point of view.
Austin Financial's September 24, 1999 opinion was based solely upon the
information available to it and the economic, market and other circumstances as
they existed and could be evaluated as of the date its opinion was delivered;
events occurring after the date of its September 24, 1999 opinion could
materially affect the assumptions used in preparing its opinion. Austin
Financial has not undertaken to reaffirm and revise its September 24, 1999
opinion or otherwise comment upon any events occurring after that date.
Columbia Bancorp retained Austin Financial based upon its banking experience
and expertise. Austin Financial is a nationally recognized investment banking
firm specializing in the banking and financial services industry. Austin
Financial is continually engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, private placements and valuations
for estate, corporate and other purposes.
Columbia Bancorp's board of directors engaged Austin Financial to render an
opinion in connection with the board's discharge of its fiduciary obligations.
The terms of the merger were the result of arm's-length negotiations between
representatives of Suburban Bancshares and representatives of Columbia Bancorp.
Austin Financial has advised the board of directors that it does not believe
that any person, including a stockholder of Columbia Bancorp, other than the
board of directors has the legal right to rely upon the opinion for any claim
arising under state law and that, should any claim be brought against it, it
will raise this assertion as a defense. Resolution of this matter under state
law, however, will have no effect on the rights and responsibilities of any
person under the federal securities laws or on the rights and responsibilities
of Columbia Bancorp.
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<PAGE>
Pursuant to the terms of an engagement letter dated September 19, 1999,
Columbia Bancorp agreed to pay Austin Financial for acting as financial advisor
to the board of directors in connection with the merger a fee of $17,500, plus
expenses, payable in cash upon delivery of the opinion.
In addition, Columbia Bancorp has agreed to indemnify Austin Financial and
certain related persons against certain liabilities relating to or arising out
of its engagement, including certain liabilities under the federal securities
laws.
Interests of Persons in the Merger Other Than as Stockholders
Some officers and directors of Suburban Bancshares have interests in the
merger in addition to their interests as stockholders. The board of directors
of each of the companies was aware of these interests and took these interests
into account in approving the merger agreement and the transactions
contemplated thereby. These interests include, among other things:
. the appointment of Winfield Kelly, Albert Turner, Lawrence Schulman,
Vincent Palumbo and Kenneth Michael, who are currently serving as
directors of Suburban Bancshares, to the Columbia Bancorp board of
directors after the merger;
. execution of certain employment and services agreement with certain
members of Suburban Bancshares' management team, including without
limitation, Messrs. Kelly and Horvath;
. the continuation of the indemnification rights and liability insurance
of directors and officers of Suburban Bancshares.
Composition of Columbia Bancorp's Board Following the Merger. In connection
with the merger and the transactions contemplated thereby, Columbia Bancorp
agreed to cause its board of directors, consistent with their fiduciary duties
and in accordance with Maryland law, to appoint Messrs. Kelly, Turner,
Schulman, Palumbo and Michael, currently members of Suburban Bancshares' board
of directors, to become members of Columbia Bancorp's and Columbia Bank's board
of directors promptly after the effective time of the merger (as defined below
in "--Effective Time of the Merger"). Mr. Kelly will serve as Chairman of the
Board of Directors and as Chairman of the Board of Directors of Columbia Bank.
There are no agreements or understandings regarding the re-nomination or re-
election of any of the Suburban Bancshares' directors or directors of Columbia
Bancorp after the expiration of their initial terms. Messrs. Kelly and Turner
will be appointed to the class of directors of Columbia Bancorp serving until
2002, Messrs. Schulman and Palumbo to the class of directors of Columbia
Bancorp serving until 2001 and Mr. Michael to the class of directors of
Columbia Bancorp serving until 2000.
Employment and Services Agreements. Pursuant to a services agreement between
Columbia Bancorp and Winfield M. Kelly, Jr., Mr. Kelly will serve as the
Chairman of the board of directors of the Columbia Bancorp and as Chairman of
the board of directors of Columbia Bank. Under the services agreement Mr. Kelly
will receive (i) annual director's fees of $60,000, and (ii) certain employee
benefits. The term of the amended agreement will expire upon the expiration of
Mr. Kelly's initial term as a director of Columbia Bancorp and is subject to
automatic renewal upon his re-election as Chairman of the Board by the board of
directors. If the agreement is terminated by Columbia Bancorp without cause or
if Mr. Kelly terminates the agreement for "cause", Columbia Bancorp must pay
Mr. Kelly the sum of $120,000 as severance compensation. If Mr. Kelly's
agreement is terminated by Columbia Bancorp for "cause", he will be entitled
only to compensation earned prior to such termination. Upon the earlier of (i)
five years from the effective date of the merger or (ii) in the event the
agreement is terminated or not renewed as a result of any sale or exchange of
stock resulting in a change in a controlling interest of Columbia Bancorp or
Columbia Bank, Columbia Bancorp will pay Mr. Kelly $200,000 as additional
compensation.
Under the terms of his employment agreement, Stephen A. Horvath will serve as
the Executive Vice President--Washington Region of Columbia Bank with a minimum
annual base compensation of $150,000,
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<PAGE>
which is subject to normal periodic review, at least annually, for increases
based on the salary policies of Columbia Bank and Mr. Horvath's contribution to
Columbia Bank. The terms of Mr. Horvath's employment agreement continue until
the earlier of (i) the close of business on the date which is two years after
the date on which either party provides written notice of termination, other
than for "cause", as defined in the employment agreement, but no later than the
close of business on the sixty-fifth birthday of Mr. Horvath, or (ii) the date
on which Mr. Horvath's employment is otherwise terminated pursuant to the terms
of the employment agreement. Mr. Horvath is also entitled to participate in all
incentive and benefit programs offered by Columbia Bank. If Mr. Horvath's
employment is terminated, other than for "cause", Columbia Bank is required to
continue to provide benefits to him and pay his salary for two years. The
employment agreement also contains a non-competition provision which prohibits
Mr. Horvath during his employment with Columbia Bank or for a period of two
years following voluntary resignation or termination for "cause", from directly
or indirectly engaging in activities competitive with the business of Columbia
Bank.
The Agreement also provides that in the event of (i) termination, other than
for "cause", (ii) resignation due to a significant change in the nature or
scope of authority and duties, or (iii) resignation as a result of not having
been offered a new employment agreement with similar terms, 90 days prior to,
or within one year after, any "change in control" (as defined in the employment
agreement) of Columbia Bank, Mr. Horvath, within 15 days of termination, will
be paid a lump sum payment equal to two times the sum of his annual base
compensation and the average of the bonuses paid to him over the past two
years. In the event of voluntary resignation 90 days prior to, or within one
year after, any "change in control" of Columbia Bank, Mr. Horvath, within 15
days of resignation, will be paid a lump sum payment equal to the sum of his
annual base salary and the average of the bonuses paid to him over the past
three years. Any payments made in connection with a "change in control" of
Columbia Bank after Mr. Horvath reaches 63 years of age will be pro-rated to
age 65. In addition, if within one year of Mr. Horvath's employment he resigns
for any reason, Columbia Bank will pay him a lump sum of $150,000.
Form of the Merger
If (i) a majority of the holders of Suburban Bancshares common stock approve
the merger agreement, (ii) two-thirds of the Columbia Bancorp stockholders
approve the merger agreement, and (iii) all other conditions to the merger are
satisfied or waived, where permissible, Suburban Bancshares will be merged with
and into Columbia Bancorp, with Columbia Bancorp being the surviving
corporation after the merger. In the merger, each share of Suburban Bancshares
common stock will be exchanged for shares of Columbia Bancorp common stock.
Columbia Bancorp's current bylaws and charter will become those of the
surviving corporation. Columbia Bancorp and Suburban Bancshares anticipate that
the closing date will occur as promptly as practicable after the meetings. As
part of the merger, Columbia Bank and Suburban Bank entered into a bank plan of
merger. The bank plan of merger provides that Suburban Bank will merge into
Columbia Bank. We expect to complete the bank merger concurrently with the
completion of the merger.
Consideration for the Merger
The merger agreement provides that, at the effective time of the merger, each
share of Suburban Bancshares common stock will be exchanged for between 0.2338
and 0.2196 shares of Columbia Bancorp common stock. The conversion ratio is
based upon a formula which causes the average market value of shares of
Columbia Bancorp common stock exchanged for each share of Suburban Bancshares
common stock to be $3.00 per share when the average market value of Columbia
Bancorp common stock is between $12.81 and $13.68 per share. The conversion
ratio is fixed at 0.2196 if the average market value is above $13.68 per share
and at 0.2338 if it is below $12.81 per share. Former Suburban Bancshares
stockholders will hold between 35.5% and 36.9% of the outstanding shares of
Columbia Bancorp common stock after the merger, depending on the final
conversion ratio.
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In lieu of fractional shares of Columbia Bancorp common stock, Columbia
Bancorp will pay an amount in cash (rounded to the nearest cent) equal to the
product of (i) the fractional share interest to which a Suburban Bancshares
stockholder (after taking into account all shares of Suburban Bancshares common
stock held immediately prior to the effective time of the merger by such
stockholder) would otherwise be entitled and (ii) the average daily high and
low trade prices per share of Columbia Bancorp common stock for the 10 trading
days ending three trading days before the effective date.
At the effective time, each Suburban Bancshares stock option, whether vested
or unvested, is to be converted into an option to purchase shares of Columbia
Bancorp common stock, with the number of shares and options prices adjusted to
give effect to the conversion rate, and will no longer represent a right to
acquire shares of Suburban Bancshares common stock.
Effective Time of the Merger
The "effective date of the merger" will be upon the filing of articles of
merger with the Maryland Department of Assessments and Taxation and a
certificate of merger with the Secretary of State of the State of Delaware or
at such other time as specified in these filings. These filings will be made at
the same time as the closing of the merger.
Procedures for Exchange of Suburban Bancshares Stock Certificates
Promptly after the effective date, Columbia Bancorp will send transmittal
materials to each Suburban Bancshares stockholder for use in exchanging his or
her certificates representing shares of Suburban Bancshares common stock for
shares of Columbia Bancorp common stock. Suburban Bancshares stockholders
should not surrender their certificates for exchange until they receive the
letter of transmittal and instructions. The transfer agent will deliver
certificates for Columbia Bancorp common stock and/or a check for any
fractional share interests or dividends or distributions once it receives the
certificates representing a holder's shares of Suburban Bancshares common
stock. No party will be liable to any stockholder for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
If a Suburban Bancshares stockholder requests that any cash or certificates
representing shares of Columbia Bancorp common stock be paid to or issued in a
different name, then the certificate surrendered must be properly endorsed and
the Suburban Bancshares stockholder must show that any transfer taxes have been
paid or pay the amount of such taxes to the transfer agent. Columbia Bancorp
and the transfer agent may withhold funds from consideration to be paid to any
certificate holder as required by any tax law; however, the holder will be
deemed to have received the full consideration for purposes of the merger
agreement.
If you participate in Suburban Bancshares' Stock Purchase Plan, the Suburban
Bancshares shares held in your account under the plan will be converted to
shares of Columbia Bancorp common stock based on the conversion ratio. These
Columbia Bancorp shares will then be distributed to you after the effective
date of the merger. Columbia Bancorp does not maintain a stock purchase plan
and will terminate Suburban Bancshares' plan upon the effective date.
After the effective date, there will be no transfers of shares of Suburban
Bancshares common stock on Suburban Bancshares' stock transfer books. If
certificates representing shares of Suburban Bancshares common stock are
presented for transfer after the effective date, the transfer agent will cancel
and exchange them for certificates representing shares of Columbia Bancorp
common stock and a check for the amount to be paid for fractional shares of
Columbia Bancorp common stock, if any, and new certificates bearing the name of
the holder will be issues representing shares of Columbia Bancorp common stock.
You should not forward Suburban Bancshares common stock certificates to the
transfer agent until you receive a letter of transmittal.
Fractional Shares. Columbia Bancorp will not issue any fractional shares of
Columbia Bancorp common stock. Instead, a Suburban Bancshares stockholder who
would otherwise have received a fraction of a share of
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Columbia Bancorp common stock will receive cash, without interest. The amount
of cash received will be determined by multiplying the fraction of Columbia
Bancorp common stock the stockholder would have been entitled to receive by the
average daily high and low trade prices per share of Columbia Bancorp common
stock for the 10 trading days ending three trading days before the effective
date. Holders will not be entitled to dividends, voting rights or any other
rights as a stockholder with respect to any fractional shares.
Exchange of Suburban Bancshares Stock Options
At the effective date, each Suburban Bancshares stock option, whether vested
or unvested, is to be converted into an option to purchase shares of Columbia
Bancorp common stock and will no longer represent a right to acquire shares of
Suburban Bancshares common stock. These options will be adjusted so that (1)
the number of shares of Columbia Bancorp common stock purchasable upon exercise
of the Suburban Bancshares stock option will be equal to the number of shares
of Suburban Bancshares common stock that were purchasable under the Suburban
Bancshares stock option immediately prior to the effective time multiplied by
the conversion ratio, and rounded down to the nearest whole share, and (2) the
per share exercise price under each Suburban Bancshares stock option will be
adjusted by dividing the per share exercise price of the Suburban Bancshares
stock option by the conversion ratio, and rounding down to the nearest cent.
However, each Suburban Bancshares stock option which is intended to be an
"incentive stock option" will be adjusted in accordance with the requirements
of the Internal Revenue Code. Accordingly, with respect to any incentive stock
options, fractional shares will be rounded down to the nearest whole number of
shares and where necessary the per share exercise price will be rounded up to
the nearest cent. At or prior to the effective time, Columbia Bancorp must take
all corporate action necessary to reserve for issuance a sufficient number of
shares of Columbia Bancorp common stock for delivery upon exercise of the
Suburban Bancshares stock options assumed by it in accordance with the merger
agreement. As soon as practicable after the effective time, Columbia Bancorp
must file a registration statement in appropriate form covering the issuance of
Columbia Bancorp common stock subject to the Suburban Bancshares stock options
that are converted pursuant to the terms of the merger.
Anticipated Accounting Treatment
We intend for the merger to be accounted for as a pooling-of-interests in
accordance with generally accepted accounting principles. Columbia Bancorp will
restate, retroactively at the effective time of the merger, its consolidated
financial statements to include the assets, liabilities, stockholders' equity
and results of operations of Suburban Bancshares, subject to any adjustments
required to conform with the accounting policies and financial statement
classifications of the two companies, as if the companies had been combined at
the first date covered by the combined financial statements. In future
financial statements, the results of operations of the combined entity will
include the results of both Columbia Bancorp and Suburban Bancshares for the
entire fiscal year in which the merger occurs and all prior fiscal periods
presented therein.
The unaudited pro forma combined condensed financial data contained in this
proxy statement/prospectus with respect to Columbia Bancorp and Suburban
Bancshares has been prepared using the pooling-of-interests accounting method
to account for the merger.
Material Federal Income Tax Considerations
The following is a summary of the material U.S. federal income tax
consequences to holders of Suburban Bancshares common stock who hold the stock
as a "capital asset" within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended (the "Code"). Special tax consequences may be
applicable to particular classes of taxpayers, such as financial institutions,
insurance companies, tax-exempt organizations, broker-dealers, traders in
securities that elect to apply a mark-to-market method of accounting, persons
that hold Suburban Bancshares common stock as part of a hedge, straddle or
conversion transaction, persons who are not citizens or residents of the United
States and stockholders who acquired their shares of Suburban
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Bancshares common stock through the exercise of an employee stock option or
otherwise as compensation. The following represents general information only
and is based upon the Code, its legislative history, existing and proposed
regulations thereunder, published rulings and decisions, all as currently in
effect as of the date hereof, and all of which are subject to change, possibly
with retroactive effect. Tax considerations under state, local and foreign laws
are not addressed in this proxy statement/prospectus. All stockholders should
consult with their own tax advisors as to the particular tax consequences of
the merger to them, including the applicability and effect of the alternative
minimum tax and any state, local or foreign income and other tax laws and of
changes in those tax laws.
Tax Consequences of the Merger Generally. Neither Columbia Bancorp nor
Suburban Bancshares will be obligated to complete the merger unless they
receive an opinion of Columbia Bancorp's counsel, Piper Marbury Rudnick & Wolfe
LLP, dated the closing date of the merger, to the effect that, on the basis of
facts, representations and assumptions set forth in that opinion, the merger
will be treated as a reorganization within the meaning of Section 368(a) of the
Code and that Columbia Bancorp and Suburban Bancshares will each be a party to
the reorganization under 368(b) of the Code. This tax opinion will not be
binding on the Internal Revenue Service and neither Columbia Bancorp nor
Suburban Bancshares intends to request any ruling from the Internal Revenue
Service as to the U.S. federal income tax consequences of the merger.
The above opinion of counsel, which will be delivered on the effective date,
is filed as an exhibit to the registration statement. Piper Marbury Rudnick &
Wolfe LLP will deliver their opinion on the basis of facts, representations and
assumptions set forth in their opinion that are consistent with the state of
facts expected to exist at the effective time of the merger. In rendering its
opinion, Piper Marbury Rudnick & Wolfe LLP has required and relied upon certain
representations contained in certificates of officers of Columbia Bancorp and
Suburban Bancshares. Based on this opinion, for U.S. federal income tax
purposes (1) no gain or loss will be recognized by Columbia Bancorp or Suburban
Bancshares pursuant to the merger and (2) a stockholder of Suburban Bancshares
who receives solely Columbia Bancorp common stock in exchange for its shares of
Suburban Bancshares common stock in the merger will not recognize any gain or
loss (except, as discussed below, with respect to cash received instead of
fractional shares or dissenters shares of Columbia Bancorp common stock).
Exchange of Suburban Bancshares Common Stock Solely for Columbia Bancorp
Common Stock. A stockholder of Suburban Bancshares who receives solely Columbia
Bancorp common stock in exchange for its shares of Suburban Bancshares common
stock in the merger generally will not recognize any gain or loss upon the
exchange. The stockholder may recognize gain or loss, however, with respect to
cash received instead of a fractional share of Suburban Bancshares common
stock, as discussed below. The aggregate adjusted tax basis of the shares of
Columbia Bancorp common stock received in the exchange (including fractional
shares deemed received and redeemed as described below) will be equal to the
aggregate adjusted tax basis of the shares surrendered, and the holding period
of the Columbia Bancorp common stock (including fractional shares deemed
received and redeemed as described below) will include the holding period of
the shares of Suburban Bancshares common stock surrendered.
Cash Received Instead of a Fractional Interest of Columbia Bancorp Common
Stock. A stockholder of Suburban Bancshares who receives cash instead of a
fractional share of Columbia Bancorp common stock will be treated as having
received the fractional share pursuant to the merger and then as having
exchanged the fractional share for cash in a redemption by Columbia Bancorp
subject to Section 302 of the Code. This deemed redemption will be treated as a
sale of the fractional share, provided that it is not "essentially equivalent
to a dividend" or is "substantially disproportionate" with respect to the
Suburban Bancshares stockholder. If the deemed redemption is treated as a sale
of a fractional share, a Suburban Bancshares stockholder will recognize capital
gain or loss equal to the difference between the amount of cash received and
the portion of the basis of the shares of Columbia Bancorp common stock
allocable to the fractional interest. This capital gain or loss will be long-
term capital gain or loss if, as of the date of the exchange, the holding
period for the shares is greater than one year.
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Backup Withholding and Information Reporting. Payments of cash to a holder
surrendering shares of Suburban Bancshares common stock will be subject to
information reporting and "backup" withholding at a rate of 31% of the cash
payable to the holder, unless the holder furnishes its taxpayer identification
number in the manner prescribed in applicable Treasury Regulations, certifies
that number is correct, certifies as to no loss of exemption from backup
withholding and meets certain other conditions. Any amounts withheld from
payments to a holder under the backup withholding rules will be allowed as a
refund or credit against the holder's U.S. federal income tax liability,
provided the required information is furnished to the Internal Revenue Service.
Tax Consequences to Dissenting Stockholders. If a Suburban Bancshares
stockholder dissents to the merger and receives solely cash in exchange for its
shares of Suburban Bancshares common stock, the cash received will be treated
as having been received by them as a distribution in redemption of its shares
of Suburban Bancshares common stock, subject to the provisions and limitations
of Section 302 of the Code. See "--Appraisal Rights." Unless the redemption is
treated as a dividend under Section 302(d) of the Code, a stockholder will
recognize gain or loss measured by the difference between the amount of cash
received and the tax basis of the shares of Suburban Bancshares common stock
redeemed. This gain or loss will be capital gain or loss if the shares of
Suburban Bancshares common stock was held by the stockholder as a capital asset
at the time of the merger. If, on the other hand, the redemption is treated as
a dividend under Section 302(d) of the Code, the full amount of cash received
by the stockholder will be treated as ordinary income to the extent of Suburban
Bancshares's current or accumulated earnings and profits.
Under the tests of Section 302 of the Code, the redemption of a dissenting
Suburban Bancshares stockholder's Suburban Bancshares common stock generally
will be treated as a dividend unless the redemption (i) results in a "complete
termination" of the stockholder's direct or indirect stock interest in Columbia
Bancorp under Section 302(b)(3) of the Code, (ii) is "substantially
disproportionate" with respect to the stockholder under Section 302(b)(2) of
the Code or (iii) is "not essentially equivalent to a dividend" with respect to
the stockholder under Section 302(b)(1) of the Code.
In order to determine whether there has been a complete termination, a
substantially disproportionate redemption or a redemption not essentially
equivalent to a dividend with respect to a dissenting Suburban Bancshares
stockholder, it is necessary to consider the common stock owned by persons from
whom ownership is attributed to such stockholder under the rules of Section 318
of the Code. Under Section 318 of the Code, a stockholder is considered to own
shares that are directly or indirectly owned by certain members of their family
or by certain trusts, partnerships or corporations in which they have an
ownership or beneficial interest. A stockholder is also considered to own any
shares underlying exercisable options he holds. In some cases, a dissenting
Suburban Bancshares stockholder may be deemed to own constructively common
stock held by persons who do not exercise appraisal rights.
Regulatory Approvals Required
We have agreed to use each of our reasonable best efforts to obtain all
regulatory approvals required to consummate the transactions contemplated by
the merger agreement, which include approval from the FDIC, the Board of
Governors of the Federal Reserve System and state and other regulatory
authorities, and will file all appropriate applications and notifications. The
merger and the bank merger cannot proceed in the absence of these regulatory
approvals. We cannot assure you that we will obtain these regulatory approvals,
and, if we are able to obtain them, we cannot assure you when we will receive
these approvals or that there will not be litigation challenging these
approvals. Likewise we cannot assure you that the United States Department of
Justice or any state attorney general will not attempt to challenge the merger
or bank merger on antitrust grounds, or, if such a challenge is made, we cannot
assure you as to its result.
We are not aware of any other material governmental approvals or actions that
are required prior to the parties' consummation of the merger other than those
described below. We presently contemplate that if any
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additional governmental approvals or actions are required, we will seek such
approvals or actions. We cannot assure you, however, that we will be able to
obtain any of these additional approvals or actions.
Federal Deposit Insurance Corporation. The acquisition of Suburban Bancshares
as contemplated in this proxy statement/prospectus is subject to approval of
the FDIC pursuant to the Bank Merger Act (12 U.S.C. Sec. 1828 et seq.) ("BMA").
The BMA requires that the FDIC consider, among other factors, the financial and
managerial resources and future prospects of the existing and proposed
organizations and the convenience and needs of the communities to be served. In
considering financial and managerial factors, the FDIC will evaluate, among
other things, the adequacy of the capital of the parties to the transaction. In
addition, the FDIC will assess the degree to which the parties are taking
appropriate steps to assure that their electronic data processing systems and
those of their vendors are Year 2000 compliant and their plans for ensuring
Year 2000 readiness of the resulting organization.
The FDIC is prohibited from approving any transaction if it would result in a
monopoly or would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any part of
the United States or if its effect in any section of the United States would be
substantially to lessen competition, or to tend to create a monopoly, or result
in a restraint of trade, unless the FDIC finds that the anti-competitive
effects of the transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served.
In addition, the FDIC must take into account the record of performance of the
existing and proposed institutions under the Community Reinvestment Act of 1977
in meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by such institutions. Applicable
regulations also require publication of notice of the application for approval
of the acquisition and provide an opportunity for the public to comment on the
application in writing and to request a hearing. Subject to certain exceptions,
the BMA provides that no bank merger may be completed until the 15th day after
approval, during which time the United States Department of Justice may
challenge the Reorganization Agreement on antitrust grounds. Columbia Bancorp
will submit an application to the FDIC for approval to complete the merger.
Federal Reserve Board. In view of the FDIC's consideration under the BMA of
the bank merger, the Federal Reserve Board permits an abbreviated application
for prior approval of the merger under the Bank Holding Company Act and the
Federal Reserve Board's Regulation Y. Columbia Bancorp will file the
abbreviated application with the Federal Reserve Board.
Suburban Bancshares' and Columbia Bancorp's rights to exercise their
respective options under the option agreements also require the prior approval
of the Federal Reserve Board, to the extent that the exercise of their options
under the option agreements would cause Suburban Bancshares or Columbia Bancorp
to own more than 5% of the outstanding shares of the other. Each of Columbia
Bancorp and Suburban Bancshares intends to file the required application and
notifications with the Federal Reserve Board for approval of the exercise of
its option under the relevant Option Agreement prior to any exercise of any
option under the relevant Option Agreement. In considering whether to approve
Suburban Bancshares' or Columbia Bancorp's right to exercise its respective
option, the Federal Reserve Board would generally apply the same statutory
criteria it would apply to its consideration of approval of the merger.
State Regulatory Authorities. The merger and the bank merger are also subject
to the approval the Maryland Commissioner of Financial Regulation.
Nasdaq Stock Market Listing
It is a condition to the merger that any shares of Columbia Bancorp common
stock issuable in the merger be authorized for listing on The Nasdaq Stock
Market, subject to official notice of issuance.
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Appraisal Rights
Columbia Bancorp stockholders do not have dissenters' appraisal rights in
connection with the merger.
If the merger is completed, Suburban Bancshares stockholders who do not vote
for the adoption of the merger agreement and who otherwise comply with the
provisions of Section 262 of the Delaware General Corporation Law summarized
below will be entitled to an appraisal by the Delaware Court of Chancery of the
"fair value" of their shares of Suburban Bancshares common stock. Columbia
Bancorp has the right to terminate the merger agreement and be released from
all obligations if, immediately prior to the effective date, the number of
Suburban Bancshares stockholders who have demanded appraisal rights and not
withdrawn those demands jeopardizes the qualification of the merger for
pooling-of-interests accounting treatment and KPMG LLP fails or refuses to
deliver a letter to Columbia Bancorp to that effect.
To perfect their appraisal rights, Suburban Bancshares stockholders must
strictly comply with the procedures in Section 262. Failure to strictly comply
with these procedures will result in the loss of appraisal rights. Holders of
options to acquire shares of Suburban Bancshares common stock will not be
entitled to appraisal rights with respect their options.
THE FOLLOWING IS A SUMMARY OF THE MATERIAL ASPECTS OF SECTION 262. THE FULL
TEXT OF SECTION 262 IS REPRINTED AS APPENDIX H TO THIS JOINT/PROXY STATEMENT
PROSPECTUS. YOU SHOULD READ APPENDIX H IN ITS ENTIRETY.
To perfect appraisal rights under Section 262 with respect to his or her
shares of Suburban Bancshares common stock, a Suburban Bancshares stockholder:
. must not vote for the adoption of the merger agreement; and
. must deliver to Suburban Bancshares a written demand for appraisal of
his shares of Suburban Bancshares common stock before the vote on the
proposal to adopt the merger agreement.
In order not to vote in favor of the adoption of the merger agreement, a
Suburban Bancshares stockholder must either:
. not return a proxy card and not vote in person in favor of the adoption
of the merger agreement;
. return a proxy card with the "Against" or "Abstain" box checked;
. vote in person against the adoption of the merger agreement; or
. register in person an abstention from the proposal to adopt the merger
agreement.
A written demand for appraisal must reasonably inform Suburban Bancshares of
the identity of the Suburban Bancshares stockholder and his or her intent to
demand appraisal of his or her shares of Suburban Bancshares common stock. This
written demand for appraisal must be separate from any proxy or vote in person
against or abstaining from the adoption of the merger agreement. A proxy or
vote in person against the adoption of the merger agreement will not, in and of
itself, constitute a demand for appraisal.
A Suburban Bancshares stockholder wishing to assert appraisal rights must be
the record holder of his or her shares of Suburban Bancshares common stock on
the date the written demand for appraisal is made. Only a holder of record of
shares of Suburban Bancshares common stock is entitled to assert appraisal
rights for the shares of Suburban Bancshares common stock registered in that
holder's name. Moreover, to preserve his or her appraisal rights, a Suburban
Bancshares stockholder must continue to hold his or her shares through the
effective time. Accordingly, a Suburban Bancshares stockholder who is the
record holder of shares of Suburban Bancshares common stock on the date the
written demand for appraisal is made, but who subsequently transfers shares
prior to the effective time, will lose any right to appraisal in respect of
those shares.
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ALL WRITTEN DEMANDS FOR APPRAISAL MUST BE MAILED OR DELIVERED TO:
SUBURBAN BANCSHARES, INC.
7505 GREENWAY CENTER DRIVE
GREENBELT, MARYLAND 20768
ATTENTION: CORPORATE SECRETARY
OR SHOULD BE DELIVERED TO THE SECRETARY AT THE SUBURBAN BANCSHARES SPECIAL
MEETING PRIOR TO THE VOTE ON THE MERGER AGREEMENT.
Within ten days after the effective date, Columbia Bancorp, as successor to
Suburban Bancshares, will notify each Suburban Bancshares stockholder who
properly delivered to Suburban Bancshares a written demand for appraisal and
has not voted for the adoption of the merger agreement, of the effective time.
Within 120 days after the effective date, any Suburban Bancshares stockholder
who has complied with the provisions will be entitled, within ten days after
written request, to receive from Columbia Bancorp, as successor to Suburban
Bancshares, a statement of the aggregate number of shares of Suburban
Bancshares common stock not voted in favor of the adoption of the merger
agreement and with respect to which demands for appraisal were received, and
the number of holders of those shares.
Within 120 days after the effective date, Columbia Bancorp, as successor to
Suburban Bancshares, or any Suburban Bancshares stockholder who has complied
with the above requirements may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of shares of Suburban
Bancshares common stock. If no such petition is filed, appraisal rights will be
lost for all Suburban Bancshares stockholders who had previously demanded
appraisal of their shares. Suburban Bancshares is not under any obligation, and
has no present intention, to file a petition with respect to appraisal of the
value of the shares of Suburban Bancshares common stock.
Any Suburban Bancshares stockholder who properly demands appraisal of his or
her shares of Suburban Bancshares common stock but fails to perfect, or
effectively withdraws or loses, his or her right to appraisal, will then have
only the right to receive shares of Columbia Bancorp common stock for his or
her shares in accordance with the terms of the merger.
If a petition for an appraisal is timely filed and a copy served upon
Columbia Bancorp, as successor to Suburban Bancshares, Columbia Bancorp will
then be obligated within 20 days to file with the Delaware Register in Chancery
a list containing the names and addresses of the Suburban Bancshares
stockholders who have demanded appraisal of their shares of Suburban Bancshares
common stock and with whom agreements as to the value of their shares have not
been reached. After notice to the Suburban Bancshares stockholders as required
by the Delaware Court of Chancery, the Delaware Court of Chancery may conduct a
hearing on such petition to determine those Suburban Bancshares stockholders
entitled to appraisal rights. The Delaware Court of Chancery may require the
Suburban Bancshares stockholders who demanded appraisal rights of their shares
of Suburban Bancshares common stock to submit their stock certificates to the
Delaware Register in Chancery for notation of the pendency of the appraisal
proceeding. If any Suburban Bancshares stockholder fails to comply, the
Delaware Court of Chancery may dismiss the proceedings as to that Suburban
Bancshares stockholder.
After determining which Suburban Bancshares stockholders are entitled to
appraisal, the Delaware Court of Chancery will appraise the "fair value" of
their shares of Suburban Bancshares common stock, excluding any element of
value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest, if any, to be paid upon the amount determined to
be the fair value. Suburban Bancshares stockholders considering seeking
appraisal should be aware that the fair value of their shares as determined
under Section 262 could be more than, the same as or less than the
consideration they are entitled to receive under the terms of the merger if
they did not seek appraisal of their shares of Suburban Bancshares common
stock, and that investment banking opinions as to fairness from a financial
point of view are not necessarily opinions as to fair value under Section 262.
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The costs of an appraisal action may be determined by the Delaware Court of
Chancery and charged to the parties as the Delaware Court of Chancery deems
equitable. The Delaware Court of Chancery may also order that all or a portion
of the expenses incurred by any Suburban Bancshares stockholder in connection
with an appraisal be charged pro rata against the value of all of the shares
entitled to appraisal. In the absence of such determination or assessment, each
party bears its own expenses.
At any time within 60 days after the effective time, any Suburban Bancshares
stockholder will have the right to withdraw his or her demand for appraisal and
to accept shares of Columbia Bancorp common stock for shares of Suburban
Bancshares common stock in accordance with the terms of the merger. After this
period, a Suburban Bancshares stockholder may withdraw his or her demand for
appraisal only with the written consent of Suburban Bancshares. No petition
timely filed in the Delaware Court of Chancery demanding appraisal will be
dismissed as to any Suburban Bancshares stockholder without the approval of the
Delaware Court of Chancery, which may be conditioned on terms the Delaware
Court of Chancery deems just.
Any Suburban Bancshares stockholder who has demanded and perfected an
appraisal in compliance with Section 262 will not, after the effective time of
the merger, be entitled to vote his or her shares for any purpose or be
entitled to the payment of dividends, except dividends payable to Suburban
Bancshares stockholders prior to the effective time.
Resale of Columbia Bancorp Common Shares After the Merger
Columbia Bancorp common stock issued pursuant to the merger will not be
subject to any restrictions on transfer arising under the Securities Act of
1933, as amended (the "Securities Act"), except for shares issued to any
Suburban Bancshares stockholder who may be deemed to be an "affiliate" of
Suburban Bancshares for purposes of Rule 145 under the Securities Act.
This proxy statement/prospectus does not cover resales of shares of Columbia
Bancorp common stock received by any person who may be deemed to be such an
affiliate.
Persons who may be deemed to be affiliates of Suburban Bancshares generally
include individuals or entities that control, are controlled by, or are under
common control with Suburban Bancshares, and generally include the executive
officers and directors of Suburban Bancshares and entities controlled by
directors of Suburban Bancshares. Affiliates may not sell their shares of
Columbia Bancorp common stock acquired in connection with the merger, except
pursuant to an effective registration under the Securities Act covering such
shares or in compliance with Rule 145 under the Securities Act (or Rule 144
under the Securities Act in the case of persons who become affiliates of
Columbia Bancorp) or another applicable exemption from the registration
requirements of the Securities Act. In general, Rule 145 under the Securities
Act provides that, for one year following the effective time of the merger, an
affiliate (together with certain related persons) would be entitled to sell
shares of Columbia Bancorp common stock acquired in connection with the merger
only through unsolicited "broker transactions" or in transactions directly with
a "market maker," as such terms are defined in Rule 144 under the Securities
Act. Additionally, the number of shares to be sold by an affiliate (together
with certain related persons and certain persons acting in concert) within any
three-month period for purposes of Rule 145 under the Securities Act may not
exceed the greater of 1% of the outstanding shares of Columbia Bancorp common
stock or the average weekly trading volume of such shares during the four
calendar weeks preceding such sale (excluding such persons trading). Rule 145
under the Securities Act will remain available to affiliates if Columbia
Bancorp timely files reports under the Exchange Act with the SEC. One year
after the effective time of the merger, an affiliate will be able to sell such
shares of Columbia Bancorp common stock without being subject to such manner of
sale or volume limitations, provided that Columbia Bancorp is current with its
Exchange Act informational filings and such affiliate is not then an affiliate
of Columbia Bancorp. Two years after the effective time of the merger, an
affiliate will be able to sell such shares of Columbia Bancorp common stock
without any restrictions so long as such affiliate had not been an affiliate of
Columbia Bancorp for at least three months prior to the date of such sale.
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the merger agreement.
This summary is qualified in its entirety by reference to the merger agreement,
which is incorporated by reference in its entirety and attached to this proxy
statement/prospectus as Appendix A. Columbia Bancorp and Suburban Bancshares
stockholders are urged to read the merger agreement in its entirety for a more
complete description of the merger.
General
Pursuant to the merger agreement, as amended, Suburban Bancshares will merge
with and into Columbia Bancorp, with Columbia Bancorp surviving the merger. The
stockholders of Suburban Bancshares will receive the consideration described
below. The effective date of the merger will occur following the satisfaction
or waiver, where permissible, of all conditions to completion of the merger
specified in the merger agreement. Columbia Bancorp and Suburban Bancshares may
also mutually agree on a different date. We expect that the effective date of
the merger will occur on March 1, 2000.
As part of the merger, Columbia Bancorp and Suburban Bancshares will cause
Columbia Bank and Suburban Bank to enter into a bank plan of merger. The bank
plan of merger provides that Suburban Bank will merge with and into Columbia
Bank, with Columbia Bank surviving. We expect to complete the bank merger
concurrently with completion of the merger.
On or prior to the effective date of the merger, we will file articles of
merger with the Maryland State Department of Assessments and Taxation and a
certificate of merger with the Delaware Secretary of State, and each such
document will set forth the effective date of the merger. Either Columbia
Bancorp or Suburban Bancshares can terminate the merger agreement if, among
other reasons, the merger does not occur on or before June 30, 2000 and the
terminating party has not breached or failed to perform any of its obligations
under the merger agreement. See "--Termination" on page 56.
Conversion Ratios; Fractional Shares
At the time the merger becomes effective, each share of issued and
outstanding Suburban Bancshares common stock, except for shares of dissenting
stockholders, will be canceled and cease to be outstanding and will be
exchanged for between 0.2338 and 0.2196 shares of Columbia Bancorp common
stock. The conversion ratio is based upon a formula which causes the average
market value of shares of Columbia Bancorp common stock exchanged for each
share of Suburban Bancshares common stock to be $3.00 per share when the
average market value of Columbia Bancorp common stock is between $12.81 and
$13.68 per share. The conversion ratio is fixed at 0.2196 if the average market
value is above $13.68 per share and at 0.2338 if it is below $12.81 per share.
No fractional shares will be issued. Instead, stockholders will be paid in cash
the amount equal to the fractional share multiplied by the average daily high
and low trade prices per share of Columbia Bancorp common stock for the 10
trading days ending three trading days before the effective date.
Certain Representations and Warranties
The merger agreement contains various representations and warranties made by
Columbia Bancorp and Suburban Bancshares, some of which are qualified as to
materiality, regarding the following matters, among others:
. corporate existence, organization, standing, authority and
capitalization;
. ownership of the shares of capital stock of its subsidiaries, and the
corporate existence, organization, standing and authority of its
subsidiaries;
. that the merger agreement and the related transactions will not result
in a violation of Columbia Bancorp's or Suburban Bancshares'
organizational documents or contracts to which Columbia Bancorp or
Suburban Bancshares, or any of their subsidiaries, is a party, or
violate any law, rule or regulation;
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. consistency of financial statements with generally accepted accounting
principles;
. the filing of tax returns and payment of taxes;
. absences of undisclosed liabilities;
. absence of certain material adverse events, changes or effects;
. accuracy of information supplied by Columbia Bancorp and Suburban
Bancshares in connection with the merger agreement and related
documents;
. quality of title to properties and assets;
. material contracts;
. absence of pending or threatened suits, actions or other proceedings;
. absence of material environmental violations, actions or liabilities;
. labor matters;
. retirement and other employee plans and matters relating to the Employee
Retirement Income Security Act of 1974;
. transactions with affiliates;
. consents and regulatory approvals necessary to complete the merger;
. compliance with laws and required licenses and permits;
. corporate power and authority to execute, deliver and perform its
obligations under the merger agreement, and to consummate the merger,
subject only to stockholder approval;
. maintenance of adequate insurance and financial institutions bonds;
. no claims for brokerage commissions or advisory fees, except to the
financial advisors of Columbia Bancorp and Suburban Bancshares in
connection with the merger; and
. year 2000 compliance.
The representations and warranties of Suburban Bancshares and Columbia
Bancorp will not be deemed waived or otherwise affected by any investigation
made by any party and do not survive beyond the effective time of the merger.
Certain Covenants and Agreements
Conduct of Business Pending Merger. Pursuant to the merger agreement,
Suburban Bancshares and Columbia Bancorp have each agreed (except as permitted
by the other party or as otherwise expressly contemplated by the merger
agreement) to conduct their respective businesses in the ordinary course
consistent with past practice and that, pending the merger, they will not, nor
will they permit any of their subsidiaries to:
. amend their respective charters or bylaws or comparable documents of any
subsidiary;
. change their authorized, issued or outstanding capital stock, except for
outstanding stock options which are currently exercisable;
. declare any cash dividend on its capital stock, except that Columbia
Bancorp may declare a dividend that does not exceed $0.10 per share;
. increase the compensation or benefits of any employees, outside the
ordinary course of its business and consistent with past practices or
enter into or modify any employment contract with any of its officers or
employees;
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. make any change in any of their accounting policies or practices or take
any action that would prevent Columbia Bancorp from accounting for the
merger as a pooling-of-interests;
. incur any liability for borrowed money except extensions of credit other
than in the ordinary course of business, provided the extensions of
credit are at a variable rate with maturities of one year or less;
. enter into any material contract, commitment or transaction outside the
ordinary course of business and consistent with past practice; or
. enter into any contract with respect to the foregoing or authorize any
of, or commit or agree to take any of, the foregoing actions.
Pending the Effective Date, Columbia Bancorp and Suburban Bancshares have
agreed to:
. use commercially reasonable efforts to preserve their business
organizations and assets and to keep available the services of their
full-time officers and employees;
. continue in effect the present method of conducting their businesses;
and
. consult with the other party as to making decisions or actions in
matters other than those in the ordinary course of business, or
involving any capital expenditures in excess of $25,000.
Columbia Bancorp and Suburban Bancshares have jointly agreed:
. to submit the merger agreement and related transactions to their
stockholders for approval;
. to use their best efforts to obtain all required regulatory approvals
and required third party consents;
. to deliver to the other copies of all securities documents when filed;
. to use their best efforts to prevent their agents and representatives
from engaging in any merger, acquisition or similar transaction;
. to cooperate with each other and use their best efforts to identify
those persons who may be deemed to be affiliates of Columbia Bancorp and
Suburban Bancshares;
. to take all actions necessary to complete the transactions contemplated
by the merger agreement;
. to use their best efforts not to permit any of their officers,
directors, employees or other representatives to take any action that
would prevent Columbia Bancorp from treating the merger as a pooling-of-
interests for financial reporting purposes;
. to file all tax returns and pay all taxes when due; and
. to agree upon the form and substance of any press release or public
disclosure related to the merger.
No Solicitation. The merger agreement provides that, except to the extent
legally required by the fiduciary obligations of their boards of directors
prior to the effective time of the merger, neither Suburban Bancshares nor
Columbia Bancorp, nor any of their respective subsidiaries will, or will permit
any of their agents or representatives to directly or indirectly, solicit or
initiate any inquiries or the making of any offer or proposal with respect to:
. any merger, consolidation, or other business combination involving
Suburban Bancshares, Columbia Bancorp or any of their respective
subsidiaries; or
. the acquisition of all or any significant part of the assets or capital
stock of Suburban Bancshares, Columbia Bancorp or any of their
respective subsidiaries.
Those Columbia Bancorp and Suburban Bancshares stockholders who are party to
the support agreements have also agreed that, in their capacity as
stockholders, they will not directly or indirectly solicit, initiate or
encourage any inquiries or proposals or participate in any discussions or
negotiations with anyone concerning any merger, acquisition or similar
transaction.
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Composition of the Board of Directors of Columbia Bancorp and Columbia Bank
Following the Merger. In connection with the merger, Columbia Bancorp has
agreed to increase its board of directors by five members at the effective date
and to cause its board of directors, consistent with their fiduciary duties and
in accordance with Maryland law, to appoint Winfield M. Kelly, Jr., Albert W.
Turner, Lawrence A. Schulman, Vincent D. Palumbo, and Kenneth H. Michael, each
of whom are currently members of Suburban Bancshares' board of directors, to
become members of Columbia Bancorp's board of directors promptly after the
effective time of the merger. The other 16 directors will be those persons
serving as directors of Columbia Bancorp at the time of the effective date and
will continue to serve in their respective classes. Also at the effective date,
the board of directors of Columbia Bank will be increased by five members. All
of the directors of Columbia Bank immediately prior to the effective date will
continue as directors, and the five directors from Suburban Bancshares
mentioned above will also become directors of Columbia Bank.
Conditions to the Merger
Our obligation to effect the merger is subject to the satisfaction or waiver
(if permitted by law), at or prior to the merger, of the following conditions,
among others:
Representations, Warranties and Covenants. Each of the representations and
warranties of the other party contained in the merger agreement must be true
and correct, as of the date of the merger agreement, and, except to the extent
such representations and warranties speak as of an earlier date, as of the
effective time of the merger as though they were made at the effective time of
the merger. Columbia Bancorp must receive an officers' certificate to that
effect. Suburban Bancshares will receive a similar certificate signed on
Columbia Bancorp's behalf. The other party must have performed in all material
respects all of its obligations required to be performed under the merger
agreement prior to the effective time of the merger. Columbia Bancorp will
receive an officers' certificate to that effect. Suburban Bancshares will
receive a similar certificate signed on Columbia Bancorp's behalf.
Material Adverse Change. Any materially adverse change in the condition,
results of operations, assets liabilities or business of the other party and
its subsidiaries cannot have occurred since December 31, 1998. A material
adverse change will include, without limitation, (i) a reduction of
stockholders' equity to less than $19,366,000 in the case of Suburban
Bancshares and $38,000,000 in the case of Columbia Bancorp, (ii) a decrease in
the net income for calendar year 1999 and through the effective date to less
than $625,000 in the case of Suburban Bancshares and $3,400,000 in the case of
Columbia Bancorp, or (iii) an increase in the ratio of non-performing assets to
total assets to above 1.5%.
Regulatory Approvals. We must obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental
authorities and other third parties that are necessary in connection with the
merger as contemplated by the merger agreement. These conditions may be waived,
except where failure to obtain them would result in a materially adverse effect
on Columbia Bancorp or Suburban Bancshares, or would so materially and
adversely affect the economic or business benefits of the merger that Columbia
Bancorp would not have entered into the proposed merger.
Stockholder Approval. Stockholders holding a majority of the issued and
outstanding voting stock of Suburban Bancshares and stockholders holding at
least two-thirds of the issued and outstanding voting stock of Columbia Bancorp
must approve and adopt the merger agreement and approve the merger. Also, the
sole stockholder of each of Suburban Bank and Columbia Bank must approve the
merger of those two banks as contemplated by the merger agreement.
Effectiveness of Registration Statement. The Registration Statement on Form
S-4 (of which this proxy statement/prospectus is a part) must become effective
in accordance with the provisions of the Securities Act. The SEC must not have
issued any stop order suspending the effectiveness of the Registration
Statement, and the SEC must not have initiated proceedings for that purpose.
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Nasdaq Listing. The shares of Columbia Bancorp common stock issued in
connection with the merger must be approved for listing on The Nasdaq Stock
Market, subject to official notice of issuance.
No Injunctions. No action or proceeding challenging the merger in connection
with the mergers can be threatened or pending. No order issued by any
governmental entity having jurisdiction over Columbia Bancorp, Suburban
Bancshares, or any of their subsidiaries that materially restricts, prevents or
prohibits the consummation of the merger can be in effect or pending.
Consents. Suburban Bancshares and Columbia Bancorp must have obtained the
consent, approval or waiver of each entity whose consent or approval is
required in connection with the transactions contemplated by the merger
agreement under any contract, except where the failure to obtain this consent
would not reasonably be expected, to have a material adverse effect on Suburban
Bancshares, Columbia Bancorp or the combined company.
Tax Opinion. Columbia Bancorp and Suburban Bancshares must have received an
opinion from Columbia Bancorp's tax counsel that, among other things, the
merger will qualify for United States federal income tax purposes as a tax-free
reorganization.
Fairness Opinion. Each of Columbia Bancorp and Suburban Bancshares have
received an opinion from its financial advisor that the issuance of shares of
Columbia Bancorp common stock in the merger will be fair from a financial point
of view to the Columbia Bancorp stockholders or the Suburban Bancshares
stockholders, as the case may be.
Legal Opinions. Counsel for Columbia Bancorp and Suburban Bancshares must
have delivered certain legal opinions regarding each of their authorizations to
execute the merger agreement and other documents.
Pooling Letter. Columbia Bancorp must have received a letter from KPMG LLP
stating that the mergers will qualify for pooling-of-interests accounting
specified in Accounting Principles Board Opinion No. 16 if the mergers are
completed according to the merger agreement. In rendering this letter, KPMG LLP
requires delivery of and will rely upon certain representation letters
delivered by Columbia Bancorp and Suburban Bancshares and a pooling letter
delivered by Stegman & Company.
At any time prior to the effective time of the merger, each of Columbia
Bancorp and Suburban Bancshares may waive the compliance with any conditions
that may legally be waived. However, we may not waive conditions that are
required by law to complete the merger, including (i) the requirement for
stockholder approval, (ii) the requirement for regulatory approvals, and (iii)
the requirement that the registration statement be effective on the closing
date. Furthermore, after approval of the merger agreement by the stockholders
of Suburban Bancshares and Columbia Bancorp, we cannot waive any conditions
that under applicable law would require further approval of our stockholders
without obtaining stockholder approval. See "--Amendment; Waiver."
Termination
We may terminate the merger agreement at any time prior to the completion of
the merger, by mutual written consent.
Either Columbia Bancorp or Suburban Bancshares may terminate the merger
agreement at any time prior to the completion of the merger:
. if the merger has not been completed by June 30, 2000, unless the
failure to complete the merger is the result of a breach of the merger
agreement by the party seeking to terminate the merger agreement, or
. if prior to June 30, 2000 any court has entered an order which prohibits
completion of the mergers and the transactions contemplated by the
merger agreement.
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Columbia Bancorp may terminate the merger agreement at any time prior to the
completion of the merger:
. if there has been a material breach of any of the representations or
warranties, covenants or agreements of Suburban Bancshares in the merger
agreement, which is not curable within 60 days after Columbia Bancorp
gives written notice of the breach to Suburban Bancshares;
. if Columbia Bancorp does not obtain stockholder approval, unless the
failure to obtain stockholder approval is due to the failure of Columbia
Bancorp to perform or observe the agreements set forth in the merger
agreement;
. if any permanent injunction, order, decree or ruling by any governmental
entity preventing the completion of the merger has become final and non-
appealable;
. if prior to June 30, 2000 any action or proceeding against Columbia
Bancorp or against Suburban Bancshares or any of their respective
subsidiaries is pending which seeks to prevent completion of the
transactions contemplated by the merger agreement; or
. if prior to June 30, 2000, any approval, consent, or waiver of any
governmental entity have been denied which are required to permit the
completion of the transactions contemplated by the merger agreement;
. if prior to June 30, 2000 any approval, consent, or waiver of any
governmental entity required to permit completion of the transactions
contemplated by the merger agreement include any condition or
requirement that would (i) have a material adverse effect on Columbia
Bancorp or Suburban Bancshares, or (ii) so materially and adversely
affect the economic or business benefits of the mergers that Columbia
Bancorp would not have entered into the merger agreement if it had known
of these conditions or requirements;
. if, immediately prior to the effective date, the number of Suburban
Bancshares stockholders who have demanded appraisal rights and not
withdrawn those demands jeopardizes the qualification of the merger for
pooling-of-interests accounting treatment and KPMG LLP fails or refuses
to deliver a letter to Columbia Bancorp to that effect; or
. if Columbia Bancorp's board of directors vote to negotiate the sale of
Columbia Bancorp to another party.
Suburban Bancshares may terminate the merger agreement at any time prior to
the completion of the merger:
. if there has been a breach of any of the representations or warranties,
covenants or agreements of Columbia Bancorp in the merger agreement,
which is not curable within 60 days after written notice of this breach
is given by Suburban Bancshares to Columbia Bancorp:
. if Suburban Bancshares' board of directors votes to negotiate the sale
of Suburban Bancshares to another party; or
. if Suburban Bancshares does not obtain stockholder approval, unless the
failure to obtain stockholder approval is due to the failure of Suburban
Bancshares to perform or observe the agreements set forth in the merger
agreement.
Amendment; Waiver
Subject to applicable legal restrictions, at any time prior to the completion
of the merger, the parties may:
. amend the merger agreement;
. extend the time for the performance of any of the obligations or other
acts of the other party required in the merger agreement;
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. waive any inaccuracies in the representations and warranties of the
other party contained in the merger agreement; or
. waive compliance by the other party with any of the agreements or
conditions contained in the merger agreement, except for the
requirements of stockholder approval, regulatory approval and the
absence of any order, decree or injunction preventing the merger.
We amended the merger agreement on November 24, 1999 to provide for the
effects of dissenting stockholders. After you have approved the merger
agreement, however, we cannot modify either the amount or the form of
consideration you will receive upon the completion of the merger or otherwise
materially adversely affect you without stockholder approval.
Expenses
We will each pay all of our respective costs and expenses, including fees and
expenses of financial consultants, accountants and legal counsel, except that:
. we will equally share the cost of filing fees in respect of bank
regulatory approvals required in order to complete the mergers;
. Columbia Bancorp will pay the registration fee of the SEC;
. Columbia Bancorp will pay the fee payable to The National Association of
Securities Dealers, Inc. in respect of the listing on The Nasdaq Stock
Market of the shares of Columbia Bancorp common stock to be issued in
the merger; and
. Columbia Bancorp will pay the costs of printing and mailing the proxy
statement/prospectus.
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STOCK OPTION AGREEMENTS
The following description sets forth the material provisions of each of the
Columbia Bancorp stock option agreement and the Suburban Bancshares stock
option agreement, but is not complete and is subject to the full texts of, and
qualified in its entirety by reference to, these agreements, which are attached
as Appendices D and E, respectively, to this proxy statement/prospectus and are
incorporated herein by reference. All Columbia Bancorp stockholders and
Suburban Bancshares stockholders are urged to read each of the Columbia Bancorp
stock option agreement and the Suburban Bancshares stock option agreement
carefully and in its entirety.
General
As an inducement for Columbia Bancorp to enter into the merger agreement, we
entered into the Suburban Bancshares stock option agreement pursuant to which
Suburban Bancshares granted Columbia Bancorp an option to purchase shares of
Suburban Bancshares common stock. As an inducement for Suburban Bancshares to
enter into the merger agreement, we also entered into the Columbia Bancorp
stock option agreement pursuant to which Columbia Bancorp granted Suburban
Bancshares an option to purchase shares of Columbia Bancorp common stock.
Except as otherwise noted below, the terms and conditions of the Columbia
Bancorp stock option agreement and the Suburban Bancshares stock option
agreement are identical in all material respects.
Exercise; Expiration
Columbia Bancorp granted Suburban Bancshares an option to purchase up to
497,140 shares of Columbia Bancorp common stock, and Suburban Bancshares
granted Columbia Bancorp an option to purchase up to 2,807,668 shares of
Suburban Bancshares common stock. Although these numbers are subject to
adjustment in certain cases, as described below, they will never exceed 19.9%
of the number of shares of Suburban Bancshares common stock or 9.9% of Columbia
Bancorp common stock, as the case may be, outstanding immediately before
exercise of the option. The exercise price of the Columbia Bancorp option is
$13.063 per share of Columbia Bancorp common stock and the exercise price of
the Suburban Bancshares option is $2.313 per share of Suburban Bancshares
common stock, but each per share option price is subject to adjustment in
certain cases (this exercise price, as adjusted, is referred to below as the
"option price").
Each of Columbia Bancorp and Suburban Bancshares can exercise its option if a
"purchase event" occurs prior to completion of the merger or the termination of
the merger agreement according to its terms. The purchase of any shares of
Columbia Bancorp and Suburban Bancshares common stock pursuant to the options
is subject to compliance with applicable law.
The option agreements generally define the term "purchase event" to mean any
of the following events or transactions:
. the issuer of the option or one of its significant subsidiaries, without
the prior written consent of the grantee of the option, enters into an
agreement to engage in a merger, sale or similar transaction with a
third party;
. a third party acquires beneficial ownership or the right to acquire
beneficial ownership of 15% or more of the outstanding shares of the
issuer of the option's common stock;
. a third party has made a bona fide proposal to the issuer of the option
or its stockholders to engage in merger, sale or similar transaction and
this proposal has been publicly announced and after the announcement the
stockholders fail to vote to approve the merger; or
. the issuer of the option willingly breaches any covenant or obligation
contained in the merger agreement after a third party has proposed a
merger, sale or similar transaction, and following the breach the
grantee of the option is entitled to terminate the merger agreement.
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The stock option agreements terminate upon any of the following: (i)
completion of the merger; (ii) termination of the merger agreement in
accordance with its terms provided that this would not include a termination of
the merger agreement by the grantee of the option based on a willful breach of
a representation, warranty, covenant or other agreement contained in the merger
agreement; or (iii) the passage of 12 months, subject to extension in order to
obtain required regulatory approvals, after termination of the merger agreement
by the grantee of the option based on a willful breach by the issuer of the
option of a representation warranty, covenant or other agreement contained in
the merger agreement.
If the option becomes exercisable, it may be exercised in whole or in part
within sixty days following the notice of exercise. The times during which the
grantee has the right to exercise the option and certain other rights under the
stock option agreement are subject to an extension in order to obtain required
regulatory approvals and comply with applicable regulatory waiting periods. The
option price and the number of shares issuable under the option are subject to
adjustment in the event of specified changes in the capital stock of the issuer
of the option.
Registration Rights
In connection with the stock option agreements, the issuer of the option
agreed to file one registration statement for the shares received upon exercise
of the option in order to permit the sale of these shares. The issuer of the
option must use its best efforts to cause the registration statement to become
effective and remain effective for at least 270 days.
Purpose of the Agreements
Arrangements such as the stock option agreements are customarily entered into
in connection with announced mergers involving publicly traded companies to
increase the likelihood that the transactions will be consummated in accordance
with their terms, and to compensate the person granted the option for the
efforts undertaken and the expenses and losses incurred by the person if the
transaction is not completed. The stock option agreements may have the effect
of discouraging offers by third parties to acquire the issuer of the option,
even if those persons were prepared to offer to pay consideration to the issuer
of the option's stockholders that has a higher current market price than the
shares of the grantee of the option common stock to be received by the holders
pursuant to the merger agreement. Also, following consultation with our
respective independent accountants, we believe that the exercise of either of
the stock options is likely to prohibit another acquiror from accounting for
any acquisition of the issuer of the stock option using the "pooling of
interests" accounting method for a period of two years.
To our best knowledge no event giving rise to the right to exercise either
option has occurred as of the date of this proxy statement/prospectus.
SUPPORT AGREEMENTS
Concurrently with the execution of the merger agreement, our directors,
executive officers and affiliates entered into support agreements with Columbia
Bancorp and Suburban Bancshares. The following description of the support
agreement is qualified in its entirety by reference to the support agreement,
copies of which are attached to this proxy statement/prospectus as Appendices B
and C and which are incorporated by reference into this proxy
statement/prospectus.
Each of the directors, executive officers and affiliates of Columbia Bancorp
and Suburban Bancshares executed the support agreements as a condition to the
completion of the merger. Under the support agreements, the parties agreed to
vote an aggregate of 21.7% of the outstanding shares of Columbia Bancorp common
stock and an aggregate of 20.0% of the outstanding shares of Suburban
Bancshares common stock in favor of the merger. The parties also agreed to vote
any additional shares of common stock of Columbia Bancorp or
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Suburban Bancshares acquired by the stockholder after the date of the support
agreement. The support agreements also restrict the power of the stockholders
to transfer their shares of Columbia Bancorp common stock or Suburban
Bancshares common stock, as the case may be, until the completion of the merger
or termination of the merger agreement. Those Columbia Bancorp and Suburban
Bancshares stockholders who are party to the support agreements have also
agreed that, in their capacity as stockholders, they will not directly or
indirectly solicit, initiate or encourage any inquiries or proposals or
participate in any discussions or negotiations with anyone concerning any
merger, acquisition or similar transaction.
CERTAIN INFORMATION INCORPORATED BY REFERENCE
Information relating to principal stockholders and security ownership of
management, executive compensation, various benefit plans (including share
option plans), certain relationships and related transactions and other related
matters as to Columbia Bancorp is set forth in Columbia Bancorp's Annual Report
on Form 10-K for the year ended December 31, 1998 and Quarterly Reports on Form
10-Q for the quarters ended March 31, 1999, June 30, 1999 and September 30,
1999, incorporated herein by reference. Stockholders of Columbia Bancorp and
Suburban Bancshares desiring a copy of Columbia Bancorp's 1998 Annual Report
may contact Columbia Bancorp by mail at 9171 Baltimore National Pike, Ellicott
City, Maryland 21042, Attention: John A. Scaldara, Jr. or by telephone at (410)
465-4800 as indicated under "Where You Can Find More Information" on page 80."
Information relating to principal stockholders and security ownership of
management, executive compensation, various benefit plans (including share
option plans), certain relationships and related transactions and other related
matters as to Suburban Bancshares is set forth in Suburban Bancshares' Annual
Report on Form 10-K for the year ended December 31, 1998, and Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1999, June 30, 1999 and September
30, 1999, incorporated herein by reference. Stockholders of Suburban Bancshares
and Columbia Bancorp desiring a copy of Suburban Bancshares' 1998 Annual Report
may contact Suburban Bancshares by mail at 7505 Greenway Center Drive, P. O.
Box 298, Greenbelt, Maryland 20768-0298, Attention: Stephen A. Horvath or by
telephone at (301) 474-6694 as indicated under "Where You Can Find More
Information" on page 80."
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COMPARISON OF THE RIGHTS OF HOLDERS OF COLUMBIA BANCORP CAPITAL STOCK AND
SUBURBAN BANCSHARES CAPITAL STOCK
Columbia Bancorp and Suburban Bancshares are incorporated in Maryland and
Delaware, respectively. Upon consummation of the merger, stockholders of
Suburban Bancshares, whose rights as stockholders are currently governed by
Delaware General Corporation Law, the Suburban Bancshares charter, and the
Suburban Bancshares bylaws, will automatically become stockholders of Columbia
Bancorp. As stockholders of Columbia Bancorp, their rights will be governed by
the Maryland General Corporation Law and by the Columbia Bancorp charter and
the Columbia Bancorp bylaws. The following is a summary of the material
differences between the rights of holders of Suburban Bancshares capital stock
and the rights of holders of Columbia Bancorp capital stock. The following does
not purport to be a complete description of the differences between the rights
of Columbia Bancorp and Suburban Bancshares stockholders. Such differences may
be determined in full by reference to the Maryland General Corporation Law, the
Delaware General Corporation Law, the Columbia Bancorp charter, the Suburban
Bancshares charter and the Columbia Bancorp bylaws and Suburban Bancshares
bylaws.
The Maryland General Corporation Law, the Columbia Bancorp charter and
Columbia Bancorp bylaws contain provisions that may be deemed to have an anti-
takeover effect and that may delay, defer or prevent a change in control of
Columbia Bancorp or other transaction that a Columbia Bancorp stockholder might
consider in its best interest, including a transaction that might result in a
premium over the market price for the shares held by Columbia Bancorp
stockholders. These provisions are expected to discourage various types of
coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of Columbia Bancorp to negotiate first with
the Columbia Bancorp board. Columbia Bancorp's management believes that the
benefits of these provisions outweigh the potential disadvantages of
discouraging such proposals because, among other things, negotiation of such
proposals might result in an improvement of their terms. Although similar
provisions exist under Delaware law and have been applicable to Suburban
Bancshares, the Suburban Bancshares charter and Suburban Bancshares bylaws do
not contain some of the anti-takeover provisions contained in the Columbia
Bancorp charter.
AUTHORIZED CAPITAL STOCK
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
10,000,000 shares of common stock, par value $0.01 per share. 20,000,000 shares of common stock, par value $0.01 per share
Subject to applicable Nasdaq rules and regulations, 1,000,000 shares of preferred stock, par value $0.01 per
the Columbia Bancorp board may issue, in its discretion, share.
additional shares of Columbia Bancorp common stock or
Columbia Bancorp preferred stock; provided, that the total The Suburban Bancshares board may increase or decrease
number of shares issued does not exceed the authorized the number of shares of common stock or preferred stock,
number of shares of capital stock. but not below the number of shares of such class or
series then outstanding, subject to the rights of the
holders of any class or series of preferred stock and to
applicable Nasdaq rules and regulations.
</TABLE>
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<PAGE>
VOTING RIGHTS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Maryland law provides that, unless otherwise provided in Delaware law provides that, unless otherwise provided in
a corporation's charter: a corporation's charter:
. each share of its capital stock is entitled to one vote; . each share of its capital stock is entitled to one vote;
. the presence in person or by proxy of stockholders . a stockholder with voting rights may authorize another
entitled to cast a majority of all the votes entitled person to act for such stockholder be revocable or
to be cast at a meeting constitutes a quorum; and irrevocable proxy.
. in matters other than the election of directors or the Delaware law provides that a corporation may designate
approval of extraordinary transactions, a majority of the voting rights of each class of stock and must specify
all the votes cast at a meeting at which a quorum is the voting rights of such class of stock in the certificate
present is sufficient to approve a matter which properly of incorporation or the board resolutions providing for the
comes before a stockholder meeting. issuance of stock.
Maryland law limits the voting rights of "control shares" Each holder of Suburban Bancshares common stock is
held by persons who, directly or indirectly, have the entitled to one vote per share. Suburban Bancshares'
power to exercise: certificate of incorporation permits the Suburban
Bancshares board to issue Suburban Bancshares preferred
. one-fifth or more, but less than one-third; stock in one or more series that may have voting power that
differs from that of the Suburban Bancshares common stock.
. one-third or more, but less than a majority; or
. a majority or more of all voting power in the election
of directors. See "State Law Takeover Legislation."
Subject to Maryland law, each holder of Columbia Bancorp
common stock is entitled to one vote per share. Columbia
Bancorp's charter permits the Columbia Bancorp board to
classify and issue Columbia Bancorp preferred stock in one
or more series that may have voting power that differs from
that of the Columbia Bancorp common stock. See "Description
of Columbia Bancorp Capital Stock."
</TABLE>
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<PAGE>
ADVANCE NOTICE PROVISION/SPECIAL MEETING OF STOCKHOLDERS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Maryland law provides that special meetings of the Delaware law provides that special meetings of the
stockholders of a corporation may be called by the stockholders of a corporation may be called by the
corporation's board of directors or by such other persons corporation's board of directors or by such other persons
as may be authorized in the corporation's charter or as may be authorized in the corporation's certificate of
bylaws. incorporation or bylaws.
The Columbia Bancorp bylaws provide that with respect to At special meetings of stockholders, only the business
an annual meeting of stockholders, nominations of persons specified in Suburban Bancshares' notice of meeting may be
for election of the Columbia Bancorp board and the proposal brought before the meeting of stockholders.
of business to be considered by stockholders may be made
only: Under the Suburban Bancshares bylaws, in order for a
stockholder to nominate a candidate for the election as a
. pursuant to Columbia Bancorp's notice of the meeting, director or propose business for consideration at an
annual meeting, the stockholder must generally give notice
. by the Columbia Bancorp board, or to the Suburban Bancshares Secretary not less than 90 days
from the first anniversary of the last annual meeting.
. by a stockholder who is entitled to vote at the meeting
and has complied with the procedures set forth in the
Columbia Bancorp bylaws.
With respect to special meetings of stockholders, only
the business specified in Columbia Bancorp's notice of
meeting may be brought before the meeting of stockholders.
Nominations of persons for election to the Columbia Bancorp
board may be made at a special meeting of stockholders:
. pursuant to Columbia Bancorp's notice of the meeting,
. by the Columbia Bancorp board, or
. provided that the Columbia Bancorp board has determined
that directors shall be elected at such meeting, by a
stockholder who is entitled to vote at the meeting and
has complied with the advance notice provisions set
forth in the Columbia Bancorp bylaws.
Under the Columbia Bancorp bylaws, in order for a
stockholder to nominate a candidate for the election as a
director or propose business for consideration at an annual
meeting, the stockholder must generally give notice to the
Columbia Bancorp Secretary not more then 90 days or less
than 60 days from the first anniversary of the last annual
meeting.
</TABLE>
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<PAGE>
SIZE OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, a corporation must generally have at Delaware law provides that the certificate of
least three directors at all times. Subject to this incorporation or the bylaws of a corporation may allow the
provision, a corporation's bylaws may alter the number of stockholders or the board of directors to fix or change the
directors and authorize a majority of the entire board of number of directors, but a corporation must have at least
directors to alter within specified limits the number of one director. The Suburban Bancshares board is currently
directors set by the corporation's charter or its bylaws. comprised of 10 members. The Suburban Bancshares bylaws
The number of persons currently constituting the Columbia provide that the number of members of the board of
Bancorp board is seventeen. The Columbia Bancorp charter directors shall be not less than seven nor more than 20
provides that the number of persons constituting the directors.
Columbia Bancorp board shall be 25 unless changed by an
amendment to the Columbia Bancorp bylaws but may never be
less than allowed by law. The Columbia Bancorp bylaws
provide that the number of directors shall be no more than
30 and generally, no less than three.
</TABLE>
CLASSIFICATION OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
The directors of Columbia Bancorp are divided into three Under Delaware law, directors, unless their terms are
classes, with approximately one-third of the directors staggered, are elected at each annual stockholders meeting.
elected by the stockholders annually. Consequently, members The certificate of incorporation may authorize the
of the Columbia Bancorp board serve staggered three-year election of directors by one or more classes or series of
terms. Classification of the Columbia Bancorp board is shares, and the certificate of incorporation, an initial
intended to assure the continuity and stability of Columbia bylaw or a bylaw adopted by a vote of the stockholders may
Bancorp's business strategies and policies as determined by provide for staggered terms for the directors.
the Columbia Bancorp board. The classified board provision
of the Columbia Bancorp bylaws could also have the effect The directors of Suburban Bancshares are divided into
of making the replacement of incumbent directors more time three classes, with approximately one-third of the
consuming and difficult, which could delay, defer or directors elected by the stockholders annually.
prevent an attempt by a third party to obtain control of Consequently, members of the Suburban Bancshares board
Columbia Bancorp or cause such transaction to benefit serve staggered three-year terms.
Columbia Bancorp or its stockholders. At least two annual
meetings of stockholders, instead of one, will generally
be required to effect a change in a majority of the
Columbia Bancorp board. Thus, the classified board
provision could increase the likelihood that incumbent
directors will retain their positions.
</TABLE>
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<PAGE>
ELECTION OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Maryland law provides that a corporation's directors Elections for the Suburban Bancshares board are decided
shall be elected by a plurality of the votes cast at a by a plurality of the votes cast.
meeting at which a quorum is present.
Under Delaware law, stockholders do not have cumulative
Under Maryland law, a corporation's charter may voting rights unless the certificate of incorporation so
provide that stockholders of a corporation can elect provides. The Suburban Bancshares certificate of
directors by cumulative voting. Neither the Columbia incorporation does not grant cumulative voting rights to
Bancorp charter nor the Columbia Bancorp bylaws grant holders of Suburban Bancshares common stock.
cumulative voting rights with respect to the election of
directors to holders of Columbia Bancorp common stock.
Maryland law permits the bylaws of the corporation to
provide for the term of office a director may serve, except
that (1) the term of office of a director may not be longer
than five years or, except in the case of an initial or
substitute director, shorter than the period between annual
meetings and (2) the term of office of at least one class
shall expire each year. The Columbia Bancorp charter
provides for a classified board.
</TABLE>
REMOVAL OF DIRECTORS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, unless the corporation's charter Under Delaware law, in the case of a corporation whose
provides otherwise, the stockholders of a corporation with board of directors is classified, except as otherwise
a classified board of directors may remove any director, provided in a corporation's certificate of incorporation,
only for cause, by the affirmative vote of a majority of the stockholders may remove any director only for cause by
all the votes entitled to be cast for the election of the vote of a majority of all the votes entitled to be cast
directors. The Columbia Bancorp charter provides that in the election of the directors. The Suburban Bancshares'
directors may be removed only by the affirmative vote of certificate of incorporation provides for the removal of
the holders of 80% of the votes entitled to be cast in the directors, only for cause, by the affirmative vote of the
election of the directors. holders of a majority of all classes of outstanding
capital stock.
</TABLE>
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<PAGE>
FILLING VACANCIES
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under the Columbia Bancorp charter and bylaws, vacancies Under Delaware law, unless the certificate of
in the Columbia Bancorp board caused by the removal or incorporation or bylaws provide otherwise, the board of
resignation of a director may be filled by the vote of a directors of a corporation may fill any vacancy on the
majority of the remaining directors or, if the vacancy is board, including vacancies resulting from an increase in
caused by the removal of a director, by the stockholders at the number of directors.
an annual or special meeting, and the appointee shall hold
office for the unexpired term of his predecessor, or until The Suburban Bancshares bylaws provide that the directors,
his successor is elected or appointed and is qualified. whether or not a quorum, may by majority vote, choose a
Newly created directorships may be filled by a majority of successor to hold office for the unexpired portion of the
the entire Columbia Bancorp board and the appointee shall term of a class of the director whose place has been
hold office until the next election of directors by the filled. Vacancies resulting from an increase in the numbers
stockholders or may be filled by the stockholders at an may be filled by the directors, whether or not a quorum, by
annual or special meeting. majority vote or be filled by the stockholders at an annual
or special meeting.
</TABLE>
STANDARD OF CONDUCT FOR DIRECTOR
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, the standard of conduct for directors Under Delaware law, the standards of conduct for
is set forth in Section 2-405.1(a) of the Maryland General directors have developed through written opinions of the
Corporation Law, which requires that a director of a Delaware courts in cases decided by them. Generally,
Maryland corporation perform his or her duties in "good directors of Delaware corporations are subject to a duty of
faith," with "a reasonable belief" that his or her actions loyalty, a duty of care and a duty of candor to the
are "in the best interests of the corporation" and with the stockholders. The duty of loyalty requires directors to
care of an "ordinarily prudent person in a like refrain from self-dealing. According to the Delaware
position . . . under similar circumstances." Supreme Court, the duty of care requires "directors . . .
in managing the corporate affairs . . . to use that amount
of care which ordinarily careful and prudent men would use
in similar circumstances" and the duty of candor requires
directors "to disclose fully and fairly all material
information within the board's control when it seeks
stockholder action." Later case law has established "gross
negligence" as the test for breach of the standard for the
duty of care in the process of decision-making by
directors.
</TABLE>
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<PAGE>
LIABILITY OF DIRECTORS; INDEMNIFICATION OF DIRECTORS AND OFFICERS; INSURANCE
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Maryland law requires a corporation, unless its charter Delaware law provides that a corporation may indemnify
provides otherwise, which Columbia Bancorp's charter does any person made a party or threatened to be made a party to
not, to indemnify a director or officer who has been any type of proceeding, other than an action by or in the
successful, on the merits or otherwise, in the defense of right of the corporation, because he or she is or was an
any proceeding to which the person made a party by reason officer, director, employee or agent of the corporation or
of his service in that capacity. Maryland law permits a was serving at the request of the corporation as a
corporation to indemnify its present and former directors director, officer, employee or agent of another corporation
and officers, among others, in connection with any or entity, against expenses, judgments, fines and amounts
proceeding to which they may be made a party by reason of paid in settlement actually and reasonably incurred in
their service in those or other capacities unless it is connection with such proceeding: (1) if he or she acted in
established that: good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the
. the act or omission of the director or officer was corporation, and (2) in the case of a criminal proceeding,
material to the matter giving rise to the proceeding and he or she had no reasonable cause to believe that his or
was committed in bad faith or was the result of active her conduct was unlawful.
and deliberate dishonesty,
A corporation may indemnify any person made a party or
. the director or officer actually received an improper threatened to be made a party to any threatened, pending or
personal benefit in money, property or services, or completed action or suit brought by or in the right of the
corporation because he or she was an officer, director,
. in the case of any criminal proceeding, the director or employee or agent of the corporation, or is or was serving
officer had reasonable cause to believe that the act or at the request of the corporation as a director, officer,
omission was unlawful. employee or agent of another corporation or other entity,
against expenses actually and reasonably incurred in
The indemnity may include judgments, penalties, fines, connection with such action or suit (1) if he or she acted
settlements and reasonable expenses actually incurred by in good faith and (2) in a manner he or she reasonably
the director or officer in connection with the proceeding; believed to be in or not opposed to the best interests of
provided, however, that if the proceeding is one by or in the corporation, except that no indemnification shall be
the right of the corporation, indemnification is not made if the person is found liable to the corporation
permitted with respect to any proceeding in which the unless, in such a case, the court determines the person is
director or officer has been adjudged to be liable to the entitled to such indemnification.
corporation.
A corporation must indemnify a director, officer,
In addition, a director or officer may not be indemnified employee or agent against expenses actually and reasonably
with respect to any proceeding charging improper personal incurred by him or her, who successfully defends himself
benefit to the director or officer in which the director or in a proceeding to which he or she was a party by reason of
officer was adjudged to be liable on the basis that the person's service in that capacity. Expenses incurred by
personal benefit was improperly received. The termination an officer or director, or other employees or agents as
of any proceeding by conviction or upon a plea of nolo deemed appropriate by the board of directors, in defending
contendere or its equivalent or an entry of an order of a civil or criminal proceeding may be paid by the
probation prior to judgment creates a rebuttable corporation in advance of the final disposition of such
presumption that the director or officer did not meet the proceeding
requisite standard of conduct required for permitted
indemnification. The termination of any
</TABLE>
68
<PAGE>
<TABLE>
<S> <C> <C>
proceeding by judgment, order or settlement, however, does upon receipt of an undertaking by or on behalf of such
not create a presumption that the director or officer did director or officer to repay such amount if it shall
not meet the requisite standard of conduct for permitted ultimately be determined that he or she is not entitled
indemnification. to be indemnified by the corporation.
As a condition to advancing expenses to a director who is The Delaware law indemnification and expense advancement
a party to a proceeding, Maryland law requires Columbia provisions are not exclusive of any other rights which may
Bancorp to obtain a written affirmation from the director be granted by the Suburban Bancshares bylaws, a vote of
or officer of his good faith belief that he has met the stockholders or disinterested directors or otherwise.
standard of conduct necessary for indemnification by
Columbia Bancorp and a written statement by or on his Under Delaware law, termination of any suit or other
behalf to repay the amount paid or reimbursed by Columbia action or its equivalent shall not, of itself, create a
Bancorp if it is ultimately determined that the standard presumption that such person is prohibited from being
of conduct was not met. indemnified.
The Columbia Bancorp charter provides that Columbia The Suburban Bancshares certificate of incorporation
Bancorp, to the fullest extent of Maryland law, will provides that each director, officer and employee of the
indemnify, and advance expenses to a director or corporation shall be indemnified by the corporation to the
officer of Columbia Bancorp. fullest extent permitted by Delaware law.
</TABLE>
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Maryland law permits a Maryland corporation's charter to As permitted under Delaware law, Suburban Bancshares'
include a provision expanding or limiting the liability of certificate of incorporation limits the personal liability
its directors and officers to the corporation or its of directors, but not officers, for monetary damages for
stockholders for money damages, except for liability breach of such directors' fiduciary duty.
resulting from:
The certificate of incorporation further provides for the
. actual receipt of an improper benefit or profit in elimination or limitation of liability to the fullest
money, property, or services, in which case recovery is extent permitted by Delaware law.
limited to the actual amount of the benefit or profit
actually received, or
. a judgment or other final adjudication adverse to the
person that is entered in a proceeding based on a
finding in the proceeding that the person's action, or
failure to act, was result of active and deliberate
dishonesty and was material to the cause of action
adjudicated in the proceeding.
The Columbia Bancorp charter provides that, to the
fullest extent permitted by law, Columbia Bancorp directors
and officers are not liable to Columbia Bancorp or its
stockholders for money damages. However, such provisions do
not limit the availability of equitable relief to Columbia
Bancorp or its stockholders.
</TABLE>
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<PAGE>
INSPECTION OF BOOKS AND RECORDS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Maryland law provides that persons who together have been Delaware law allows any stockholder, upon written demand
stockholders for more than six months and own at least 5% under oath stating the purpose thereof, the right during
of the outstanding stock of any class of a Maryland usual hours for business to inspect for any proper purpose
corporation may inspect and copy the corporation's books of the corporation's stock ledger, a list of its stockholders,
account and stock ledger, request and receive a statement and its other books and records, and to make copies or
of the corporation's affairs and request and receive, extracts therefrom. A proper purpose means a purpose
within 20 days, a list of its stockholders. In addition, reasonably related to such person's interest as a
any stockholder of a Maryland corporation may inspect and stockholder.
copy the bylaws, minutes of the proceedings of stockholders
and annual statements of affairs and request the
corporation to provide a sworn statement showing all stock
and securities issued and all consideration received by the
corporation for such stock during the preceding twelve
months.
</TABLE>
CHARTER AMENDMENTS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Maryland law allows amendment of a corporation's charter Delaware law provides that unless a higher vote is
if its board of directors adopts a resolution setting forth required in the certificate of incorporation, an amendment
the amendment proposed, declaring its advisability, and the to the certificate of incorporation of a corporation may
stockholders thereafter approve such proposed amendment be approved by a majority of the outstanding shares and a
either at a special meeting called by the board for the majority of the outstanding shares of each class entitled
purpose of approval of such amendment by the stockholders to vote upon the proposed amendment.
or, if so directed by the board, at the next annual
stockholders' meeting. At any such meeting, the proposed Suburban Bancshares' certificate of incorporation
amendment must be approved by two-thirds of all votes provides that the corporation reserves the right to amend
entitled to vote on the matter. The affirmative vote of in any respect any provision of the certificate of
holders of at least 80% of the voting stock of Columbia incorporation, in the manner now or hereafter provided by
Bancorp, however, is required to repeal or amend the law. However, the affirmative vote of the holders of not
provisions of the Columbia Bancorp charter relating to the less than 80% of the outstanding shares entitled to vote
minimum and maximum number, and removal, of directors. is required to repeal, rescind, alter or amend specified
provisions on:
. the number of directors,
. personal liability of directors,
. the provisions requiring that all actions by
stockholders must be made at duly held annual or special
meetings and may not be taken only upon written consent,
. the provisions governing who may call special meetings
and what matters may be considered at such special
meetings,
. the provisions concerning the restrictions on transfer
of shares, and restrictions on acquisitions and offers
by stockholders, and
. the provisions governing amendment of the certificate
of incorporation.
</TABLE>
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<PAGE>
BYLAW AMENDMENTS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, the exclusive power to change the Delaware law provides that a corporation's bylaws may be
bylaws may be left with the stockholders, vested in the amended by its stockholders, and, if so provided in the
directors or shared by both groups. The Columbia Bancorp corporation's certificate of incorporation, by the
bylaws have vested the power to adopt, alter and repeal the corporation's directors. Suburban Bancshares' charter
Columbia Bancorp bylaws in the Columbia Bancorp board and provides that a majority of the Suburban Bancshares board
the stockholders. Such power may only be exercised by has the power, at a regular meeting or a special meeting
two-thirds of the entire Columbia Bancorp board then in where due notice has been given of the proposed amendment,
office or by a vote of the holders of 80% of the stock to alter, amend or repeal any bylaw of the corporation or
entitled to vote. create new bylaws.
The provisions governing the number of directors,
election and term of directors, directors' vacancies, and
amending the bylaws may only be amended or repealed by the
affirmative vote of the holders of not less than 80% of the
outstanding shares of capital stock of the corporation
entitled to vote generally on the election of directors
thereof.
</TABLE>
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, unless the corporate charter states Delaware law provides that, unless otherwise specified in
otherwise, the approval by the holders of two-thirds of the a corporation's certificate of incorporation, a sale or
shares of the corporation entitled to vote on such matters other disposition of all or substantially all of the
is required for: corporation's assets, a merger or consolidation of the
corporation with another corporation or a dissolution of
. sale, lease, exchange or transfer of all or the corporation requires the affirmative vote of the board
substantially all of the assets of a corporation not in of directors (except in limited circumstances) plus, with
the ordinary course of business conducted by it, and exceptions, the affirmative vote of a majority of the
outstanding stock entitled to vote thereon.
. any merger, consolidation or share exchange involving
the corporation. Suburban Bancshares' certificate of incorporation
provides that some business combinations require approval
The Columbia Bancorp charter has not taken any of the holders of 80% of the outstanding shares of voting
exception to this provision. stock of Suburban Bancshares and a majority of the combined
voting power of the holders of shares of voting stock who
Maryland law also provides that the vote of the are Disinterested Stockholders (that is, unrelated to the
stockholders of a surviving corporation is not required to person or entity with whom Suburban Bancshares is entering
approve a merger if (1) the plan of merger does not the business combination).
reclassify or change its outstanding stock or otherwise
amend the corporation's charter and (2) the number of
shares of common stock to be issued or transferred in the
merger does not increase by more than 20% of the number
of its shares of the same class outstanding immediately
before the merger becomes effective.
</TABLE>
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<PAGE>
STOCKHOLDER MEETINGS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, a special meeting of stockholders may Delaware law provides that special meetings of the
be called by the president, the board of directors or any stockholders of a corporation may be called by the
other person specified in the corporation's charter or corporation's board of directors or by such other persons
bylaws. The Columbia Bancorp bylaws provide that an annual as may be authorized in the corporation's certificate of
meeting of stockholders is to be held each year on the incorporation or bylaws. The Suburban Bancshares bylaws
third Tuesday in April or within 30 days thereof, as provide that an annual meeting of stockholders of the
designated by the Columbia Bancorp board. Under the corporation is to be held each year on the first Tuesday
Columbia Bancorp bylaws, a special meeting of the in April or at another date as designated annually by the
stockholders of Columbia Bancorp may be called at any time Suburban Bancshares board. Under the Suburban Bancshares
by bylaws, a special meeting may only be called by the
Suburban Bancshares board, the chairman of the Suburban
. the Chairman of the Board of Columbia Bancorp, Bancshares board, the president or a majority of the votes
entitled to be cast at a special meeting.
. the President of Columbia Bancorp, or
. a majority of the Columbia Bancorp board.
The Secretary of Columbia Bancorp is required to call a
special meeting of stockholders upon the written request
of stockholders entitled to cast a majority of all the
votes entitled to be cast at a special meeting. Such a
request must state the purpose of the meeting and matters
proposed to be acted on. The stockholders calling such a
special meeting are required to reimburse Columbia Bancorp
for the costs of preparing and mailing a notice of such a
meeting to the stockholders.
</TABLE>
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<PAGE>
CORPORATE ACTION WITHOUT A MEETING
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, any action required or permitted to Delaware law provides that any action required or
be taken at a meeting of stockholders may be taken without permitted at a stockholders' meeting may be taken without a
a meeting if (1) a unanimous written consent setting forth meeting if a majority of the holders of the outstanding
the action and signed by each stockholder entitled to vote shares consent in writing.
on such matters and (2) a written waiver of any right to
dissent signed by each stockholder entitled to notice of Under Suburban Bancshares' certificate of incorporation,
the meeting but not entitled to vote at it, are filed with action may be taken by the unanimous written consent of the
the records of the stockholders meeting. The Columbia stockholders entitled to vote on the matter.
Bancorp bylaws permit corporate action without a meeting
of stockholders in accordance with the parameters set forth
in Maryland law. Because Maryland law requires the
unanimous written consent of all stockholders entitled to
vote for actions by written consent, it is unlikely that
stockholders of Columbia Bancorp will be able to take
action by written consent under Maryland law. This
provision of Maryland law may deter hostile takeovers, as
a holder or group of holders controlling a majority in
interest of Columbia Bancorp common stock will not be able
to amend the Columbia Bancorp bylaws or remove directors
pursuant to a stockholders' written consent unless they
obtain a unanimous written consent of all stockholders or
call a special meeting of the stockholders.
</TABLE>
DIVIDENDS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, the board of directors has the power Subject to any restrictions contained in a corporation's
to authorize and cause the corporation to pay distributions certificate of incorporation, Delaware law generally
in cash, property or securities of the corporation unless provides that a corporation may declare and pay dividends
the declaration of such distributions would be contrary out of "surplus," which means the excess, if any, of net
to the charter. assets over capital or when no surplus exists, out of new
profits for the fiscal year in which the dividend is
Maryland law further provides that no distribution may be declared and/or the preceding fiscal year. Dividends may
made (1) if the corporation would become unable to pay its not be paid, however, out of net profits if the capital of
debts as they become due in the usual course of business or the corporation is less than the amount of capital
(2) the corporation's total assets would be less than the represented by the issued and outstanding stock of all
sum of its liabilities plus, unless the charter permits classes having a preference upon the distribution of
otherwise, the amount that would be needed, if the assets. In accordance with Delaware law, "capital" is
corporation were to be dissolved at the time of the determined by the board of directors and shall not be less
distribution, to satisfy the preferential rights upon than the aggregate par value of the outstanding capital
dissolution of stockholders whose preferential rights on stock of the corporation having par value.
dissolution are superior to those receiving the
distribution. Suburban Bancshares' bylaws provide that dividends may
be declared at any regular or special meeting, pursuant to
law. Dividends may be paid in cash, in property or in the
corporation's own shares, subject to the provisions of any
statute and of the certificate of incorporation, which does
not speak to dividends.
</TABLE>
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APPRAISAL OR DISSENTERS' RIGHTS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, stockholders of a corporation are Under Delaware law, a stockholder of a Delaware
entitled to dissenters' rights of appraisal in connection corporation may be entitled to demand appraisal and obtain
with a: payment of the judicially determined fair value of his or
her shares in the event of any plan of merger or
. Merger or consolidation, consolidation in which the corporation, the shares of which
he or she holds, is a party, provided such stockholder
. Share exchange, continuously holds such shares through the effective date
of the merger, otherwise complies with the requirements of
. Transfer of assets requiring stockholder approval Delaware law for the perfection of appraisal rights and
does not vote in favor of the merger. However, this right
. Amendment of charter which alters the contract rights of to demand appraisal does not apply to stockholders if:
any outstanding stock and substantially adversely
affects stockholder rights if the right to do so is not (i) they are stockholders of a surviving corporation and
reserved in the charter, or if a vote of the stockholders of such corporation is
not necessary to authorize the merger or
. Business combination transaction. consolidation; or
However, except with respect to transactions involving an (ii) the shares held by the stockholders are the shares are
interested stockholder, stockholders generally have no listed on a national securities of a class or series
dissenter's right of appraisal with respect to their shares listed on a national exchange or are designated as a
if: national securities exchange, designated as a
national market system security on an interdealer
. The shares are listed on a national securities exchange market system by the National Association quotation
or are designated as a national market system security system by the NASD, or
on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (iii) are held of record by more than 2,000 stockholders
on the date set to determine the stockholders
. The shares are that of the successor in the merger, entitled to vote on the merger or consolidation.
unless (1) the merger alters the contractual rights of
the shares as expressly set forth in the charter and Notwithstanding the above, appraisal rights are available
the charter does not reserve the right to do so or (2) for the shares of any class or series of stock of a
the shares are to be changed or converted in whole or Delaware corporation if the holders thereof are required by
in part in the merger into something other than either the terms of the agreement of merger or consolidation to
shares in the successor or cash, scrip, or other accept for their stock anything except: (i) shares of stock
rights or interests arising out of the provisions for of the corporation surviving or resulting from the merger
the treatment of fractional shares in the successor. or consolidation; (ii) shares of stock of any other
corporation which at the effective date of the merger or
Accordingly, Columbia Bancorp stockholders are not consolidation will be listed on The New York Stock Exchange
generally entitled to appraisal rights. or the American Stock Exchange, designated as a national
market system security on an interdealer quotation system
by the NASD or are held of record by more than 2,000
stockholders; or (iii) cash in lieu of fractional shares
of the corporations described in (i) or (ii); or (iv) any
combination of shares of stock and cash in lieu of
fractional shares described in (i), (ii) and (iii).
</TABLE>
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<TABLE>
<S> <C>
A Delaware corporation may provide in its certificate of
incorporation that appraisal rights shall be available for
the shares of any class or series of its stock as the
result of an amendment to its certificate of incorporation,
any merger or consolidation to which the corporation is a
party or a sale of all or substantially all of the assets
of the corporation. The Suburban Bancshares certificate of
incorporation does not contain any provision regarding
appraisal rights.
Consequently, because Suburban Bancshares' common stock
is quoted on the Nasdaq SmallCap Stock Market, appraisal
rights are available to holders of Suburban Bancshares
stock. If the merger is completed, Suburban Bancshares
stockholders who do not vote for the adoption of the merger
agreement and who otherwise comply with Section 262 of
Delaware law will be entitled to appraisal rights under
Delaware law.
</TABLE>
DERIVATIVE SUITS
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
There is no statutory right to bring derivative suit Under Delaware law, Suburban Bancshares stockholders
under Maryland law; however, there is a clear common law have the right to bring a derivative suit.
right in Maryland to bring a derivative suit.
</TABLE>
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STATE LAW TAKEOVER LEGISLATION
<TABLE>
<S> <C> <C>
Columbia Bancorp Suburban Bancshares
Under Maryland law, many business combinations, including In general, Delaware law prevents an "Interested
a merger, consolidation, share exchange or a significant Stockholder" (defined generally as a person with 15% or
asset transfer or issuance or reclassification of equity more of a corporation's outstanding voting stock), from
securities, between a Maryland corporation and an engaging in a "Business Combination" with a Delaware
interested stockholder who beneficially owns 10% or more of corporation for three years following the date such
the voting power of the corporation's shares or an person became an Interested Stockholder. The term
affiliate or associate (as defined in Maryland law) of the "Business Combination" includes among other things, a
corporation who, at any time within the two-year period merger, consolidation, sale of assets or share exchange.
prior to the date in question, was the beneficial owner of The three-year moratorium may be avoided if:
10% or more of the voting power of the then-outstanding
voting stock of the corporation or an affiliate thereof are . before such person became an Interested Stockholder,
prohibited for five years after the most recent date on the board of directors of the corporation approved
which the interested stockholder becomes an interested either the Business Combination or the transaction in
stockholder. Thereafter, any such business combination must which the Interested Stockholder became an Interested
be recommended by the board of directors of the corporation Stockholder;
and approved by the affirmative vote of at least (1) 80% of
the votes entitled to be cast by holders of outstanding . upon consummation of the transaction which resulted in
voting shares of the corporation and (2) two-thirds of the the stockholder becoming an Interested Stockholder, the
votes entitled to be cast by holders of outstanding voting stockholder owned at least 85% of the voting stock of
shares of the corporation other than shares held by the the corporation outstanding at the time the transaction
interested stockholder with whom (or with whose affiliate) commenced, excluding shares held by directors who are
the business combination is to be effected or by an also officers of the corporation and by employee stock
affiliate or associate of the interested stockholder, ownership plans that do not provide employees with the
unless, among other conditions, the corporation's common right to determine confidentially whether shares held
stockholders receive a minimum price (as defined in subject to the plan will be tendered in a tender or
Maryland law) for their shares and the consideration is exchange offer; or
received in cash or in the same form as previously paid by
the interested stockholder for its shares. . on or following the date on which such person became an
Interested Stockholder, the Business Combination is
These provisions of Maryland law do not apply, however, approved by the board of directors of the corporation
to business combinations that are approved or exempted by and authorized at an annual or special meeting of
the board of directors of the corporation prior to the time stockholders (not by written consent) by the affirmative
that the interested stockholder becomes an interested vote of the stockholders of at least 66 2/3% of the
stockholder. outstanding voting stock of the corporation not owned
by the Interested Stockholder.
Maryland law also provides that "control shares" of a
Maryland corporation acquired in a "control share The Business Combination restrictions described above do
acquisition" have no voting rights except to the extent not apply if, among other things:
approved by a vote of two-thirds of the votes entitled to
be cast on the matter, excluding shares owned by the . the corporation's original certificate of incorporation
acquiror, by officers or by directors who are employees of contains a provision expressly electing not to be
the corporation. "Control shares" are voting shares which, governed by the statute;
if aggregated with all other such shares previously
acquired by the acquiror, or in respect of . the corporation by action of the holders of a majority
of the voting stock of the corporation approves an
amendment to its certificate of incorporation or bylaws
expressly electing not
</TABLE>
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<TABLE>
<S> <C> <C>
which the acquiror is able to exercise or direct the . to be governed by the statute, which amendment shall
exercise of voting power (except solely by virtue of a not be applicable to any business combination with a
revocable proxy), would entitle the acquiror to exercise person who was an Interested Stockholder at or prior
voting power in electing directors within one of the to the time of the amendment; or
following ranges of voting power:
. the corporation does not have a class of voting stock
. One-fifth or more but less than one-third, that is (a) listed on a national securities exchange,
(b) authorized for quotation on Nasdaq or a similar
. One-third or more but less than a majority, or quotation system; or (c) held of record by more than
2,000 stockholders (unless an Interested Stockholder
. A majority or more of all voting power. transaction prompted any of the foregoing results).
Control shares do not include shares the acquiring person The statute also does not apply to Business Combinations
is then entitled to vote as a result of having previously with an Interested Stockholder when such combination is
obtained stockholder approval. A "control share proposed after the public announcement of, and before the
acquisition" means the acquisition of control shares, consummation or abandonment of, a merger or consolidation,
subject to exceptions. A person who has made or proposes to a sale of 50% or more of the aggregate market value of
make a control share acquisition, upon satisfaction of the assets of the corporation on a consolidated basis or
various conditions (including an undertaking to pay the aggregate market value of all outstanding shares of
expenses), may compel the board of directors of the the corporation, or a tender offer for 50% or more of the
corporation to call a special meeting of stockholders to be outstanding voting shares of the corporation, if the
held within 50 days of demand to consider the voting rights triggering transaction is with or by a person who either
of the shares. If no request for a meeting is made, the was not an Interested Stockholder during the previous
corporation may itself present the question at any three years or who became an Interested Stockholder with
stockholders meeting. If voting rights are not approved at the approval of the board, and if the transaction is
the meeting or if the acquiring person does not deliver an approved or not opposed by a majority of the current
acquiring person statement as required by the statute, then directors who were also directors prior to any person
the corporation may generally redeem any or all of the becoming an Interested Stockholder during the previous
control shares (except those for which voting rights have three years.
previously been approved) for fair value determined,
without regard to the absence of voting rights for the Although Suburban Bancshares could opt out of the
control shares, as of the date of the last control share provisions of this statute, it has not done so. In addition,
acquisition by the acquiror or of any meeting of Suburban Bancshares' certificate of incorporation provides
stockholders at which the voting rights of such shares are that the affirmative vote of:
considered and not approved. If voting rights for
control--shares are approved at a stockholders meeting and . the holders of not less than 80% of the outstanding
the acquiror becomes entitled to vote a majority of the shares of capital stock entitled to vote generally in
shares entitled to vote, all other stockholders may the election of directors; and
exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not . the holders of a majority of shares of capital stock
be less than the highest price per share paid by the with such voting rights who are disinterested
acquiror in the control share acquisition, and limitations stockholders, that is, a stockholder who is not a
and restrictions otherwise applicable to the exercise of related person or an affiliate of a related person,
appraisal rights do not apply in the context of a control shall be required for the approval or authorization of
share acquisition. any business combination with a related person.
The control share acquisition statute does not apply to A related person is any individual, corporation,
shares acquired in a merger, consolidation or share partnership or other person or entity which beneficially
exchange, if the corporation is a party to the transaction, owns 10% or more of the capital stock with voting rights
or to acquisitions approved or exempted by a provision in of the corporation.
the charter or bylaws of the corporation adopted before
the acquisition of shares. Delaware does not have a control share acquisition
statute.
</TABLE>
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DESCRIPTION OF COLUMBIA BANCORP CAPITAL STOCK
General
Columbia Bancorp's authorized capital stock consists of 10,000,000 shares of
common stock, par value $.01 per share. The board of directors may classify and
reclassify any unissued shares of capital stock by setting or changing in any
one or more respects the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such shares of stock. The following description
does not contain all the information that might be important to you; therefore,
you should read carefully the more detailed provisions of the Columbia Bancorp
charter and by-laws. The following summary does not give effect to provisions
of statutory or common law, the provisions of applicable laws and the Columbia
Bancorp charter, which is incorporated by reference as exhibits to the
registration of Form S-4 of which this proxy statement/prospectus is a part.
Common Stock
As of January 4, 2000, there were 4,508,669 shares of Columbia Bancorp common
stock outstanding. A holder of common stock has one vote for each share held by
him on all matters submitted to a vote of stockholders and the exclusive voting
power for all purposes is vested in the holders of the common stock. Holders of
common stock do not have the right of cumulative voting in connection with the
election of directors. The common stock has no conversion rights and is not
subject to redemption. A stockholder of Columbia Bancorp has no preemptive
rights to subscribe for additional shares of stock or other securities of
Columbia Bancorp except as may be granted by the board of directors.
The holders of common stock of Columbia Bancorp are entitled to receive, pro
rata, dividends when, as and if declared by the board of directors from funds
legally available therefor. The ability of Columbia Bancorp to pay dividends to
its stockholders is limited primarily by the ability of Columbia Bank to pay
dividends to Columbia Bancorp. In the event of any liquidation, dissolution or
winding up of Columbia Bancorp the holders of common stock are entitled to
share ratably in all the remaining assets.
All of the outstanding shares of common stock are, and the shares of common
stock offered hereby will be, validly issued, fully paid and nonassessable.
The Transfer Agent for the common stock is Registrar and Transfer Company.
Preferred Stock
Under the Columbia Bancorp charter, the Columbia Bancorp is authorized
without further stockholder action, from time to time, to classify any unissued
shares of capital stock as preferred stock and to issue shares of preferred
stock of Columbia Bancorp, in one or more series, with such designations,
preferences, powers and relative participating, optional or other special
rights, and the qualifications, limitations or restrictions thereon, including,
but not limited to, dividend rights, dividend rate or rates, conversion rights,
voting rights, rights and terms of redemption, the redemption price or prices,
and the liquidation preferences as shall be stated in the resolution providing
for the issue of a series of such stock adopted, at any time or from time to
time, by the Columbia Bancorp board.
FUTURE STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated under the Exchange Act, Columbia Bancorp
stockholders may present proposals for inclusion in the Columbia Bancorp proxy
statement for consideration at the next annual meeting of its stockholders by
submitting their proposals to Columbia Bancorp in a timely manner. Suburban
Bancshares stockholders who become stockholders of Columbia Bancorp may present
proposals for inclusion
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in the Columbia Bancorp proxy statement for its 2000 annual meeting, as the
date for inclusion in the proxy statement for the 1999 annual meeting has
already passed. Any such proposal must comply with Rule 14a-8.
Columbia Bancorp's by-laws require stockholders who intend to propose
business for consideration by stockholders at an annual meeting, other than
stockholder proposals that are included in the proxy statement, to give written
notice to the Secretary of Columbia Bancorp not less than sixty days and not
more than ninety days before the anniversary of the prior years' meeting. A
stockholder must submit a matter to be raised at Columbia Bancorp's 2000
meeting of Stockholders on or after January 28, 2000, but not later than
February 25, 2000. The written notice should be sent to Columbia Bancorp's
principal office (to the attention of the Secretary) and must include a brief
description of the business, the reasons for conducting such business, any
material interest the stockholder has in such business, the name and address of
the stockholder as they appear on Columbia Bancorp's books and the number of
shares of Columbia Bancorp common stock the stockholder beneficially owns.
SEC rules set forth standards for what stockholder proposals Columbia Bancorp
is required to include in a proxy statement for an annual meeting.
OTHER MATTERS
The boards of directors of Columbia Bancorp and Suburban Bancshares do not
know of any other business to be presented for consideration at the meetings.
If other matters properly come before the meetings, the persons named in the
accompanying forms of proxy intend to vote on such matters based on their best
judgment.
Columbia Bancorp will bear the cost of the meeting and the cost of soliciting
proxies, including the cost of mailing the proxy materials. In addition to
solicitation by mail, directors, officers and regular employees of Columbia
Bancorp (none of whom will be specifically compensated for such services) may
solicit proxies by telephone or otherwise. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send proxy
cards and proxy materials to the stockholders they represent and Columbia
Bancorp will reimburse them for their expenses.
Columbia Bancorp will furnish, without charge, to each person whose proxy is
being solicited, upon request, a copy of its Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, as filed with the SEC, including the
financial statements, notes to the financial statements and the financial
schedules contained in the report. Columbia Bancorp will also furnish copies of
any exhibits to the report but may charge a reasonable copying charge.
Stockholders should address requests for copies of any of these materials to
John A. Scaldara, Jr., Columbia Bancorp, 9171 Baltimore National Pike, Ellicott
City, Maryland 21042.
Suburban Bancshares will bear the cost of the meeting and the cost of
soliciting proxies, including the cost of mailing the proxy materials. In
addition to solicitation by mail, directors, officers and regular employees of
Suburban Bancshares (none of whom will be specifically compensated for such
services) may solicit proxies by telephone or otherwise. Arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy cards and proxy materials to the stockholders they represent and
Suburban Bancshares will reimburse them for their expenses.
Suburban Bancshares will furnish, without charge, to each person whose proxy
is being solicited, upon request, a copy of its Annual Report on Form 10-K for
the fiscal year ended December 31, 1998, as filed with the SEC, including the
financial statements, notes to the financial statements and the financial
schedules contained in the report. Suburban Bancshares will also furnish copies
of any exhibits to the report but may charge a reasonable copying charge.
Stockholders should address requests for copies of any of these materials to
Stephen A. Horvath, Suburban Bancshares, Inc., 7505 Greenway Center Drive, P.O.
Box 298, Greenbelt, Maryland 20768-0298.
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We may engage one or more proxy solicitation firms to assist in obtaining
proxies from our stockholders on a timely basis. As of the date of this proxy
statement/prospectus, neither of us has engaged a proxy solicitation firm or
has committed ourselves to the payment of any fees for this service.
LEGAL MATTERS
Piper Marbury Rudnick & Wolfe LLP has issued a legal opinion concerning the
legality of the common stock of Columbia Bancorp to be issued to Suburban
Bancshares stockholders. Certain federal income tax consequences and other
matters relating to the merger will be passed upon by Piper Marbury Rudnick &
Wolfe LLP. Certain matters relating to the merger will be passed upon by
McNamee, Hosea, Jernigan & Kim, P.A., as counsel to Suburban Bancshares.
EXPERTS
The financial statements of Columbia Bancorp as of December 31, 1998 and
1997, and for each of the years in the three-year period ended December 31,
1998, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of Suburban Bancshares, Inc. at
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998, have been incorporated by reference herein and in the
registration statement in reliance upon the report of Stegman & Company,
independent certified public accountants, incorporated by reference herein, and
upon the authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Columbia Bancorp has filed with the SEC a registration statement under the
Securities Act that registers the distribution to Suburban Bancshares
stockholders of the shares of Columbia Bancorp common stock to be issued in
connection with the merger. The registration statement, including the attached
exhibits and schedules, contains additional relevant information about Columbia
Bancorp and Columbia Bancorp common stock. The rules and regulations of the SEC
allow us to omit certain information included in the registration statement
from this proxy statement/prospectus.
In addition, Columbia Bancorp and Suburban Bancshares file annual, quarterly
and special reports, proxy statements and other information with the SEC under
the Securities Exchange Act. You may read and copy this information at the
SEC's Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549.
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet world wide web site that contains reports, proxy
statements and other information about issuers, like Columbia Bancorp and
Suburban Bancshares, who file electronically with the SEC. The address of the
site is http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this proxy
statement/prospectus, except for any information that is superseded by
information that is included directly in this proxy statement/prospectus.
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This proxy statement/prospectus incorporates by reference the documents
listed below that Columbia Bancorp and Suburban Bancshares previously filed
with the SEC. They contain important information about the companies and their
financial condition.
<TABLE>
<CAPTION>
Columbia Bancorp Commission
Filings Period or Date Filed
--------------------------- --------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Quarterly Report on Form 10-Q Quarter ended June 30, 1999
Quarterly Report on Form 10-Q Quarter ended September 30, 1999
Current Report on Form 8-K October 4, 1999
<CAPTION>
Suburban Bancshares
Commission Filings Period or Date Filed
------------------- --------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Quarterly Report on Form 10-Q Quarter ended June 30, 1999
Quarterly Report on Form 10-Q Quarter ended September 30, 1999
Current Report on Form 8-K October 1, 1999
</TABLE>
This proxy statement/prospectus is accompanied by copies of Columbia
Bancorp's Annual Report on Form 10-K for the year ended December 31, 1998,
Proxy Statement dated March 24, 1999 for its Annual Meetings of Stockholders
held on April 27, 1999 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999.
This proxy statement/prospectus is also accompanied by copies of Suburban
Bancshares' Annual Report on Form 10-K for the year ended December 31, 1998,
Proxy Statement dated April 22, 1999 for its Annual Meetings of Stockholders
held on May 19, 1999 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999.
We also incorporate by reference additional documents that either company may
file with the SEC between the date of this proxy statement/prospectus and the
date of the Columbia Bancorp or Suburban Bancshares special meetings. These
documents include periodic reports, such as annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K, as well as
proxy statements.
Columbia Bancorp has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Columbia Bancorp, as
well as all pro forma financial information, and Suburban Bancshares has
supplied all information relating to Suburban Bancshares.
Documents incorporated by reference are available from Columbia Bancorp and
Suburban Bancshares without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference as an exhibit in
this proxy statement/prospectus. You can obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them in writing or
by telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
Columbia Bancorp Suburban Bancshares, Inc.
9171 Baltimore National Pike 7505 Greenway Center Drive, P.O. Box 298
Ellicott City, Maryland 21042 Greenbelt, Maryland 20768-0298
Phone: (410) 465-4800 Phone: (301) 474-6694
</TABLE>
If you would like to request documents, please do so by February 15, 2000 to
receive them before the special meeting. If you request any incorporated
documents from Columbia Bancorp or Suburban Bancshares, we will mail them to
you by first class mail, or another equally prompt means, within one business
day after we receive your request.
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We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this proxy statement/prospectus or in any of the
materials that have been incorporated into this proxy statement/prospectus.
Therefore, if anyone does give you information of this sort, you should not
rely on it. If you are in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities offered by this
proxy statement/prospectus or the solicitation of proxies is unlawful, or if
you are a person to whom it is unlawful to direct these types of activities,
then the offer presented in this proxy statement/prospectus does not extend to
you. 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.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
A-1
<PAGE>
PLAN AND AGREEMENT TO MERGE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. Effective Date............................................................................... 7
2. Events Preceding Effectiveness............................................................... 7
3. Representations and Warranties of Suburban Bancshares........................................ 9
3.1. Organization, Standing, and Capitalization of Suburban Bancshares and the
Suburban Subsidiaries........................................................................ 9
3.2. Financial Statements......................................................................... 10
3.3. Taxes........................................................................................ 10
3.4. No Undisclosed Liabilities................................................................... 11
3.5. Absence of Certain Changes or Events......................................................... 11
3.6. Complete and Accurate Disclosure............................................................. 11
3.7. Title to Properties; Absence of Liens and Encumbrances; Compliance with Laws................. 12
3.8. Contracts.................................................................................... 12
3.9. Litigation, Etc.............................................................................. 14
3.10 Environmental Matters........................................................................ 14
3.11. Labor Matters................................................................................ 16
3.12. Pension and Welfare Matters.................................................................. 16
3.13. Related Party Transactions................................................................... 20
3.14. No Conflict with Other Documents............................................................. 20
3.15. Compliance with Laws; Governmental Authorizations............................................ 20
3.16. Authority; Enforceability.................................................................... 21
3.17. Insurance.................................................................................... 21
3.18. Financial Institutions Bond.................................................................. 21
3.19. Brokers; Financial Advisor................................................................... 21
3.20. Beneficial Ownership of Columbia Bancorp Common Stock........................................ 22
3.21. Year 2000.................................................................................... 22
4. Representations and Warranties of Columbia Bancorp........................................... 22
4.1. Organization, Standing, and Capitalization of Columbia Bancorp and Columbia
Subsidiaries................................................................................. 22
4.2. Financial Statements......................................................................... 24
4.3. Taxes........................................................................................ 24
4.4. No Undisclosed Liabilities................................................................... 24
4.5. Absence of Certain Changes or Events......................................................... 25
</TABLE>
A-2
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<TABLE>
<CAPTION>
<S> <C>
4.6. Complete and Accurate Disclosure............................................................. 25
4.7. Title to Properties; Absence of Liens and Encumbrances; Compliance with Laws................. 25
4.8. Contracts.................................................................................... 26
4.9. Litigation, Etc.............................................................................. 27
4.10. Environmental Matters........................................................................ 28
4.11. Labor Matters................................................................................ 29
4.12. Pension and Welfare Matters.................................................................. 29
4.13. Related Party Transactions................................................................... 33
4.14. No Conflict with Other Documents............................................................. 33
4.15. Compliance with Laws; Governmental Authorizations............................................ 33
4.16. Authority; Enforceability.................................................................... 34
4.17. Insurance.................................................................................... 34
4.18. Financial Institutions Bond.................................................................. 34
4.19. Brokers; Financial Advisor................................................................... 34
4.20. Beneficial Ownership of Suburban Bancshares Common Stock..................................... 35
4.21. Year 2000.................................................................................... 35
5. Covenants of Suburban Bancshares............................................................. 35
5.1. Information.................................................................................. 35
5.2. Events Preceding Effectiveness............................................................... 36
5.3. Regulatory Approvals......................................................................... 36
5.4. Conduct of Business.......................................................................... 36
5.5. Reservation of Shares........................................................................ 37
5.6. Meeting of Stockholders of Suburban Bancshares; Document Preparation......................... 37
5.7. Consents..................................................................................... 38
5.8. Current Information; Advice of Changes....................................................... 38
5.9. No Solicitation of Other Offers.............................................................. 39
5.10 Affiliate Agreements......................................................................... 40
5.11. Pooling-of-Interests......................................................................... 40
5.12. Taxes........................................................................................ 40
5.13. Public Announcements......................................................................... 41
6. Covenants of Columbia Bancorp................................................................ 41
6.1. Information.................................................................................. 41
6.2. Events Preceding Effectiveness............................................................... 42
6.3. Applications to Governmental Regulatory Authorities.......................................... 42
6.4. Conduct of Business.......................................................................... 42
</TABLE>
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<TABLE>
<CAPTION>
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6.5 Columbia Bancorp Common Stock................................................................. 43
6.6. Registration of Shares........................................................................ 43
6.7. Meeting of Stockholders of Columbia Bancorp; Document Preparation............................. 44
6.8. Consents...................................................................................... 45
6.9. Current Information; Advice of Changes........................................................ 45
6.10 No Solicitation of Other Offers............................................................... 45
6.11. Affiliate Agreements.......................................................................... 46
6.12. Pooling-of-Interests.......................................................................... 46
6.13. Taxes......................................................................................... 46
6.14. Public Announcements.......................................................................... 47
7. Conditions Precedent to Columbia Bancorp's Obligations........................................ 47
7.1. Representations, Warranties, and Covenants.................................................... 47
7.2. No Adverse Changes............................................................................ 47
7.3. Events Preceding the Effective Date........................................................... 47
7.4. Other Evidence................................................................................ 48
7.5. No Adverse Proceedings, Events, or Regulatory Requirements.................................... 48
7.6. Consents, Etc................................................................................. 48
7.7. Opinion of Tax Counsel........................................................................ 48
7.8. Fairness Opinion.............................................................................. 48
7.9. Opinion of Counsel............................................................................ 48
7.10 Pooling-of-Interests Accounting............................................................... 48
8. Conditions Precedent to Suburban Bancshares'Obligations....................................... 49
8.1. Representations, Warranties, and Covenants.................................................... 49
8.2. No Adverse Changes............................................................................ 49
8.3. Events Preceding the Effective Date........................................................... 49
8.4. Other Evidence................................................................................ 49
8.5. No Adverse Proceedings, Events, or Regulatory Requirements.................................... 50
8.6. Consents, Etc................................................................................. 50
8.7. Opinion of Tax Counsel........................................................................ 50
8.8. Fairness Opinion.............................................................................. 50
8.9. Opinion of Counsel............................................................................ 50
9. Terms of the Holding Company Merger........................................................... 50
9.1. Structure of the Holding Company Merger....................................................... 50
9.2. Conversion of Stock; Conversion Ratio......................................................... 51
9.3. Exchange Procedure............................................................................ 51
9.4. Stock Options................................................................................. 52
</TABLE>
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<TABLE>
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9.5. Charter of the Successor Corporation.......................................................... 52
9.6. By-Laws of the Successor Corporation.......................................................... 52
9.7. Anti-Dilution Provision....................................................................... 52
9.8. Restriction on Issuance or Repurchase of Securities........................................... 53
10. Terms of the Bank Merger...................................................................... 53
10.1. Structure of the Bank Merger.................................................................. 53
10.2. Conversion of Stock; Conversion Ratio......................................................... 53
10.3. Exchange Procedure............................................................................ 53
10.4. Charter of the Successor Bank................................................................. 53
10.5. By-Laws of the Successor Bank................................................................. 53
10.6. Restriction on Issuance or Repurchase of Securities........................................... 53
11. Boards of Directors and Employment Matters.................................................... 54
12. Amendment of this Plan........................................................................ 55
13. Abandonment of this Plan; Effect Thereof...................................................... 55
14. Expenses...................................................................................... 57
15. Notices....................................................................................... 57
16. Entire Agreement; Effect...................................................................... 57
17. Representations, Warranties, and Agreements................................................... 57
18. Governing Law................................................................................. 58
19. General....................................................................................... 58
</TABLE>
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PLAN AND AGREEMENT TO MERGE
PLAN AND AGREEMENT TO MERGE (this "Plan"), dated as of September 28, 1999
by and between COLUMBIA BANCORP ("Columbia Bancorp"), a Maryland corporation,
and SUBURBAN BANCSHARES, INC. ("Suburban Bancshares"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Columbia Bancorp is a bank holding company and the holder of all
of the issued and outstanding capital stock of Columbia Bank ("Columbia Bank"),
a Maryland commercial bank; and Suburban Bancshares is a bank holding company
and the holder of all of the issued and outstanding capital stock of Suburban
Bank of Maryland ("Suburban Bank"), a Maryland commercial bank; and
WHEREAS, Columbia Bancorp desires to have Suburban Bancshares merge with
Columbia Bancorp in such a manner that, upon the merger becoming effective,
Columbia Bancorp will be the surviving Maryland corporation, and all of the
issued and outstanding shares of the Common Stock of Suburban Bancshares will be
converted into shares of the Common Stock of Columbia Bancorp, subject to the
terms and conditions and based upon Suburban Bancshares' representations,
warranties, and covenants hereinafter set forth, such merger hereinafter
referred to as the "Holding Company Merger;" and
WHEREAS, Columbia Bancorp desires to have Suburban Bank merge with Columbia
Bank in such a manner that, upon the merger becoming effective, Columbia Bank
will be the surviving Maryland commercial bank, and all of the issued and
outstanding shares of the Common Stock of Suburban Bank will be converted into
shares of the Common Stock of Columbia Bank and owned by Columbia Bancorp,
subject to the terms and conditions and based upon Suburban Bancshares'
representations, warranties, and covenants hereinafter set forth, such merger
hereinafter referred to as the "Bank Merger," and with the Holding Company
Merger, collectively, the "Mergers;" and
WHEREAS, Suburban Bancshares desires that it be merged with Columbia
Bancorp in the manner set forth above, and that the issued and outstanding
shares of the Common Stock of Suburban Bancshares be converted into shares of
the Common Stock of Columbia Bancorp, subject to the terms and conditions and
based upon Columbia Bancorp's representations, warranties, and covenants
hereinafter set forth; and
WHEREAS, Suburban Bancshares desires that Suburban Bank be merged with
Columbia Bank in the manner set forth above, and that the issued and outstanding
shares of the Common Stock of Suburban Bank be converted into shares of the
Common Stock of Columbia Bank owned by Columbia Bancorp, subject to the terms
and conditions and based upon Columbia Bancorp's representations, warranties,
and covenants hereinafter set forth; and
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and the mutual benefits to be derived herefrom, the parties
agree as follows:
1. Effective Date. Pursuant to Md. General Corporation Law (S) 3-113(a),
Md. Fin. Ins. Code (S) 3-709(b), and De. General Corporation Law (S) 252(c), the
effective date of this Plan and the Mergers (the "Effective Date") shall be
either (a) the first day of the month following the month in which the last of
the events in Section 2, Section 7 and Section 8 occurs; or (b) such other date
as Columbia Bancorp and Suburban Bancshares may agree upon. Columbia Bancorp and
Suburban Bancshares will prepare and execute an Agreement and Articles of Merger
in substantially the form attached as Appendix II which will set forth the
Effective Date, and will file the Agreement and Articles of Merger with the
Maryland State Department of Assessments and Taxation and the Delaware Secretary
of State. Columbia Bank and Suburban Bank will prepare and execute an Agreement
of Bank Merger in substantially the form attached as Appendix II, and will file
the Agreement of Bank Merger and the Certificate of Merger of the Commissioner
of Financial Institutions which will set forth the Effective Date with the
Maryland State Department of Assessments and Taxation.
2. Events Preceding Effectiveness. On or before the Effective Date the
following shall have occurred:
(a) A majority of the Boards of Directors of each of Suburban
Bancshares and Columbia Bancorp shall have approved and agreed to this Plan
and the Mergers;
(b) A majority of the Boards of Directors of each of Suburban
Bancshares and Columbia Bancorp shall have approved and agreed to the Stock
Option Agreements (the "Stock Option Agreements") in the forms attached as
Appendix III and Appendix IV, respectively; and Suburban Bancshares and
Columbia Bancorp, respectively, shall have authorized and reserved an
adequate number of shares of its Common Stock for issuance upon exercise of
the option granted by such Stock Option Agreements, and taken all actions
necessary to fulfill its obligations thereunder;
(c) the Board of Directors of Suburban Bancshares shall call a
meeting of the stockholders of Suburban Bancshares. Notice of the time and
place of the meeting shall be provided in accordance with De. General
Corporation Law (S) 252(c), and this Plan and the Holding Company Merger
shall have been ratified and confirmed by the affirmative vote of not less
than a majority of the issued and outstanding voting stock of Suburban
Bancshares at the meeting, in accordance with De. General Corporation Law
(S) 252(c);
(d) the Board of Directors of Columbia Bancorp shall call a
meeting of the stockholders of Columbia Bancorp. Notice of the time and
place of the meeting shall be provided in accordance with Md. General
Corporation
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Law (S) 2-504, and this Plan and the Holding Company Merger shall have been
ratified and confirmed by the affirmative vote of not less than two-thirds
of the issued and outstanding voting stock of Columbia Bancorp at the
meeting, in accordance with Md. General Corporation Law (S) 3-105(d);
(e) the Board of Directors and the stockholder of Columbia Bank
shall have approved the Bank Merger in accordance with Md. Fin. Ins. Code
(S)(S) 3-701 et seq.;
(f) the Board of Directors and the stockholder of Suburban Bank
shall have approved the Bank Merger in accordance with Md. Fin. Ins. Code
(S)(S) 3-701 et seq.;
(g) Columbia Bancorp shall have procured the required approval,
consent, waiver, or other administrative action with respect to this Plan
and the transactions contemplated hereby by the Board of Governors of the
Federal Reserve System under Section 3(a)(5) of the Bank Holding Company
Act of 1956, as amended;
(h) Columbia Bank and Suburban Bank shall have procured the
required approval, consent, waiver, or other administrative action with
respect to this Plan and the transactions contemplated hereby by the
Maryland Commissioner of Financial Regulation under Md. Fin. Ins. Code
(S)(S) 5-904 and 3-705;
(i) Columbia Bank and Suburban Bank shall have procured the
required approval, consent, waiver, or other administrative action with
respect to this Plan and the transactions contemplated hereby by the
Federal Deposit Insurance Corporation under Sections 18(c) and 18(d) of the
Federal Deposit Insurance Act;
(j) the parties shall have procured all other regulatory
approvals, consents, waivers, or administrative actions of governmental
entities or other persons or agencies that are necessary or appropriate to
the consummation of the transactions contemplated by this Plan, and no
approval, consent, waiver, or administrative action referred to in this
Section 2(j) shall have included any condition or requirement that would
(i) result in a materially adverse effect on Columbia Bancorp or Suburban
Bancshares, or (ii) so materially and adversely affect the economic or
business benefits of the Mergers that Columbia Bancorp, in the sole
judgment of Columbia Bancorp, would not have entered into this Plan had
such conditions or requirements been known at the date hereof;
(k) Columbia Bancorp shall have filed a Registration Statement
with the Securities and Exchange Commission (the "SEC") under the
Securities
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Act of 1933, as amended (the "Securities Act"), pertaining to the shares of
Common Stock of Columbia Bancorp to be issued to the stockholders of
Suburban Bancshares pursuant to this Plan and the Holding Company Merger,
and such Registration Statement shall have become effective and there shall
not be in effect a stop order with respect thereto; and
(l) Columbia Bancorp shall have made such filings and
obtained such approvals as are necessary under the state securities or
"blue sky" laws pertaining to the shares of Common Stock of Columbia
Bancorp to be issued to the stockholders of Suburban Bancshares pursuant to
this Plan and the Mergers.
3. Representations and Warranties of Suburban Bancshares. Suburban
Bancshares represents and warrants to Columbia Bancorp as follows:
3.1. Organization, Standing, and Capitalization of Suburban
Bancshares and the Suburban Subsidiaries. (a) Suburban Bancshares is a duly
organized and validly existing corporation and is in good standing under the
laws of the State of Delaware. Suburban Bancshares has the corporate power and
authority to own and hold its material properties and to carry on its business
as it is now being conducted. Suburban Bancshares is a registered bank holding
company under the Bank Holding Company Act of 1956, as amended. Suburban
Bancshares has no subsidiaries or affiliated companies and is not a party to any
joint venture or partnership other than as listed on Schedule 3.1(a)
(collectively, the "Suburban Subsidiaries").
(b) Suburban Bank is a duly organized and validly existing
Maryland commercial bank and is in good standing under the laws of the State of
Maryland. The deposits of Suburban Bank are insured under the provisions of the
Federal Deposit Insurance Act, as amended. Each of the other Suburban
Subsidiaries is a duly organized and validly existing corporation or other
entity and is in good standing under the laws of the jurisdiction of its
incorporation or organization as set forth on Schedule 3.1(a). Each of the
Suburban Subsidiaries has the power (corporate or other) and authority to own
and hold its material properties and to carry on its business as it is now being
conducted. All outstanding shares of capital stock or other equity interests of
all of the Suburban Subsidiaries are validly issued, fully paid, and non-
assessable. Except as disclosed in Schedule 3.1(b), each of the Suburban
Subsidiaries is wholly owned by its parent. There are no outstanding options,
warrants, rights, or obligations of any kind entitling the holder thereof to
acquire shares of the capital stock or other equity interests of any of the
Suburban Subsidiaries, and there are no outstanding securities or instruments of
any kind that are convertible into shares of the capital stock or other equity
interests of any of the Suburban Subsidiaries. Except as disclosed in Schedule
3.1(b), none of the Suburban Subsidiaries is a party to any joint venture or
partnership.
(c) Copies of all organizational documents and by-laws of
Suburban Bancshares and each of the Suburban Subsidiaries are attached as
Schedule 3.1(c), and all such copies are true and correct as of the date hereof.
The minute books of Suburban Bancshares and each of the Suburban Subsidiaries,
which have been made available to Columbia Bancorp for inspection, are
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complete in all material respects and accurately record the actions taken by the
stockholders and directors of Suburban Bancshares and each of the Suburban
Subsidiaries.
(d) The authorized capital stock of Suburban Bancshares consists
exclusively of 20,000,000 shares of Common Stock, par value $.01 per share,
11,301,218 of which shares are outstanding at September 17, 1999, and 1,000,000
shares of Preferred Stock, par value $.01 per share, none of which shares are
issued or outstanding. All outstanding shares of Suburban Bancshares Common
Stock are validly issued, fully paid, and non assessable. Suburban Bancshares
has reserved 500,000 shares of its Common Stock for issuance under its Stock
Option Plans. On September 17, 1999, there were outstanding options to purchase
491,134 shares of Suburban Bancshares' Common Stock at prices ranging from
$2.59375 to $5.625 pursuant to these Stock Option Plans. Except for the option
to be granted to Columbia Bancorp pursuant to the Stock Option Agreement
attached as Appendix III and as disclosed in Schedule 3.1(d), there are no other
outstanding options, warrants, rights, or obligations of any kind entitling the
holder thereof to acquire shares of the Common Stock of Suburban Bancshares, and
there are no outstanding securities or instruments of any kind that are
convertible into shares of the Common Stock of Suburban Bancshares.
3.2. Financial Statements. Suburban Bancshares has provided in
Schedule 3.2 copies of the Consolidated Financial Statements of Suburban
Bancshares and the Suburban Subsidiaries at December 31, 1994, 1995, 1996, 1997,
and 1998 and for each of the years then ended, as reported upon by Stegman &
Company, and at June 30, 1998 and 1999 and for each of the six month periods
then ended, all of which are true and complete in all material respects, have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods covered by such consolidated
financial statements and present fairly the financial position, results of
operations, cash flows, and changes in stockholders' equity of Suburban
Bancshares and the Suburban Subsidiaries at the dates of and for the periods
covered by such financial statements.
3.3. Taxes. Schedule 3.3 sets forth the tax returns to federal,
state, county, municipal, or foreign taxing authorities for the taxable year
ended December 31, 1994 and all taxable years through and including December 31,
1998 for Suburban Bancshares and the Suburban Subsidiaries. Suburban Bancshares
and the Suburban Subsidiaries have filed with appropriate federal, state,
county, municipal, or foreign taxing authorities all tax returns required to be
filed (taking any applicable extensions into consideration) and have paid or
reserved for all taxes shown to be due on such returns and all penalties and
interest payable in respect thereof. Except as disclosed in Schedule 3.3,
neither Suburban Bancshares nor any of the Suburban Subsidiaries have received
from any taxing authority any notice of deficiency or assessment of additional
taxes not paid or any notice of an intention to commence an examination or audit
of its tax returns, and no tax audits by any taxing authority are in process.
Except as disclosed on Schedule 3.3, neither Suburban Bancshares nor any of the
Suburban Subsidiaries have granted any waiver of any statute of limitations or
otherwise agreed to any extension of a period for the assessment of any federal,
state, county, municipal, or foreign income tax. The accruals and reserves
reflected in the consolidated financial statements which Suburban Bancshares has
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provided to Columbia Bancorp as described in Section 3.2 are adequate to cover
all taxes (including interest and penalties, if any, thereon) that are payable
or accrued as a result of the operations of Suburban Bancshares and the Suburban
Subsidiaries for all periods prior to the date of such consolidated financial
statements. For purposes of this Section 3.3, any reference to the Suburban
Subsidiaries shall be deemed to include any entity listed on Schedules 3.1(a)
and 3.1 (b).
3.4. No Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated financial statements referred
to in Section 3.2, neither Suburban Bancshares nor any of the Suburban
Subsidiaries at the dates of such consolidated financial statements had any
material liabilities or obligations (whether accrued, absolute, or contingent)
required under generally accepted accounting principles to be reflected thereon
which would materially and adversely affect the fair presentation of such
financial statements. Neither Suburban Bancshares nor any of the Suburban
Subsidiaries has incurred any liability since the date of the consolidated
financial statements referred to in Section 3.2 (including any liability for
taxes) which would materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, or operations of Suburban Bancshares
and the Suburban Subsidiaries, taken as a whole, other than liabilities which
have been incurred in the ordinary course of business.
3.5. Absence of Certain Changes or Events. Except as set forth in
Schedule 3.5, since December 31, 1998 there has not been:
(a) Any materially adverse change in the financial position,
results of operations, assets, liabilities, or business of Suburban
Bancshares or the Suburban Subsidiaries, other than changes in the ordinary
course of business;
(b) any increase in salaries or wages of directors,
officers, or employees of Suburban Bancshares or the Suburban Subsidiaries
other than in the ordinary course of business; or any establishment or
increase of any employment, compensation, bonus, pension, option, incentive
or deferred compensation, retirement payments, profit sharing, or similar
agreement or benefit, authorized, granted, or accrued to any directors,
officers, or employees of Suburban Bancshares or the Suburban Subsidiaries
other than in the ordinary course of business; or
(c) any declaration, payment, or set aside by Suburban
Bancshares of any dividend or distribution in respect of its Common Stock,
or any purchase, issuance, or sale of any of its Common Stock.
3.6. Complete and Accurate Disclosure. Neither this Plan (insofar
as it relates to Suburban Bancshares and the Suburban Subsidiaries, the Common
Stock of Suburban Bancshares, and the involvement of Suburban Bancshares in the
transactions contemplated hereby) nor any financial statement, schedule,
certificate, or other statement or document set
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forth on a schedule delivered by Suburban Bancshares to Columbia Bancorp in
connection with this Plan, when considered in the aggregate, contains any
statement which, at the time and in light of the circumstances under which it is
made, is false or misleading with respect to any material fact or omits to state
any material fact necessary to make the statements contained herein or therein
not false or misleading.
3.7. Title to Properties; Absence of Liens and Encumbrances;
Compliance with Laws. Except as disclosed on Schedule 3.7, Suburban Bancshares
and each of the Suburban Subsidiaries has good and marketable title to all of
their respective properties and assets, including those reflected in the
consolidated financial statements referred to in Section 3.2, except as sold or
otherwise disposed of for fair value and only in the ordinary course of
business, free and clear of all liens and encumbrances, except (i) with respect
to property as to which they are lessees, (ii) with respect to real estate owned
by Suburban Bancshares or the Suburban Subsidiaries, for use, occupancy, and
similar restrictions of public record that may be observed by an inspection of
the property, and such other utility and other easements and encumbrances as do
not materially adversely affect the fair market value of such real property, and
(iii) liens to secure borrowings, liens to secure governmental deposits, and
liens for current taxes not yet due and payable. Neither Suburban Bancshares nor
any of the Suburban Subsidiaries owns or leases real property except as
disclosed on Schedule 3.7, and is not in default under any material lease of
real or personal property to which it is a party. As of the date hereof, except
as disclosed on Schedule 3.7, the real properties, structures, buildings,
equipment, and the tangible personal property owned, operated, or leased by
Suburban Bancshares or any of the Suburban Subsidiaries are (x) in good repair,
order, and condition, except for depletion, depreciation, and ordinary wear and
tear, (y) suitable for the uses for which they were intended, and (z) free from
any known structural defects. As of the date hereof, there are no laws,
conditions of record, or other impediments which materially interfere with the
intended uses by Suburban Bancshares or any of the Suburban Subsidiaries of the
real property or tangible personal property owned or leased by it, except as set
forth in Schedule 3.7. Neither Suburban Bancshares nor any of the Suburban
Subsidiaries have received any notice of any violation of any applicable law,
building code, zoning ordinance, or other similar law. Suburban Bancshares and
the Suburban Subsidiaries own or have the rights to use all real and personal
properties and assets that are material to the conduct of the business as now
conducted of Suburban Bancshares and the Suburban Subsidiaries, taken as a
whole.
3.8. Contracts. Except for the plans, contracts, and agreements
of Suburban Bancshares and the Suburban Subsidiaries (or of any plan under
Section 3.8(b)) disclosed on Schedule 3.8, neither Suburban Bancshares nor any
of the Suburban Subsidiaries (nor any plan under Section 3.8(b)) is a party to
or subject to:
(a) Any employment, consultation, or compensation contract
or arrangement (other than those terminable at will) with any officer,
consultant, director, or employee;
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(b) any plan, contract, program, understanding, or agreement
providing for bonuses, pensions, severance pay, executive compensation,
options, stock purchases, or any other form of retirement, incentive or
deferred compensation, retirement payments, death benefits, profit sharing,
branch closing benefits, workers' compensation, tuition reimbursement or
scholarship program, any plans providing benefits or payments in the event
of a change in control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of Suburban
Bancshares or any of the Suburban Subsidiaries, or any health, accident,
disability, sick leave, vacation pay, life insurance, or other welfare
benefit, or any other employee or retired employee benefit (including,
without limitation, any "employee benefit plan" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) in which any current or former employee, director, or agent (or
beneficiary of any of them) of Suburban Bancshares or any of the Suburban
Subsidiaries is or was, within the last six years, entitled to participate;
(c) any contract or agreement with any labor union;
(d) any lease of real or personal property with annual
rentals in excess of $5,000;
(e) any agreement for services in excess of $10,000 per
year or for the purchase or disposition of any equipment or supplies except
individual purchase orders for office supplies incurred in the ordinary
course of business of $10,000 or less;
(f) any instrument evidencing or relating to indebtedness
for borrowed money except for customer accounts, deposits, certificates of
deposit, federal funds purchased, and the like which may be construed as
borrowings and except for loans made by Suburban Bank as lender in the
ordinary course of its business;
(g) any lease or other contract containing covenants not to
enter into or consummate the transactions contemplated hereby or which
provides for payments in excess of $2,000 and will be terminated or
violated by the Mergers or in respect of which the Mergers would cause a
default or acceleration of obligations; or
(h) any other contract or agreement not of the type covered
by any of the other specific terms of this Section 3.8 obligating Suburban
Bancshares or any Suburban Subsidiary to expenditures in excess of $25,000.
Each of the instruments disclosed on Schedule 3.8 is valid and in full force and
effect. Neither Suburban Bancshares nor any of the Suburban Subsidiaries are in
default nor have any of them
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received any notice that they are in default, nor to their actual knowledge is
any other party in default, under any material agreements, instruments, or
obligations to which Suburban Bancshares or any of the Suburban Subsidiaries is
a party or by which they are bound.
3.9. Litigation, Etc. Except as disclosed on Schedule 3.9, (a)
there is no litigation, proceeding, or investigation pending or, to the
knowledge of Suburban Bancshares, threatened against Suburban Bancshares or any
of the Suburban Subsidiaries which would result in any materially adverse change
in the condition (financial or otherwise), assets, liabilities, business,
operations, or future prospects of Suburban Bancshares and the Suburban
Subsidiaries, taken as a whole; (b) there are no outstanding orders, writs,
injunctions, judgments, decrees, directives, consent agreements, or memoranda of
understanding issued by any federal, state, or local court or governmental
authority or arbitration tribunal issued against or with the consent of Suburban
Bancshares or any of the Suburban Subsidiaries that materially and adversely
affect the condition (financial or otherwise), assets, liabilities, business,
operations, or future prospects or that in any manner restrict Suburban
Bancshares' right to carry on its business or that of the Suburban Subsidiaries
as now conducted; and (c) Suburban Bancshares is aware of no fact or condition
now existing that might give rise to any litigation, investigation, or
proceeding which, if determined adversely to Suburban Bancshares or any of the
Suburban Subsidiaries, would materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business, operations, or future
prospects of Suburban Bancshares and the Suburban Subsidiaries, taken as a
whole, or would restrict in any manner Suburban Bancshares' right to carry on
its business or that of the Suburban Subsidiaries as now conducted. Suburban
Bancshares has disclosed on Schedule 3.9 all litigation in which Suburban
Bancshares or any of the Suburban Subsidiaries is involved as a party (other
than bankruptcy proceedings in which Suburban Bancshares or any of the Suburban
Subsidiaries has filed proofs of claim or routine collection and foreclosure
suits initiated in the ordinary course of business).
3.10.Environmental Matters. (a) The following terms shall have
the indicated meaning:
"Property" or "Properties" means all branch properties now
or formerly owned or operated, all other real property now owned or
operated, and any real properties owned or operated on or after July 1,
1991 and subsequently disposed of.
"Environmental Law" means (i) any applicable federal,
state, or local statute, law, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, order, judgment, decree,
directive, requirement, or agreement with any court, governmental
authority, or other regulatory or administrative agency or commission,
domestic or foreign ("Governmental Entity") now existing, relating to the
use, storage, treatment, generation, transportation, processing, handling,
labeling, production, release, or disposal of Hazardous Substances, each as
amended, or (ii) any common law that may impose liability or
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obligations for injuries or damages due to the presence of or exposure to
any Hazardous Substance.
"Hazardous Substance" means any substance, whether liquid, solid,
or gas, listed, defined, designated, or classified as hazardous, toxic,
radioactive, or dangerous under any applicable Environmental Law, whether
by type or by quantity. Hazardous Substance includes, without limitation,
any "hazardous substance" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, and any other
substance regulated or subject to any federal environmental statute,
including, but not limited to the Toxic Substance Control Act, Clean Water
Act, Clean Air Act, Oil Pollution Act and Resource Conservation and
Recovery Act, or a similar state statute, regardless of the amount of the
Hazardous Substance.
(b) Except as disclosed on Schedule 3.10 or as would not individually
or in the aggregate have a materially adverse effect on the condition (financial
or otherwise), assets, liabilities, business, or operations of Suburban
Bancshares and the Suburban Subsidiaries, taken as a whole:
(i) neither Suburban Bancshares nor any of the Suburban
Subsidiaries has received any written notices, demand letters, or written
requests for information from any Governmental Entity or any third party
indicating that Suburban Bancshares or any Suburban Subsidiary may be in
violation of, or liable under, any Environmental Law;
(ii) there are no civil, criminal, or administrative actions,
suits, demands, claims, hearings, investigations, or proceedings pending or
to the knowledge of Suburban Bancshares threatened against Suburban
Bancshares or any Suburban Subsidiary alleging that they may be in
violation of, or liable under, any Environmental Law;
(iii) no reports have been filed with any Governmental Entity,
nor to the knowledge of Suburban Bancshares are any reports required to be
filed with any Governmental Entity, by Suburban Bancshares or any of the
Suburban Subsidiaries concerning the release of any Hazardous Substance or
the violation of any Environmental Law on or at any of the Properties of
Suburban Bancshares or any of the Suburban Subsidiaries;
(iv) to the knowledge of Suburban Bancshares or except as
disclosed on Schedule 3.10, there are no underground storage tanks on, in,
or under any of the Properties of Suburban Bancshares or any of the
Suburban Subsidiaries, and no underground storage tanks have been closed or
removed from any Property of Suburban Bancshares or any of the Suburban
Subsidiaries while
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such Property was owned or operated by Suburban Bancshares or any of the
Suburban Subsidiaries;
(v) to the knowledge of Suburban Bancshares or except as
disclosed on Schedule 3.10, no Hazardous Substance has been generated,
used, stored, processed, disposed of, or discharged on or into any of the
Properties of Suburban Bancshares or any of the Suburban Subsidiaries,
except for such hazardous substances as may be used in the everyday
business of a bank office; and
(vi) to the knowledge of Suburban Bancshares or except as
disclosed on Schedule 3.10, no materials containing asbestos have been used
or incorporated in any building or other structure or improvement located
on any of the Properties of Suburban Bancshares or any of the Suburban
Subsidiaries.
(c) There are no permits or licenses or agency filings or reports
required under any Environmental Law in respect of any of the Properties now or
formerly owned or operated by Suburban Bancshares or any of the Suburban
Subsidiaries that the absence of which could, individually or in the aggregate,
have a materially adverse effect on the condition (financial or otherwise),
assets, liabilities, business, or operations of Suburban Bancshares and the
Suburban Subsidiaries, taken as a whole.
(d) Suburban Bancshares has disclosed on Schedule 3.10 a copy of its
current policy regarding compliance with Environmental Laws.
3.11. Labor Matters. To Suburban Bancshares' knowledge, no organization
effort with respect to any of the employees of Suburban Bancshares or any of the
Suburban Subsidiaries is pending or threatened, and no labor dispute, strike,
work stoppage, employee action, or labor relation problem which may materially
affect Suburban Bancshares or any of the Suburban Subsidiaries currently is
pending or threatened. Suburban Bancshares and each of the Suburban Subsidiaries
have at all times in all material respects complied with all applicable employee
termination notice and similar laws. Suburban Bancshares and each of the
Suburban Subsidiaries have at all times complied in all material respects with
all applicable family medical leave and similar laws. If applicable, Suburban
Bancshares and each of the Suburban Subsidiaries have at all times complied in
all material respects with all applicable requirements of the Worker Adjustment
and Retraining Notification Act and all similar state laws.
3.12. Pension and Welfare Matters. With respect to the plans,
contracts, programs, understandings, or agreements identified pursuant to
Sections 3.8(a) and (b) (for purposes of this Section 3.12, the "plans"):
(a) Schedule 3.12 clearly identifies all of the plans which are
(i) Multiemployer Plans (as defined in (l) below), (ii) multiple employer
plans subject to Sections 4063 and 4064 of ERISA ("Multiple Employer
Plans"), (iii)
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plans other than Multiemployer Plans and Multiple Employer Plans that are
subject to Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code"), (iv) plans intended to qualify under Section 401 of the Code,
and (v) "welfare benefit plans" within the meaning of Section 3(1) of ERISA
which provide for continuing benefits or coverage for any participant or
any beneficiary of a participant after such participant's termination of
employment except coverage or benefits required by Section 4980B of the
Code if paid 100% by the participant;
(b) true, correct and complete copies of the following documents,
with respect to each of the plans have been made available or delivered to
Columbia Bancorp: (i) all plan documents, including trust agreements,
insurance policies, loan documents, and service agreements and amendments
thereto, (ii) the most recent Forms 5500 and any financial statements
attached thereto and those for the prior three years, (iii) the last
Internal Revenue Service determination letter and the application with
respect thereto, (iv) summary plan descriptions, (v) the most recent
actuarial statements and those for the prior three years, (vi) written
descriptions of all non-written agreements relating to any such plan, as
applicable, for Suburban Bancshares and each of the Suburban Subsidiaries,
and (vii) all filings with a governmental agency or entity within the last
three years, including, without limitation, filings under the voluntary or
other compliance programs of the U.S. Department of Labor or the Internal
Revenue Service;
(c) each of the plans has been operated in all material respects
in accordance with its terms and in accordance with all applicable laws
including, but not limited to, the ERISA, the Code, the Consolidated
Omnibus Budget Reconciliation Act of 1985, the Health Insurance Portability
and Accountability Act of 1996, and state health care continuation laws;
(d) all reporting and disclosure requirements of ERISA imposed
upon each such plan have been complied with in all material respects, and
all required governmental filings have been made with respect to the plans;
(e) none of (i) the plans, (ii) the Suburban Subsidiaries, and
(iii) Suburban Bancshares, and to Suburban Bancshares' knowledge, (x) no
current or former director, officer, employee, agent, or representative of
Suburban Bancshares or any of the Suburban Subsidiaries, and (y) no
fiduciary, "party in interest" (as defined in Section 3(14) of ERISA) or
"disqualified person" (as defined in Section 4975 of the Code) with respect
to any of the plans has engaged in any non-exempt "prohibited transaction"
in connection with any of the plans within the meaning of Section 4975 of
the Code or Title I, Part 4 of ERISA;
(f) none of the plans has any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or
not
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waived, with respect to the latest five plan years, nor any liability to
the Pension Benefit Guaranty Corporation (the "PBGC") (other than normal
premium payments);
(g) with respect to plans which are pension plans (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA, the assets of each
such funded plans equal or exceed the liabilities (as defined in Section
4001(a)(16) of ERISA) under such plans when such liabilities are valued on
a termination basis using PBGC interest and other assumptions;
(h) no contributions to any of the plans from Suburban Bancshares
or any of the Suburban Subsidiaries are currently past due and, if
applicable, all past service and other liabilities currently existing but
payable in the future, if any, are reflected in the latest actuarial report
in accordance with sound actuarial principles;
(i) no audits, proceedings, investigations, filings, or other
matters (excluding any determination letter application that has been or
may be filed prior to the Effective Date) are pending before the IRS, the
Department of Labor, the PBGC, or other public or quasi-public body in
connection with any such plans;
(j) each plan intended to qualify under Section 401(a) of the
Code is so qualified and the trust maintained pursuant thereto is exempt
from taxation under Section 501 of the Code and nothing has occurred with
respect to the operation or administration of such plan which would cause
the loss of such qualification or exemption or the imposition of any
liability, penalty, or tax under ERISA or the Code that could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, business, or operations of Suburban
Bancshares and the Suburban Subsidiaries, taken as a whole, or on such
plan;
(k) except as disclosed in Schedule 3.12, through the Effective
Date, there will be no changes in the operation of the plans or in the
documents constituting or affecting the plans except for amendments and
operational changes required by applicable law which do not materially
increase the cost of such plans;
(l) no employees, former employees, or retired employees of
Suburban Bancshares or any of the Suburban Subsidiaries, as a result of
their employment with Suburban Bancshares or any of the Suburban
Subsidiaries, are participants in any "multiemployer plan" which is a
"pension plan," as such terms are defined in Sections 3(37) and 3(2) of
ERISA, respectively, ("Multiemployer Plan") and neither Suburban Bancshares
nor any of the Suburban Subsidiaries has any current, contingent or
potential liability with respect to any such plan;
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(m) no "reportable event," as such term is defined in Section
4043(c) of ERISA, has occurred with respect to any plan since the effective
date of ERISA, other than a reportable event for which the 30 days notice
requirement under regulations of the PBGC has been waived;
(n) there are no pending or threatened claims by or disputes with
any participants or beneficiaries of the plans, except plan benefit claims
arising in the normal course of the operations of the plans (other than
terminated plans) and as to which no dispute exists;
(o) Suburban Bancshares has no knowledge of any facts which could
give rise to any claims against any plan or any fiduciary of any plan,
except for plan benefit claims arising in the normal course of the
operations of the plans (other than terminated plans);
(p) neither Suburban Bancshares nor any of the Suburban
Subsidiaries nor any fiduciary of any plan has given notice to any
fiduciary liability insurer of any claims or potential claims in connection
with any of the plans;
(q) except as disclosed in Schedule 3.12, each of the plans which
benefit retired employees of Suburban Bancshares or any of the Suburban
Subsidiaries may effectively be terminated or amended, in any manner and at
any time, without further liability to its participants, by its sponsoring
employer;
(r) neither Suburban Bancshares nor any of the Suburban
Subsidiaries has provided, nor is required to provide, security to any
pension plan or to any single-employer plan pursuant to Section 401(a)(29)
of the Code or Section 307 of ERISA;
(s) there has been no announcement or legally binding commitment
by Suburban Bancshares or any of the Suburban Subsidiaries to create an
additional plan, or to amend a plan except for amendments required by
applicable law which do not materially increase the cost of such plan;
(t) as to any terminated plans, all obligations for plan benefits
or other liabilities have been satisfied in full;
(u) none of the plans contains any provision which would prohibit
the transactions contemplated by this Plan or which, except as disclosed in
Schedule 3.12, would give rise to any severance, termination, or other
payments or liabilities, or any forgiveness of indebtedness, vesting,
distribution, increase in benefits, or obligations to fund benefits as a
result of the transactions contemplated by this Plan; no payment that is
owed or may become due any
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director, officer, employee, or agent of Suburban Bancshares or any of the
Suburban Subsidiaries in connection with a plan will be non-deductible to
the payor under Section 280G of the Code, and none of the Suburban
Subsidiaries, Columbia Subsidiaries, Suburban Bancshares, and Columbia
Bancorp will be required to "gross up" or otherwise compensate any person
in connection with a plan because of the imposition of any excise tax under
Section 4999 of the Code; and
(v) no plan is funded by, associated with, or related to a
"voluntary employees' beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
3.13. Related Party Transactions. Except as disclosed on Schedule 3.13,
neither Suburban Bancshares nor any of the Suburban Subsidiaries has any
contract, extension of credit, business arrangement, or other relationship of
any kind with any of the following persons: (a) any executive officer or
director of Suburban Bancshares or any of the Suburban Subsidiaries; (b) any
stockholder owning five percent or more of the outstanding Common Stock of
Suburban Bancshares; or (c) any "affiliate" (as defined in the SEC Rule 405) of
the foregoing persons or any business in which any of the foregoing persons is
an officer, director, employee, or five percent or greater equity owner.
3.14. No Conflict with Other Documents. Except as disclosed on Schedule
3.14, neither the execution and delivery of this Plan nor the carrying out of
the transactions contemplated hereunder will result in any violation,
termination, or default or acceleration of, or be in conflict with, any terms of
any contract or other instrument to which Suburban Bancshares or any of the
Suburban Subsidiaries is a party, or of any judgment, decree, or order
applicable to Suburban Bancshares or any of the Suburban Subsidiaries, or result
in the creation of any lien, charge, or encumbrance upon any of their properties
or assets, except for any of the foregoing which would not have a material
adverse effect upon the condition (financial or otherwise), assets, liabilities,
business, or operations of Suburban Bancshares and the Suburban Subsidiaries,
taken as a whole.
3.15. Compliance with Laws; Governmental Authorizations. (a) Except
where noncompliance would not have a material and adverse effect upon the
condition (financial or otherwise), assets, liabilities, business, or operations
of Suburban Bancshares and the Suburban Subsidiaries, taken as a whole, (i)
Suburban Bancshares and each of the Suburban Subsidiaries are in compliance with
all statutes, laws, ordinances, rules, regulations, judgments, orders, decrees,
directives, consent agreements, memoranda of understanding, permits,
concessions, grants franchises, licenses, and other governmental authorizations
or approvals applicable to Suburban Bancshares, the Suburban Subsidiaries, or
any of their properties; and (ii) all permits, concessions, grants, franchises,
licenses, and other governmental authorizations and approvals necessary for the
conduct of the business of Suburban Bancshares and the Suburban Subsidiaries as
now conducted have been duly obtained and are in full force and effect, and
there
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are no proceedings pending or, to Suburban Bancshares' knowledge, threatened
which may result in the revocation, cancellation, suspension, or materially
adverse modification of any thereof.
(b) Suburban Bancshares has filed all reports that it was required to
file with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), all of which complied in all material respects with all
applicable requirements of the Exchange Act and the rules and regulations
adopted thereunder. As of their respective dates, each such report, statement,
form, or other document, including without limitation, any financial statements
or schedules included therein, did not contain any untrue statement of a
material fact or omit 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, provided, that information as of a later
date shall be deemed to modify information as of an earlier date.
3.16. Authority; Enforceability. The execution, delivery, and
performance of this Plan by Suburban Bancshares have been duly and validly
authorized by its Board of Directors, subject only to requisite approval by the
stockholders of Suburban Bancshares and appropriate governmental regulatory
authorities. This Plan is a valid and binding agreement of Suburban Bancshares,
enforceable against it in accordance with its terms, subject as to enforcement
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
3.17. Insurance. All insurance policies held by Suburban Bancshares and
the Suburban Subsidiaries relating to their operations (except for title
insurance policies), including without limitation all financial institutions
bonds, are set forth on Schedule 3.17. All such policies are in full force and
effect. Neither Suburban Bancshares nor any of the Suburban Subsidiaries has
received any notice of cancellation with respect to any such policies and has no
reason to expect that it will receive a notice of cancellation from any of its
present insurance carriers; provided, however, that Suburban Bancshares makes no
representation as to the effect of this Plan or the Mergers on its present
financial institutions bond or bonds.
3.18. Financial Institutions Bond. Since January 1, 1993, Suburban
Bancshares and the Suburban Subsidiaries have continuously maintained in full
force and effect one or more financial institutions bonds insuring Suburban
Bancshares and the Suburban Subsidiaries against acts of dishonesty by each of
their employees. No claim has been made under any such bond since such date, and
Suburban Bancshares is not aware of any fact or condition now existing which
forms the basis of a claim under any such bond. Suburban Bancshares and the
Suburban Subsidiaries have no reason to expect that their present financial
institutions bond or bonds will not be renewed by their carrier on substantially
the same terms as those now in effect; provided, however, that Suburban
Bancshares makes no representation as to the effect of this Plan or the Mergers
on its present financial institutions bond or bonds.
3.19. Brokers; Financial Advisor. All negotiations relating to this Plan
and the transactions contemplated hereunder have been carried on by Suburban
Bancshares directly or
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through its counsel or financial advisor, and there has been no intervention of
any person as the result of any action of Suburban Bancshares (and, so far as
known to Suburban Bancshares, no intervention of any other person) in such
manner as to give rise to any valid claim against any of the parties hereto for
a brokerage commission, finder's fee, or other like payment (other than to its
financial advisor, Danielson Associates Inc.). Schedule 3.19 is a copy of the
agreement with Danielson Associates Inc., which has been engaged by Suburban
Bancshares as its financial advisor and to deliver an opinion as to the fairness
of the transactions contemplated by this Plan to Suburban Bancshares.
3.20. Beneficial Ownership of Columbia Bancorp Common Stock. As of the
date hereof, Suburban Bancshares does not beneficially own any shares of
Columbia Bancorp Common Stock or have any option, warrant, or right of any kind
to acquire the beneficial ownership of any Columbia Bancorp Common Stock, except
pursuant to the terms of this Plan, the terms of the Stock Option Agreement
attached as Appendix IV, or in a fiduciary capacity.
3.21. Year 2000. Suburban Bancshares has carried out a review to
evaluate the extent to which the business or operations of Suburban Bancshares
or any of the Suburban Subsidiaries will be affected by the Year 2000 Problem
(as defined below). As a result of such review, Suburban Bancshares has no
reason to believe, and does not believe, that the Year 2000 Problem will have a
material adverse effect on the condition (financial or otherwise), assets,
liabilities, business, or operations of Suburban Bancshares and the Suburban
Subsidiaries, taken as a whole. Suburban Bancshares reasonably believes that the
suppliers, vendors, customers or other material third parties used or served by
Suburban Bancshares and the Suburban Subsidiaries are addressing or will address
the Year 2000 Problem in a timely manner. Suburban Bancshares is in compliance
with all applicable requirements of any Governmental Entity relating to the Year
2000 Problem and has not received any correspondence from or provided any
written information to any Governmental Entity relating to the Year 2000 Problem
except as disclosed in Schedule 3.21. Suburban Bancshares has provided in
Schedule 3.21 copies of all of its internal plans, including estimates of the
anticipated associated costs, for addressing the Year 2000 Problem as it relates
to Suburban Bancshares and the Suburban Subsidiaries. "Year 2000 Problem" means
the risk that computer hardware or software applications will not record, store,
process, calculate and present calendar dates falling on and after January 1,
2000, and calculate information dependent upon or relating to such dates, in the
same manner and with the same functionality, data integrity and performance as
such products record, store, process, calculate and present calendar dates
falling on or before December 31, 1999, and calculate information dependent on
or relating to such dates.
4. Representations and Warranties of Columbia Bancorp. Columbia Bancorp
represents and warrants to Suburban Bancshares as follows:
4.1. Organization, Standing, and Capitalization of Columbia Bancorp
and Columbia Subsidiaries. (a) Columbia Bancorp is a duly organized and validly
existing corporation in good standing under the laws of the State of Maryland.
Columbia Bancorp has the corporate power and authority to own and hold its
properties and to carry on its business as it is
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now being conducted. Columbia Bancorp is a registered bank holding company under
the Bank Holding Company Act of 1956, as amended. Columbia Bancorp has no
subsidiaries or affiliated companies and is not a party to any joint venture or
partnership other than as listed on Schedule 4.1(a) (collectively, the "Columbia
Subsidiaries").
(b) Columbia Bank is a duly organized and validly existing Maryland
commercial bank and is in good standing under the laws of the State of Maryland.
The deposits of Columbia Bank are insured under the provisions of the Federal
Deposit Insurance Act, as amended. Each of the other Columbia Subsidiaries is a
duly organized and validly existing corporation or other entity and is in good
standing under the laws of the jurisdiction of its incorporation or organization
as set forth on Schedule 4.1(a). Each of the Columbia Subsidiaries has the power
(corporate or other) and authority to own and hold its material properties and
to carry on its business as it is now being conducted. All outstanding shares of
capital stock or other equity interests of all of the Columbia Subsidiaries are
validly issued, fully paid, and non-assessable. Except as disclosed in Schedule
4.1(b), each of the Columbia Subsidiaries is wholly owned by its parent. There
are no outstanding options, warrants, rights, or obligations of any kind
entitling the holder thereof to acquire shares of the capital stock or other
equity interests of any of the Columbia Subsidiaries, and there are no
outstanding securities or instruments of any kind that are convertible into
shares of the capital stock or other equity interests of any of the Columbia
Subsidiaries. Except as disclosed in Schedule 4.1(b), none of the Columbia
Subsidiaries is a party to any joint venture or partnership.
(c) Copies of all organization documents and by-laws of Columbia Bancorp
and each of the Columbia Subsidiaries are attached as Schedule 4.1(c), and all
such copies are true and correct as of the date hereof. The minute books of
Columbia Bancorp and each of the Columbia Subsidiaries, which have been made
available to Suburban Bancshares for inspection, are complete in all material
respects and accurately record the actions taken by the stockholders and
directors of Columbia Bancorp and each of the Columbia Subsidiaries.
(d) The authorized capital stock of Columbia Bancorp consists
exclusively of 9,994,000 shares of Common Stock, par value $.01 per share,
4,506,035 of which shares are outstanding on September 17, 1999, and 6,000
shares of Series A Convertible Preferred Stock, par value $.01 per share, none
of which shares are outstanding on September 17, 1999. All outstanding shares of
Columbia Bancorp Common Stock are validly issued, fully paid, and non-
assessable. Columbia Bancorp has reserved 300,000 shares of its Common Stock for
issuance under its Dividend Reinvestment and Stock Purchase Plan and 300,000
shares of its Common Stock for issuance under its Stock Option Plans. On
September 17, 1999, there were outstanding options to purchase 292,310 shares of
Columbia Bancorp's Common Stock at prices ranging from $4.545 to $17.00 pursuant
to these Stock Option Plans. Except for the option to be granted to Suburban
Bancshares pursuant to the Stock Option Agreement attached as Appendix IV and as
disclosed in Schedule 4.1(d), there are no other outstanding options, warrants,
rights, or obligations of any kind entitling the holder thereof to acquire
shares of the Common Stock of Columbia Bancorp, and there are no outstanding
securities or instruments of any kind that are convertible into shares of the
Common Stock of Columbia Bancorp. The Common Stock of
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Columbia Bancorp deliverable pursuant to this Plan will be, prior to its
issuance, duly authorized for issuance and will, when issued and delivered in
accordance with this Plan, be duly and validly issued, fully paid, and
nonassessable.
4.2. Financial Statements. Columbia Bancorp has provided in Schedule 4.2
copies of the Consolidated Financial Statements of Columbia Bancorp and the
Columbia Subsidiaries at December 31, 1994, 1995, 1996, 1997, and 1998 and for
each of the years then ended, as reported upon by KPMG LLP, and at June 30, 1998
and 1999 and for each of the six month periods then ended, all of which are true
and complete in all material respects, have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods covered by such consolidated financial statements and present fairly the
financial position, results of operations, cash flows, and changes in
stockholders' equity of Columbia Bancorp and the Columbia Subsidiaries at the
dates of and for the periods covered by such financial statements.
4.3. Taxes. Schedule 4.3 sets forth the tax returns to federal, state,
county, municipal, or foreign taxing authorities for the taxable year ended
December 31, 1994 and all taxable years through and including December 31, 1998
for Columbia Bancorp and the Columbia Subsidiaries. Columbia Bancorp and the
Columbia Subsidiaries have filed with appropriate federal, state, county,
municipal, or foreign taxing authorities all tax returns required to be filed
(taking any applicable extensions into consideration) and have paid or reserved
for all taxes shown to be due on such returns and all penalties and interest
payable in respect thereof. Except as disclosed in Schedule 4.3, neither
Columbia Bancorp nor any of the Columbia Subsidiaries have received from any
taxing authority any notice of deficiency or assessment of additional taxes not
paid or any notice of an intention to commence an examination or audit of its
tax returns, and no tax audits by any taxing authority are in process. Except as
disclosed on Schedule 4.3, neither Columbia Bancorp nor any of the Columbia
Subsidiaries have granted any waiver of any statute of limitations or otherwise
agreed to any extension of a period for the assessment of any federal, state,
county, municipal, or foreign income tax. The accruals and reserves reflected in
the consolidated financial statements which Columbia Bancorp has provided to
Suburban Bancshares as described in Section 4.2 are adequate to cover all taxes
(including interest and penalties, if any, thereon) that are payable or accrued
as a result of the operations of Columbia Bancorp and the Columbia Subsidiaries
for all periods prior to the date of such consolidated financial statements. For
purposes of this Section 4.3, any reference to the Columbia Subsidiaries shall
be deemed to include any entity listed on Schedules 4.1(a) and 4.1 (b).
4.4. No Undisclosed Liabilities. Except as and to the extent reflected
or reserved against in the consolidated financial statements referred to in
Section 4.2, neither Columbia Bancorp nor any of the Columbia Subsidiaries at
the dates of such consolidated financial statements had any material liabilities
or obligations (whether accrued, absolute, or contingent) required under
generally accepted accounting principles to be reflected thereon which would
materially and adversely affect the fair presentation of such financial
statements. Neither Columbia Bancorp nor any of the Columbia Subsidiaries has
incurred any liability since
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the date of the consolidated financial statements referred to in Section 4.2
(including any liability for taxes) which would materially and adversely affect
the condition (financial or otherwise), assets, liabilities, business, or
operations of Columbia Bancorp and the Columbia Subsidiaries, taken as a whole,
other than liabilities which have been reasonably incurred in the ordinary
course of business.
4.5. Absence of Certain Changes or Events. Except as set forth in
Schedule 4.5, since December 31, 1998 there has not been:
(a) Any materially adverse change in the financial position,
results of operations, assets, liabilities, or business of Columbia Bancorp
or the Columbia Subsidiaries, other than changes in the ordinary course of
business;
(b) any increase in salaries or wages of directors, officers, or
employees of Columbia Bancorp or the Columbia Subsidiaries other than in
the ordinary course of business; or any establishment or increase of any
employment, compensation, bonus, pension, option, incentive or deferred
compensation, retirement payments, profit sharing, or similar agreement or
benefit, authorized, granted, or accrued to any directors, officers, or
employees of Columbia Bancorp or the Columbia Subsidiaries other than in
the ordinary course of business; or
(c) except with respect to the three cash dividend payments
aggregating $.24 per share paid to date and the cash dividend payment of
$.08 per share of Common Stock declared on September 27, 1999, to be paid
on October 29, 1999, any declaration, payment, or set aside by Columbia
Bancorp of any dividend or distribution in respect of its Common Stock, or
any purchase, issuance, or sale of any of its Common Stock.
4.6. Complete and Accurate Disclosure. Neither this Plan (insofar as it
relates to Columbia Bancorp and the Columbia Subsidiaries, the Common Stock of
Columbia Bancorp, and the involvement of Columbia Bancorp in the transactions
contemplated hereby) nor any financial statement, schedule, certificate, or
other statement or document set forth on a schedule delivered by Columbia
Bancorp to Suburban Bancshares in connection with this Plan, when considered in
the aggregate, contains any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact or omits to state any material fact necessary to make the
statements contained herein or therein not false or misleading.
4.7. Title to Properties; Absence of Liens and Encumbrances; Compliance
with Laws. Except as disclosed on Schedule 4.7, Columbia Bancorp and each of the
Columbia Subsidiaries has good and marketable title to all of their respective
properties and assets, including those reflected in the consolidated financial
statements referred to in Section 4.2, except as sold or otherwise disposed of
for fair value and only in the ordinary course of business, free and clear of
all liens and encumbrances, except (i) with respect to property as to which they
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are lessees, (ii) with respect to real estate owned by Columbia Bancorp or the
Columbia Subsidiaries, for use, occupancy, and similar restrictions of public
record that may be observed by an inspection of the property, and such other
utility and other easements and encumbrances as do not materially adversely
affect the fair market value of such real property, and (iii) liens to secure
borrowings, liens to secure governmental deposits, and liens for current taxes
not yet due and payable. Neither Columbia Bancorp nor any of the Columbia
Subsidiaries owns or leases real property except as disclosed on Schedule 4.7,
and is not in default under any material lease of real or personal property to
which it is a party. As of the date hereof, except as disclosed on Schedule 4.7,
the real properties, structures, buildings, equipment, and the tangible personal
property owned, operated, or leased by Columbia Bancorp or any of the Columbia
Subsidiaries are (x) in good repair, order, and condition, except for depletion,
depreciation, and ordinary wear and tear, (y) suitable for the uses for which
they were intended, and (z) free from any known structural defects. As of the
date hereof, there are no laws, conditions of record, or other impediments which
materially interfere with the intended uses by Columbia Bancorp or any of the
Columbia Subsidiaries of the real property or tangible personal property owned
or leased by it, except as set forth in Schedule 4.7. Neither Columbia Bancorp
nor any of the Columbia Subsidiaries have received any notice of any violation
of any applicable law, building code, zoning ordinance, or other similar law.
Columbia Bancorp and the Columbia Subsidiaries own or have the rights to use all
real and personal properties and assets that are material to the conduct of the
business as now conducted of Columbia Bancorp and the Columbia Subsidiaries,
taken as a whole.
4.8. Contracts. Except for the plans, contracts, and agreements of
Columbia Bancorp and the Columbia Subsidiaries (or of any plan under Section
4.8(b)) disclosed on Schedule 4.8, neither Columbia Bancorp nor any of the
Columbia Subsidiaries (nor any plan under Section 4.8(b)) is a party to or
subject to:
(a) Any employment, consultation, or compensation contract or
arrangement (other than those terminable at will) with any officer,
consultant, director, or employee;
(b) any plan, contract, program, understanding, or agreement
providing for bonuses, pensions, severance pay, executive compensation,
options, stock purchases, or any other form of retirement, incentive or
deferred compensation, retirement payments, death benefits, profit sharing,
branch closing benefits, workers' compensation, tuition reimbursement or
scholarship program, any plans providing benefits or payments in the event
of a change in control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of Columbia
Bancorp or any of the Columbia Subsidiaries, or any health, accident,
disability, sick leave, vacation pay, life insurance, or other welfare
benefit, or any other employee or retired employee benefit (including,
without limitation, any "employee benefit plan" as defined in Section 3(3)
of ERISA) in which any current or former employee, director, or agent (or
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beneficiary of any of them) of Columbia Bancorp or any of the Columbia
Subsidiaries is or was, within the last six years, entitled to participate;
(c) any contract or agreement with any labor union;
(d) any lease of real or personal property with annual rentals in
excess of $5,000;
(e) any agreement for services in excess of $10,000 per year or for
the purchase or disposition of any equipment or supplies except individual
purchase orders for office supplies incurred in the ordinary course of
business of $10,000 or less;
(f) any instrument evidencing or relating to indebtedness for
borrowed money except for customer accounts, deposits, certificates of
deposit, federal funds purchased, and the like which may be construed as
borrowings and except for loans made by Columbia Bank as lender in the
ordinary course of its business;
(g) any lease or other contract containing covenants not to enter
into or consummate the transactions contemplated hereby or which provides
for payments in excess of $2,000 and will be terminated or violated by the
Mergers or in respect of which the Mergers would cause a default or
acceleration of obligations; or
(h) any other contract or agreement not of the type covered by any
of the other specific terms of this Section 4.8 obligating Columbia Bancorp
or any Columbia Subsidiary to expenditures in excess of $25,000.
Each of the instruments disclosed on Schedule 4.8 is valid and in full force and
effect. Neither Columbia Bancorp nor any of the Columbia Subsidiaries are in
default nor have any of them received any notice that they are in default, nor
to their actual knowledge is any other party in default, under any material
agreements, instruments, or obligations to which Columbia Bancorp or any of the
Columbia Subsidiaries is a party or by which they are bound.
4.9. Litigation, Etc. Except as disclosed on Schedule 4.9, (a) there is
no litigation, proceeding, or investigation pending or, to the knowledge of
Columbia Bancorp, threatened against Columbia Bancorp or any of the Columbia
Subsidiaries which would result in any materially adverse change in the
condition (financial or otherwise), assets, liabilities, business, operations,
or future prospects of Columbia Bancorp and the Columbia Subsidiaries, taken as
a whole; (b) there are no outstanding orders, writs, injunctions, judgments,
decrees, directives, consent agreements, or memoranda of understanding issued by
any federal, state, or local court or governmental authority or arbitration
tribunal issued against or with the consent of Columbia Bancorp or any of the
Columbia Subsidiaries that materially and adversely affect the
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condition (financial or otherwise), assets, liabilities, business, operations,
or future prospects or that in any manner restrict Columbia Bancorp's right to
carry on its business or that of the Columbia Subsidiaries as now conducted; and
(c) Columbia Bancorp is aware of no fact or condition now existing that might
give rise to any litigation, investigation, or proceeding which, if determined
adversely to Columbia Bancorp or any of the Columbia Subsidiaries, would
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business, operations, or future prospects of Columbia Bancorp and
the Columbia Subsidiaries, taken as a whole, or would restrict in any manner
Columbia Bancorp's right to carry on its business or that of the Columbia
Subsidiaries as now conducted. Columbia Bancorp has disclosed on Schedule 4.9
all litigation in which Columbia Bancorp or any of the Columbia Subsidiaries is
involved as a party (other than bankruptcy proceedings in which Columbia Bancorp
or any of the Columbia Subsidiaries has filed proofs of claim or routine
collection and foreclosure suits initiated in the ordinary course of business).
4.10. Environmental Matters. (a) Except as disclosed on Schedule 4.10
or as would not individually or in the aggregate have a materially adverse
effect on the condition (financial or otherwise), assets, liabilities, business,
or operations of Columbia Bancorp and the Columbia Subsidiaries, taken as a
whole:
(i) neither Columbia Bancorp nor any of the Columbia
Subsidiaries has received any written notices, demand letters, or written
requests for information from any Governmental Entity or any third party
indicating that Columbia Bancorp or any Columbia Subsidiary may be in
violation of, or liable under, any Environmental Law;
(ii) there are no civil, criminal, or administrative actions,
suits, demands, claims, hearings, investigations, or proceedings pending or
to the knowledge of Columbia Bancorp threatened against Columbia Bancorp or
any Columbia Subsidiary alleging that they may be in violation of, or
liable under, any Environmental Law;
(iii) no reports have been filed with any Governmental Entity,
nor to the knowledge of Columbia Bancorp are any reports required to be
filed with any Governmental Entity, by Columbia Bancorp or any of the
Columbia Subsidiaries concerning the release of any Hazardous Substance or
the violation of any Environmental Law on or at any of the Properties of
Columbia Bancorp or any of the Columbia Subsidiaries;
(iv) to the knowledge of Columbia Bancorp or except as
disclosed on Schedule 4.10, there are no underground storage tanks on, in,
or under any of the Properties of Columbia Bancorp or any of the Columbia
Subsidiaries, and no underground storage tanks have been closed or removed
from any Property of Columbia Bancorp or any of the Columbia Subsidiaries
while such Property was owned or operated by Columbia Bancorp or any of the
Columbia Subsidiaries;
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(v) to the knowledge of Columbia Bancorp or except as
disclosed on Schedule 4.10, no Hazardous Substance has been generated,
used, stored, processed, disposed of, or discharged on or into any of the
Properties of Columbia Bancorp or any of the Columbia Subsidiaries, except
for such hazardous substances as may be used in the everyday business of a
bank office; and
(vi) to the knowledge of Columbia Bancorp or except as
disclosed on Schedule 4.10, no materials containing asbestos have been used
or incorporated in any building or other structure or improvement located
on any of the Properties of Columbia Bancorp or any of the Columbia
Subsidiaries.
(b) There are no permits or licenses or agency filings or reports
required under any Environmental Law in respect of any of the Properties now or
formerly owned or operated by Columbia Bancorp or any of the Columbia
Subsidiaries that the absence of which could, individually or in the aggregate,
have a materially adverse effect on the condition (financial or otherwise),
assets, liabilities, business, or operations of Columbia Bancorp and the
Columbia Subsidiaries, taken as a whole.
(c) Columbia Bancorp has disclosed on Schedule 4.10 a copy of its
current policy regarding compliance with Environmental Laws.
4.11. Labor Matters. To Columbia Bancorp's knowledge, no
organization effort with respect to any of the employees of Columbia Bancorp or
any of the Columbia Subsidiaries is pending or threatened, and no labor dispute,
strike, work stoppage, employee action, or labor relation problem which may
materially affect Columbia Bancorp or any of the Columbia Subsidiaries currently
is pending or threatened. Columbia Bancorp and each of the Columbia Subsidiaries
have at all times in all material respects complied with all applicable employee
termination notice and similar laws. Columbia Bancorp and each of the Columbia
Subsidiaries have at all times complied in all material respects with all
applicable family medical leave and similar laws. If applicable, Columbia
Bancorp and each of the Columbia Subsidiaries have at all times complied in all
material respects with all applicable requirements of the Worker Adjustment and
Retraining Notification Act and all similar state laws.
4.12. Pension and Welfare Matters. With respect to the plans,
contracts, programs, understandings, or agreements identified pursuant to
Sections 4.8(a) and (b) (for purposes of this Section 4.12, the "plans"):
(a) Schedule 4.12 clearly identifies all of the plans which
are (i) Multiemployer Plans, (ii) Multiple Employer Plans, (iii) plans
other than Multiemployer Plans and Multiple Employer Plans that are subject
to Section 412 of the Code, (iv) plans intended to qualify under Section
401 of the Code, and (v) "welfare benefit plans" within the meaning of
Section 3(1) of ERISA which provide for continuing benefits or coverage for
any participant or any beneficiary of a participant after such
participant's termination of employment except
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coverage or benefits required by Section 4980B of the Code if paid 100% by
the participant;
(b) true, correct and complete copies of the following
documents, with respect to each of the plans have been made available or
delivered to Suburban Bancshares: (i) all plan documents, including trust
agreements, insurance policies, loan documents, and service agreements and
amendments thereto, (ii) the most recent Forms 5500 and any financial
statements attached thereto and those for the prior three years, (iii) the
last Internal Revenue Service determination letter and the application with
respect thereto, (iv) summary plan descriptions, (v) the most recent
actuarial statements and those for the prior three years, (vi) written
descriptions of all non-written agreements relating to any such plan, as
applicable, for Columbia Bancorp and each of the Columbia Subsidiaries, and
(vii) all filings with a governmental agency or entity within the last
three years, including, without limitation, filings under the voluntary or
other compliance programs of the U.S. Department of Labor or the Internal
Revenue Service;
(c) each of the plans has been operated in all material
respects in accordance with its terms and in accordance with all applicable
laws including, but not limited to, the ERISA, the Code, the Consolidated
Omnibus Budget Reconciliation Act of 1985, the Health Insurance Portability
and Accountability Act of 1996, and state health care continuation laws;
(d) all reporting and disclosure requirements of ERISA imposed
upon each such plan have been complied with in all material respects, and
all required governmental filings have been made with respect to the plans;
(e) none of (i) the plans, (ii) the Columbia Subsidiaries, and
(iii) Columbia Bancorp, and to Columbia Bancorp's knowledge, (x) no current
or former director, officer, employee, agent, or representative of Columbia
Bancorp or any of the Columbia Subsidiaries, and (y) no fiduciary, "party
in interest" (as defined in Section 3(14) of ERISA) or "disqualified
person" (as defined in Section 4975 of the Code) with respect to any of the
plans has engaged in any non-exempt "prohibited transaction" in connection
with any of the plans within the meaning of Section 4975 of the Code or
Title I, Part 4 of ERISA;
(f) none of the plans has any accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether
or not waived, with respect to the latest five plan years, nor any
liability to the PBGC (other than normal premium payments);
(g) with respect to plans which are pension plans (as defined
in Section 3(2) of ERISA) subject to Title IV of ERISA, the assets of each
such
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funded plans equal or exceed the liabilities (as defined in Section
4001(a)(16) of ERISA) under such plans when such liabilities are valued on
a termination basis using PBGC interest and other assumptions;
(h) no contributions to any of the plans from Columbia Bancorp
or any of the Columbia Subsidiaries are currently past due and, if
applicable, all past service and other liabilities currently existing but
payable in the future, if any, are reflected in the latest actuarial report
in accordance with sound actuarial principles;
(i) no audits, proceedings, investigations, filings, or other
matters (excluding any determination letter application that has been or
may be filed prior to the Effective Date) are pending before the IRS, the
Department of Labor, the PBGC, or other public or quasi-public body in
connection with any such plans;
(j) each plan intended to qualify under Section 401(a) of the
Code is so qualified and the trust maintained pursuant thereto is exempt
from taxation under Section 501 of the Code and nothing has occurred with
respect to the operation or administration of such plan which would cause
the loss of such qualification or exemption or the imposition of any
liability, penalty, or tax under ERISA or the Code that could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, business, or operations of Columbia
Bancorp and the Columbia Subsidiaries, taken as a whole, or on such plan;
(k) except as disclosed in Schedule 4.12, through the
Effective Date, there will be no changes in the operation of the plans or
in the documents constituting or affecting the plans except for amendments
and operational changes required by applicable law which do not materially
increase the cost of such plans;
(l) no employees, former employees, or retired employees of
Columbia Bancorp or any of the Columbia Subsidiaries, as a result of their
employment with Columbia Bancorp or any of the Columbia Subsidiaries, are
participants in any Multiemployer Plan and neither Columbia Bancorp nor any
of the Columbia Subsidiaries has any current, contingent, or potential
liability with respect to any such plan;
(m) no "reportable event," as such term is defined in Section
4043(c) of ERISA, has occurred with respect to any plan since the effective
date of ERISA, other than a reportable event for which the 30 days notice
requirement under regulations of the PBGC has been waived;
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(n) there are no pending or threatened claims by or disputes
with any participants or beneficiaries of the plans, except plan benefit
claims arising in the normal course of the operations of the plans (other
than terminated plans) and as to which no dispute exists;
(o) Columbia Bancorp has no knowledge of any facts which could
give rise to any claims against any plan or any fiduciary of any plan,
except for plan benefit claims arising in the normal course of the
operations of the plans (other than terminated plans);
(p) neither Columbia Bancorp nor any of the Columbia
Subsidiaries nor any fiduciary of any plan has given notice to any
fiduciary liability insurer of any claims or potential claims in connection
with any of the plans;
(q) except as disclosed in Schedule 4.12, each of the plans
which benefit retired employees of Columbia Bancorp or any of the Columbia
Subsidiaries may effectively be terminated or amended, in any manner and at
any time, without further liability to its participants, by its sponsoring
employer;
(r) neither Columbia Bancorp nor any of the Columbia
Subsidiaries has provided, nor is required to provide, security to any
pension plan or to any single-employer plan pursuant to Section 401(a)(29)
of the Code or Section 307 of ERISA;
(s) there has been no announcement or legally binding
commitment by Columbia Bancorp or any of the Columbia Subsidiaries to
create an additional plan, or to amend a plan except for amendments
required by applicable law which do not materially increase the cost of
such plan;
(t) as to any terminated plans, all obligations for plan
benefits or other liabilities have been satisfied in full;
(u) none of the plans contains any provision which would
prohibit the transactions contemplated by this Plan or which, except as
disclosed in Schedule 4.12, would give rise to any severance, termination,
or other payments or liabilities, or any forgiveness of indebtedness,
vesting, distribution, increase in benefits, or obligations to fund
benefits as a result of the transactions contemplated by this Plan; no
payment that is owed or may become due any director, officer, employee, or
agent of Columbia Bancorp or any of the Columbia Subsidiaries in connection
with a plan will be non-deductible to the payor under Section 280G of the
Code, and none of the Suburban Subsidiaries, Columbia Subsidiaries,
Suburban Bancshares, and Columbia Bancorp will be required to
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"gross up" or otherwise compensate any person in connection with a plan
because of the imposition of any excise tax under Section 4999 of the Code;
and
(v) no plan is funded by, associated with, or related to a
"voluntary employees' beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
4.13. Related Party Transactions. Except as disclosed on Schedule
4.13, neither Columbia Bancorp nor any of the Columbia Subsidiaries has any
contract, extension of credit, business arrangement, or other relationship of
any kind with any of the following persons: (a) any executive officer or
director of Columbia Bancorp or any of the Columbia Subsidiaries; (b) any
stockholder owning five percent or more of the outstanding Common Stock of
Columbia Bancorp; or (c) any "affiliate" (as defined in the SEC Rule 405) of the
foregoing persons or any business in which any of the foregoing persons is an
officer, director, employee, or five percent or greater equity owner.
4.14. No Conflict with Other Documents. Except as disclosed on
Schedule 4.14, neither the execution and delivery of this Plan nor the carrying
out of the transactions contemplated hereunder will result in any violation,
termination, or modification of, or be in conflict with, any terms of any
contract or other instrument to which Columbia Bancorp or any of the Columbia
Subsidiaries is a party, or of any judgment, decree, or order applicable to
Columbia Bancorp or any of the Columbia Subsidiaries, or result in the creation
of any lien, charge, or encumbrance upon any of their properties or assets,
except for any of the foregoing which would not have a material adverse effect
upon the condition (financial or otherwise), assets, liabilities, business, or
operations of Columbia Bancorp and the Columbia Subsidiaries, taken as a whole.
4.15. Compliance with Laws; Governmental Authorizations. (a) Except
where noncompliance would not have a material and adverse effect upon the
condition (financial or otherwise), assets, liabilities, business, or operations
of Columbia Bancorp and the Columbia Subsidiaries, taken as a whole, (i)
Columbia Bancorp and each of the Columbia Subsidiaries are in compliance with
all statutes, laws, ordinances, rules, regulations, judgments, orders, decrees,
directives, consent agreements, memoranda of understanding, permits,
concessions, grants franchises, licenses, and other governmental authorizations
or approvals applicable to Columbia Bancorp, the Columbia Subsidiaries, or any
of their properties; and (ii) all permits, concessions, grants, franchises,
licenses, and other governmental authorizations and approvals necessary for the
conduct of the business of Columbia Bancorp and the Columbia Subsidiaries as now
conducted have been duly obtained and are in full force and effect, and there
are no proceedings pending or, to Columbia Bancorp's knowledge, threatened which
may result in the revocation, cancellation, suspension, or materially adverse
modification of any thereof.
(b) Columbia Bancorp has filed all reports that it was
required to file with the SEC under the Exchange Act, all of which complied in
all material respects with all applicable requirements of the Exchange Act and
the rules and regulations adopted thereunder. As of their
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respective dates, each such report, statement, form, or other document,
including without limitation, any financial statements or schedules included
therein, did not contain any untrue statement of a material fact or omit 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; provided, that information as of a later date shall be deemed to
modify information as of an earlier date.
4.16. Authority; Enforceability. The execution, delivery, and
performance of this Plan by Columbia Bancorp has been duly and validly
authorized by its Board of Directors, subject only to requisite approval by the
stockholders of Columbia Bancorp and appropriate governmental regulatory
authorities. This Plan is a valid and binding agreement of Columbia Bancorp,
enforceable against it in accordance with its terms, subject as to enforcement
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
4.17. Insurance. All insurance policies held by Columbia Bancorp and
the Columbia Subsidiaries relating to their operations (except for title
insurance policies), including without limitation all financial institutions
bonds, are set forth on Schedule 4.17. All such policies are in full force and
effect. Neither Columbia Bancorp nor any of the Columbia Subsidiaries has
received any notice of cancellation with respect to any such policies and has no
reason to expect that it will receive a notice of cancellation from any of its
present insurance carriers; provided, however, that Columbia Bancorp makes no
representation as to the effect of this Plan or the Mergers on its present
financial institutions bond or bonds.
4.18. Financial Institutions Bond. Since January 1, 1993, Columbia
Bancorp and the Columbia Subsidiaries have continuously maintained in full force
and effect one or more financial institutions bonds insuring Columbia Bancorp
and the Columbia Subsidiaries against acts of dishonesty by each of their
employees. No claim has been made under any such bond since such date, and
Columbia Bancorp is not aware of any fact or condition now existing which forms
the basis of a claim under any such bond. Columbia Bancorp and the Columbia
Subsidiaries have no reason to expect that their present financial institutions
bond or bonds will not be renewed by their carrier on substantially the same
terms as those now in effect; provided, however, that Columbia Bancorp makes no
representation as to the effect of this Plan or the Mergers on its present
financial institutions bond or bonds.
4.19. Brokers; Financial Advisor. All negotiations relating to this
Plan and the transactions contemplated hereunder have been carried on by
Columbia Bancorp directly or through its counsel or financial advisor and there
has been no intervention of any person as the result of any action of Columbia
Bancorp (and, so far as known to Columbia Bancorp, no intervention of any other
person) in such manner as to give rise to any valid claim against any of the
parties hereto for a brokerage commission, finder's fee, or other like payment
(other than to its financial advisor, Austin Financial Services, Inc.).
Schedule 4.19 is a copy of the agreement with Austin Financial Services, Inc.,
which has been engaged by Columbia Bancorp as its
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financial advisor and to deliver an opinion as to the fairness of the
transactions contemplated by this Plan to Columbia Bancorp.
4.20. Beneficial Ownership of Suburban Bancshares Common Stock. As of
the date hereof, Columbia Bancorp does not beneficially own any shares of
Suburban Bancshares Common Stock or have any option, warrant, or right of any
kind to acquire the beneficial ownership of any Suburban Bancshares Common
Stock, except pursuant to the terms of this Plan, the terms of the Stock Option
Agreement attached as Appendix III, or in a fiduciary capacity.
4.21. Year 2000. Columbia Bancorp has carried out a review to
evaluate the extent to which the business or operations of Columbia Bancorp or
any of the Columbia Subsidiaries will be affected by the Year 2000 Problem. As
a result of such review, Columbia Bancorp has no reason to believe, and does not
believe, that the Year 2000 Problem will have a material adverse effect on the
condition (financial or otherwise), assets, liabilities, business, or operations
of Columbia Bancorp and the Columbia Subsidiaries, taken as a whole. Columbia
Bancorp reasonably believes that the suppliers, vendors, customers or other
material third parties used or served by Columbia Bancorp and the Columbia
Subsidiaries are addressing or will address the Year 2000 Problem in a timely
manner. Columbia Bancorp is in compliance with all applicable requirements of
any Governmental Entity relating to the Year 2000 Problem and has not received
any correspondence from or provided any written information to any Governmental
Entity relating to the Year 2000 Problem except as disclosed in Schedule 4.21.
Columbia Bancorp has provided in Schedule 4.21 copies of all of its internal
plans, including estimates of the anticipated associated costs, for addressing
the Year 2000 Problem as it relates to Columbia Bancorp and the Columbia
Subsidiaries.
5. Covenants of Suburban Bancshares. Except as otherwise consented to in
writing by Columbia Bancorp after the date of this Plan, Suburban Bancshares
covenants to and agrees with Columbia Bancorp as follows:
5.1. Information. (a) Suburban Bancshares shall, upon reasonable
notice, give to Columbia Bancorp and to its officers, accountants, counsel,
financial advisors, and other representatives, reasonable access during Suburban
Bancshares' and the Suburban Subsidiaries' normal business hours throughout the
period prior to the Effective Date to all of their properties, books, contracts,
commitments, reports of examination (consistent with applicable law), depositor
and stockholder lists, and records. Suburban Bancshares and the Suburban
Subsidiaries will, at their own expense, furnish Columbia Bancorp during such
period with all such information concerning their affairs as Columbia Bancorp
may reasonably request, including information for use in determining if the
conditions of Section 7.1 through Section 7.10 have been satisfied, necessary to
prepare the regulatory filings or applications to be filed with governmental
regulatory authorities to obtain the approvals referred to in Section 2, and for
use in any other necessary filings to be made with appropriate governmental
regulatory authorities.
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(b) Suburban Bancshares acknowledges that information received by it
concerning Columbia Bancorp and the Columbia Subsidiaries and their operations
is subject to the Confidentiality Agreement dated September 16, 1999 between
Columbia Bancorp and Suburban Bancshares (the "Confidentiality Agreement").
Without limiting the foregoing, Suburban Bancshares will not, and will cause its
representatives not to, use any information obtained pursuant to Section 6.1 for
any purpose unrelated to the consummation of the transactions contemplated by
this Plan. Subject to the requirements of law, Suburban Bancshares will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to Section 6.1 unless such
information (i) was already known to Suburban Bancshares, (ii) becomes available
to Suburban Bancshares from other sources not known by Suburban Bancshares to be
bound by a confidentiality obligation, (iii) is disclosed with prior written
approval of Columbia Bancorp and the Columbia Subsidiaries, or (iv) is or
becomes readily ascertainable from published information or trade sources. In
the event that this Plan is terminated or the transactions contemplated by this
Plan shall otherwise fail to be consummated, Suburban Bancshares shall promptly
cause all copies of documents or extracts thereof containing information and
data as to Columbia Bancorp and the Columbia Subsidiaries to be returned. In
the event that this Plan has been terminated or the transactions contemplated
hereby shall have failed to be consummated and Suburban Bancshares or any of its
agents or representatives are requested or required (by oral questions,
interrogatories, requests for information, or documents in legal proceedings,
subpoena, civil investigative demand, or other similar process) to disclose any
of the materials delivered or obtained pursuant to the Plan (the "Columbia
Documentation"), Suburban Bancshares shall provide Columbia Bancorp with prompt
written notice of any such request or requirement so that Columbia Bancorp may
seek a protective order or other appropriate remedy. If, in the absence of a
protective order or other remedy, Suburban Bancshares or any of its agents or
representatives are compelled to disclose any of such Columbia Documentation to
any tribunal or else stand liable for contempt or suffer other censure or
penalty, Suburban Bancshares or its agents or representatives may, without
liability hereunder, disclose to such tribunal only that portion of the Columbia
Documentation which Suburban Bancshares' counsel advises Suburban Bancshares is
legally required to be disclosed, provided, that Suburban Bancshares shall
exercise its best efforts to preserve the confidentiality of the Columbia
Documentation, including, without limitation, by cooperating with Columbia
Bancorp to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded the Columbia Documentation by such
tribunal.
5.2. Events Preceding Effectiveness. Suburban Bancshares and the
Suburban Subsidiaries will use commercially reasonable efforts to assure that
each of the events specified in Section 2 which require action on its part shall
occur on or before the Effective Date.
5.3. Regulatory Approvals. Suburban Bancshares and the Suburban
Subsidiaries will, where necessary, cooperate with Columbia Bancorp's efforts to
obtain all necessary regulatory approvals of the transactions contemplated by
this Plan.
5.4. Conduct of Business. After the date of this Plan and pending the
Effective Date, (a) Suburban Bancshares and the Suburban Subsidiaries will
conduct their business only in
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the ordinary course; (b) Suburban Bancshares and the Suburban Subsidiaries shall
not effect any change or amendment in their respective charters or by-laws; (c)
except with respect to Suburban Bancshares stock options outstanding on the date
of this Plan which are or may become subject to exercise, Suburban Bancshares
and the Suburban Subsidiaries shall not change their authorized, issued, or
outstanding capital stock; (d) Suburban Bancshares shall not declare cash
dividends in respect of its Common Stock; (e) except as disclosed in Schedule
5.4(e), Suburban Bancshares and the Suburban Subsidiaries shall not increase
employee compensation or benefit levels (except for annual increases not in
excess of amounts established by its regular past practices), shall not
establish or make any increase in any employment, compensation, bonus, pension,
option, incentive or deferred compensation, retirement, death, profit sharing,
or similar agreements or benefits of any of its past, present, or future
officers or employees, other than additional premiums to obtain an extension of
directors' and officers' liability coverage for six years (which Suburban
Bancshares is authorized to obtain), and except as provided in this Agreement,
shall not modify the existing employment agreements with any officers or
employees; (f) Suburban Bancshares and the Suburban Subsidiaries shall not make
any change in any of their accounting policies or practices unless required by
generally accepted accounting principles or take any action which would cause
the Mergers not to be accounted for as a pooling-of-interests (and will provide
and cause Stegman & Company to provide the letters contemplated by Section
7.10); (g) Suburban Bancshares and the Suburban Subsidiaries shall not incur any
liability for borrowed money except in the ordinary course of their banking
business (i.e., may only incur variable rate loans with terms not greater than
one year) or place upon or permit any lien or encumbrance upon any of their
properties or assets except liens of the type permitted in the exceptions to
Section 3.7; and (h) notwithstanding the foregoing, upon Columbia Bancorp's
request, Suburban Bancshares shall terminate the Suburban Bancshares, Inc.
401(k) Plan, effective as of the date immediately preceding the Effective Date.
Pending the Effective Date, Suburban Bancshares and the Suburban Subsidiaries
shall (x) use commercially reasonable efforts to preserve their business
organization and assets and to keep available the services of their full-time
officers and employees, (y) continue in effect the present method of conducting
their business, and (z) consult with Columbia Bancorp as to making decisions or
actions in matters (i) other than those in the ordinary course of business, or
(ii) except as disclosed in Schedule 5.4(z)(ii), involving any capital
expenditures in excess of $25,000.
5.5. Reservation of Shares. Suburban Bancshares shall have reserved a
sufficient number of shares of its Common Stock for issuance upon exercise of
the option granted pursuant to the Stock Option Agreement attached as Appendix
III, which is to be executed by Columbia Bancorp and Suburban Bancshares, and
shall have taken all other actions necessary to fulfill its obligations
thereunder.
5.6. Meeting of Stockholders of Suburban Bancshares; Document
Preparation. (a) Suburban Bancshares will duly call and convene a meeting of
its stockholders to act upon the transactions contemplated hereby as soon as
practicable. Except to the extent legally required for the discharge by the
board of directors of its fiduciary duties, Suburban Bancshares will recommend
approval of this Plan and the Holding Company Merger to its
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stockholders, and will use commercially reasonable efforts to obtain a favorable
vote thereon. The calling and holding of such meeting and all notices,
transactions, documents, and information related thereto will be in material
compliance with all applicable laws.
(b) Suburban Bancshares shall furnish Columbia Bancorp with such
information concerning Suburban Bancshares and the Suburban Subsidiaries as is
necessary in order to cause the Proxy Statement/Prospectus (as defined in
Section 6.6), insofar as it relates to such corporations, to comply with Section
6.6. Suburban Bancshares agrees promptly to advise Columbia Bancorp if at any
time prior to the Suburban Bancshares stockholders' meeting, any information
provided by Suburban Bancshares in the Proxy Statement/Prospectus becomes
incorrect or incomplete in any material respect and to provide Columbia Bancorp
with the information needed to correct such inaccuracy or omission. Suburban
Bancshares shall furnish Columbia Bancorp with such supplemental information as
may be necessary in order to cause the Proxy Statement/Prospectus, insofar as it
relates to Suburban Bancshares and the Suburban Subsidiaries, to comply with
Section 6.6 after the mailing thereof to Suburban Bancshares stockholders. The
information provided and the representations made by Suburban Bancshares to
Columbia Bancorp in connection with the Registration Statement described in
Section 6.6, both at the time such information and representations are provided
and made and at the Effective Date, will be true and accurate in all material
respects and will not contain any false or misleading statement with respect to
any material fact or omit to state any material fact required to be stated
therein or necessary in order (i) to make the statements made therein not false
or misleading, or (ii) to correct any statement contained in an earlier
communication with respect to such information or representations which has
become false or misleading. Suburban Bancshares may rely upon all information
provided to it by Columbia Bancorp and its representatives in the preparation of
the Proxy Statement/Prospectus and shall not be liable for any untrue statement
of a material fact or any omission to state a material fact in the Proxy
Statement/Prospectus, if such statement is made in reliance upon any information
provided to it by Columbia Bancorp or by any of its officers or authorized
representatives.
(c) Suburban Bancshares shall promptly furnish Columbia Bancorp with
such information regarding the Suburban Bancshares stockholders as Columbia
Bancorp requires to enable it to determine what filings are required under
applicable state securities laws. Suburban Bancshares authorizes Columbia
Bancorp to utilize in such filings the information concerning Suburban
Bancshares and the Suburban Subsidiaries provided to Columbia Bancorp in
connection with, or contained in, the Proxy Statement/Prospectus. Suburban
Bancshares shall promptly notify Columbia Bancorp of all communications, oral,
or written, with the SEC concerning the Registration Statement and the Proxy
Statement/Prospectus.
5.7. Consents. Suburban Bancshares and the Suburban Subsidiaries will
use commercially reasonable efforts to obtain any consents, approvals, or
waivers from third parties required in connection with the transactions
contemplated hereunder.
5.8. Current Information; Advice of Changes. (a) During the period
from the date of this Plan to the Effective Date, Suburban Bancshares will cause
one or more of its
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designated representatives to confer on a monthly or more frequent basis with
representatives of Columbia Bancorp regarding its business, operations,
properties, assets, and condition (financial or otherwise) and matters relating
to the completion of the transactions contemplated herein. As soon as reasonably
available, but in no event more than 45 days after the end of each calendar
quarter (other than the last calendar quarter of each calendar year) ending
after the date of this Plan, Suburban Bancshares will deliver to Columbia
Bancorp its quarterly reports on Form 10-Q, as filed with the SEC under the
Exchange Act. As soon as reasonably available, but in no event more than 90 days
after the calendar year, Suburban Bancshares will deliver to Columbia Bancorp
its Annual Report on Form 10-K as filed with the SEC under the Exchange Act.
(b) Between the date of this Plan and the Effective Date, Suburban
Bancshares shall promptly advise Columbia Bancorp in writing of any fact which,
if existing or known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Plan or of any fact which, if existing
or known as of the date hereof, would have made any of the representations
contained herein untrue in any material respect.
5.9. No Solicitation of Other Offers. Suburban Bancshares agrees that
neither it nor any of the Suburban Subsidiaries nor any of their respective
officers, directors, and employees shall, and Suburban Bancshares shall direct
and use its best efforts to cause its and the Suburban Subsidiaries' agents and
representatives (including, without limitation, any investment banker, attorney,
or accountant retained by it or any of the Suburban Subsidiaries) not to,
directly or indirectly, take any action to solicit or initiate any inquiries or
the making of any offer or proposal (including without limitation any proposal
to stockholders of Suburban Bancshares) with respect to a merger, consolidation,
business combination, liquidation, reorganization, sale or other disposition of
any significant portion of assets (except problem assets shown on Schedule 5.9),
sale of shares of capital stock, or similar transactions involving Suburban
Bancshares or any of the Suburban Subsidiaries (any such inquiry, offer, or
proposal, a "Suburban Acquisition Proposal"), or, except in the opinion of
outside counsel to Suburban Bancshares as may be legally required to comply with
the duties the Board of Directors of Suburban Bancshares under applicable law
and upon receipt of a confidentially agreement with terms not materially less
favorable to Suburban Bancshares than those contained in the Confidentiality
Agreement, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to a
Suburban Acquisition Proposal. As of the time hereof, Suburban Bancshares is
not engaged in any negotiations or discussions relating to a Suburban
Acquisition Proposal. Suburban Bancshares shall promptly notify Columbia
Bancorp orally and in writing of, and keep it fully and currently informed on,
any Suburban Acquisition Proposal or any inquiries with respect thereto, such
written notification to include the identity of the Person making such inquiry
or Suburban Acquisition Proposal and such other information with respect thereto
as is reasonably necessary to apprise Columbia Bancorp of the material terms of
such Suburban Acquisition Proposal. Suburban Bancshares shall give Columbia
Bancorp contemporaneous written notice upon engaging in discussions or
negotiations with, or providing any information regarding Suburban Bancshares or
any of the Suburban Subsidiaries to, any such person regarding a Suburban
Acquisition Proposal.
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5.10. Affiliate Agreements. Within 10 days of the date of this Plan,
Suburban Bancshares shall deliver or cause to be delivered to Columbia Bancorp
memoranda substantially in the form attached as Appendix V (the "Affiliates'
Memoranda") and agreements substantially in the form attached as Appendix VII
(the "Support Agreements") from each of its executive officers and directors
(and shall use commercially reasonable efforts to obtain and deliver such
memoranda and agreements from each stockholder of Suburban Bancshares who (a)
may be deemed to be an "affiliate" of Suburban Bancshares, as that term is
defined for purposes of the SEC Rules 145 and 405, or (b) may be restricted
under the accounting rules applicable to a pooling-of-interests). Under the
terms of the Affiliates' Memoranda, each such officer, director or stockholder
shall acknowledge and agree (i) to abide by all limitations imposed by the
Securities Act and by all rules, regulations, and releases promulgated
thereunder by the SEC with respect to the sale or other disposition of the
shares of the Common Stock of Columbia Bancorp to be received by such person
pursuant to the Holding Company Merger, and (ii) to abide by all limitations
imposed by the accounting rules for the Mergers to be accounted for as a
pooling-of-interests. Under the terms of the Support Agreements, each such
officer, director, or stockholder shall agree to support and vote the shares of
Common Stock of Suburban Bancshares owned or controlled by him or her to ratify
and confirm this Plan and the Holding Company Merger.
5.11. Pooling-of-Interests. Suburban Bancshares shall use its best
efforts not to permit any of the directors, officers, employees, stockholders,
agents, consultants, or other representatives of Suburban Bancshares or any of
the Suburban Subsidiaries to take any action that would preclude Columbia
Bancorp from treating the Mergers as a pooling-of-interests for financial
reporting purposes.
5.12. Taxes. Suburban Bancshares shall have filed with appropriate
federal, state, county, municipal, or foreign taxing authorities all tax returns
required to be filed (taking any applicable extensions into consideration) on or
before the Effective Date and shall have paid (or shall have made adequate
provision or set up an adequate actual reserve on the financial statements
referred to in Section 3.2 for the payment of) all taxes imposed by any taxing
authority with respect to any Pre-Closing Tax Period (as hereinafter defined),
together with any interest, additions, or penalties related to any such taxes.
For purposes of this Section 5.12, any reference to Suburban Bancshares shall be
deemed to include any corporation more than 50% of the outstanding capital stock
(by vote or value) of which is owned by Suburban Bancshares. "Pre-Closing Tax
Period" shall mean (i) each taxable period that ends on or before the Effective
Date, and (ii) any taxable period that includes (but does not end on) the
Effective Date (the period described in this clause (ii) being hereafter
referred to as a "Straddle Period"). In the case of any tax for a Straddle
Period, the covenant in this Section 5.12 shall be limited to the Pre-Closing
Tax Amount determined as follows:
(a) In the case of a periodic tax that is not based on income
or receipts (e.g., an ad valorem property tax), the "Pre-Closing Tax
Amount" shall be an amount equal to the amount of such tax for the entire
Straddle Period multiplied by a fraction the numerator of which is the
number of days elapsed
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between the beginning of the Straddle Period and the Effective Date, and
the denominator of which is the total number of days in the Straddle
Period; and
(b) in the case of any other tax, the "Pre-Closing Tax Amount"
shall be the amount of such tax for which Suburban Bancshares would have
been liable if the Straddle Period had ended as of the close of business on
the day of the Effective Date.
5.13. Public Announcements. Between the date of this Plan and the
Effective Date, Suburban Bancshares and the Suburban Subsidiaries will consult
with Columbia Bancorp before issuing any press release or otherwise making any
public statements with respect to this Plan and the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as counsel may advise is required
by law.
6. Covenants of Columbia Bancorp. Except as otherwise consented to in
writing by Suburban Bancshares after the date of this Plan, Columbia Bancorp
covenants to and agrees with Suburban Bancshares as follows:
6.1. Information. (a) Columbia Bancorp shall, upon reasonable notice,
give to Suburban Bancshares and to its officers, accountants, counsel, financial
advisors, and other representatives, reasonable access during Columbia Bancorp's
and the Columbia Subsidiaries' normal business hours throughout the period prior
to the Effective Date to all of their properties, books, contracts, commitments,
reports of examination (consistent with applicable law), depositor lists, and
records. Columbia Bancorp and the Columbia Subsidiaries will, at their own
expense, furnish Suburban Bancshares during such period with all such
information concerning their affairs as Suburban Bancshares may reasonably
request, including information for use in determining if the conditions of
Section 8.1 through Section 8.09 have been satisfied and for use in any
necessary filings to be made by Suburban Bancshares or the Suburban Subsidiaries
with appropriate governmental regulatory authorities.
(b) Columbia Bancorp acknowledges that information received by it
concerning Suburban Bancshares and the Suburban Subsidiaries and their
operations is subject to the Confidentiality Agreement. Without limiting the
foregoing, Columbia Bancorp will not, and will cause its representatives not to,
use any information obtained pursuant to Section 5.1 for any purpose unrelated
to the consummation of the transactions contemplated by this Plan. Subject to
the requirements of law, Columbia Bancorp will keep confidential, and will cause
its representatives to keep confidential, all information and documents obtained
pursuant to Section 5.1 unless such information (i) was already known to
Columbia Bancorp, (ii) becomes available to Columbia Bancorp from other sources
not known by Columbia Bancorp to be bound by a confidentiality obligation, (iii)
is disclosed with prior written approval of Suburban Bancshares and the Suburban
Subsidiaries, or (iv) is or becomes readily ascertainable from published
information or trade sources. In the event that this Plan is terminated or the
transactions contemplated by this Plan shall otherwise fail to be consummated,
Columbia Bancorp shall
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promptly cause all copies of documents or extracts thereof containing
information and data as to Suburban Bancshares and the Suburban Subsidiaries to
be returned. In the event that this Plan has been terminated or the transactions
contemplated hereby shall have failed to be consummated and Columbia Bancorp or
any of its agents or representatives are requested or required (by oral
questions, interrogatories, requests for information, or documents in legal
proceedings, subpoena, civil investigative demand, or other similar process) to
disclose any of the materials delivered or obtained pursuant to the Plan (the
"Suburban Bancshares Documentation"), Columbia Bancorp shall provide Suburban
Bancshares with prompt written notice of any such request or requirement so that
Suburban Bancshares may seek a protective order or other appropriate remedy. If,
in the absence of a protective order or other remedy, Columbia Bancorp or any of
its agents or representatives are compelled to disclose any of such Suburban
Bancshares Documentation to any tribunal or else stand liable for contempt or
suffer other censure or penalty, Columbia Bancorp or its agents or
representatives may, without liability hereunder, disclose to such tribunal only
that portion of the Suburban Bancshares Documentation which Columbia Bancorp's
counsel advises Columbia Bancorp is legally required to be disclosed, provided,
that Columbia Bancorp shall exercise its best efforts to preserve the
confidentiality of the Suburban Bancshares Documentation, including, without
limitation, by cooperating with Suburban Bancshares to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Suburban Bancshares Documentation by such tribunal.
6.2. Events Preceding Effectiveness. Columbia Bancorp and the
Columbia Subsidiaries will use commercially reasonable efforts to assure that
each of the events specified in Section 2 which require action on its part shall
occur on or before the Effective Date.
6.3. Applications to Governmental Regulatory Authorities. Columbia
Bancorp and the Columbia Subsidiaries will promptly prepare and file with the
appropriate governmental regulatory authorities an application requesting the
regulatory approvals referred to in Sections 2(g), 2(h), 2(i), and 2(j) and will
use commercially reasonable efforts to secure favorable action on such
applications, including without limitation commercially reasonable efforts to
pursue an appeal of a denial of a regulatory approval.
6.4. Conduct of Business. After the date of this Plan and pending the
Effective Date, (a) Columbia Bancorp and the Columbia Subsidiaries will conduct
their business only in the ordinary course; (b) Columbia Bancorp and the
Columbia Subsidiaries shall not effect any change or amendment in their
respective charters or by-laws; (c) except with respect to Columbia Bancorp
stock options outstanding on the date of this Plan which are or may become
subject to exercise, Columbia Bancorp and the Columbia Subsidiaries shall not
change their authorized, issued, or outstanding capital stock; (d) Columbia
Bancorp shall declare regular quarterly cash dividends in respect of its Common
Stock at the rate of not in excess of $.10 per share; (e) except as disclosed in
Schedule 6.4(e), Columbia Bancorp and the Columbia Subsidiaries shall not
increase employee compensation or benefit levels (except for annual increases
not in excess of amounts established by its regular past practices), shall not
establish or make any increase in any employment, compensation, bonus, pension,
option, incentive or deferred compensation,
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retirement, death, profit sharing, or similar agreements or benefits of any of
its past, present, or future officers or employees, and shall not modify the
existing employment agreements with any officers or employees; (f) Columbia
Bancorp and the Columbia Subsidiaries shall not make any change in any of their
accounting policies or practices unless required by generally accepted
accounting principles or take any action which would cause the Mergers not to be
accounted for as a pooling-of-interests; and (g) Columbia Bancorp and the
Columbia Subsidiaries shall not incur any liability for borrowed money except in
the ordinary course of their banking business (i.e., may only incur variable
rate loans with terms not greater than one year) or place upon or permit any
lien or encumbrance upon any of their properties or assets except liens of the
type permitted in the exceptions to Section 4.7. Pending the Effective Date,
Columbia Bancorp and the Columbia Subsidiaries shall (x) use commercially
reasonable efforts to preserve their business organization and assets and to
keep available the services of their full-time officers and employees, (y)
continue in effect the present method of conducting their business, and (z)
consult with Suburban Bancshares as to making decisions or actions in matters
(i) other than those in the ordinary course of business, or (ii) except as
disclosed in Schedule 6.4(z)(ii), involving any capital expenditures in excess
of $25,000.
6.5. Columbia Bancorp Common Stock. (a) At the Effective Date, the
Columbia Bancorp Common Stock to be issued in exchange for the Suburban
Bancshares Common Stock pursuant to the terms of this Plan shall be duly
authorized, validly issued, fully paid, and non-assessable, free of preemptive
rights and free and clear of all liens, encumbrances, or restrictions created by
or through Columbia Bancorp, with no personal liability attaching to the
ownership thereof. The Columbia Bancorp Common Stock to be issued upon exchange
for the Suburban Bancshares Common Stock pursuant to the terms of this Plan will
be issued in all material respects in accordance with applicable state and
federal laws, rules, and regulations.
(b) Columbia Bancorp shall have reserved a sufficient number of
shares of its Common Stock for issuance upon exercise of the option granted
pursuant to the Stock Option Agreement attached as Appendix IV, which is to be
executed by Columbia Bancorp and Suburban Bancshares, and shall have taken all
other actions necessary to fulfill its obligations thereunder.
6.6. Registration of Shares. Columbia Bancorp, with the assistance of
Suburban Bancshares and its representatives, will promptly file a Registration
Statement with the SEC which shall include a joint proxy statement for Columbia
Bancorp and Suburban Bancshares and a prospectus which shall satisfy all
applicable requirements of applicable state and federal laws, including the
Securities Act, the Exchange Act, and applicable state securities laws and the
rules and regulations thereunder (such joint proxy statement and prospectus,
together with any and all amendments or supplements thereto, being herein
referred to as the "Proxy Statement/Prospectus," and the various documents to be
filed by Columbia Bancorp under the Securities Act with the SEC to register the
Columbia Bancorp Common Stock into which shares of the Common Stock of Suburban
Bancshares held by stockholders will be converted, including the Proxy
Statement/Prospectus, are referred to herein as the "Registration Statement").
The number of shares to be registered will be an amount sufficient to allow all
of
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the shares of the Common Stock of Columbia Bancorp issued to holders of the
Common Stock of Suburban Bancshares pursuant to this Plan to be registered under
the Securities Act. Columbia Bancorp will use commercially reasonable efforts to
secure the effectiveness of the Registration Statement and, after the
Registration Statement has been declared effective, will issue the shares so
registered to the holders of the Common Stock of Suburban Bancshares on the
Effective Date. Columbia Bancorp may rely upon all information provided to it by
Suburban Bancshares and its representatives in the preparation of the
Registration Statement, any post-effective amendment thereto and the Proxy
Statement and shall not be liable for any untrue statement of a material fact or
any omission to state a material fact in the Registration Statement, the post-
effective amendment, or the Proxy Statement, if such statement is made in
reliance upon any information provided to it by Suburban Bancshares or by any of
its officers or authorized representatives. Columbia Bancorp shall promptly take
all such actions as may be necessary or appropriate in order to comply in all
material respects with all applicable securities laws of any state having
jurisdiction over the transactions contemplated by this Plan and the Holding
Company Merger. Columbia Bancorp shall furnish Suburban Bancshares with copies
of all such filings and keep Suburban Bancshares advised of the status thereof.
Columbia Bancorp shall promptly notify Suburban Bancshares of all
communications, oral or written, with the SEC concerning the Registration
Statement and the Proxy Statement/Prospectus. Prior to the Effective Date,
Columbia Bancorp will cause the listing of the Common Stock of Columbia Bancorp
deliverable pursuant to this Plan on The National Market of The National
Association of Securities Dealers, Inc. ("NASDAQ").
6.7. Meeting of Stockholders of Columbia Bancorp; Document
Preparation. (a) Columbia Bancorp shall duly call and convene a meeting of its
stockholders to act upon the transactions contemplated hereby as soon as
practicable. Except to the extent legally required for the discharge by the
board of directors of its fiduciary duties, Columbia Bancorp will recommend
approval of this Plan and the Holding Company Merger to its stockholders and
will use commercially reasonable efforts to obtain a favorable vote thereon. The
calling and holding of such meeting and all notices, transactions, documents,
and information related thereto will be in compliance with all applicable laws.
(b) Columbia Bancorp shall furnish such information concerning
Columbia Bancorp and the Columbia Subsidiaries as is necessary in order to cause
the Proxy Statement/Prospectus, insofar as it relates to such corporations, to
comply with Section 6.6. Columbia Bancorp agrees promptly to advise Suburban
Bancshares if at any time prior to the Columbia Bancorp stockholders' meeting,
any information provided by Columbia Bancorp in the Proxy Statement/Prospectus
becomes incorrect or incomplete in any material respect and to provide Suburban
Bancshares with the information needed to correct such inaccuracy or omission.
Columbia Bancorp shall furnish Suburban Bancshares with such supplemental
information as may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to Columbia Bancorp and the Columbia
Subsidiaries, to comply with Section 6.6 after the mailing thereof to Columbia
Bancorp stockholders. The information provided and the representations made by
Columbia Bancorp to Suburban Bancshares in connection with the
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Proxy Statement/Prospectus, both at the time such information and
representations are provided and made and at the Effective Date, will be true
and accurate in all material respects and will not contain any false or
misleading statement with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order (i) to make
the statements made therein not false or misleading, or (ii) to correct any
statement contained in an earlier communication with respect to such information
or representations which has become false or misleading. Columbia Bancorp may
rely upon all information provided to it by Suburban Bancshares and its
representatives in the preparation of the Proxy Statement/Prospectus and shall
not be liable for any untrue statement of a material fact or any omission to
state a material fact in the Proxy Statement/Prospectus, if such statement is
made in reliance upon any information provided to it by Suburban Bancshares or
by any of its officers or authorized representatives.
6.8. Consents. Columbia Bancorp and the Columbia Subsidiaries will
use commercially reasonable efforts to obtain any consents, approvals, or
waivers from third parties required in connection with the transactions
contemplated hereunder.
6.9. Current Information; Advice of Changes. (a) During the period
from the date of this Plan to the Effective Date, Columbia Bancorp will cause
one or more of its designated representatives to confer on a monthly or more
frequent basis with representatives of Suburban Bancshares regarding its
business, operations, properties, assets, and condition (financial or otherwise)
and matters relating to the completion of the transactions contemplated herein.
As soon as reasonably available, but in no event more than 45 days after the end
of each calendar quarter (other than the last calendar quarter of each calendar
year) ending after the date of this Plan, Columbia Bancorp will deliver to
Suburban Bancshares its quarterly reports on Form 10-Q, as filed with the SEC
under the Exchange Act. As soon as reasonably available, but in no event more
than 90 days after the calendar year, Columbia Bancorp will deliver to Suburban
Bancshares its Annual Report on Form 10-K as filed with the SEC under the
Exchange Act.
(b) Between the date of this Plan and the Effective Date, Columbia
Bancorp shall promptly advise Suburban Bancshares in writing of any fact which,
if existing or known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Plan or of any fact which, if existing
or known as of the date hereof, would have made any of the representations
contained herein untrue in any material respect.
6.10. No Solicitation of Other Offers. Columbia Bancorp agrees that
neither it nor any of the Columbia Subsidiaries nor any of their respective
officers, directors, and employees shall, and Columbia Bancorp shall direct and
use its best efforts to cause its and the Columbia Subsidiaries' agents and
representatives (including, without limitation, any investment banker, attorney,
or accountant retained by it or any of the Columbia Subsidiaries) not to,
directly or indirectly, take any action to solicit or initiate any inquiries or
the making of any offer or proposal (including without limitation any proposal
to stockholders of Columbia Bancorp) with respect to a merger, consolidation,
business combination, liquidation, reorganization, sale or other disposition of
any significant portion of assets (except problem assets shown on Schedule
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6.10), sale of shares of capital stock, or similar transactions involving
Columbia Bancorp or any of the Columbia Subsidiaries (any such inquiry, offer,
or proposal, a "Columbia Acquisition Proposal"), or, except in the opinion of
outside counsel to Columbia Bancorp as may be legally required to comply with
the duties the Board of Directors of Columbia Bancorp under applicable law and
upon receipt of a confidentially agreement with terms not materially less
favorable to Columbia Bancorp than those contained in the Confidentiality
Agreement, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to a
Columbia Acquisition Proposal. As of the time hereof, Columbia Bancorp is not
engaged in any negotiations or discussions relating to a Columbia Acquisition
Proposal. Columbia Bancorp shall promptly notify Suburban Bancshares orally and
in writing of, and keep it fully and currently informed on, any Columbia
Acquisition Proposal or any inquiries with respect thereto, such written
notification to include the identity of the Person making such inquiry or
Columbia Acquisition Proposal and such other information with respect thereto as
is reasonably necessary to apprise Suburban Bancshares of the material terms of
such Columbia Acquisition Proposal. Columbia Bancorp shall give Suburban
Bancshares contemporaneous written notice upon engaging in discussions or
negotiations with, or providing any information regarding Columbia Bancorp or
any of the Columbia Subsidiaries to, any such person regarding a Columbia
Acquisition Proposal.
6.11. Affiliate Agreements. Within 10 days of the date of this Plan,
Columbia Bancorp shall deliver or cause to be delivered to Suburban Bancshares
memoranda substantially in the form attached as Appendix VI (the "Affiliates'
Memoranda") and agreements substantially in the form attached as Appendix VIII
(the "Support Agreements") from each of its executive officers and directors
(and shall use commercially reasonable efforts to obtain and deliver such
memoranda and agreements from each stockholder of Columbia Bancorp who may be
restricted under the accounting rules applicable to a pooling-of-interests).
Under the terms of the Affiliates' Memoranda, each such officer, director or
stockholder shall acknowledge and agree to abide by all limitations imposed by
the accounting rules for the Mergers to be accounted for as a pooling-of-
interests. Under the terms of the Support Agreements, each such officer,
director, or stockholder shall agree to support and vote the shares of Common
Stock of Columbia Bancorp owned or controlled by him or her to ratify and
confirm this Plan and the Holding Company Merger.
6.12. Pooling-of-Interests. Columbia Bancorp shall use its best
efforts not to permit any of the directors, officers, employees, stockholders,
agents, consultants, or other representatives of Columbia Bancorp or any of the
Columbia Subsidiaries to take any action that would preclude Columbia Bancorp
from treating the Mergers as a pooling-of-interests for financial reporting
purposes.
6.13. Taxes. Columbia Bancorp shall have filed with appropriate
federal, state, county, municipal, or foreign taxing authorities all tax returns
required to be filed (taking any applicable extensions into consideration) on or
before the Effective Date and shall have paid (or shall have made adequate
provision or set up an adequate actual reserve on the financial statements
referred to in Section 4.2 for the payment of) all taxes imposed by any taxing
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authority with respect to any Pre-Closing Tax Period (as hereinafter defined),
together with any interest, additions, or penalties related to any such taxes.
For purposes of this Section 6.13, any reference to Columbia Bancorp shall be
deemed to include any corporation more than 50% of the outstanding capital stock
(by vote or value) of which is owned by Columbia Bancorp. "Pre-Closing Tax
Period" shall mean each taxable period that ends on or before the Effective
Date.
6.14. Public Announcements. Between the date of this Plan and the
Effective Date, Columbia Bancorp and the Columbia Subsidiaries will consult with
Suburban Bancshares before issuing any press release or otherwise making any
public statements with respect to this Plan and the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement prior to such consultation, except as counsel may advise is required
by law.
7. Conditions Precedent to Columbia Bancorp's Obligations. Unless waived
in writing by Columbia Bancorp in its sole discretion, all obligations of
Columbia Bancorp hereunder shall be subject to the fulfillment prior to or at
the Effective Date of the following conditions:
7.1. Representations, Warranties, and Covenants. The representations
and warranties of Suburban Bancshares herein contained shall be true in all
material respects as of the date hereof, shall be deemed made again at and as of
the Effective Date, and shall be true in all material respects as so made again;
Suburban Bancshares and the Suburban Subsidiaries shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions required by this Plan to be performed
or complied with by them on or prior to the Effective Date; and Columbia Bancorp
shall have received from Suburban Bancshares an officers' certificate to their
knowledge, information, and belief in such detail as Columbia Bancorp may
reasonably request, dated the Effective Date and signed by its Chief Executive
Officer and its Secretary, to the foregoing effect.
7.2. No Adverse Changes. There shall not have been any materially
adverse change in the condition (financial or otherwise), results of operations,
assets, liabilities, or business of Suburban Bancshares and the Suburban
Subsidiaries, taken as a whole, from December 31, 1998 to the Effective Date.
For purposes of this Section 7.2, a "materially adverse change" shall include,
without limitation, (a) a reduction of the stockholders' equity of Suburban
Bancshares to less than $19,366,000 (plus such additions to stockholders' equity
as a result of the issuance of any Common Stock after the date of this Plan),
(b) a decrease in the net income of Suburban Bancshares for calendar year 1999
and through the Effective Date to less than $625,000, or (c) an increase in
Suburban Bancshares' ratio of non-performing assets to total assets to above
1.5%, and a "materially adverse change" shall not include expenses of the
transactions under this Plan.
7.3. Events Preceding the Effective Date. Each of the events set forth
in Section 2 shall have occurred and any other required regulatory approvals
shall have been obtained.
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7.4. Other Evidence. Suburban Bancshares shall have delivered to
Columbia Bancorp such further certificates and documents evidencing due action
in accordance with this Plan, including certified copies of all applicable
proceedings of stockholders and directors of Suburban Bancshares and Suburban
Bank pertaining to the transactions under this Plan, as Columbia Bancorp shall
reasonably request.
7.5. No Adverse Proceedings, Events, or Regulatory Requirements. No
action or proceeding against Columbia Bancorp or any of the Columbia
Subsidiaries or against Suburban Bancshares or any of the Suburban Subsidiaries
shall be pending which seeks to prevent consummation of the transactions
contemplated by this Plan; and no order of any court shall have been entered
which prohibits consummation of the Mergers and the transactions contemplated by
this Plan. No approval, consent, waiver, or administrative action shall have
included any condition or requirement that would (i) result in a materially
adverse effect on Columbia Bancorp or Suburban Bancshares, or (ii) so materially
and adversely affect the economic or business benefits of the Mergers that
Columbia Bancorp, in the sole judgment of Columbia Bancorp, would not have
entered into this Plan had such conditions or requirements been known at the
date hereof.
7.6. Consents, Etc. All requisite consents, approvals, waivers,
undertakings, memoranda, agreements, exercises, and terminations by third
parties which Suburban Bancshares and the Suburban Subsidiaries have covenanted
to use commercially reasonable efforts to obtain under Sections 5.7, 5.10, and
5.11 shall have been obtained by Suburban Bancshares or waived by Columbia
Bancorp.
7.7. Opinion of Tax Counsel. Columbia Bancorp shall have received a
opinion from its tax counsel, dated the Effective Date, in form and substance
reasonably satisfactory to Columbia Bancorp, covering the matters set forth in
Appendix IX. In rendering such opinion, tax counsel shall require delivery of
and rely upon certain representation letters delivered by Columbia Bancorp,
Suburban Bancshares, and certain stockholders of Suburban Bancshares, which
letters shall be in form and substance satisfactory to tax counsel.
7.8. Fairness Opinion. Columbia Bancorp shall have received a
written opinion from Austin Financial Services, Inc. (or such other recognized
investment firm as Columbia Bancorp may select), dated contemporaneously with
the date of the Proxy Statement, to the effect that the consideration to be
received in the Holding Company Merger is fair to the stockholders of Columbia
Bancorp from a financial point of view.
7.9. Opinion of Counsel. Columbia Bancorp shall have received an
opinion of counsel to Suburban Bancshares, dated the Effective Date, in form and
substance reasonably satisfactory to Columbia Bancorp, covering the matters set
forth in Appendix X.
7.10. Pooling-of-Interests Accounting. Columbia Bancorp shall have
received a letter from KPMG LLP to the effect that the Mergers qualify for
pooling-of-interests accounting treatment if consummated in accordance with this
Plan; provided, that such condition shall be
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void and of no further force and effect if Columbia Bancorp has not received
such letter because of any action or inaction of Columbia Bancorp. In rendering
such letter, KPMG LLP shall require delivery of and rely upon certain
representation letters delivered by Columbia Bancorp and Suburban Bancshares and
a pooling letter delivered by Stegman & Company, which letters shall be in form
and substance satisfactory to KPMG LLP.
8. Conditions Precedent to Suburban Bancshares' Obligations. Unless
waived in writing by Suburban Bancshares in its sole discretion, all obligations
of Suburban Bancshares hereunder shall be subject to the fulfillment prior to or
at the Effective Date of the following conditions:
8.1. Representations, Warranties, and Covenants. The
representations and warranties of Columbia Bancorp herein contained shall be
true in all material respects as of the date hereof, shall be deemed made again
at and as of the Effective Date, and shall be true in all material respects as
so made again; Columbia Bancorp and the Columbia Subsidiaries shall have
performed in all material respects all obligations and agreements, and complied
in all material respects with all covenants and conditions required by this Plan
to be performed or complied with by them on or prior to the Effective Date; and
Suburban Bancshares shall have received from Columbia Bancorp an officers'
certificate to their knowledge, information and belief in such detail as
Suburban Bancshares may reasonably request, dated the Effective Date and signed
by its Chief Executive Officer and its Secretary, to the foregoing effect.
8.2. No Adverse Changes. There shall not have been any materially
adverse change in the condition (financial or otherwise), results of operations,
assets, liabilities, or business of Columbia Bancorp and the Columbia
Subsidiaries, taken as a whole, from December 31, 1998 to the Effective Date.
For purposes of this Section 8.2, a "materially adverse change" shall include,
without limitation, (a) a reduction of the stockholders' equity of Columbia
Bancorp to less than $38,000,000 (plus such additions to stockholders' equity as
a result of the issuance of any Common Stock after the date of this Plan), (b) a
decrease in the net income of Columbia Bancorp for calendar year 1999 and
through the Effective Date to less than $3,400,000, or (c) an increase in
Columbia Bancorp's ratio of non-performing assets to total assets to above 1.5%,
and a "materially adverse change" shall not include expenses of the transactions
under this Plan.
8.3. Events Preceding the Effective Date. Each of the events set
forth in Section 2 shall have occurred and any other required regulatory
approvals shall have been obtained.
8.4. Other Evidence. Columbia Bancorp shall have delivered to
Suburban Bancshares such further certificates and documents evidencing due
action in accordance with this Plan, including certified copies of all
applicable proceedings of stockholders and directors of Columbia Bancorp and
Columbia Bank pertaining to the transactions under this Plan, as Suburban
Bancshares shall reasonably request.
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8.5. No Adverse Proceedings, Events, or Regulatory Requirements.
No action or proceeding against Columbia Bancorp or any of the Columbia
Subsidiaries or against Suburban Bancshares or any of the Suburban Subsidiaries
shall be pending which seeks to prevent consummation of the transactions
contemplated by this Plan; and no order of any court shall have been entered
which prohibits consummation of the Mergers and the transactions contemplated by
this Plan. No approval, consent, waiver, or administrative action shall have
included any condition or requirement that would (i) result in a materially
adverse effect on Columbia Bancorp or Suburban Bancshares, or (ii) so materially
and adversely affect the economic or business benefits of the Mergers that
Suburban Bancshares, in the sole judgment of Suburban Bancshares, would not have
entered into this Plan had such conditions or requirements been known at the
date hereof.
8.6. Consents, Etc. All requisite consents, approvals, or
waivers, undertakings, memoranda, agreements, exercises, and terminations by
third parties which Columbia Bancorp has covenanted to use commercially
reasonable efforts to obtain under Sections 6.8, 6.11, and 6.12 shall have been
obtained by Columbia Bancorp or waived by Suburban Bancshares.
8.7. Opinion of Tax Counsel. Suburban Bancshares shall have
received an opinion from tax counsel to Columbia Bancorp, dated the Effective
Date, in form and substance reasonably satisfactory to Suburban Bancshares,
covering the matters set forth in Appendix IX. In rendering such opinion, tax
counsel shall require delivery of and rely upon certain representation letters
delivered by Columbia Bancorp, Suburban Bancshares, and certain stockholders of
Suburban Bancshares, which letters shall be in form and substance satisfactory
to tax counsel.
8.8. Fairness Opinion. Suburban Bancshares shall have received a
written opinion from Danielson Associates Inc. (or such other recognized
investment firm as Suburban Bancshares may select), dated contemporaneously with
the date of the Proxy Statement, to the effect that the consideration to be
received in the Holding Company Merger is fair to the stockholders of Suburban
Bancshares from a financial point of view.
8.9. Opinion of Counsel. Suburban Bancshares shall have received
an opinion of counsel to Columbia Bancorp, dated the Effective Date, in form and
substance reasonably satisfactory to Suburban Bancshares, covering the matters
set forth in Appendix XI.
9. Terms of the Holding Company Merger.
9.1. Structure of the Holding Company Merger. At the Effective
Date, subject to the terms and conditions of this Plan, Suburban Bancshares will
merge with and into Columbia Bancorp, the separate corporate existence of
Suburban Bancshares shall cease, and Columbia Bancorp shall continue as the
successor corporation (the "Successor Corporation"). From and after the
Effective Date, the Holding Company Merger shall have the effects set forth in
Md. General Corporation law (S) 3-114 and De. General Corporation law (S)(S)
259 - 261.
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9.2. Conversion of Stock; Conversion Ratio. (a) On the Effective
Date, each share of the Suburban Bancshares Common Stock outstanding immediately
prior to the Effective Date (other than shares (the "Dissenters' Shares'') with
respect to which dissenter's rights shall have been perfected in accordance with
De. General Corporation Law ss 262), shall, without any action on the part of
the holder thereof, be canceled and converted into the number of shares of
Successor Corporation Common Stock (rounded to the nearest 0.01 share) which
results after multiplication by the Conversion Ratio. The Conversion Ratio shall
be 0.2196; provided, however, that the Conversion Ratio shall be increased (but
not decreased) to the extent necessary to cause the average market value (based
on the mean of the daily high and low trade prices, or, if none, of the daily
high bid and low asked prices, reported on NASDAQ) of Columbia Bancorp Common
Stock (for each of the 10 trading days ending on the trading date that is three
days before the Effective Date) received for each share of Suburban Bancshares
Common Stock to be $3.00 per share; provided, further that such adjustment may
not increase the Conversion Ratio above 0.2338.
(b) No certificates for fractional shares of Successor
Corporation Common Stock shall be issued; in lieu thereof, each holder otherwise
entitled to a fractional interest shall receive an amount in cash based on the
market value of Columbia Bancorp Common Stock as determined in Section 9.2. Each
such holder shall have no other rights with respect to such fractional interest.
(c) Dissenters' Shares shall be paid for in accordance with De.
General Corporation Law ss 262 and thereupon shall be cancelled, retired and
cease to exist.
(d) Notwithstanding any provision of this Plan to the contrary,
any Dissenters' Shares, which as of the Effective Date the holder thereof has
not withdrawn or lost any right to such appraisal shall not be exchanged, or
represent a right to receive shares of Columbia Bancorp Common Stock, but the
holder shall only be entitled to such rights as are granted by De. General
Corporation Law ss 262. If a stockholder of Suburban Bancshares who demands
appraisal of his shares under De. General Corporation Law ss 262 shall
effectively withdraw or lose (through failure to perfect or otherwise) the right
to appraisal, then, as of the Effective Date or the occurrence of such event,
whichever last occurs, that stockholder's shares of the Suburban Bancshares
Common Stock shall be exchanged and represent only the right to receive shares
of Columbia Bancorp Common Stock as provided in Section 9.2(a) pursuant to the
procedures in Section 9.3. Suburban Bancshares shall give Columbia Bancorp (a)
prompt written notice of any written demands for appraisal of any share of the
Suburban Bancshares Common Stock, attempted withdrawals of such demands and any
other instruments served pursuant to the De. General Corporation Law ss 262
relating to the Suburban Bancshares stockholders' rights of appraisal and (b)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under De. General Corporation Law ss 262. Suburban
Bancshares shall not, except with the prior written consent of Columbia Bancorp,
voluntarily make any payment with respect to any demands for appraisals of share
of the Suburban Bancshares Common Stock, offer to settle or settle any such
demands or approve any withdrawal of any such demands. Notwithstanding any
provision of this Plan to the contrary, Columbia Bancorp shall have the right to
terminate this Plan and be released from all obligations hereunder if,
immediately prior to the proposed Effective Date, Suburban Bancshares
stockholders holding in excess of ___% of the outstanding shares of the Suburban
Bancshares Common Stock have demanded appraisal rights (which demands
theretofore have not been withdrawn) so as to jeopardize the accounting
treatment specified in Section 7.10 and, KPMG LLP fails or refuses to deliver a
letter to Columbia Bancorp to the effect that the Mergers qualify for
pooling-of-interests accounting treatment, as provided in Section 7.10.
9.3. Exchange Procedure. (a) After the Effective Date,
certificates representing such shares of Common Stock of Suburban Bancshares
shall represent the right to receive certificates representing shares of Common
Stock of Successor Corporation determined in accordance with Section 9.2; such
Suburban Bancshares certificates at any time after the Effective Date may be
exchanged by the holders thereof for new certificates for the appropriate number
of shares of Common Stock of Successor Corporation by forwarding such Suburban
Bancshares Common Stock certificates and the letter of transmittal provided by
Successor Corporation to the transfer agent for Successor Corporation Common
Stock, and the payment of cash in lieu of fractions, dividends, and other
distributions on said stock may be withheld until the Suburban Bancshares
certificates are surrendered for exchange to the transfer agent for Successor
Corporation Common Stock; when such new certificates are issued, the holders
thereof shall be entitled to be paid the amount (without any interest thereon)
of all such withheld cash in lieu of fractions, dividends, or other
distributions which have theretofore become payable with respect to such shares
of Common Stock of Successor Corporation.
(b) As soon as possible after the Effective Date, the transfer
agent for Successor Corporation Common Stock shall send or cause to be sent a
notice and transmittal form to each record holder of a certificate theretofore
evidencing shares of the Suburban Bancshares Common Stock.
(c) All shares of Successor Corporation Common Stock into which
shares of Suburban Bancshares Common Stock shall have been converted shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Suburban Bancshares Common Stock.
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9.4. Stock Options. (a) At the Effective Date, all options
granted by Suburban Bancshares which are outstanding under all Stock Option
Plans previously adopted by Suburban Bancshares to purchase shares of Suburban
Bancshares Common Stock, which are outstanding and unexercised immediately prior
thereto (each, an "Outstanding Option"), shall be converted as to each whole
share subject to such Outstanding Option into an option (each, an "Exchange
Option") to purchase a number of shares of Successor Corporation Common Stock
equal to the number of shares of Suburban Bancshares Common Stock which could
have been purchased under the Outstanding Option multiplied by the Conversion
Ratio, with the total for each holder's Exchange Options with the same option
price and expiration date rounded down to the next whole share.
(b) The per share exercise price of each Exchange Option shall
be equal to the price per share set forth in the Outstanding Option divided by
the Conversion Ratio, rounded up to the nearest whole cent.
(c) The Exchange Option shall otherwise have the same duration
and other terms as the Outstanding Option.
(d) The adjustments provided herein with respect to any options
which are "incentive stock options" (as defined in Section 422 of the Code)
shall be effected in a manner consistent with Section 424(a) of the Code.
9.5. Charter of the Successor Corporation. The Charter of
Columbia Bancorp, as in effect immediately prior to the Effective Date, shall be
the Charter of the Successor Corporation until thereafter amended as provided by
law.
9.6. By-Laws of the Successor Corporation. The By-Laws of
Columbia Bancorp, as in effect immediately prior to the Effective Date (with the
amendments set forth in Appendix XII), shall be the By-Laws of the Successor
Corporation until thereafter amended as provided by law.
9.7. Anti-Dilution Provision. If Columbia Bancorp takes any
action which establishes, prior to the Effective Date, a record date or
effective date for a stock dividend on its Common Stock, a split or reverse
split of its Common Stock or any distribution on all shares of its Common Stock
other than cash dividends, Columbia Bancorp will take such action as shall be
necessary in order that each share of Common Stock of Suburban Bancshares will
be converted into the same number of shares of the Common Stock of Successor
Corporation (whether such number is greater or less than the number otherwise
provided for herein) that the owner of such shares would have owned immediately
after the record date or effective date of such event had the Effective Date
occurred immediately before such record date or effective date, and the
Conversion Ratio set forth in Section 9.2 shall be adjusted accordingly.
Suburban Bancshares hereby agrees to any revision in the exchange ratio pursuant
to this Section 9.7.
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9.8. Restriction on Issuance or Repurchase of Securities. Except
transactions that would preclude the issuance of the pooling-of-interest letter
under Section 7.10, nothing in this Plan shall limit the right of Columbia
Bancorp to amend its Charter and By-Laws and to issue or repurchase any of its
stock or other securities in any manner and for any consideration permitted by
law either in connection with acquisitions of new affiliates or otherwise, prior
to or after the Effective Date.
10. Terms of the Bank Merger.
10.1. Structure of the Bank Merger. At the Effective Date,
subject to the terms and conditions of this Plan, Suburban Bank will merge with
and into Columbia Bank, the separate corporate existence of Suburban Bank shall
cease, and Columbia Bank shall continue as the successor banking institution
(the "Successor Bank"). From and after the Effective Date, the Bank Merger shall
have the effects set forth in Md. Fin. Ins. Code (S) 3-712.
10.2. Conversion of Stock; Conversion Ratio. On the Effective
Date, each share of the Suburban Bank Common Stock outstanding immediately prior
to the Effective Date, shall, without any action on the part of the holder
thereof, be canceled.
10.3. Exchange Procedure. (a) After the Effective Date,
certificates representing such shares of Common Stock of Suburban Bank shall
represent the right to receive certificates representing shares of Common Stock
of Successor Bank determined in accordance with Section 10.2; such Suburban Bank
certificates at any time after the Effective Date may be exchanged by Columbia
Bancorp for new certificates for the appropriate number of shares of Common
Stock of Successor Bank.
(b) All shares of Successor Bank Common Stock into which shares
of Suburban Bank Common Stock shall have been converted shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Suburban Bank Common Stock.
10.4. Charter of the Successor Bank. The Charter of Columbia
Bank, as in effect immediately prior to the Effective Date, shall be the Charter
of the Successor Bank until thereafter amended as provided by law.
10.5. By-Laws of the Successor Bank. The By-Laws of Columbia
Bank, as in effect immediately prior to the Effective Date (with the amendments
set forth in Appendix XIII), shall be the By-Laws of the Successor Bank until
thereafter amended as provided by law.
10.6. Restriction on Issuance or Repurchase of Securities.
Nothing in this Plan shall limit the right of Columbia Bank to amend its Charter
and By-Laws and to issue or repurchase any of its stock or other securities in
any manner and for any consideration permitted by law either in connection with
acquisitions of new affiliates or otherwise, prior to or after the Effective
Date.
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11. Boards of Directors and Employment Matters. Upon the Effective Date
or as otherwise indicated:
(a) At Effective Date, the Board of Directors of Successor
Corporation will be increased by five members. All of the directors of
Columbia Bancorp immediately prior to the Effective Date shall continue as
directors of Successor Corporation after the Effective Date, and five of
the directors of Suburban Bancshares before the Effective Date will become
directors of Successor Corporation as shown on Appendix XIV.
(b) At Effective Date, the Board of Directors of Successor Bank
will be increased by five members. All of the directors of Columbia Bank
immediately prior to the Effective Date shall continue as directors of
Successor Bank after the Effective Date, and five of the directors of
Suburban Bank before the Effective Date will become directors of Successor
Bank as shown on Appendix XIII.
(c) The members the Boards of Directors having board titles and
the persons serving as executive officers of Successor Corporation and
Successor Bank at the Effective Date are listed on Appendix XIV. The
employment of all officers and employees of Suburban Bancshares, other than
the officer with an employment agreement from Successor Corporation and
listed on Appendix XIV (the "Bancorp Contract Employee"), will terminate
without compensation or benefits of any kind or form immediately prior to
the Effective Date, and none will become officers or employees of Successor
Corporation except as listed on Appendix XIV. The chief executive
officer/board chairman's service agreement of the Bancorp Contract Employee
will terminate immediately prior to the Effective Date without payment or
benefits of any kind or form, and the Bancorp Contract Employee will be
offered an employment agreement with Successor Corporation in the form
attached as Appendix IX.
(d) The officers and employees of Suburban Bank, other than the
officers and employees with an employment agreement from Successor Bank and
listed on Appendix XIV (the "Bank Contract Employees"), will continue as
officers and employees of Successor Bank as at-will employees. The
severance agreements of officers listed on Appendix XIV will be assumed by
Successor Bank, and the other officers or employees of Suburban Bank (other
than the Bank Contract Employees) becoming officers or employees of
Successor Bank upon termination of employment by Successor Bank within four
months of the Effective Date will receive a severance payment equal to one
week's pay (rounded to the nearest one-tenth of a week) for each year's
service with Suburban Bank (with a minimum payment of four weeks' pay and a
maximum payment of 12 weeks' pay). The chief executive officer/board
chairman's service agreement and the employment agreement of the Bank
Contract Employees (whether with
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Suburban Bancshares or Suburban Bank) will terminate immediately prior to
the Effective Date without payment or benefits of any kind or form, and the
Bank Contract Employees will be offered employment agreements with the
Successor Bank in the forms attached as Appendix XV and Appendix XVI.
(e) Successor Corporation will provide the employees of Suburban
Bank who continue as at-will employees of Successor Bank after the
Effective Date with benefits under Successor Corporation's employee benefit
plans to the extent they are eligible to do so under the terms of such
plans or programs as are in force on the Effective Date, with credit given
for their prior service with Suburban Bank for purposes of allocation,
eligibility, and vesting. In that connection, Successor Corporation may, in
its sole discretion, freeze or terminate the employee benefit plans of
Suburban Bancshares, merge them with one or more employee benefit plans of
Successor Corporation, or continue to maintain them.
12. Amendment of this Plan. This Plan may be amended at any time prior
to the Effective Date in response to comments of governmental regulatory
authorities, or otherwise; provided, that any such amendment is in writing and
is approved by the Board of Directors of each of the parties hereto.
13. Abandonment of this Plan; Effect Thereof. Anything herein to the
contrary notwithstanding, and notwithstanding any stockholder vote or approval,
this Plan may be terminated and abandoned:
(a) by mutual consent of the Boards of Directors of Suburban
Bancshares and Columbia Bancorp;
(b) by Columbia Bancorp or Suburban Bancshares, if its Board of
Directors so determines, in the event of the failure of the stockholders of
Columbia Bancorp or the stockholders of Suburban Bancshares to approve this
Plan at the meetings called to consider such approval, unless in each case
the failure of such occurrence shall be due to the failure of the party
seeking to terminate this Plan to perform or observe its agreement set
forth herein to be performed or observed by such party at or before the
Effective Date;
(c) by Columbia Bancorp or Suburban Bancshares, if its Board of
Directors so determines, in the event of a material breach by the other
party hereto of any representation, warranty, covenant, or agreement
contained herein which is not cured or not curable within 60 days after
written notice of such breach is given to the party committing such breach
by the other party;
(d) by Columbia Bancorp by written notice to Suburban Bancshares
if prior to June 30, 2000 (i) any approval, consent, or waiver of any
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Governmental Entity required to permit consummation of the transactions
contemplated hereby shall have been denied, (ii) any approval, consent, or
waiver of any Governmental Entity required to permit consummation of the
transactions contemplated hereby shall include any condition or requirement
that would (i) result in a materially adverse effect on Columbia Bancorp or
Suburban Bancshares, or (ii) so materially and adversely affect the
economic or business benefits of the Mergers that Columbia Bancorp, in the
sole judgment of Columbia Bancorp, would not have entered into this Plan
had such conditions or requirements been known at the date hereof, (iii)
any action or proceeding against Columbia Bancorp or any of the Columbia
Subsidiaries or against Suburban Bancshares or any of the Suburban
Subsidiaries shall be pending which seeks to prevent consummation of the
transactions contemplated by this Plan, (iv) any court shall have entered
an order which prohibits consummation of the Mergers and the transactions
contemplated by this Plan or (v) termination is permitted as provided in
Section 9.2(d);
(e) by Columbia Bancorp or Suburban Bancshares, by action of the
Board of Directors of either party and the delivery of written notice by
either party to the other, in the event that the Mergers are not
consummated by June 30, 2000, unless the failure to so consummate by such
time is due to the breach of any representation, warranty, agreement, or
covenant contained in this Plan by the party seeking to terminate, or if
prior to June 30, 2000, any Governmental Entity of competent jurisdiction
shall have issued a final, unappealable order or ruling enjoining or
otherwise prohibiting consummation of the transactions contemplated by this
Plan;
(f) by action of the Board of Directors of Suburban Bancshares
in their sole discretion if they determine to negotiate a Suburban
Acquisition Proposal under Section 5.9;
(g) by action of the Board of Directors of Columbia Bancorp in
their sole discretion if they determine to negotiate a Columbia Acquisition
Proposal under Section 6.10; or
(h) by Columbia Bancorp or Suburban Bancshares, by action of the
Board of Directors of either party in their sole discretion and the
delivery of written notice by either party to the other within 10 business
days of the date hereof, in the event that Columbia Bancorp or Suburban
Bancshares, as the case may be, is not satisfied with the results of its
review of the loan and related files and reports of the other (as to which
full access will be given under Sections 5.1 and 6.1).
Except as provided in Section 17, in the event of the termination of this Plan
by either Columbia Bancorp or Suburban Bancshares, as provided above, this Plan
shall thereafter become void, and there shall be no liability on the part of any
party hereto or their respective officers or directors,
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<PAGE>
except that any such termination shall be without prejudice to the rights of any
party hereto arising out of the willful breach of any other party of any
covenant or willful misrepresentation contained in this Plan.
14. Expenses. Whether or not the transactions hereunder are
consummated, each party to the Plan shall pay its own expenses relating hereto,
including fees and disbursements of its counsel and accountants and one half of
filing fees in respect of bank regulatory approvals required in order to
consummate the Mergers; provided, however, that Columbia Bancorp shall pay (a)
the registration fee of the SEC, filing fees in respect of state "blue sky"
laws, and the fee payable to The National Association of Securities Dealers,
Inc. in respect of the listing on NASDAQ of the shares of Columbia Bancorp
Common Stock to be issued pursuant to this Plan, and (b) the costs of printing
and mailing the Proxy Statement/Prospectus. The foregoing shall not be construed
as a limitation of damages in the event of breach.
15. Notices. All notices, requests, demands, and other communications
under or connected with this Plan shall be in writing, and (a) if to Columbia
Bancorp, shall be addressed to Columbia Bancorp, 9171 Baltimore National Pike,
Ellicott City, Maryland 21042, attention of John M. Bond, Jr., President and
Chief Executive Officer, with a copy to its counsel, Piper & Marbury l.l.p., 36
South Charles Street, Baltimore, Maryland 21201-3010, attention of James J.
Winn, Jr., Esquire; or (b) if to Suburban Bancshares, shall be addressed to
Suburban Bancshares, Inc., 7505 Greenway Center Drive, Greenbelt, Maryland
20768, attention of Winfield M. Kelly, Jr., Chairman of the Board and Chief
Executive Officer, with a copy to its counsel, McNamee, Hosea, Jernigan & Kim,
P.A., 6411 Ivy Lane, Suite 200, Greenbelt, Maryland 20770, attention of Stephen
C. Hosea, Esquire. Any such notices, requests, demands, and other
communications shall be mailed, postage prepaid, first class mail, or delivered
personally and shall be sufficient and effective when delivered to or received
at the address as specified. Each of the parties may change the address at
which it is to receive communications by like written notice to the other.
16. Entire Agreement; Effect. Subject to Sections 5.1(b) and 6.1(b),
this Plan (including the financial statements, lists, schedules, and documents
delivered pursuant hereto, which are made a part hereof) is intended by the
parties to and does constitute the entire agreement of the parties with respect
to the transaction contemplated hereunder. This Plan supersedes any and all
prior understandings, including prior letters of intent, and it may not be
changed, waived, discharged, or terminated orally, but only in writing by a
party against which enforcement of the change, waiver, discharge, or termination
is sought.
17. Representations, Warranties, and Agreements. Except as set forth in
this Section 17, all representations, warranties, and agreements of Columbia
Bancorp and Suburban Bancshares made in this Plan, or in any instrument
delivered by Columbia Bancorp or Suburban Bancshares pursuant to this Plan,
shall expire at the Effective Date. In the event of the consummation of the
transactions contemplated hereby, the agreements contained in or referred to in
Sections 9, 10, and 11 shall survive the Effective Date. In the event of the
termination of this Plan in accordance with its terms, the agreements contained
in or referred to in Sections 5.1(b), 5.5, 5.9, 6.1(b), 6.5(b), 6.10, and 14,
the Stock Option Agreements, and the Support
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Agreements (which shall only terminate in accordance with their respective
terms) shall survive such termination. Except to the extent that
representations, warranties, and agreements of Columbia Bancorp and Suburban
Bancshares made in this Plan, or in any instrument delivered by Columbia Bancorp
or Suburban Bancshares pursuant to this Plan, shall expire at the Effective
Date, nothing contained herein shall be construed to limit the liability of a
party to another party for damages caused by a breach of this Plan.
18. Governing Law. This Plan shall be governed by, and shall be
interpreted in accordance with, the laws of the State of Maryland or, to the
extent applicable, the federal laws of the United States of America or the laws
of the State of Delaware.
19. General. The section headings contained in this Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretations of this Plan. This Plan may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Plan shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors but shall not be assigned to and shall not create any rights in favor
of any other party. Any purported assignment in violation of this Section 19
shall be void.
IN WITNESS WHEREOF, Columbia Bancorp and Suburban Bancshares have caused
this Plan to be duly executed by their respective chairmen or presidents, and
their respective seals to be hereunto affixed and attested by their respective
secretaries, thereunto duly authorized as of the date first above written.
ATTEST: [SEAL] COLUMBIA BANCORP
___________________________ By:______________________________________
John A. Scaldara, Jr. John M. Bond, Jr.
Secretary President and Chief Executive Officer
ATTEST: [SEAL] SUBURBAN BANCSHARES, INC.
___________________________ By:______________________________________
Winfield M. Kelly, Jr.
Secretary Chairman of the Board
and Chief Executive Officer
A-58
<PAGE>
APPENDIX B
SUPPORT AGREEMENT OF COLUMBIA BANCORP
B-1
<PAGE>
FORM OF SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") dated as of September 28, 1999,
between SUBURBAN BANCSHARES INC., a Delaware corporation and registered bank
holding company ("Suburban Bancshares"), and each of the individuals listed on
Schedule A attached hereto (collectively, the "Columbia Bancorp Stockholders").
W I T N E S S E T H:
WHEREAS, the Columbia Bancorp Stockholders (i) collectively possess the
sole or joint right to vote, or direct the voting of, an aggregate of
___________ shares of common stock, par value $.01 per share (the "Shares"), of
Columbia Bancorp, a Maryland corporation and registered bank holding company
("Columbia Bancorp"), which constitute approximately _____ % of the outstanding
capital stock of Columbia Bancorp, and (ii) individually possess the right to
vote, or to direct the voting of, the number of Shares set forth opposite such
Columbia Bancorp Stockholder's name on Schedule A hereto; and
WHEREAS, the Columbia Bancorp Stockholders (i) collectively possess the
sole or joint power to dispose of, or to direct the disposition of, an aggregate
of ___________ Shares, which constitute approximately _____ % of the outstanding
capital stock of Columbia Bancorp, and (ii) individually possess the power to
dispose of, or direct the disposition of, the number of Shares set forth
opposite such Columbia Bancorp Stockholder's name on Schedule A hereto; and
WHEREAS, Columbia Bancorp has entered into a Plan and Agreement to Merge
with Suburban Bancshares, dated as of the business day immediately prior to the
date hereof (the "Plan"), pursuant to which Suburban Bancshares would merge with
and into Columbia Bancorp (the "Holding Company Merger"), with shares of the
Common Stock of Columbia Bancorp to be issued to the stockholders of Suburban
Bancshares; and
WHEREAS, pursuant to Section 6.10 of the Plan, Columbia Bancorp has
covenanted to obtain agreements from each of its officers and directors (and to
use commercially reasonable efforts to obtain agreements from any such other
person identified herein as a Columbia Bancorp Stockholder) in which the
officers and directors of Columbia Bancorp (in their capacity as Columbia
Bancorp Stockholders) and the Columbia Bancorp Stockholders would agree to
support the Holding Company Merger; and the Columbia Bancorp Stockholders have
in accordance with such covenant agreed to support the Holding Company Merger.
NOW, THEREFORE, to induce Columbia Bancorp to enter into the Plan and in
consideration of the mutual covenants and agreements set forth herein and in the
Plan and the mutual benefits to be derived herefrom and therefrom, the parties
agree as follows:
1. Representations of the Columbia Bancorp Stockholders. Each of the
Columbia Bancorp Stockholders, severally, and not jointly, represents that:
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<PAGE>
(a)(1) such Columbia Bancorp Stockholder possesses the sole or joint
right to vote, or direct the voting of, all of the Shares set forth on Schedule
A opposite the Columbia Bancorp Stockholder's name, (2) such number of Shares
constitutes all of the Shares with respect to which the Columbia Bancorp
Stockholder possesses the sole or joint right to vote, or direct the voting of,
as the case may be, and (3) except as to Shares held only under a power of
attorney or as guardian or custodian, such Columbia Bancorp Stockholder has good
and merchantable title to all of the Shares indicated on said list opposite the
Columbia Bancorp Stockholder's name, free of all restrictions and encumbrances
of every kind and character, except as indicated on Schedule A.
(b)(1) such Columbia Bancorp Stockholder possesses the sole or joint
power to dispose of, or direct the disposition of, the Shares set forth on
Schedule A opposite the Columbia Bancorp Stockholder's name, (2) such number of
Shares constitutes all of the Shares with respect to which the Columbia Bancorp
Stockholder possesses or will possess the sole or joint power to dispose of or
direct the disposition of, and (3) except as to Shares held only under a power
of attorney, such Columbia Bancorp Stockholder has good and merchantable title
to all of the Shares indicated on said list opposite the Columbia Bancorp
Stockholder's name free of all restrictions and encumbrances of any kind or
character except as indicated on Schedule A.
(c) such Columbia Bancorp Stockholder does not own, of record or
beneficially, any Shares that are not reflected on Schedule A. For the purposes
of this Agreement, beneficial ownership has the meaning set forth in Rule 13d-3
of the Securities Exchange Act of 1934, as amended.
(d) such Columbia Bancorp Stockholder has full right, power, and
authority to enter into, deliver and perform this Agreement; this Agreement has
been duly executed and delivered by such Columbia Bancorp Stockholder; and this
Agreement constitutes the legal, valid, and binding obligation of the Columbia
Bancorp Stockholder, and is enforceable in accordance with its terms.
2. Covenants of the Columbia Bancorp Stockholders. Each of the Columbia
Bancorp Stockholders, severally and not jointly, covenants as follows:
(a) Restrictions on Transfer. With respect to Shares listed on
Schedule A, during the term of this Agreement, such Columbia Bancorp
Stockholder shall not voluntarily pledge, hypothecate, grant a security
interest in, sell, transfer, or otherwise dispose of or encumber any of such
Shares and will not enter into any agreement, arrangement, or understanding
(other than a proxy for the purpose of voting his or her Shares in accordance
with Subparagraph 2(c) hereof) which would, during that term (i) restrict,
(ii) establish a right of first refusal to, or (iii) otherwise relate to the
transfer or voting of such Shares; provided, however, this
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<PAGE>
restriction shall not apply to a transfer of any of the Shares by the Columbia
Bancorp Stockholder to his or her spouse, children, or grandchildren, subject
to the conditions that any transferee, recipient, or custodian of any such
transferee or recipient must execute an agreement substantially in the form of
this Agreement in a form satisfactory to Columbia Bancorp, and Schedule A
hereto may be revised by Columbia Bancorp to reflect such transfer.
(b) Other Restrictions. During the term of this Agreement, such Columbia
Bancorp Stockholder, as a Columbia Bancorp Stockholder, shall not, directly or
indirectly, solicit, initiate, or encourage inquiries or proposals from, or
participate in any discussions or negotiations with, or provide any
information to, any individual, corporation, partnership, or other person,
entity, or group (other than Suburban Bancshares, any of its subsidiaries, and
their respective officers, employees, representatives, and agents) concerning
any sale of assets, sale of shares of capital stock, merger, consolidation,
share exchange, or similar transactions involving Columbia Bancorp. Such
Columbia Bancorp Stockholder shall promptly advise Suburban Bancshares of, and
communicate to Suburban Bancshares the terms of, any such inquiry or proposal
addressed either to such Columbia Bancorp Stockholder or to Columbia Bancorp
that such Columbia Bancorp Stockholder receives or of which such Columbia
Bancorp Stockholder has knowledge.
(c) Holding Company Merger. With respect to the Shares listed on Schedule
A pursuant to Subparagraph 1(a) hereof, each of the Columbia Bancorp
Stockholders shall vote such Shares to ratify and confirm the Plan and the
Holding Company Merger and the transactions contemplated thereby. Each of the
Columbia Bancorp Stockholders, as a Columbia Bancorp Stockholder, further
agrees to use all commercially reasonable efforts to cause the Holding Company
Merger to be effected.
(d) Additional Shares. The provisions of subparagraphs (a) and (c) above
shall apply to all Shares currently owned and hereafter acquired, of record or
beneficially, by each of the Columbia Bancorp Stockholders.
3. Termination. This Agreement shall terminate upon the termination of the
Plan.
4. Governing Law. This Agreement shall in all respects be governed by and
construed under the laws of Maryland, all rights and remedies being governed by
such laws.
5. Benefit of Agreement. This Agreement shall be binding upon and inure to
the benefit of, and shall be enforceable by, the parties hereto and their
respective personal representatives, successors, and assigns, except that
neither party may transfer or assign any of its respective rights or obligations
hereunder without the prior written consent of the other party or, if by
Columbia Bancorp, in accordance with the Plan.
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<PAGE>
6. Counterparts. For convenience of the parties hereto, this Agreement may
be executed in several counterparts, each of which shall be deemed an original,
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Suburban Bancshares, Inc. and the Columbia Bancorp
Stockholders have caused this Agreement to be duly executed as of the day and
year first above written.
SUBURBAN BANCSHARES, INC.
By:_________________________________
Winfield M. Kelly, Jr.
Chairman of the Board
and Chief Executive Officer
COLUMBIA BANCORP STOCKHOLDERS:
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
B-5
<PAGE>
APPENDIX C
SUPPORT AGREEMENT OF SUBURBAN BANCSHARES
C-1
<PAGE>
FORM OF SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") dated as of September 28, 1999,
between COLUMBIA BANCORP, a Maryland corporation and registered bank holding
company ("Columbia Bancorp"), and each of the individuals listed on Schedule A
attached hereto (collectively, the "Suburban Bancshares Stockholders").
W I T N E S S E T H:
WHEREAS, the Suburban Bancshares Stockholders (i) collectively possess the
sole or joint right to vote, or direct the voting of, an aggregate of
___________ shares of common stock, par value $.01 per share (the "Shares"), of
Suburban Bancshares, Inc., a Delaware corporation and registered bank holding
company ("Suburban Bancshares"), which constitute approximately _____ % of the
outstanding capital stock of Suburban Bancshares, and (ii) individually possess
the right to vote, or to direct the voting of, the number of Shares set forth
opposite such Suburban Bancshares Stockholder's name on Schedule A hereto; and
WHEREAS, the Suburban Bancshares Stockholders (i) collectively possess the
sole or joint power to dispose of, or to direct the disposition of, an aggregate
of ___________ Shares, which constitute approximately _____ % of the outstanding
capital stock of Suburban Bancshares, and (ii) individually possess the power to
dispose of, or direct the disposition of, the number of Shares set forth
opposite such Suburban Bancshares Stockholder's name on Schedule A hereto; and
WHEREAS, Columbia Bancorp has entered into a Plan and Agreement to Merge
with Suburban Bancshares, dated as of the business day immediately prior to the
date hereof (the "Plan"), pursuant to which Suburban Bancshares would merge with
and into Columbia Bancorp (the "Holding Company Merger"), with shares of the
Common Stock of Columbia Bancorp to be issued to the stockholders of Suburban
Bancshares; and
WHEREAS, pursuant to Section 5.10 of the Plan, Suburban Bancshares has
covenanted to obtain agreements from each of its officers and directors (and to
use commercially reasonable efforts to obtain agreements from any such other
person identified herein as a Suburban Bancshares Stockholder) in which the
officers and directors of Suburban Bancshares (in their capacity as Suburban
Bancshares Stockholders) and the Suburban Bancshares Stockholders would agree to
support the Holding Company Merger; and the Suburban Bancshares Stockholders
have in accordance with such covenant agreed to support the Holding Company
Merger.
NOW, THEREFORE, to induce Columbia Bancorp to enter into the Plan and in
consideration of the mutual covenants and agreements set forth herein and in the
Plan and the mutual benefits to be derived herefrom and therefrom, the parties
agree as follows:
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<PAGE>
1. Representations of the Suburban Bancshares Stockholders. Each of the
Suburban Bancshares Stockholders, severally, and not jointly, represents that:
(a)(1) such Suburban Bancshares Stockholder possesses the sole or
joint right to vote, or direct the voting of, all of the Shares set forth
on Schedule A opposite the Suburban Bancshares Stockholder's name, (2) such
number of Shares constitutes all of the Shares with respect to which the
Suburban Bancshares Stockholder possesses the sole or joint right to vote,
or direct the voting of, as the case may be, and (3) except as to Shares
held only under a power of attorney or as guardian or custodian, such
Suburban Bancshares Stockholder has good and merchantable title to all of
the Shares indicated on said list opposite the Suburban Bancshares
Stockholder's name, free of all restrictions and encumbrances of every kind
and character, except as indicated on Schedule A.
(b)(1) such Suburban Bancshares Stockholder possesses the sole or
joint power to dispose of, or direct the disposition of, the Shares set
forth on Schedule A opposite the Suburban Bancshares Stockholder's name,
(2) such number of Shares constitutes all of the Shares with respect to
which the Suburban Bancshares Stockholder possesses or will possess the
sole or joint power to dispose of or direct the disposition of, and (3)
except as to Shares held only under a power of attorney, such Suburban
Bancshares Stockholder has good and merchantable title to all of the Shares
indicated on said list opposite the Suburban Bancshares Stockholder's name
free of all restrictions and encumbrances of any kind or character except
as indicated on Schedule A.
(c) such Suburban Bancshares Stockholder does not own, of record or
beneficially, any Shares that are not reflected on Schedule A. For the
purposes of this Agreement, beneficial ownership has the meaning set forth
in Rule 13d-3 of the Securities Exchange Act of 1934, as amended.
(d) such Suburban Bancshares Stockholder has full right, power, and
authority to enter into, deliver and perform this Agreement; this Agreement
has been duly executed and delivered by such Suburban Bancshares
Stockholder; and this Agreement constitutes the legal, valid, and binding
obligation of the Suburban Bancshares Stockholder, and is enforceable in
accordance with its terms.
2. Covenants of the Suburban Bancshares Stockholders. Each of the
Suburban Bancshares Stockholders, severally and not jointly, covenants as
follows:
(a) Restrictions on Transfer. With respect to Shares listed on
Schedule A, during the term of this Agreement, such Suburban Bancshares
Stockholder shall not voluntarily pledge, hypothecate, grant a security
interest in, sell, transfer, or otherwise dispose of or encumber any of
such Shares and will not enter into
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<PAGE>
any agreement, arrangement, or understanding (other than a proxy for the
purpose of voting his or her Shares in accordance with Subparagraph 2(c)
hereof) which would, during that term (i) restrict, (ii) establish a right
of first refusal to, or (iii) otherwise relate to the transfer or voting of
such Shares; provided, however, this restriction shall not apply to a
transfer of any of the Shares by the Suburban Bancshares Stockholder to his
or her spouse, children, or grandchildren, subject to the conditions that
any transferee, recipient, or custodian of any such transferee or recipient
must execute an agreement substantially in the form of this Agreement in a
form satisfactory to Columbia Bancorp, and Schedule A hereto may be revised
by Columbia Bancorp to reflect such transfer.
(b) Other Restrictions. During the term of this Agreement, such
Suburban Bancshares Stockholder, as a Suburban Bancshares Stockholder,
shall not, directly or indirectly, solicit, initiate, or encourage
inquiries or proposals from, or participate in any discussions or
negotiations with, or provide any information to, any individual,
corporation, partnership, or other person, entity, or group (other than
Columbia Bancorp, any of its subsidiaries, and their respective officers,
employees, representatives, and agents) concerning any sale of assets, sale
of shares of capital stock, merger, consolidation, share exchange, or
similar transactions involving Suburban Bancshares. Such Suburban
Bancshares Stockholder shall promptly advise Columbia Bancorp of, and
communicate to Columbia Bancorp the terms of, any such inquiry or proposal
addressed either to such Suburban Bancshares Stockholder or to Suburban
Bancshares that such Suburban Bancshares Stockholder receives or of which
such Suburban Bancshares Stockholder has knowledge.
(c) Holding Company Merger. With respect to the Shares listed on
Schedule A pursuant to Subparagraph 1(a) hereof, each of the Suburban
Bancshares Stockholders shall vote such Shares to ratify and confirm the
Plan and the Holding Company Merger and the transactions contemplated
thereby. Each of the Suburban Bancshares Stockholders, as a Suburban
Bancshares Stockholder, further agrees to use all commercially reasonable
efforts to cause the Mergers to be effected.
(d) Additional Shares. The provisions of subparagraphs (a) and (c)
above shall apply to all Shares currently owned and hereafter acquired, of
record or beneficially, by each of the Suburban Bancshares Stockholders.
3. Termination. This Agreement shall terminate upon the termination of the
Plan.
4. Governing Law. This Agreement shall in all respects be governed by and
construed under the laws of Maryland, all rights and remedies being governed by
such laws.
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5. Benefit of Agreement. This Agreement shall be binding upon and inure to
the benefit of, and shall be enforceable by, the parties hereto and their
respective personal representatives, successors, and assigns, except that
neither party may transfer or assign any of its respective rights or obligations
hereunder without the prior written consent of the other party or, if by
Columbia Bancorp, in accordance with the Plan.
6. Counterparts. For convenience of the parties hereto, this Agreement may
be executed in several counterparts, each of which shall be deemed an original,
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Columbia Bancorp and the Suburban Bancshares
Stockholders have caused this Agreement to be duly executed as of the day and
year first above written.
COLUMBIA BANCORP
By:_____________________________________
John M. Bond, Jr.
President and Chief Executive Officer
SUBURBAN BANCSHARES STOCKHOLDERS:
________________________________________
________________________________________
________________________________________
________________________________________
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<PAGE>
APPENDIX D
COLUMBIA BANCORP STOCK OPTION AGREEMENT
D-1
<PAGE>
FORM OF STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Option Agreement") dated as of September
28, 1999, between SUBURBAN BANCSHARES, INC. ("Suburban Bancshares"), a Delaware
corporation, and COLUMBIA BANCORP ("Columbia Bancorp"), a Maryland corporation,
recites and provides:
A. The Board of Directors of Suburban Bancshares and Columbia Bancorp have
approved a Plan and Agreement to Merge dated September 28, 1999 (the "Plan")
providing for the merger (the "Holding Company Merger") of Suburban Bancshares
with and into Columbia Bancorp.
B. As a condition to and as consideration for Suburban Bancshares' entry
into the Plan and to induce such entry, Columbia Bancorp has agreed to grant to
Suburban Bancshares the option set forth herein to purchase authorized but
unissued shares of Columbia Bancorp Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms defined in the Plan and used herein
shall have the same meanings as in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Columbia Bancorp hereby grants to Suburban Bancshares an option (the "Option")
to purchase up to 497,140 shares of Columbia Bancorp Common Stock at an exercise
price of $13.063 per share payable in cash as provided in Section 4; provided,
however, that in the event Columbia Bancorp issues or agrees to issue any shares
of Columbia Bancorp Common Stock (other than as permitted under the Plan) at a
price less than $13.063 per share (as adjusted pursuant to Section 6), the
exercise price shall be such lesser price.
3. Exercise of Option. (a) Unless Suburban Bancshares shall have
breached in any material respect any covenant or representation contained in the
Plan and such breach has not been cured, Suburban Bancshares may exercise the
Option, in whole or part, at any time or from time to time if a Purchase Event
(as defined below) shall have occurred and be continuing; provided, that to the
extent the Option shall not have been exercised, it shall terminate and be of no
further force and effect upon the earliest to occur of (i) the Effective Date of
the Holding Company Merger, or (ii) the termination of the Plan in accordance
with the provisions thereof prior to the occurrence of a Purchase Event (other
than as a result of a willful breach by Columbia Bancorp of any Specified
Covenant or as a result of failure of Columbia Bancorp's stockholders to approve
the Plan by the vote required under applicable law or under Columbia Bancorp's
Charter), or (iii) 12 months after termination of the Plan due to a willful
breach by Columbia Bancorp of any Specified Covenant or failure of Columbia
Bancorp's stockholders to approve the Plan by the vote required under applicable
law or under Columbia Bancorp's
D-2
<PAGE>
Charter; provided, however, that any purchase of shares upon exercise of the
Option shall be subject to compliance with applicable law, including, without
limitation, the Bank Holding Company Act of 1956, as amended. Any exercise of
the Option shall be subject to compliance with applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Columbia Bancorp or The Columbia Bank ("Columbia Bank"),
without having received Suburban Bancshares' prior written consent, shall
have entered into an agreement with any person (x) to merge or consolidate,
or enter into any similar transaction, except as contemplated in the Plan,
(y) to purchase, lease, or otherwise acquire all or substantially all of
the assets of Columbia Bancorp or Columbia Bank, or (z) to purchase or
otherwise acquire (including by way of merger, consolidation, share
exchange, or any similar transaction) securities representing 15% or more
of the voting power of Columbia Bancorp or Columbia Bank;
(ii) any person (other than Columbia Bancorp or Columbia Bank in
a fiduciary capacity, or Suburban Bancshares or Columbia Bank in a
fiduciary capacity) shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 15% or more of the outstanding shares of
Columbia Bancorp Common Stock after the date hereof (the term "beneficial
ownership" for purposes of this Option Agreement having the meaning
assigned thereto in Section 13(d) of the Securities Exchange Act of 1934
(the "Exchange Act") and the regulations promulgated thereunder);
(iii) any person shall have made a bona fide proposal to Columbia
Bancorp by public announcement or written communication that is or becomes
the subject of public disclosure to acquire Columbia Bancorp or Columbia
Bank by merger, consolidation, purchase of all or substantially all of its
assets, or any other similar transaction, and following such bona fide
proposal the stockholders of Columbia Bancorp vote not to adopt the Plan;
or
(iv) Columbia Bancorp shall have willfully breached any
Specified Covenant following a bona fide proposal to Columbia Bancorp or
Columbia Bank to acquire Columbia Bancorp or Columbia Bank by merger,
consolidation, purchase of all or substantially all of its assets, or any
other similar transaction, which breach would entitle Suburban Bancshares
to terminate the Plan (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the Notice Date
(as defined below).
If more than one of the transactions giving rise to a Purchase
Event under this Section 3(b) is undertaken or effected, then all such
transactions shall give rise only to one Purchase Event, which Purchase
Event shall be deemed continuing for all purposes hereunder until all such
transactions are abandoned.
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As used in this Option Agreement, "person" shall have the meanings
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event Suburban Bancshares wishes to exercise the Option,
it shall send to Columbia Bancorp a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise, and (ii) a place and date not
earlier than three business days nor later than 60 business days after the
Notice Date for the closing of such purchase ("Closing Date"); provided, that if
prior notification to or approval of any federal or state regulatory agency is
required in connection with such purchase, Suburban Bancshares shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
period has expired or been terminated or such approval has been obtained and any
requisite waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant made by
Columbia Bancorp and contained in Section 6 of the Plan.
4. Payment and Delivery of Certificates. (a) At the closing referred to
in Section 3, Suburban Bancshares shall pay to Columbia Bancorp the aggregate
purchase price for the shares of Columbia Bancorp Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Columbia Bancorp.
(b) At such closing, simultaneously with the delivery of funds as
provided in subsection (a), Columbia Bancorp shall deliver to Suburban
Bancshares a certificate or certificates representing the number of shares of
Columbia Bancorp Common Stock purchased by Suburban Bancshares, and Suburban
Bancshares shall deliver to Columbia Bancorp a letter agreeing that Suburban
Bancshares will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Option Agreement.
(c) Certificates for Columbia Bancorp Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN PROVISIONS OF A STOCK OPTION AGREEMENT BETWEEN THE REGISTERED
HOLDER HEREOF AND COLUMBIA BANCORP ("COLUMBIA BANCORP") AND TO RESALE
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF COLUMBIA BANCORP.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY COLUMBIA BANCORP OF A WRITTEN REQUEST."
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It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Suburban Bancshares
shall have delivered to Columbia Bancorp a copy of a letter from the staff of
the Securities and Exchange Commission, or an opinion of counsel, in form and
substance satisfactory to Columbia Bancorp, to the effect that such legend is
not required for purposes of the Securities Act of 1933, as amended (the
"Securities Act").
5. Representations. Columbia Bancorp represents, warrants, and covenants
to Suburban Bancshares as follows:
(a) Columbia Bancorp shall at all times maintain sufficient
authorized but unissued shares of Columbia Bancorp Common Stock so that the
Option may be exercised without authorization of additional shares of Columbia
Bancorp Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part,
of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid, and nonassessable.
6. Adjustment Upon Changes in Capitalization. In the event of any change
in Columbia Bancorp Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, exchanges of shares, or the like, the
type and number of shares subject to the Option, and the purchase price per
share, as the case may be, shall be adjusted appropriately. In the event that
any additional shares of Columbia Bancorp Common Stock are issued or otherwise
become outstanding after the date of this Option Agreement (other than pursuant
to this Option Agreement), the number of shares of Columbia Bancorp Common Stock
subject to the Option shall be adjusted so that, after such issuance, it equals
9.936% of the number of shares of Columbia Bancorp Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section 6 shall be deemed to authorize
Columbia Bancorp to breach any provision of the Plan.
7. Registration Rights. If requested by Suburban Bancshares, Columbia
Bancorp shall as expeditiously as possible file a registration statement on a
form of general use under the Securities Act if necessary in order to permit the
sale or other disposition of the shares of Columbia Bancorp Common Stock that
have been acquired upon exercise of the Option in accordance with the intended
method of sale or other disposition requested by Suburban Bancshares. Suburban
Bancshares shall provide all information reasonably requested by Columbia
Bancorp for inclusion in any registration statement to be filed hereunder.
Columbia Bancorp will use its best efforts to cause such registration statement
first to become effective and then to remain effective for such period not in
excess of 270 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sales or other
dispositions. Only one registration may be effected under this Section 7 at
Columbia Bancorp's expense, and which shall not include underwriting commissions
and the fees and disbursements of Suburban Bancshares' counsel attributable to
the registration of such Columbia Bancorp Common Stock. The filing of any
registration statement hereunder may be delayed for such
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period of time as may reasonably be required to facilitate any public
distribution by Columbia Bancorp of Columbia Bancorp Common Stock. If requested
by Suburban Bancshares, in connection with any such registration, Columbia
Bancorp will become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities, and other agreements customarily
included in such underwriting agreements. Upon receiving any request from
Suburban Bancshares or assignee thereof under this Section 7, Columbia Bancorp
agrees to send a copy thereof to Suburban Bancshares and to any assignee thereof
known to Columbia Bancorp, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies.
8. Severability. If any term, provision, covenant, or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, and covenants, and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired, or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire the full number of shares of Columbia Bancorp
Common Stock provided in Section 2 (as adjusted pursuant to Section 6), it is
the express intention of Columbia Bancorp to allow the holder to acquire such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
9. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein,
this Option Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing Suburban Bancshares may assign in whole or in part its rights and
obligations hereunder; provided, however, that to the extent required by
applicable regulatory authorities, Suburban Bancshares may not assign its rights
under the Option except in
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(i) a widely dispersed public distribution, (ii) a private placement in which no
one party acquires the right to purchase in excess of 2% of the voting shares of
Columbia Bancorp, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on Suburban Bancshares' behalf, or (iv) any other manner approved
by applicable regulatory authorities.
(d) Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the address provided for in or pursuant to Section 15 of the Plan.
(e) Counterparts. This Option Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
SUBURBAN BANCSHARES, INC.
By:___________________________________
Winfield M. Kelly, Jr.
Chairman of the Board
and Chief Executive Officer
COLUMBIA BANCORP
By:___________________________________
John M. Bond, Jr.
President and Chief Executive Officer
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<PAGE>
APPENDIX E
SUBURBAN BANCSHARES STOCK OPTION AGREEMENT
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<PAGE>
FORM OF STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Option Agreement") dated as of September
28, 1999, between SUBURBAN BANCSHARES, INC. ("Suburban Bancshares"), a Delaware
corporation, and COLUMBIA BANCORP ("Columbia Bancorp"), a Maryland corporation,
recites and provides:
A. The Board of Directors of Suburban Bancshares and Columbia Bancorp have
approved a Plan and Agreement to Merge dated September 28, 1999 (the "Plan")
providing for the merger (the "Holding Company Merger") of Suburban Bancshares
with and into Columbia Bancorp.
B. As a condition to and as consideration for Columbia Bancorp's entry
into the Plan and to induce such entry, Suburban Bancshares has agreed to grant
to Columbia Bancorp the option set forth herein to purchase authorized but
unissued shares of Suburban Bancshares Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms defined in the Plan and used herein
shall have the same meanings as in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Suburban Bancshares hereby grants to Columbia Bancorp an option (the "Option")
to purchase up to 2,807,668 shares of Suburban Bancshares Common Stock at an
exercise price of $2.313 per share payable in cash as provided in Section 4;
provided, however, that in the event Suburban Bancshares issues or agrees to
issue any shares of Suburban Bancshares Common Stock (other than as permitted
under the Plan) at a price less than $2.313 per share (as adjusted pursuant to
Section 6), the exercise price shall be such lesser price.
3. Exercise of Option. (a) Unless Columbia Bancorp shall have breached
in any material respect any covenant or representation contained in the Plan and
such breach has not been cured, Columbia Bancorp may exercise the Option, in
whole or part, at any time or from time to time if a Purchase Event (as defined
below) shall have occurred and be continuing; provided, that to the extent the
Option shall not have been exercised, it shall terminate and be of no further
force and effect upon the earliest to occur of (i) the Effective Date of the
Holding Company Merger, or (ii) the termination of the Plan in accordance with
the provisions thereof prior to the occurrence of a Purchase Event (other than
as a result of a willful breach by Suburban Bancshares of any Specified Covenant
or as a result of failure of Suburban Bancshares' stockholders to approve the
Plan by the vote required under applicable law or under Suburban Bancshares'
Charter), or (iii) 12 months after termination of the Plan due to a willful
breach by Suburban Bancshares of any Specified Covenant or failure of Suburban
Bancshares' stockholders to approve the Plan by the vote required under
applicable law or under Suburban
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<PAGE>
Bancshares' Charter; provided, however, that any purchase of shares upon
exercise of the Option shall be subject to compliance with applicable law,
including, without limitation, the Bank Holding Company Act of 1956, as amended.
Any exercise of the Option shall be subject to compliance with applicable
provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Suburban Bancshares or Suburban Bank of Maryland ("Suburban
Bank"), without having received Columbia Bancorp's prior written consent,
shall have entered into an agreement with any person (x) to merge or
consolidate, or enter into any similar transaction, except as contemplated
in the Plan, (y) to purchase, lease, or otherwise acquire all or
substantially all of the assets of Suburban Bancshares or Suburban Bank, or
(z) to purchase or otherwise acquire (including by way of merger,
consolidation, share exchange, or any similar transaction) securities
representing 15% or more of the voting power of Suburban Bancshares or
Suburban Bank;
(ii) any person (other than Suburban Bancshares or Suburban Bank in a
fiduciary capacity, or Columbia Bancorp or Columbia Bank in a fiduciary
capacity) shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 15% or more of the outstanding shares of Suburban
Bancshares Common Stock after the date hereof (the term "beneficial
ownership" for purposes of this Option Agreement having the meaning
assigned thereto in Section 13(d) of the Securities Exchange Act of 1934
(the "Exchange Act") and the regulations promulgated thereunder);
(iii) any person shall have made a bona fide proposal to Suburban
Bancshares by public announcement or written communication that is or
becomes the subject of public disclosure to acquire Suburban Bancshares or
Suburban Bank by merger, consolidation, purchase of all or substantially
all of its assets, or any other similar transaction, and following such
bona fide proposal the stockholders of Suburban Bancshares vote not to
adopt the Plan; or
(iv) Suburban Bancshares shall have willfully breached any Specified
Covenant following a bona fide proposal to Suburban Bancshares or Suburban
Bank to acquire Suburban Bancshares or Suburban Bank by merger,
consolidation, purchase of all or substantially all of its assets, or any
other similar transaction, which breach would entitle Columbia Bancorp to
terminate the Plan (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the Notice Date
(as defined below).
If more than one of the transactions giving rise to a Purchase Event under this
Section 3(b) is undertaken or effected, then all such transactions shall give
rise only to one Purchase Event, which Purchase Event shall be deemed continuing
for all purposes hereunder until all such
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<PAGE>
transactions are abandoned. As used in this Option Agreement, "person" shall
have the meanings specified in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act.
(c) In the event Columbia Bancorp wishes to exercise the Option, it
shall send to Suburban Bancshares a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise, and (ii) a place and date not
earlier than three business days nor later than 60 business days after the
Notice Date for the closing of such purchase ("Closing Date"); provided, that if
prior notification to or approval of any federal or state regulatory agency is
required in connection with such purchase, Columbia Bancorp shall promptly file
the required notice or application for approval and shall expeditiously process
the same and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required notification
period has expired or been terminated or such approval has been obtained and any
requisite waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant made by
Suburban Bancshares and contained in Section 5 of the Plan.
4. Payment and Delivery of Certificates. (a) At the closing referred to
in Section 3, Columbia Bancorp shall pay to Suburban Bancshares the aggregate
purchase price for the shares of Suburban Bancshares Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Suburban Bancshares.
(b) At such closing, simultaneously with the delivery of funds as
provided in subsection (a), Suburban Bancshares shall deliver to Columbia
Bancorp a certificate or certificates representing the number of shares of
Suburban Bancshares Common Stock purchased by Columbia Bancorp, and Columbia
Bancorp shall deliver to Suburban Bancshares a letter agreeing that Columbia
Bancorp will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Option Agreement.
(c) Certificates for Suburban Bancshares Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN PROVISIONS OF A STOCK OPTION AGREEMENT BETWEEN THE REGISTERED
HOLDER HEREOF AND SUBURBAN BANCSHARES, INC. ("SUBURBAN BANCSHARES") AND TO
RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF SUBURBAN
BANCSHARES. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY SUBURBAN BANCSHARES OF A WRITTEN REQUEST."
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It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Columbia Bancorp
shall have delivered to Suburban Bancshares a copy of a letter from the staff of
the Securities and Exchange Commission, or an opinion of counsel, in form and
substance satisfactory to Suburban Bancshares, to the effect that such legend is
not required for purposes of the Securities Act of 1933, as amended (the
"Securities Act").
5. Representations. Suburban Bancshares represents, warrants, and
covenants to Columbia Bancorp as follows:
(a) Suburban Bancshares shall at all times maintain sufficient
authorized but unissued shares of Suburban Bancshares Common Stock so that the
Option may be exercised without authorization of additional shares of Suburban
Bancshares Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part,
of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid, and nonassessable.
6. Adjustment Upon Changes in Capitalization. In the event of any change
in Suburban Bancshares Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, exchanges of shares, or the like, the
type and number of shares subject to the Option, and the purchase price per
share, as the case may be, shall be adjusted appropriately. In the event that
any additional shares of Suburban Bancshares Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement (other than
pursuant to this Option Agreement), the number of shares of Suburban Bancshares
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of Suburban Bancshares Common
Stock then issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section 6 shall be
deemed to authorize Suburban Bancshares to breach any provision of the Plan.
7. Registration Rights. If requested by Columbia Bancorp, Suburban
Bancshares shall as expeditiously as possible file a registration statement on a
form of general use under the Securities Act if necessary in order to permit the
sale or other disposition of the shares of Suburban Bancshares Common Stock that
have been acquired upon exercise of the Option in accordance with the intended
method of sale or other disposition requested by Columbia Bancorp. Columbia
Bancorp shall provide all information reasonably requested by Suburban
Bancshares for inclusion in any registration statement to be filed hereunder.
Suburban Bancshares will use its best efforts to cause such registration
statement first to become effective and then to remain effective for such period
not in excess of 270 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sales or other
dispositions. Only one registration may be effected under this Section 7 at
Suburban Bancshares' expense, and which shall not include underwriting
commissions and the fees and disbursements of Columbia Bancorp's counsel
attributable to the registration of such Suburban Bancshares Common Stock. The
filing of any registration statement hereunder may be delayed
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<PAGE>
for such period of time as may reasonably be required to facilitate any public
distribution by Suburban Bancshares of Suburban Bancshares Common Stock. If
requested by Columbia Bancorp, in connection with any such registration,
Suburban Bancshares will become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities, and other agreements
customarily included in such underwriting agreements. Upon receiving any request
from Columbia Bancorp or assignee thereof under this Section 7, Suburban
Bancshares agrees to send a copy thereof to Columbia Bancorp and to any assignee
thereof known to Suburban Bancshares, in each case by promptly mailing the same,
postage prepaid, to the address of record of the persons entitled to receive
such copies.
8. Severability. If any term, provision, covenant, or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, and covenants, and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired, or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire the full number of shares of Suburban Bancshares
Common Stock provided in Section 2 (as adjusted pursuant to Section 6), it is
the express intention of Suburban Bancshares to allow the holder to acquire such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
9. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein,
this Option Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing Columbia Bancorp may assign in whole or in part its rights and
obligations hereunder; provided, however, that to the extent required by
applicable regulatory authorities, Columbia Bancorp may not assign its rights
under the Option except in (i)
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<PAGE>
a widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Suburban Bancshares, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on Columbia Bancorp's behalf, or (iv) any other manner approved by
applicable regulatory authorities.
(d) Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the address provided for in or pursuant to Section 15 of the Plan.
(e) Counterparts. This Option Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
SUBURBAN BANCSHARES, INC.
By:________________________________________
Winfield M. Kelly, Jr.
Chairman of the Board
and Chief Executive Officer
COLUMBIA BANCORP
By:________________________________________
John M. Bond, Jr.
President and Chief Executive Officer
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<PAGE>
APPENDIX F
OPINION OF AUSTIN FINANCIAL SERVICES, INC.
September 24, 1999
Board of Directors
Columbia Bancorp
10480 Little Patuxent Parkway
Columbia, Maryland 21044
Members of the Board:
You have requested our opinion, from a financial point of view, as to the
fairness to Columbia Bancorp, ("Columbia") Columbia, Maryland and its
shareholders of the proposed terms of the Plan and Agreement to Merge
("Agreement"), between Suburban Bancshares, Inc., ("Suburban")
Greenbelt, Maryland and Columbia. The reorganization will result in the merger
of Suburban with and into Columbia, the separate corporate existence of Suburban
shall cease, and Columbia shall continue as the successor corporation. Columbia
will continue to carry on its banking business in substantially the same manner
as before the reorganization.
Austin Financial Services, Inc., ("AFSI") is a nationally recognized
investment banking firm specializing in the banking and financial services
industry. AFSI is continually engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, private placements and
valuations for estate, corporate and other purposes. In the past, AFSI has not
provided professional services and/or products to Columbia or Suburban in the
ordinary course of business. Furthermore, AFSI does not contemplate any future
business with Columbia and/or Suburban arising from this engagement, nor has its
opinion concerning the fairness, from a financial point of view, of the terms of
the Agreement been subject to indications of future business with
either Columbia or Suburban.
In connection with its opinion, AFSI reviewed material bearing upon the
financial operating condition of Columbia and Suburban including, but not
limited to: (1) the Annual Report of Suburban for the year ending 1998; (2)
Consolidated Reports of Condition and Income of Suburban for the years ending
1994-1998 and for June 30, 1999; (3) SEC form 10Q of Suburban for June 30, 1999;
(4) Uniform Bank Performance Report of Suburban for June 30, 1999; (5) the
investment security portfolio of Suburban as of August 31, 1999; (6) the
statement of financial condition of Suburban as of August 31, 1999; (7) rate
sensitivity analysis data of Suburban's loan portfolio as of August 31, 1999;
(8) the interest rate schedule for Suburban as of September 14, 1999; (9)
Suburban's stock price history from July 1, 1999 to September 16, 1999; (10) the
trial balance of Suburban as of August 31, 1999; (11) the classified assets and
watch loan list of Suburban as of August 31, 1999; (12) the nonaccrual loan list
of Suburban as of August 31, 1999; (13) depreciation projection for Suburban for
the years 2000-2004; (14) other internal financial and operating
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<PAGE>
information which was provided to AFSI by Suburban; (15) publicly available
information concerning certain other banks/thrifts and bank/thrift holding
companies, the trading markets for their securities and the nature and terms of
certain other merger and acquisition transactions believed relevant to its
inquiry; (16) the reported price and trading activity for Columbia's common
stock; (17) certain financial and stock market information for Columbia and
Suburban with similar information of certain other financial institutions whose
securities are publicly-traded; (18) discussed the foregoing as well as other
matters relevant to its inquiry, including the past and current business
operations and acquisitions, results of regulatory examinations, financial
condition, current loan quality and trends, and future prospects of Suburban
with certain officers and representatives of Suburban; and (19) the Agreement.
AFSI also took into account its assessment of general economic, market and
financial conditions and its experience in other transactions, as well as, its
experience in securities valuation and general knowledge of the banking
industry. AFSI's opinion was necessarily based upon conditions as they existed
and could be evaluated on the date of the opinion and the information made
available to AFSI through that date.
AFSI relied upon and assumed without independent verification the accuracy
and completeness of all of the financial and other information provided to it by
Columbia and Suburban or from public sources. AFSI has not made an independent
evaluation of the assets of Suburban, but has relied upon the books and records,
where applicable, of Suburban, and the audited financial statements as presented
to AFSI as the valuators of the fair market value of Suburban. AFSI did not
independently verify and relied on and assumed the aggregate allowances for loan
losses set forth in the balance sheet for Suburban at August 31, 1999, were
adequate to cover such losses and complied fully with applicable law, regulatory
policy, and sound banking practice as of the date of such financial statements.
AFSI did not independently verify the carrying values of other real estate owned
and loans classified as in-substance foreclosures of Suburban in its respective
August 31, 1999, balance sheet, and AFSI assumed that such carrying values
complied fully with applicable law, regulatory policy and sound banking practice
as of such date. AFSI did not make any independent evaluation or appraisal of
the assets, liabilities or prospects of Suburban, nor was AFSI furnished with
any such evaluation or appraisal. AFSI also assumed that the Agreement is, and
will be, in compliance with all laws and regulations that are applicable to
Columbia and Suburban.
In its analyses, AFSI made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of Columbia and Suburban. Any estimates contained in
AFSI's analyses are not necessarily indicative of future results or value, which
may be significantly more or less favorable than such estimates. AFSI's
estimates of values of other financial institutions used in its analyses do not
purport to be appraisals or necessarily reflect the price at which these
financial institutions or their securities actually may be sold. No financial
institution or transaction utilized in AFSI's analyses was identical to Columbia
or Suburban or the Agreement. Accordingly, such analyses are not based solely on
arithmetic calculations; rather, they involve complex considerations and
judgments by AFSI concerning differences in financial and operating
characteristics of the relevant financial institutions, the timing of the
relevant transactions and prospective buyer interest, as well as other factors
that could affect the public trading markets of the financial institution or
financial institutions to which they are being compared.
The following is a brief description of the analyses performed by AFSI in
connection with its opinion as described to Columbia's board of directors by
AFSI:
Under the terms of the Agreement between Columbia and Suburban, each share
of Suburban common stock outstanding immediately prior to consummation of the
reorganization, will be cancelled and exchanged for
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of Columbia common stock equivalent to an average market value of $3.00 per
share. The exchange ratio necessary to cause the average market value of shares
of Columbia common stock exchanged for each share of Suburban common stock to be
$3.00 per share will continually change until the merger is completed, except
that the exchange ratio will not be above .2338 nor decreased below .2196. The
reorganization will result in Suburban merging with and into Columbia, the
separate corporate existence of Suburban shall cease, and Columbia shall
continue as the successor corporation. Columbia will continue to carry on its
banking business in substantially the same manner as before the reorganization.
Using a discounted cash flow analysis, AFSI projected Suburban's cash flow
from August 31, 2000, through August 31, 2004, assuming a minimum equity capital
to asset ratio of 6.00%. AFSI also estimated the residual value of Suburban's
common equity as of August 31, 2004. The steps involved in determining the
discounted cash flow value of Suburban included the following: (1) the projected
earnings in excess over the amount necessary to maintain a 6.00% equity capital
to asset ratio were added to book charges such as depreciation less any
projected capital expenditures in order to determine future cash flows; (2) the
future cash flows were then converted to a present value equivalent using a
discount rate of 17.20%, which was determined from the use of the Capital Asset
Pricing Model ("CAPM"); (3) the residual value was then calculated by dividing
the projected cash flows for the year 2004 by the capitalization rate. The
capitalization rate not only includes all aspects of the CAPM but also reflects
the long-term income growth prospects of Suburban, as well as specific company
risk factors; (4) the present value equivalent of the projected residual value
was calculated using the 17.20% discount rate; and (5) the present value of the
cash flows and the residual value were added together. The present value per
share currently outstanding of Suburban's common stock resulting from this
analysis was $3.21 (assuming 11,301,218 shares outstanding).
AFSI also determined the adjusted book value of Suburban as an alternative
valuation method. The adjusted book value approach requires a three-step
process. First, the book value is determined. This figure is derived from the
August 31, 1999, balance sheet, and it represents the summary measure of
stockholders' claims against the assets, on a historical cost basis. Second,
assets and liabilities are restated to their fair market values. The adjusted
book value calculation considers each major asset and liability account
classification. Finally, additional "off-balance sheet" adjustments are
calculated, if necessary. The fair market value per share currently outstanding
of Suburban's common stock resulting from this analysis was $2.71.
AFSI applied a 75% weighting to the discounted cash flow value and a 25%
weighting to the adjusted book value. The weightings were based on AFSI's review
of the financial position, history and recent performance of Suburban. The sum
of the weighted values or $3.08 per share equates to the fair market value of
Suburban. Based on the terms of the Agreement, a closing price per share of
$13.0625 for Columbia's common stock as of September 23, 1999, would result in a
$3.00 per share value for Suburban's shareholders. Therefore, the exchange terms
of the Agreement would be favorable, from a financial standpoint, to Columbia
shareholders since the transaction would result in a positive margin of $0.08
per share in comparison to the fair market value of Suburban as determined by
AFSI.
AFSI analyzed certain other mergers and acquisitions that have consummated
over the past eight months in Maryland as well as other nearby states (including
the states of Delaware, West Virginia, New Jersey, Pennsylvania, and Virginia)
involving target financial institutions with assets under $700 million. AFSI
compared the multiple produced by this reorganization to the mean multiples for
the transactions analyzed. Set forth below are the mean transaction multiples:
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<TABLE>
<CAPTION>
Selected
Bank/Thrift
Acquisitions Suburban
------------ --------
<S> <C> <C>
Price/Earnings Multiple 27.73 28.61
Price/Book Value Multiple 197.42 161.11
</TABLE>
The financial institution acquisition transactions announced for the four-
state area during the past twelve months included in the above multiples are:
<TABLE>
<S> <C>
Buyer (City, State) Target (City, State)
BB&T Corporation (Winston-Salem, NC) Matewan Bancshares Inc. (Williamson, WV)
CNB Financial Corporation (Clearfield, PA) First National Bank of Spangler (Spangler, PA)
ESB Financial Corporation (Ellwood City, PA) SHS Bancorp Inc. (Pittsburgh, PA)
F&M Bancorp (Frederick, MD) Patapsco Valley Bancshares Inc. (Ellicott City,
MD)
FCNB Corp. (Frederick, MD) First Frederick Financial Corp. (Frederick, MD)
First Leesport Bancorp Inc. (Leesport, PA) Merchants of Shenandoah Ban-Corp (Shenandoah, PA)
FNB Financial Services Corporation (Reidsville, NC) Black Diamond Savings Bank FSB (Norton, VA)
Hudson United Bancorp (Mahwah, NJ) Little Falls Bancorp Inc. (Little Falls, NJ)
Hudson United Bancorp (Mahwah, NJ) Southern Jersey Bancorp of Del. Inc. (Bridgeton,
NJ)
Independence Community Bank Corp. (Brooklyn, NY) Broad National Bancorporation (Newark, NJ)
Independence Community Bank Corp. (Brooklyn, NY) Statewide Financial Corporation (Jersey City, NJ)
James River Bankshares Inc. (Suffolk, VA) State Bank of Remington (Remington, VA)
Lehman Brothers Holdings Inc. (New York, NY) DSB Bancorp Inc. (Wilmington, DE)
NBT Bancorp Inc. (Norwich, NY) Lake Ariel Bancorp Inc. (Lake Ariel, PA)
Peapack-Gladstone Financial Corporation Chatham Savings FSB (Chatham, NJ)
(Gladstone, NJ)
PSB Bancorp Inc. (Philadelphia, PA) First Bank of Philadelphia (Philadelphia, PA)
South Branch Valley Bancorp Inc. (Moorefield, WV)* Potomac Valley Bank (Petersburg, WV)*
Southern Financial Bancorp (Warrenton, VA) Horizon Bank of Virginia (Merrifield, VA)
Staten Island Bancorp Inc. (Staten Island, NY) First State Bancorp (Howell Township, NJ)
Sterling Financial Corp. (Lancaster, PA) Northeast Bancorp Inc. (North East, MD)
Virginia Commonwealth Financial Corp. (Culpeper, Caroline Savings Bank (Bowling Green, VA)
VA)
</TABLE>
AFSI's analysis showed that the implied valuations of Suburban, applying
the mean transaction multiples described above to Suburban's last twelve months
earnings per share and book value per share as of August 31, 1999, was $2.91 per
share and $3.67 per share, respectively. The results produced in
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this analysis do not purport to be indicative of actual values or expected
values of Suburban or shares of Suburban common stock.
Columbia and AFSI have entered into an arrangement relating to the services
to be provided by AFSI in connection with the Agreement. In regards to AFSI's
services in determining an opinion as to the fairness, from a financial point
of view, of the terms of the Agreement, the cost is a contractual $17,500 plus
out of pocket expenses. In addition, Columbia also has agreed to indemnify
AFSI and its officers, directors, shareholders, employees and agents for all
of its time, expenses, and any liability incurred as a result of AFSI's
proposed engagement by means of legal action, administrative proceedings or
threat thereof, unless such action, pending or threat thereof is caused by
AFSI's own unlawful conduct, breach of duty or negligence during the course of
performing AFSI's services.
AFSI, in rendering its opinion, has assumed that the transaction will be a
tax-free reorganization with no material adverse tax consequences to any of the
parties involved. In addition, AFSI has assumed that in the course of obtaining
the necessary regulatory approvals for the transaction, no condition will be
imposed upon Columbia or Suburban that will have a materially adverse impact on
the contemplated benefits of the proposed transaction to Columbia and Suburban
and their shareholders.
Based upon AFSI's analysis and subject to the qualifications described
herein, considering all circumstances known to us and based upon other matters
considered relevant, AFSI believes that as of the date of this letter, the terms
of the Agreement from a financial point of view are fair to Columbia and its
shareholders.
On behalf of Austin Financial Services, Inc.
/s/ D. V. Austin
- ------------------------------
Dr. Douglas V. Austin
President and CEO
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APPENDIX G
OPINION OF DANIELSON ASSOCIATES INC.
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September 28, 1999
Board of Directors
Suburban Bancshares, Inc.
7505 Greenway Center Drive
Greenbelt, Maryland 20770
Dear Members of the Board:
Set forth herein is Danielson Associates Inc.'s ("Danielson Associates")
independent opinion as to the "fairness" of the offer by Columbia Bancorp
("Columbia") of Columbia, Maryland to acquire all of the outstanding common
stock of Suburban Bancshares, Inc. ("Suburban") of Greenbelt, Maryland through
an exchange of stock with a value at the time of the offer of about $34 million.
The "fair" sale value is defined as the price at which all of the shares of
Suburban Bancshares' common stock would change hands between a willing seller
and a willing buyer, each having reasonable knowledge of the relevant facts. In
opining to the "fairness" of the offer, it also had to be determined if the
Columbia common stock to be exchanged for Suburban common stock was "fairly"
valued.
In preparing the opinion, the markets served by Suburban have been
analyzed; its business and future prospects have been reviewed; its financial
performance has been compared with banks in the region; and the acquisition
prices of comparable banks have been analyzed. In addition, any unique
characteristics have been considered.
This opinion is based on data supplied by Suburban, and relies on some
public information, all of which is believed to be reliable, but the accuracy or
the completeness of such information cannot be guaranteed. The opinion assumes
that there are no significant loan problems beyond what was stated in recent
reports to regulatory agencies.
In determining the "fair" sale value of Suburban, the emphasis has been on
prices paid for banks and bank holding companies with similar financial,
structural and market characteristics. These sale prices were then related to
earnings and equity capital, also referred to as "book."
In determining the "fairness" of the offer, we compared the common stock to
be exchanged by Columbia for Suburban common stock with the common stock of
other, similar bank holding companies. In so doing, we also compared Columbia's
financial performance with these comparable financial institutions.
Based on the foregoing, we are of the opinion on the date hereof that the
offer made by Columbia to acquire all of the common stock of Suburban pursuant
to the merger agreement is "fair" from a financial point of view to Suburban and
its stockholders.
Respectfully submitted,
Jon D. Holtaway
Senior Vice President
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APPENDIX H
SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to (S) 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S) 251 (other than a merger effected pursuant to (S)
251(g) of this title), (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or (S) 264 of
this title:
(1) Provided, however, that no appraisal rights under this shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to (S)(S) 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository
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<PAGE>
receipts at the effective date of the merger or consolidation
will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under (S) 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S)
228 or (S) 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or
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consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice
is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all
such holders of any class or series of stock of a constituent corporation
that are entitled to appraisal rights. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office
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<PAGE>
of the Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded payment
for their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
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(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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