Delmar Bancorp (OTCPK:DBCP) entered into a definitive agreement to acquire Virginia Partners Bank (OTCPK:PTRS) from Kenneth R. Lehman, Series B Warrant and others for $55.1 million in a merger of equals transaction on December 13, 2018. Under the agreement, each share of Virginia Partners Bank common stock will be exchanged for 1.7179 shares of Delmar Bancorp common stock. Cash will be paid in lieu of fractional shares. Options and warrants to acquire Virginia Partners Bank common stock will be assumed by Delmar Bancorp and converted into options and warrants to acquire shares of Delmar Bancorp common stock. Holders of Virginia Partners Bank common stock would own an aggregate of approximately 44% of the outstanding shares of Delmar Bancorp following completion of the share exchange. Virginia Partners Bank will become a separate wholly owned subsidiary of Delmar Bancorp upon closing. Each bank will continue to operate as independent subsidiaries of Delmar Bancorp. In case of the termination, either of the parties will be required to pay a termination fee of $2.2 million.

The banks will maintain their existing names, executive management teams, and Boards of Directors. Kenneth R. Lehman currently serves on the Board of Directors of both Virginia Partners Bank and Delmar Bancorp. Following the completion of the transaction, Board of Directors of Delmar Bancorp will consist of five current members of the Delmar Bancorp Board of Directors, four current members of the Virginia Partners Bank Board of Directors and Kenneth R. Lehman. Following consummation of the transaction, John W. Breda will continue as President and Chief Executive Officer of The Bank of Delmarva, and as President and Chief Operating Officer of Delmar Bancorp. Following consummation of the transaction, Lloyd B. Harrison, III, will continue to serve as President and Chief Executive Officer of Virginia Partners Bank, and as Chief Executive Officer of Delmar Bancorp. Lloyd B. Harrison, III, President and Chief Executive Officer of Partners, has entered into a termination agreement relating to his existing employment agreement with Partners and a new employment agreement with Partners and Delmar, pursuant to which he will become Chief Executive Officer of Delmar and President and Chief Executive Officer of Partners. Each of these agreements will be effective upon the consummation of the share exchange, and provide for certain payments upon the consummation of the share exchange, ongoing benefits, an increase in base salary and a discretionary bonus structure. Wallace N. King, Sr., Executive Vice President and Senior Loan Officer of Partners, has entered into a new employment agreement with Partners to be effective upon the consummation of the share exchange, providing for an increase in base salary, a discretionary bonus structure and a change in control payment with respect to a subsequent change in control. J. Adam Sothen, Executive Vice President and Chief Financial Officer of Partners, has entered into a new employment agreement with Partners to be effective upon the consummation of the share exchange, providing for an increase in base salary, a discretionary bonus structure and a change in control payment with respect to a subsequent change in control. The right to continued indemnification and liability insurance coverage for Partners' current directors by Delmar after the share exchange for acts or omissions occurring before the share exchange Partners will award retention bonuses to certain other Partners employees if they do not terminate their employment with Partners prior to a predetermined date, and Partners and Delmar employees will receive severance payments if they are terminated involuntarily without cause within nine months following the effective time of the share exchange, payable pursuant to the terms of the share exchange agreement. The appointment of four directors from Partners' Board to Delmar's Board following completion of the share exchange (in addition to Kenneth R. Lehman who is already a director of Delmar), and any related compensation for such services. The transaction is subject to approval by the shareholders of Virginia Partners Bank, the approval of the applicable bank regulatory authorities, and the satisfaction or waiver of the conditions to closing and covenants of each party contained in the agreement and have been unanimously approved by the Boards of Directors of both Delmar Bancorp and Virginia Partners Bank. As of July 3, 2019, Virginia Partners Bank notify that a special meeting of shareholders of Virginia Partners Bank will be held on August 12, 2019 to approve the transaction. As of July 3, 2019, all regulatory approvals have been received. On August 12, 2019, shareholders of Virginia Partners provided the approval for the transaction. The transaction is expected to close in the second quarter of 2019. As of July 3, 2019, the transaction is expected to close late in the second quarter or in the third quarter of 2019. As of August 9, 2019, the transaction is expected to close in the third quarter of 2019. As of August 28, 2019, the transaction is expected to close on November 30, 2019. As of November 7, 2019, the transaction is expected to close during the fourth quarter of 2019. Delmar expects that the transaction will be accretive to Delmar's earnings during the first full year following the closing of the transaction, and will result in modest dilution to tangible book value, which is expected to be earned back in less than three years. Delmar expects to achieve approximately 21% in cost savings, of which 25% will be realized in 2019, and 100% in 2020.

Reid Brewer of Sandler O'Neill & Partners, L.P. acted as financial advisor and fairness opinion provider to Virginia Partners Bank. Jacob A. Lutz III and Mark Jones of Troutman Sanders LLP as legal counsel to Virginia Partners Bank. Sloan Deerin of FIG Partners, LLC acted as financial advisor and Noel M. Gruber of Buckley Sandler LLP acted as legal counsel to Delmar Bancorp. FIG Partners, LLC also acted as fairness opinion provider to Delmar Bancorp. Sandler O'Neill is acting as Virginia Partners' financial advisor in connection with the share exchange and will receive a fee for such services in an amount equal to 1% of the aggregate purchase price, which fee is contingent upon the closing of the share exchange. At the time of announcement of the share exchange Sandler O'Neill's fee was approximately $0.55 million. Sandler O'Neill also received a $0.15 million fee from Virginia Partners upon rendering its opinion. FIG Partners has acted as financial advisor to Delmar Bancorp in connection with the share exchange and received a $15,000 retainer fee and a $0.1 million fee upon rendering its fairness opinion to the Delmar Bancorp board of directors. In addition, upon the successful completion of the share exchange, FIG Partners will be paid a success fee equal to $0.285 million.