| Item 1.01 | Entry into a Material Definitive Agreement |
On February 22, 2023, LINKBANCORP, Inc., a Pennsylvania
corporation (“LINK”), and Partners Bancorp, a Maryland corporation (“Partners”), entered into an Agreement and
Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions
set forth therein, Partners will merge with and into LINK, with LINK as the surviving entity (the “Merger”). The Merger Agreement
further provides that immediately following the Merger, The Bank of Delmarva, a Delaware chartered bank and a wholly-owned subsidiary
of Partners (“TBOD”), will merge with and into LINKBANK, a Pennsylvania chartered bank and a wholly-owned Subsidiary of LINK,
with LINKBANK as the surviving bank (the “TBOD Bank Merger”). The Merger Agreement also provides that immediately following
the TBOD Bank Merger, Virginia Partners Bank, a Virginia chartered bank and a wholly-owned subsidiary of Partners (“VPB”),
will merge with and into LINKBANK, with LINKBANK as the surviving bank (the “VPB Bank Merger” and, together with the Merger
and the TBOD Bank Merger, the “Transaction”). The Merger Agreement was unanimously approved by the board of directors of each
of LINK and Partners.
Merger Consideration
Upon the terms and subject to the conditions of
the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value
$0.01 per share, of Partners (“Partners Common Stock”) outstanding immediately prior to the Effective Time, other than certain
shares held by Partners or LINK, will be converted into the right to receive 1.150 of shares (the “Exchange Ratio”) of common
stock, par value $0.01 per share, of LINK (“LINK Common Stock”). Holders of Partners Common Stock will receive cash in lieu
of fractional shares.
The Merger is intended to be a tax-free reorganization
under Section 368(a) of the Internal Revenue Code.
Treatment of Partners’ Equity Awards
Upon the terms and subject to the conditions of
the Merger Agreement, at the Effective Time, (i) each option to purchase shares of Partners Common Stock under the Partners Bancorp
2021 Incentive Stock Plan, Virginia Partners Bank 2015 Incentive Stock Option Plan, Delmar Bancorp 2014 Stock Plan, Virginia Partners
Bank 2008 Incentive Stock Option Plan, Liberty Bell Bank 2004 Incentive Stock Option Plan and Liberty Bell Bank 2004 Non-Qualified Stock
Option Plan (the “Partners Stock Plans”) outstanding immediately prior to the Effective Time will be converted into an option
to purchase a certain number of shares of LINK Common Stock and (ii) each outstanding share
of Partners Common Stock subject to a restricted stock award under the Partners Stock Plans prior to the date of the Merger Agreement,
whether vested or unvested, will be cancelled and converted automatically into the right to receive the Merger Consideration.
Certain Governance Matters
The Merger Agreement provides that, prior to the
Effective Time, LINK will take all actions necessary to adopt certain amendments to the bylaws of LINK (the “LINK Bylaws Amendment”)
regarding governance matters. Effective as of the Effective Time, and in accordance with the LINK Bylaws Amendment, the number of directors
that will comprise the full boards of directors of LINK and LINKBANK will be 22, of which (i) twelve will be directors of LINK immediately
prior to the Effective Time (the “LINK Continuing Directors”) and (ii) ten will be directors of Partners immediately prior
to the Effective Time (“Partners Continuing Directors”). In addition, all 22 directors will be appointed to the board of directors
of the surviving corporation for terms to expire at LINK’s next annual meeting of shareholders and will be nominated to serve for
two terms. For two years, any vacancies in LINK Continuing Directors will be generally filled by the remaining LINK Continuing Directors
and any vacancies in Partners Continuing Directors will be generally filled by the remaining Partners Continuing Directors. The current
Chairman of Partners will become the Vice Chairman of the surviving corporation and surviving bank upon completion of the Merger and will
become the Chairman of the surviving corporation and surviving bank in September 2024 (or such earlier date as of which the current Chairman
ceases for any reason to serve as Chairman of the surviving corporation or surviving bank). The LINK Bylaws Amendment may be amended or
waived by the approval of at least eighty percent (80%) of the members of the surviving corporation’s board of directors then in
office. The Merger Agreement provides that, following the Transaction, the headquarters of the surviving corporation and the surviving
bank will remain located in Camp Hill, Pennsylvania and the name of the surviving corporation and the surviving bank will remain LINKBANCORP,
Inc. and LINKBANK, respectively.
In connection with the Merger Agreement, LINK
and LINKBANK have entered into employment agreements with the following executive officers of Partners: John W. Breda, President and Chief
Executive Officer of Partners; Adam G. Nalls, Executive Vice President and Chief Operating Officer of VPB; David A. Talebian, President
of VPB; and Wallace N. King, Sr., Executive Vice President and Chief Lending Officer of VPB. The employment agreements become effective
contingent upon the completion of the Transaction.
Certain Other Terms and Conditions of the
Merger Agreement
The Merger Agreement contains customary representations
and warranties from both LINK and Partners, and each party has agreed to customary covenants, including, among others, covenants relating
to (i) the conduct of its business during the interim period between the execution of the Merger Agreement and the Effective Time,
(ii) in the case of LINK, its obligation to call a meeting of its shareholders to approve the Merger Agreement and the amendment
to the LINK articles of incorporation to increase the number of authorized shares of LINK Common Stock (“Charter Amendment”),
subject to certain exceptions, the obligation of its board of directors to recommend that its shareholders approve the Merger Agreement
and the Charter Amendment, (iii) in the case of Partners, its obligation to call a meeting of its shareholders to approve the Merger Agreement,
and, subject to certain exceptions, the obligation of its board of directors to recommend that its shareholders approve the Merger Agreement,
and (iv) each party’s non-solicitation obligations related to alternative acquisition proposals. LINK and Partners have also agreed
to use their reasonable best efforts to prepare and file all applications, notices and other documents to obtain all necessary consents
and approvals for consummation of the transactions contemplated by the Merger Agreement.
The completion of the Merger is subject to customary
conditions, including (i) approval of the Merger Agreement by the requisite vote of the Partners shareholders, (ii) approval
of the Merger Agreement and Charter Amendment by the requisite vote of the LINK shareholders, (iii) authorization for listing on
NASDAQ of the shares of LINK Common Stock to be issued in the Merger, subject to official notice of issuance, (iv) receipt of required
regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System, the Pennsylvania Department of Banking
and Securities, the Delaware Office of the State Bank Commissioner and the Virginia Bureau of Financial Institutions, without the imposition
of any condition or restriction that would be reasonably expected to have a material adverse effect on the surviving corporation of the
Merger and its subsidiaries, taken as a whole, after giving effect to the Merger, the TBOD Bank Merger, and the VPB Bank Merger, (v) effectiveness
of the registration statement on Form S-4 for the LINK Common Stock to be issued in the Merger and (vi) the absence of any order,
injunction, decree or other legal restraint preventing the completion of the Merger, the TBOD Bank Merger, the VPB Bank Merger or any
of the other transactions contemplated by the Merger Agreement or making the completion of the Merger, the TBOD Bank Merger, the VPB Bank
Merger or any of the other transactions contemplated by the Merger Agreement illegal. Each party’s obligation to complete the Merger
is also subject to certain additional customary conditions, including (a) subject to certain exceptions, the accuracy of the representations
and warranties of the other party, (b) performance in all material respects by the other party of its obligations under the Merger
Agreement, and (c) receipt by such party of an opinion from its counsel to the effect that the Merger will qualify as a “reorganization”
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
The Merger Agreement provides certain termination
rights for both LINK and Partners and further provides that a termination fee of $6.5 million will be payable by either LINK or Partners,
as applicable, upon termination of the Merger Agreement under certain circumstances.
The representations, warranties and covenants
of each party set forth in the Merger Agreement have been made only for purposes of, and were and are solely for the benefit of the parties
to, the Merger Agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential
disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these
matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable
to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made
or at any other time, and investors should not rely on them as statements of fact. In addition, such representations and warranties (i) will
not survive consummation of the Merger and (ii) were made only as of the date of the Merger Agreement or such other date as is specified
in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the
date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures.
Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger
Agreement, and not to provide investors with any other factual information regarding LINK or Partners, their respective affiliates or
their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information
regarding LINK, Partners, their respective affiliates or their respective businesses, the Merger Agreement, the Merger, the TBOD Bank
Merger and the VPB Bank Merger that will be contained in, or incorporated by reference into, the Registration Statement on Form S-4
that will include a joint proxy statement of LINK and Partners and a prospectus of LINK, as well as in the Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings that each of LINK and Partners makes with the
Securities and Exchange Commission (“SEC”).
The foregoing description of the Merger Agreement
does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached
hereto as Exhibit 2.1 and incorporated herein by reference.
Voting and Support Agreements
Simultaneously with the
execution of the Merger Agreement, LINK entered into Voting and Support Agreements (the “Partners Voting Agreements”) with
each of the directors on the board of Partners. Each Partners director, as a shareholder party to a Partners Voting Agreement, has agreed,
among other things, to vote shares of Partners’ common stock owned by such shareholder, and over which such shareholder has the
right to dispose of and has voting power, in favor of the Merger Agreement and the other transactions contemplated by the Merger Agreement,
and against any competing acquisition proposal, any action, agreement transaction or proposal which could reasonably be expected to result
in a breach of any representation, warranty, covenant, agreement or other obligation of Partners in the Merger Agreement in any material
respect, or other action that is intended or would reasonably be expected to prevent, impede, interfere with, delay, postpone or discourage
any of the transactions contemplated by the Merger Agreement. The Partners Voting Agreements will terminate in certain circumstances,
including upon consummation of the Merger or the termination of the Merger Agreement in accordance with its terms.
Furthermore, simultaneously
with the execution of the Merger Agreement, Partners entered into Voting and Support Agreements (the “LINK Voting Agreements”)
with each of the directors on the board of LINK. Each LINK director, as a shareholder party to a LINK Voting Agreement, has agreed, among
other things, to vote shares of LINK’s common stock owned by such shareholder, and over which such shareholder has the right to
dispose of and has voting power, in favor of the Merger Agreement, the Charter Amendment and the other transactions contemplated by the
Merger Agreement, and against any competing acquisition proposal, any action, agreement transaction or proposal which could reasonably
be expected to result in a breach of any representation, warranty, covenant, agreement or other obligation of LINK in the Merger Agreement
in any material respect, or other action that is intended or would reasonably be expected to prevent, impede, interfere with, delay, postpone
or discourage any of the transactions contemplated by the Merger Agreement. The LINK Voting Agreements will terminate in certain circumstances,
including upon consummation of the Merger or the termination of the Merger Agreement in accordance with its terms.
The foregoing description
of the Partners Voting Agreements and LINK Voting Agreements do not purport to be complete and are qualified in their entirety by reference
to the full text of the Partners Voting Agreements and LINK Voting Agreements, forms of which are attached as Exhibit 99.1 and 99.2, respectively,
to this Current Report on Form 8-K and are incorporated by reference herein.
