EXHIBIT 10.2
INDENTURE AGREEMENT
TABLE OF CONTENTS
SECTION 1. AUTHORIZATION OF NOTE.......................................... 1
(a) The Note....................................................... 1
(b) Authorization.................................................. 1
SECTION 2. SALE AND PURCHASE OF NOTE...................................... 2
SECTION 3. CLOSING........................................................ 2
SECTION 4. CONDITIONS TO CLOSING.......................................... 2
(a) Representations and Warranties Correct......................... 2
(b) Performance; No Default........................................ 2
(c) Closing Certificate............................................ 2
(d) Opinion of Company's Counsel................................... 2
(e) Proceedings and Documents...................................... 2
SECTION 5. REPRESENTATIONS AND WARRANTIES................................. 3
(a) Organization, Standing, Etc., of the Company................... 3
(b) Subsidiaries................................................... 3
(c) Qualification.................................................. 4
(d) Disclosure, Etc................................................ 4
(e) Financial Statements........................................... 4
(f) Changes, Etc................................................... 5
(g) Tax Returns and Payments....................................... 5
(h) Indebtedness, Etc.............................................. 5
(i) Title to Properties; Liens..................................... 6
(j) Litigations, Etc............................................... 6
(k) Compliance with Other Instruments, Etc......................... 6
(l) Governmental Consent........................................... 7
(m) Investment Company Act Status.................................. 7
(n) Patents, Trademarks, Etc....................................... 7
(o) Offer of Note.................................................. 7
(p) Regulation G, Etc.............................................. 8
(q) Foreign Credit Restraints...................................... 8
(r) Employee Retirement Income Security Act of 1974................ 8
(s) Brokers, Etc................................................... 8
(t) No Defaults.................................................... 8
(u) Compliance With Laws; Licenses................................. 9
SECTION 6. USE OF PROCEEDS................................................ 9
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SECTION 7. ACCOUNTING; FINANCIAL STATEMENTS AND OTHER
INFORMATION.................................................... 9
SECTION 8. INSPECTION..................................................... 12
SECTION 9.A.PREPAYMENT OF NOTES........................................... 13
SECTION 9.B.CHANGE OF CONTROL............................................. 13
SECTION 10. RESTRICTED PAYMENTS AND OTHER RESTRICTIONS.................... 15
SECTION 11. RESTRICTIONS ON FUNDED INDEBTEDNESS........................... 17
SECTION 12. MORTGAGES, LIENS, ETC......................................... 18
SECTION 13. CONSOLIDATION AND MERGER...................................... 19
SECTION 14. SALE OF ASSETS................................................ 20
SECTION 15. SECURITIES OF SUBSIDIARIES.................................... 20
SECTION 16. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES................. 20
SECTION 17. PRESERVATION OF CORPORATE EXISTENCE, COMPLIANCE
WITH LAWS, ETC................................................ 20
SECTION 18. MAINTENANCE OF PROPERTIES; INSURANCE.......................... 21
SECTION 19. PAYMENT OF TAXES, ETC......................................... 21
SECTION 20. MAINTENANCE OF OFFICE OR AGENCY............................... 22
SECTION 21. EXCHANGE AND REPLACEMENT OF NOTES............................. 22
SECTION 22. EVENTS OF DEFAULT; ACCELERATION............................... 23
SECTION 23. ADDITIONAL REMEDIES ON DEFAULTS, ETC.......................... 25
SECTION 24. DEFINITIONS................................................... 25
SECTION 25. EXPENSES, ETC................................................. 31
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SECTION 26. SURVIVAL OF AGREEMENTS, ETC................................... 31
SECTION 27. AMENDMENTS AND WAIVERS........................................ 31
SECTION 28. PURCHASE FOR INVESTMENT....................................... 32
SECTION 29. PAYMENTS ON NOTES; NOTICE OF SALE, ETC........................ 32
SECTION 30. NOTICES, ETC.................................................. 32
SECTION 31. REPRODUCTION OF DOCUMENTS..................................... 33
SECTION 32. MISCELLANEOUS................................................. 33
EXHIBIT A NOTE....................................................... 36
EXHIBIT B OPINION OF GORDON, FEINBLATT............................... 38
EXHIBIT C SUBSIDIARIES............................................... 42
EXHIBIT D FUNDED INDEBTEDNESS........................................ 43
EXHIBIT E LIENS...................................................... 44
EXHIBIT F TRADEMARK CONFLICTS........................................ 45
SCHEDULE I SPECIAL ADDRESS FOR PAYMENTS............................... 46
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INDENTURE
THIS INDENTURE (this "Agreement"), dated as of this 23rd day of April,
1998 between ▇▇▇▇▇-▇▇▇▇▇ BANCSHARES, INC., a Maryland corporation, (the
"Company") having its principal place of business at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇. ▇▇▇▇ PRICE NEW INCOME FUND, INC. (referred
to herein as "you"), having its principal office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS
WHEREAS, the Company has authorized the execution and delivery of this
Agreement to provide for the issuance of its senior unsecured note or notes in
the aggregate principal amount of Twenty Million Dollars ($20,000,000.00),
Series A (herein called the "Note"). THE NOTE OR NOTES ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF THE COMPANY AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL
AGENCY; and
WHEREAS, all things necessary to make this Agreement a valid and
legally binding Agreement of the Company in accordance with its terms have been
done.
NOW, THEREFORE, for and in consideration of the premises and the
purchase of the Note by you, and intending to be legally bound hereby, the
Company hereby agrees as follows:
SECTION 1. AUTHORIZATION OF NOTE.
(a) The Note. The principal balance of the Note outstanding from time
to time shall accrue interest at the rate of 7.48 % per annum. Upon an "Event of
Default," as defined in Section 22, the rate of interest shall increase by one
hundred and fifty (150) basis points above the rate of interest otherwise
applicable, independent of whether you elect to accelerate the unpaid principal
balance as a result of such default. Such default interest rate shall continue
until all defaults are cured. All amounts outstanding under the Note (including
accrued interest, late payment fees and charges, and the Make-Whole Amount)
shall, subject to the terms hereof and thereof, be payable as provided herein
and in the Note; provided, however, that all sums payable hereunder and under
the Note shall be repaid in full ten (10) years from the date of this Agreement.
(b) Authorization. The Company has authorized the issuance and sale to
you of the Note. The Company has full power and authority to enter into this
Agreement, to issue the Note, to make the borrowings thereunder, to execute and
deliver all documents and instruments required hereunder and to incur and
perform the obligations provided herein, all of which have been duly authorized
by all necessary and proper corporate and other action. No consent or approval
of any person, including without limitation, stockholders of the Company or any
public authority or regulatory body, which has not been obtained is required as
a condition to the validity or enforceability hereof. This Agreement has been
duly and
properly executed by the Company, constitutes the valid and legally binding
obligation of the Company and is fully enforceable against the Company in
accordance with its terms, subject only to the laws affecting the right of
creditors generally and principles of equity.
SECTION 2. SALE AND PURCHASE OF NOTE.
The Company agrees to sell and you agree to purchase the Note in the
form attached hereto as Exhibit A.
SECTION 3. CLOSING.
Closing of the sale and the purchase of the Note shall occur on or
before April 30, 1998.
SECTION 4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Note to be purchased by you
at the Closing is subject to the fulfillment to your satisfaction, prior to or
at the time of the Closing, of the following conditions:
(a) Representations and Warranties Correct. The representations and
warranties of the Company contained in Section 5 and otherwise made in writing
by or on behalf of the Company in connection with the transactions contemplated
hereby shall have been correct when made and shall be correct at and as of the
time of the Closing.
(b) Performance; No Default. The Company shall have performed and
complied with all agreements and conditions contained herein to be performed or
complied with by it prior to or at the Closing, and at the time of the Closing
no condition or event shall exist which constitutes or which, after notice or
lapse of time or both, would constitute an Event of Default.
(c) Closing Certificate. You shall have received an Officers'
Certificate, dated the date of the Closing, certifying that the conditions
specified in Sections 4(a) and 4(b) have been fulfilled.
(d) Opinion of Company's Counsel. You shall have received from ▇▇▇▇▇▇,
Feinblatt, Rothman, Hoffberger & ▇▇▇▇▇▇▇▇▇, LLC, counsel for the Company, an
opinion, dated the date of the Closing, substantially in the form of Exhibit B
attached hereto.
(e) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory in
all material respects to you and your
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special counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request. You shall also be entitled to receive such
certificates, opinions or other instruments as you may reasonably request for
the purpose of verifying the accuracy of the representations and warranties of
the Company contained herein or otherwise made in writing by or on behalf of the
Company in connection with the transactions contemplated hereby, but, as
provided in Section 26, such representations and warranties shall survive any
investigation made by you or on your behalf.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants that:
(a) Organization, Standing, Etc., of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland and has all requisite corporate power and authority and
all necessary licenses and permits to own and operate its properties, to carry
on its business as now conducted and proposed to be conducted, to enter into
this Agreement and to issue and sell the Note and to carry out the terms hereof
and thereof. The sale of the Note and the compliance by the Company with the
provisions of this Agreement and the Note have been authorized by proper
corporate action duly taken. The Company is duly registered under the Bank
Holding Company Act of 1956, as amended. Each Banking Subsidiary is an insured
bank under the Federal Deposit Insurance Act, 12 U.S.C.A. 1811 et seq.
(b) Subsidiaries. Exhibit C attached hereto correctly sets forth, as to
each Subsidiary on the date hereof, its name, the jurisdiction of its
incorporation or establishment and the percentage of each class of its
outstanding capital stock (including directors' qualifying shares) or other
ownership interest owned by the Company. Each such Subsidiary is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or establishment and has all requisite
corporate or other power and authority to own and operate its properties and to
carry on its business as now conducted and proposed to be conducted. All such
capital stock or other ownership interest is validly issued and outstanding,
fully paid and nonassessable (except pursuant to Federal or State banking laws
to cover impairments of capital), and is owned by the Company as specified in
Exhibit C attached hereto, in each case free of any mortgage, pledge, lien,
security interest, charge, option or conditional sale or other title retention
agreement and in each case in compliance with the Bank Holding Company Act of
1956, as amended. No Subsidiary is subject to any legal, contractual or
regulatory limitation or restriction with respect to the payment of dividends or
other distributions to the Company except for restrictions imposed upon the
Subsidiaries pursuant to State and Federal statutes and regulations of general
application to business and/or banking corporations and as described in the
Disclosure Materials.
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(c) Qualification. The Company and its Subsidiaries are each duly
qualified or licensed and in good standing as foreign corporations or limited
liability companies or other entities duly authorized to do business in each
jurisdiction in which the character of the properties owned or leased or the
nature of the activities conducted or proposed to be conducted makes such
qualifications or licensing necessary.
(d) Disclosure, Etc. You have been furnished with the Company's Annual
Report on Form 10-K and Annual Report to stockholders for the year ended
December 31, 1997, the Company's Current Report on Form 8-K dated February 26,
1998, the Company's Current Report on Form 8-K/A dated February 26, 1998, the
Company's proxy statement dated March 16, 1998, and the Company's registration
statement on Form S-3 filed with the Securities and Exchange Commission on April
3, 1998, as amended on April 16, 1998, (such items being collectively referred
to as the "Disclosure Materials") which together set forth a correct summary of
business conducted or proposed to be conducted by the Company and its
Subsidiaries and which set forth certain financial and other information with
respect to the Company and its Subsidiaries and their respective businesses,
which information is complete and correct in all material respects. Neither this
Agreement nor the Disclosure Materials nor any other document, certificate or
statement furnished to you by or on behalf of the Company in connection with the
transactions contemplated hereby contains any untrue statement of any material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact known to the
Company which materially adversely affects, or in the future is reasonably
likely to (so far as the Company can now foresee) materially adversely affect,
the business, operations, affairs or condition (financial, business or
otherwise) of the Company, or its Subsidiaries or any of their respective
properties, which has not been set forth in this Agreement or in the Disclosure
Materials or in the other documents, certificates or written statements
furnished to you by or on behalf of the Company in connection with the
transactions contemplated hereby.
(e) Financial Statements. The Company has furnished to you the
financial statements of the Company and the consolidated financial statements of
the Company and its Subsidiaries dated as of December 31, 1997. Such financial
statements are complete and correct, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby (except as otherwise specified therein)
and include the accounts as of the respective dates thereof of all Subsidiaries
of the Company as of that date. The balance sheets included in such financial
statements (together with the pertinent notes thereto) fairly present the
financial condition of the corporations to which they purport to relate as at
the respective dates indicated, and in each case reflect all known material
liabilities, contingent or other, at such dates, and the statements of income,
changes in stockholders' equity and changes in financial position included
therein accurately present the results of the operations of the corporations to
which they purport to relate for the respective periods indicated.
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(f) Changes, Etc. Since December 31, 1997, except in connection with
the acquisition of The ▇▇▇▇ ▇▇▇▇▇▇ Companies and other transactions described in
the Disclosure Materials, (i) there has been no change in the assets,
liabilities or financial condition of the Company and its Subsidiaries from that
reflected in the consolidated balance sheet as at such date referred to in
Section 5(e), other than nonmaterial changes arising in the ordinary course of
business, which changes have not been, either in any individual case or in the
aggregate, materially adverse; (ii) neither the business, operations, affairs,
or condition (financial, business or otherwise) of the Company and its
Subsidiaries nor any of their respective properties has been materially
adversely affected by any occurrence or development (whether or not insured
against).
(g) Tax Returns and Payments. The Company and its Subsidiaries have
filed all tax returns required by law to be filed and have paid all taxes,
assessments and other governmental charges levied upon their respective
properties, assets, income and franchises, other than those not yet delinquent
and those, not substantial in aggregate amount, being or about to be contested
as provided in Section 19. The consolidated Federal income tax liability of the
Company and its Subsidiaries has been finally determined and satisfied through
the fiscal year ended December 31, 1995. Neither the Company nor any Subsidiary
has executed any waiver or waivers that would have the effect of extending the
applicable statute of limitations in respect of its income tax liabilities. The
charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of Federal income taxes for all periods are adequate, and the Company
knows of no material unpaid assessment for additional taxes or of any basis
therefor. The provisions for taxes on the books of the Company and its
Subsidiaries are, to the best knowledge and belief of the Company, adequate for
all open years, and for its current fiscal period. The amount of the reserve for
Federal income taxes reflected in the consolidated balance sheet of the Company
and its Subsidiaries as of December 31, 1997 is, to the best knowledge and
belief of the Company, adequate provision for such Federal income taxes, if any,
as may be payable by the Company and its Subsidiaries for the fiscal year ended
December 31, 1997.
(h) Indebtedness, Etc. Neither the Company nor any Subsidiary has any
obligation, liability or commitment, direct or contingent, which is material on
a consolidated basis and which is not reflected in the Disclosure Materials or
the financial statements contained therein or which has arisen or been incurred
since the date of the most recent financial statements contained in the
Disclosure Materials except for such of the foregoing which are nonmaterial in
nature and have been incurred in the ordinary course of business. Exhibit D
attached hereto correctly describes all Funded Indebtedness of the Company and
its Subsidiaries outstanding on March 31, 1998, and Exhibit E attached hereto
correctly describes all mortgages, pledges, liens, security interests, charges,
or encumbrances on properties of the Company and its Subsidiaries in effect on
the date hereof.
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(i) Title to Properties; Liens. The Company and its Subsidiaries have
good and marketable title in fee simple (or its equivalent under applicable law)
to all the real property, and good and marketable title to all personal
property, each purports to own, in each case including the properties and assets
reflected in the consolidated balance sheet of the Company and its Subsidiaries
as at December 31, 1997 which is contained in the Disclosure Materials, except
as disclosed in the Disclosure Materials and except properties and assets
disposed of since such date in the ordinary course of business. None of such
properties or assets is or will be subject to any mortgage, pledge, lien,
security interest, charge, or encumbrance except the mortgages and security
interests referred to in Exhibit E attached hereto and except minor liens and
encumbrances which in the aggregate are not substantial in amount, do not in any
case materially detract from the value of the property subject thereto or
materially impair the operations of the Company or any of its Subsidiaries and
have not arisen otherwise than in the ordinary course of business. The Company
and its Subsidiaries enjoy quiet possession under all leases to which they are
parties as lessees, and all such leases are valid, subsisting and in full force
and effect. None of such leases contain any provision restricting incurrence of
Indebtedness by the lessee or any unusual or burdensome provision materially
adversely affecting the current operations of the Company and its Subsidiaries.
(j) Litigations, Etc. There is no action, proceeding or investigation
pending or, to the knowledge of the Company, threatened, which questions the
validity of this Agreement or the Note or any action taken or to be taken
pursuant hereto or thereto. There is no action, proceeding or investigation
pending or, to the knowledge of the Company, threatened which is likely to
result, either in any case or in the aggregate, in any material adverse change
in the business, operations, affairs or condition (financial, business or
otherwise) of the Company or any of its Subsidiaries or their respective
properties or assets or in any material liability on the part of the Company or
any of its Subsidiaries.
(k) Compliance with Other Instruments, Etc. The execution, delivery and
performance of this Agreement and the Note will not (with or without the
delivery of notice, passage of time or both) result in any violation of, or be
in conflict with, or constitute a default under, or give rise to a right of
termination or acceleration of obligations due under, any term of the charter or
by-laws of the Company or the charter, by-laws or operating plan of any of its
Subsidiaries, or of any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to the Company or any of its
Subsidiaries, or result in the creation of any mortgage, lien, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries pursuant to any such term. There is no such term which materially
adversely affects or in the future may (so far as the Company can now foresee)
materially adversely affect the business, operations, affairs or condition
(financial, business or otherwise) of the Company and its Subsidiaries or any of
their respective properties. Neither the Company nor any of its Subsidiaries is
in violation of any term of its charter or by-laws, or operating plan, or of any
material term of any agreement or instrument to which it is a party, or of any
judgment, decree, order, statute, rule or governmental
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regulation applicable to it which would subject the Company or any of its
Subsidiaries to any material liability, penalty or forfeiture. The Company and
each of its Subsidiaries have obtained all licenses, permits, franchises or
other governmental authorizations necessary for the conduct of its business.
(l) Governmental Consent. Other than the filing of a proper Form D in
accordance with Rule 503 of Regulation D and any consent, approval or filing
required under any state securities or Blue Sky laws, neither the Company nor
any of its Subsidiaries is required to obtain any order, consent, approval or
authorization of, or presently required to make any declaration or filing with,
any governmental authority in connection with the execution, delivery and
performance of this Agreement, or the negotiation, offer, issue, sale, delivery,
and performance of the Note pursuant hereto.
(m) Investment Company Act Status. Neither the Company nor any of its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
(n) Patents, Trademarks, Etc. The Company and its Subsidiaries own or
possess all the patents, trademarks, service marks, trade names, copyrights,
franchises, consents, authorizations and licenses, and rights with respect to
the foregoing necessary for the conduct of their respective businesses as now
conducted, without any known conflict with the rights of others, except as noted
on Exhibit F.
(o) Offer of Note. The offering, issuance and sale of the Note under
this Agreement has complied with all applicable requirements of the federal
securities laws, subject to and assuming compliance by you with all of your
representations and covenants contained herein and the filing of a proper Form D
in accordance with Rule 503 of Regulation D. No form of general solicitation or
general advertising, including, but not limited to, advertisements, articles,
notices or other communications, published in any newspaper, magazine or similar
medium of broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising,
was used by the Company or any of its Subsidiaries or any of the Company's or
such Subsidiary's representatives, or, to the knowledge of the Company, any
other Person acting on behalf of the Company or any of its Subsidiaries, in
connection with the offering of the Note. Neither the Company, any of its
Subsidiaries nor any Person acting on the Company's or such Subsidiary's behalf
has directly or indirectly offered the Note, or any part thereof, for sale to,
or sold or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with any Person or Persons other
than you. The Company further represents to you that, assuming the accuracy of
your representations as set forth herein, neither the Company, any of its
Subsidiaries nor any Person acting on the Company's or such Subsidiary's behalf
has taken or will take any action which would subject
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the issue and sale of the Note to the provisions of Section 5 of the Securities
Act. The Company has not sold the Note to anyone other than you.
(p) Regulation G, Etc. As provided in Section 6, the proceeds of the
sale of the Note will be used for the repayment of an existing line of credit
and for general corporate purposes as permitted by law. None of the proceeds of
the Note will be used, directly or indirectly, by the Company or any Subsidiary
so as to cause the transactions contemplated hereby to violate Regulation G,
Regulation T or Regulation X, or any other regulation of the Board of Governors
of the Federal Reserve System, the Comptroller of the Currency, the Federal
Deposit Insurance Corporation or the Commissioner of Financial Regulation of the
State of Maryland, or the Bank Holding Company Act of 1956, or the Securities
Exchange Act of 1934, each as in effect now and as the same may be in effect at
the time of the Closing.
(q) Foreign Credit Restraints. Neither the sale of the Note nor the use
directly or indirectly of all or any portion of the proceeds of the Note will
violate or result in a violation of any provision of any applicable statute,
regulation or order of, or any restriction imposed by, the United States of
America or by any authorized official, board, department, instrumentality or
agency thereof relating to the control of foreign or overseas lending or
investment.
(r) Employee Retirement Income Security Act of 1974. Without in any way
limiting the scope of Section 5(k), neither the Company nor any Subsidiary has
incurred (i) any material accumulated funding deficiency within the meaning of
the Employee Retirement Income Security Act of 1974, or (ii) any material
liability to the Pension Benefit Guaranty Corporation established under such Act
(or any successor thereto under such Act) in connection with any employee
benefit plan established or maintained by the Company or any Subsidiary, nor has
the Company or any Subsidiary had any tax assessed against it by the Internal
Revenue Service for any alleged violation under Section 4975 of the Internal
Revenue Code of 1986, as amended. To the Company's knowledge, after reasonable
inquiry, no prohibited transaction within the meaning of said Section 4975 has
occurred with respect to any employee benefit plan established or maintained by
the Company or any of its Subsidiaries.
(s) Brokers, Etc. The Company has dealt with no broker, finder,
commission agent or other similar Person in connection with the offer or sale of
the Note and the transactions contemplated by this Agreement and the Company is
under no obligation to pay any broker's fee, finder's fee, or commission in
connection with such transactions.
(t) No Defaults. No event has occurred and no condition exists which,
upon the issuance of the Note, would constitute an Event of Default or with the
lapse of time or giving of notice, or both, would become an Event of Default.
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(u) Compliance With Laws; Licenses. The conduct by the Company and its
Subsidiaries of their respective businesses has not violated, and as presently
conducted does not violate, any federal, state, local or foreign laws, rules,
regulations or ordinances, or judgments, injunctions, writs, decrees, or orders
of any governmental authority, nor has the Company or any of its Subsidiaries
received any notice of any such violation which remains outstanding. The Company
and its Subsidiaries possess all licenses, permits, consents, authorizations,
registrations and approvals of, with or from governmental authorities which have
jurisdiction over it or them ("Licenses"), and is in full compliance with the
terms thereof. Consummation of the transactions contemplated hereby will not
adversely affect any Licenses.
SECTION 6. USE OF PROCEEDS.
The Company will apply the net proceeds of the sale of the Note to the
repayment of an existing line of credit issued to the Company's Subsidiary, ▇▇▇▇
▇▇▇▇▇▇ Loans, LLC, and guaranteed by the Company and for general corporate
purposes as permitted by law. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, use any part of such proceeds (a) for any
purpose which would cause this Agreement to violate Regulation G, Regulation T,
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation or the Commissioner of
Financial Regulation of the State of Maryland, or the Bank Holding Company Act
of 1956 or the Securities Exchange Act of 1934, each as in effect now or as the
same may be in effect at the time of the Closing, or (b) for any other purpose
which would violate any applicable statute, regulation or order of, or any
restriction imposed by, the United States of America or by any authorized
official, board, department, instrumentality or agency thereof.
SECTION 7. ACCOUNTING; FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company will maintain and cause each of its Subsidiaries to
maintain a system of accounting established and administered in accordance with
generally accepted accounting principles consistently followed, and will set
aside on its books all such proper reserves as shall be required by generally
accepted accounting principles. The Company will mail to you by first class mail
or otherwise deliver or cause to be delivered to you, so long as you or your
Affiliate or nominee shall hold the Note or any portion thereof:
(a) as soon as reasonably possible, and in any event within 45 days
after the end of each of the first three quarterly fiscal periods in each fiscal
year of the Company, the consolidated balance sheet of the Company and its
Subsidiaries as at the end of such period, and the related consolidated
statements of income, changes in stockholders' equity and changes in financial
position of the Company and its Subsidiaries for such period and for the period
from the beginning of the current fiscal year to the end of such quarterly
period, in
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each case setting forth in comparative form the figures for the corresponding
periods of the previous fiscal year, all in reasonable detail and signed by a
principal financial officer of the Company, provided that the Company shall not
be required to furnish the financial statements or reports referred to in this
Clause (a) so long as substantially similar financial statements or reports are
being furnished pursuant to the penultimate paragraph of this Section 7;
(b) as soon as reasonably possible, and in any event within 90 days
after the end of each fiscal year of the Company, the consolidated balance sheet
of the Company and its Subsidiaries as at the end of such year, and the related
consolidated statements of income, changes in stockholders' equity and changes
in financial position of the Company and its Subsidiaries for such year, in each
case setting forth in comparative form the figures for the previous fiscal year,
all in reasonable detail and accompanied by the opinion thereon of ▇▇▇▇▇▇▇ &
Company or other independent public accountants of recognized national standing
selected by the Company, which opinion shall be in a form generally recognized
as unqualified (other than qualifications as to matters concerning litigation)
and shall state that such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
that of the preceding fiscal year (except for such changes, if any, as shall be
specified and approved by such accountants in such opinion) and that the audit
by such accountants in connection with such financial statements has been made
in accordance with generally accepted auditing standards relating to reporting,
provided that the Company shall not be required to furnish the financial
statements or reports referred to in this Clause (b) so long as substantially
similar financial statements or reports are being furnished pursuant to the
penultimate paragraph of this Section 7;
(c) together with each delivery of financial statements pursuant to
Clauses (a) and (b) above (or at the time of the delivery of substantially
similar financial statements or reports pursuant to the penultimate paragraph of
this Section 7, an Officers' Certificate stating that a review of its activities
and the activities of its Subsidiaries during the preceding fiscal period has
been made under the supervision of the signing Officers with a view to
determining whether it has kept, observed, performed and fulfilled its
obligations under this Agreement and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge, the Company during
such preceding fiscal period has kept, observed, performed and fulfilled each
and every such covenant and no Event of Default occurred during such period and
at the date of such certificate there is no Event of Default that has occurred
and is continuing or, if such signers do know of such Event of Default, the
certificate shall describe the Event of Default and its status with
particularity and what action the Company has taken or proposes to take with
respect thereto, and specify the amounts available as at the end of the
accounting period in question for Company Stock Payments in compliance with
Section 10, and showing in reasonable detail the calculation thereof, and
demonstrating in reasonable detail compliance during such accounting period with
Section 10. The Officers' Certificate shall also include all calculations
necessary to show covenant compliance. The Officers'
- 10 -
Certificate shall also notify you should the Company elect to change the manner
in which it fixes its fiscal year end;
(d) so long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
Company shall deliver to you within 105 days after the end of each fiscal year a
written statement by the Company's independent certified public accountants
stating (i) that their audit examination has included a review of the terms of
this Agreement and the Note as they relate to accounting matters, and (ii)
whether, in connection with their audit examination, any Event of Default has
come to their attention and if such an Event of Default has come to their
attention, specifying the nature and period of existence thereof;
(e) promptly upon receipt thereof, copies of any notice or order from
any governmental authority (other than notices and orders which the Company or
its Subsidiaries are prohibited by law from disclosing to others) which is
specifically applicable to the Company or any Subsidiary (other than by
applicability to bank holding companies or banks generally) and which could have
a material adverse effect on the business of the Company or any Subsidiary;
(f) forthwith upon any principal officer of the Company obtaining
knowledge of, or receiving notice of any claim of or action taken with respect
to, any condition or event which constitutes an Event of Default or which, after
notice or lapse of time or both, would constitute an Event of Default
(including, without limitation, knowledge or notice that any claim by any
creditor has been made that there exists or that any action has been taken by
any creditor with respect to, any default referred to in Section 22(f) hereof),
an Officers' Certificate specifying the nature and period of existence thereof
and what action the Company has taken or is taking or proposes to take with
respect thereto; and
(g) with reasonable promptness, such other information and data with
respect to the Company and its Subsidiaries as from time to time may be
reasonably requested, including, without limitation, unaudited (or where
available, audited) consolidating balance sheets and related consolidating
statements of income and changes in financial position of the Company and each
of its Subsidiaries and any reports filed with the Federal Reserve Board or the
Federal Deposit Insurance Corporation.
Whether or not the Company is subject to Section 13(a) or
15(d) of the Exchange Act, the Company shall file with the SEC the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the SEC pursuant to such Sections 13(a) and 15(d) if the
Company were so subject, such documents to be filed with the SEC on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company shall also in any event (i) within 15 days after each Required Filing
- 11 -
Date transmit by mail to you, without cost to you, copies of the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the SEC pursuant to Sections 13(a) and 15(d) of the Exchange Act if
the Company were subject to such Sections and (ii) if filing such documents by
the Company with the SEC is not permitted under the Exchange Act, promptly upon
written request supply copies of such documents to any prospective purchaser of
the Note. In any event, such annual reports will contain consolidated financial
statements and notes thereto, together with an opinion thereon expressed by an
independent public accounting firm, and management's discussion and analysis of
financial condition and results of operations and such quarterly reports will
contain unaudited condensed consolidated financial statements for the first
three quarters of each fiscal year.
At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, upon your request, the Company will promptly furnish
or cause to be furnished such information as is specified pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision thereto) to you
or to a prospective purchaser of such Note designated by you, as the case may
be, in order to permit compliance by such prospective purchaser with Rule 144A
under the Securities Act, promptly upon their becoming available, copies
(without duplication) of all financial statements, reports, notices and proxy
statements sent by the Company to its stockholders, and all annual, periodic or
special reports or registration statements filed by the Company with the
Securities and Exchange Commission, or copies of any comparable reports or
statements filed by the Company with any governmental authority or authorities
succeeding to any of the functions of such agency.
SECTION 8. INSPECTION.
The Company will permit any authorized representative designated by
you, so long as you or your Affiliate or nominee shall hold the Note or any
portion thereof, to inspect any of the properties of the Company or any of the
Subsidiaries, including its and their books of account (and to make copies
thereof and to take extracts therefrom), and to discuss its affairs, finances
and accounts with its officers and independent accountants, at all such
reasonable times and as often as may be reasonably requested; provided that
records and reports which the Company or its Subsidiaries are prohibited by law
from disclosing to others shall not be subject to such inspection until such
time, if any, as such disclosure is no longer prohibited by law. Such inspection
shall be for the information and benefit of the holder of the Note in appraising
its investment in the Note and, unless otherwise publicly available, any
information obtained thereby or otherwise pursuant thereto shall not be divulged
to others except in connection with the enforcement of the rights of the holder
of the Note in the event of a default hereunder or thereunder or in connection
with any disposition or proposed disposition of the Note and except as may be
required by law or by any authority having jurisdiction over any holder of the
Note.
- 12 -
SECTION 9.A. PREPAYMENT OF NOTES.
(a) Except as provided in Section 9B, Section 22 or paragraph (b)
below, the Note is not subject to prepayment in whole or in part.
(b) Upon compliance with paragraph (c), the Company shall, at any time
and from time to time, have the privilege of prepaying all or any portion of the
outstanding Note (in units of $100,000 or integral multiples of $50,000 in
excess thereof), at a redemption price equal to the principal amount of the Note
to be prepaid together with accrued interest thereon to the date of prepayment,
together with a premium equal to the Make-Whole Amount, determined as of five
business days prior to the date of such prepayment pursuant to this Section 9A.
(c) The Company will give you notice of the prepayment of the Note not
less than 30 days nor more than 60 days before the date fixed for such
prepayment, which notice shall specify (i) the date of such prepayment, (ii) the
principal amount of the Note to be prepaid, and (iii) the accrued interest
applicable to such Note. Notice of prepayment having been so given, the
aggregate principal amount of Note specified in such notice, together with the
accrued interest thereon and the premium, shall become due and payable on the
prepayment date. Not less than three business days prior to the prepayment date
specified in such notice, the Company shall provide you with written notice of
the premium, if any, payable in connection with such prepayment and, whether or
not any premium is payable, a reasonably detailed computation of the Make-Whole
Amount.
SECTION 9.B. CHANGE OF CONTROL.
(a) In the event that the Company shall have at least 30 days advance
notice of a Change of Control, then it shall promptly provide you with written
notice of such proposed Change of Control (a "Section 9B(a) Notice") which
Section 9B(a) Notice shall include the information specified in Section 9B(c)
and shall request your consent to such Change of Control. Concurrently with the
closing of the transaction which results in or constitutes a Change of Control,
the Company will prepay the Note should you fail to consent in writing to the
request contained in the Section 9B(a) Notice within 20 days after receipt of
such Section 9B(a) Notice, by payment of the principal amount thereof, plus
accrued interest thereon to the date of such prepayment, together with a premium
equal to the Make-Whole Amount, determined on the date five Business Days prior
to the date of such prepayment. Not less than five days prior to the date of the
closing of the proposed Change of Control, the Company will furnish you with a
written confirmation of the closing date. No such prepayment with respect to a
particular proposed Change of Control described in a Section 9B(a) Notice shall
be made in the event that such Change of Control does not occur within 120 days
of the date of the Section 9B(a) Notice relating to such proposed Change of
Control upon terms substantially similar to those described in such Section
9B(a) Notice. The
- 13 -
Company shall give you additional notices and you shall have the rights of
prepayment as contemplated in this Section 9B in the event of any Change of
Control which occurs after 120 days after the initial notice with respect to
such proposed Change of Control or which is pursuant to terms substantially
different than the terms applicable to the proposed Change of Control previously
described in the related Section 9B(a) Notice.
(b) In the event the Company shall not have sufficient advance notice
of a Change of Control (as contemplated in Section 9B(a)) and a Change of
Control shall occur and the Company has not provided the Section 9B(a) Notice
pursuant to and in accordance with Section 9B(a), the Company will, within five
days after such Change of Control, give you notice of such event (a "Section
9B(b) Notice"), which shall include the information specified in Section 9B(c)
and shall request your consent to such Change of Control. The Company will
prepay the Note on the date designated in the Section 9B(b) Notice should you
fail to consent in writing to the request contained in the Section 9B(b) Notice
at least ten days prior to the date specified for prepayment, by payment of the
principal amount thereof, plus accrued interest thereon to the date of such
prepayment, together with a premium equal to the Make-Whole Amount, determined
on the date five Business Days prior to the date of such prepayment.
(c) The Section 9B(a) Notice and Section 9B(b) Notice required to be
given by the Company pursuant to and in accordance with the provisions of
Sections 9B(a) and (b), respectively, shall, in each case, be in writing and
shall set forth, (i) a summary of the transaction or transactions constituting
or proposed to constitute the Change of Control, (ii) such financial or other
information as would be reasonably necessary for you to make an informed
decision as to whether to require a prepayment of the Note, (iii) in the case of
any Section 9B(b) Notice, the date set for prepayment, if any, of the Note which
date shall not be less than 30 days or more than 45 days after the date of such
notice, (iv) that a premium may be payable, (v) the date when such premium will
be calculated and the estimated amount thereof (including a reasonably detailed
computation thereof) and (vi) the accrued interest applicable to the prepayment.
Not later than three Business Days prior to the related closing date specified
in any such notice, should you elect to be prepaid, the Company shall provide
you with written notice of the premium, if any, payable in connection with such
prepayment and a reasonably detailed computation of the Make-Whole Amount.
(d) As used herein, the term "Change of Control" shall mean and include
(i) the direct or indirect sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company to any person or entity or group
of persons or entities acting in concert as a partnership or other group (as
such term is used in Section 13(d)(3) or the Exchange Act) (a "Group of
Persons"), (ii) the merger or consolidation of the Company, with or into another
corporation with the effect that the then existing shareholders of the Company
beneficially own (within the meaning of Rule 13(d)(3) under the Exchange Act)
securities representing less than 50% of the voting power of the surviving
corporation of such merger or the
- 14 -
corporation resulting from such consolidation and do not otherwise have the
right or ability by contract or otherwise to elect a majority of the Board of
Directors of such surviving corporation, (iii) the replacement of a majority of
the Board of Directors of the Company from the directors who constituted such
Board of Directors on the date hereof, and such replacement shall not have been
approved by a majority of the Board of Directors of the Company then still in
office who either were (x) members of the Board of Directors on the date hereof,
or (y) whose election as a member of the Board of Directors was approved in the
manner provided in this Clause (iii), or (iv) a person or Group of Persons
shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13(d)(3) under the Exchange Act) of securities of
the Company representing 30% or more of the voting power of the Company.
SECTION 10. RESTRICTED PAYMENTS AND OTHER RESTRICTIONS
(a) Subject to Section 10(b) hereof, the Company will not at any time,
directly or indirectly, make any Restricted Payment, unless:
(i) the Capital Leverage Ratio shall be equal to or greater
than the greater of (x) 6.25% or (y) 1.25 times the level constituting
"well-capitalized" pursuant to 12 C.F.R. ss. 325.103(a)(1), as it may be
amended, for the period of twelve consecutive months ending on the last day of
the fiscal quarter of the Company which ends immediately prior to the fiscal
quarter in which the Restricted Payment is made; and
(ii) at the time of such Restricted Payment, no Event of
Default (or any event which after notice or lapse of time or both would
constitute an Event of Default) has occurred and is continuing nor would any
Event of Default (or any event which after notice or lapse of time or both would
constitute an Event of Default) occur as a result of the Company making such
Restricted Payment.
(b) Notwithstanding Section 10(a) hereof, the Company may make the
following Restricted Payments as permitted under Clauses (i) through (ii) of
this Section 10(b); provided that at the time of such Restricted Payment
pursuant to Clause (i) or (ii) hereof, no Event of Default (or any event which
after notice or lapse of time or both would constitute an Event of Default) has
occurred and is continuing nor would any Event of Default (or any event which
after notice or lapse of time or both would constitute an Event of Default)
occur as a result of the Company making such Restricted Payment.
(i) If the Capital Leverage Ratio shall be (x) less than the
greater of (1) 6.25% or (2) 1.25 times the level constituting "well-capitalized"
pursuant to 12 C.F.R. ss. 325.103(a)(1), as it may be amended, for the period of
twelve consecutive months ending on the last day of the fiscal quarter of the
Company which ends immediately prior to the fiscal
- 15 -
quarter in which the Restricted Payment is made and (y) greater than the greater
of (1) 5.0% or (2) the level constituting "well-capitalized" pursuant to 12
C.F.R. ss. 325.103(a)(1), as it may be amended, for the period of twelve
consecutive months ending on the last day of the fiscal quarter of the Company
which ends immediately prior to the fiscal quarter in which the Restricted
Payment is made, the Company may declare, pay or make any Company Stock Dividend
if, immediately after giving effect thereto, the aggregate amount of all sums
and property involved in or set apart for all Company Stock Payments declared,
paid or made during the two immediately preceding fiscal years of the Company
and during the then current fiscal year to and including the date of such
proposed action would not exceed 75% of Consolidated Net Income for the two
immediately preceding fiscal years of the Company and for the then current
fiscal year to the end of the last fiscal quarter preceding the date of such
proposed action.
(ii) If the Capital Leverage Ratio shall be less than (x) 5.0%
or (y) the level constituting well-capitalized pursuant to 12 C.F.R. ss.
325.103(a)(1), as it may be amended, for the period of twelve consecutive month
ending on the last day of the fiscal quarter of the Company which ends
immediately prior to the fiscal quarter in which the Restricted Payment is made,
the Company may declare, pay or make any Company Stock Dividend if (x) the
amount of such proposed Company Stock Dividend per share is not greater than the
dividend per share paid during the immediately preceding fiscal quarter
(adjusted for all stock dividends, stock splits and reorganizations); or (y)
immediately after giving effect to such proposed Company Stock Dividend the
aggregate amount of all sums and property involved in or set apart for all
Company Stock Payments declared, paid or made during the two immediately
preceding fiscal years of the Company and during the then current fiscal year to
and including the date of such proposed action would not exceed 75% of
Consolidated Net Income for the two immediately preceding fiscal years of the
Company and for the then current fiscal year to the end of the last fiscal
quarter preceding the date of such proposed action.
(c) The Company will not declare any dividend (other than a dividend
payable solely in shares of its own stock) on any shares of any class of its
stock payable more than 60 days after the date of the declaration thereof. The
Company will not declare or pay any dividend or make any other distribution on
any shares of its stock of any class, consisting of stock or other securities of
any Subsidiary.
(d) Except as described in the Disclosure Materials with respect to the
trust preferred securities, the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective or enter into any agreement with any Person that would
cause any consensual encumbrance or restriction of any kind on the ability of
any Subsidiary of the Company to (i) pay dividends, in cash or otherwise, or
make any other distributions on its Capital Stock or any other interest or
participation in, or measured by, its profits owned by, or pay any Indebtedness
owed to,
- 16 -
the Company or a Subsidiary of the Company, (ii) make loans or advances to the
Company or a Subsidiary of the Company, or (iii) transfer any of its properties
or assets to the Company or any Subsidiary of the Company except customary
non-assignment or sublease provisions of any agreement of the Company or its
Subsidiaries.
(e) Except as described in the Disclosure Materials with respect to the
trust preferred securities, the Company will not permit any of its Subsidiaries
to issue any Preferred Stock (other than to the Company or to a Wholly-Owned
Subsidiary of the Company).
SECTION 11. RESTRICTIONS ON FUNDED INDEBTEDNESS.
The Company will not, nor will it permit any Subsidiary to, directly or
indirectly, create, incur, assume, guarantee, agree to purchase or repurchase,
provide funds in respect of or otherwise become or be or remain liable with
respect to, any Funded Indebtedness other than:
(i) the Note;
(ii) Funded Indebtedness referred to in Exhibit D
attached hereto;
(iii) Indebtedness secured by Liens permitted by Sections
12(e);
(iv) additional Funded Indebtedness ranking on a parity
with or subordinate to the Note if, immediately
after giving effect to the incurrence of such
additional Funded Indebtedness and the application
of the proceeds thereof, Consolidated Funded
Indebtedness shall not exceed 60% of the sum of
Consolidated Funded Indebtedness and Consolidated
Net Worth; and
(v) additional Funded Indebtedness incurred in
connection with the permitted business activities of
the Company and its subsidiaries pursuant to Section
17 hereof, provided that (a) immediately after
giving effect to the incurrence of such additional
Funded Indebtedness, Funded Indebtedness incurred
under this Clause (v) shall not exceed the lesser of
2% of the total assets of the Company and its
Subsidiaries determined in accordance with generally
accepted accounting principles on a consolidated
basis and on a basis consistent with that employed
in preparing the financial statements contained in
the Disclosure Materials and (b) immediately after
giving effect to the incurrence of such additional
Funded Indebtedness and the application of the
proceeds
- 17 -
thereof, Consolidated Funded Indebtedness shall not
exceed 60% of the sum of Consolidated Funded
Indebtedness and Consolidated Net Worth.
Any corporation which becomes a Subsidiary after the date hereof shall
for all purposes of this Section 11 be deemed to have created, assumed or
incurred at the time it becomes a Subsidiary all Funded Indebtedness of such
corporation existing immediately after it becomes a Subsidiary.
Notwithstanding the foregoing, the Company will not, nor will it permit
any Subsidiary to, directly or indirectly, create, incur, assume, guarantee,
agree to purchase or repurchase, provide funds in respect of or otherwise become
liable with respect to, any Funded Indebtedness, during the existence of an
Event of Default (or any event which would constitute an Event of Default after
notice or lapse of time or both) or if such action would cause an Event of
Default (or any event which would constitute an Event of Default after notice or
lapse of time or both).
SECTION 12. MORTGAGES, LIENS, ETC.
The Company will not, nor will it permit any Subsidiary to, directly or
indirectly, create, incur, assume, or permit to continue in existence any
mortgage, lien, charge or encumbrance on, or security interest in, or pledge or
deposit of or conditional sale or other title retention agreement with respect
to, any interest of the Company or any Subsidiary in any property or asset now
owned or leased or hereafter acquired or leased by the Company or any Subsidiary
(such mortgages, liens, charges, encumbrances, security interests, pledges,
deposits, conditional sale or other title retention agreements being
collectively referred to in this Section 12 as "Liens"), except:
(a) Liens referred to in Exhibit E attached hereto, but not any
renewal, extension or refunding thereof or of the Indebtedness secured thereby;
(b) Liens securing the payment of taxes, assessments or governmental
charges or levies or the demands of suppliers, mechanics, carriers, warehousers,
landlords and other like Persons, provided that (i) such liens do not in the
aggregate materially reduce the value of any properties subject to the Liens or
materially interfere with their use in the ordinary conduct of the owning
company's business and (ii) all claims which the Liens secure are being actively
contested in good faith and by appropriate proceedings and for which appropriate
reserves have been established;
(c) Liens incurred or deposits made in the ordinary course of business
(i) in connection with worker's compensation, unemployment insurance, social
security and other like laws, or (ii) to secure the performance of letters of
credit, bids, tenders, sales contracts, leases, statutory obligations, surety,
appeal and performance bonds and other similar
- 18 -
obligations, in each case not incurred in connection with the borrowing of
money, the obtaining of advances or the payment of the deferred purchase price
of property;
(d) Attachment, judgment and other similar Liens arising in connection
with court proceedings, provided that (i) execution and other enforcement is
effectively stayed and (ii) all claims which the Liens secure are being actively
contested in good faith and by appropriate proceedings and for which appropriate
reserves have been established;
(e) Liens on property acquired after the date of this Agreement to
secure the payment of all or a portion of the property so acquired, provided
that (i) the amount of Indebtedness secured by any such Lien shall not exceed
the lesser of the cost of the property subject to such Lien or such property's
fair market value at the date of its acquisition, and (ii) such Liens shall not
encumber any assets or property other than the property so acquired and proceeds
thereof and shall attach to such property within 60 days of the acquisition
thereof, and (iii) the incurrence of the indebtedness secured by such Liens is
permitted under Sections 11(iv) or (v) hereof; or
(f) In addition to the Liens permitted under Clauses (a) through (e) of
this Section 12, Liens securing Indebtedness that is not prohibited under
Section 11.
SECTION 13. CONSOLIDATION AND MERGER.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into it, except that:
(a) any Subsidiary may be consolidated with or merged into the Company
if the Company is the surviving corporation, or any Wholly-Owned Subsidiary may
be consolidated with or merged into another Wholly-Owned Subsidiary; and
(b) subject to the provisions of Section 15, any corporation (other
than a Subsidiary) may be consolidated with or merged into the Company, and any
corporation (other than the Company or a Subsidiary) may be consolidated with or
merged into a Subsidiary, if (i) the Company or a Subsidiary, as the case may
be, is the surviving corporation, (ii) immediately after giving effect to such
transaction (A) a Company Stock Payment, if paid or made in connection with such
consolidation or merger, would be in compliance with Section 10, and (B) no
condition or event shall exist which constitutes an Event of Default or which,
after notice or lapse of time or both, would constitute an Event of Default and
(iii) in the case of a merger or consolidation involving a Subsidiary, the
Company shall retain at least the same proportionate share of the Common Stock
of the Subsidiary following such merger or consolidation as it had immediately
prior thereto.
- 19 -
SECTION 14. SALE OF ASSETS.
Except as described in the Disclosure Materials with respect to the
proposed sale of certain branches by the Bank of Maryland, the Company will not,
and will not permit any Subsidiary to, directly or indirectly, sell, lease,
abandon or otherwise dispose of all or any substantial portion of its property
and assets other than in the ordinary course of business, except that any
Subsidiary may at any time sell or otherwise dispose of any of its property and
assets to the Company or a Wholly-Owned Subsidiary. For purposes of this Section
14, a sale, lease or other disposition of property or assets shall be deemed to
be substantial if the property and assets to be disposed of, when added to all
other property or assets disposed of (other than such property and assets sold,
leased or otherwise disposed of in the ordinary course of business) either (i)
in any one fiscal year has an aggregate book value in excess of 15% of Average
Total Assets determined as of the end of the immediately preceding fiscal year
or (ii) from and after the Closing, has an aggregate book value in excess of
$250,000,000.
SECTION 15. SECURITIES OF SUBSIDIARIES.
Except for a pledge, encumbrance or assignment to secure Indebtedness
not restricted by Section 11 or Section 12 hereof, the Company will not (a)
directly or indirectly sell, assign, pledge or otherwise encumber or dispose of
any shares or other securities (or options or warrants to acquire shares or
other securities of) of any Significant Subsidiary except to qualify directors
if required by applicable law, or (b) permit any Significant Subsidiary directly
or indirectly to issue or sell any shares (or options to acquire shares) except
to the Company or a Wholly-Owned Subsidiary or to qualify directors if required
by applicable law.
SECTION 16. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, enter into any lease or other transaction with any holder of 5%
or more of any class of shares of the Company, or with any Affiliate of the
Company (other than a Subsidiary), on terms that are less favorable to the
Company than those which might be obtained at the time from Persons who are not
such a holder or Affiliate.
SECTION 17. PRESERVATION OF CORPORATE EXISTENCE, COMPLIANCE WITH
LAWS, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence, rights and franchises and those of each of its
Banking Subsidiaries except as otherwise specifically permitted by Sections 13
and 14, and its registration under the Bank Holding Company Act of 1956, as
amended, or any similar Federal statute in effect from time to time, and will at
all times substantially comply with the provisions of that Act and any
- 20 -
regulations issued thereunder. The Company will cause each of its Banking
Subsidiaries to be an insured bank under the Federal Deposit Insurance Act, as
amended, or any similar Federal statute in effect from time to time, and will at
all times cause such Banking Subsidiaries to substantially comply with the
provisions of that Act and any regulations issued thereunder. The Company shall
not, and shall not permit any of its Subsidiaries to, engage in any businesses
other than the businesses permitted to be conducted by banking institutions and
their subsidiaries pursuant to the Financial Institutions Article of the
Annotated Code of Maryland, or any similar Federal or State statute in effect
from time to time, and by bank holding companies and their non-bank affiliates
under the Bank Holding Company Act of 1956, as amended, or any similar Federal
statute in effect from time to time. The Company shall comply, and shall cause
each of its Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, all states
and municipalities thereof, and of any governmental department, commission,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except such that noncompliance with
which would not have a material adverse effect on the business, operations,
affairs or condition, (financial, business or otherwise) financial condition or
results of operations of the Company and its Subsidiaries taken as a whole.
SECTION 18. MAINTENANCE OF PROPERTIES; INSURANCE.
The Company will, insofar as it is not prevented by causes beyond its
control, maintain or cause to be maintained in good repair, working order and
condition all properties used on or useful to the business of the Company and
its Subsidiaries and from time to time will, insofar as it is not prevented by
causes beyond its control, make or cause to be made all appropriate repairs,
renewals and replacements thereof. The Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Subsidiaries against loss or damage of the kinds customarily insured against by
other corporations of established reputation engaged in the same or a similar
business and similarly situated, in such types and amounts as are customarily
carried under similar circumstances by such other corporations.
SECTION 19. PAYMENT OF TAXES, ETC.
The Company will, and will cause each of its Subsidiaries to, pay or
cause to be paid all taxes, assessments or other governmental charges levied
upon any of their respective properties or assets or in respect of their
respective franchises, businesses, income or profits before the same become
delinquent, except that no such charge need be paid if being contested in good
faith and by appropriate proceedings promptly initiated and diligently
conducted, (i) if such reserve or other appropriate provision, if any, as shall
be required by generally accepted accounting principles shall have been made
therefor and (ii) if the Company's or such Subsidiary's right to use its
property is not materially adversely affected
- 21 -
thereby. The Company will and will cause each Subsidiary to, satisfy, or cause
to be satisfied, the minimum annual funding standard, within the meaning of the
Employee Retirement Income Security Act of 1974, for any employee benefit plan
established or maintained by the Company or such Subsidiary which is subject to
such Act and the Company will not permit any tax or penalty to be incurred by it
or such Subsidiary as a result of any failure to satisfy any such minimum
funding requirement or as a result of any violation of the provisions of Section
4975 of the Internal Revenue Code of 1986, as amended, or of any regulation
issued thereunder.
SECTION 20. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain an office or agency in ▇▇▇▇▇▇▇ County,
Maryland, where payments of principal and interest on the Note shall be made and
where books for the registration and transfer of the Note shall be kept. The
principal office of the Company in such County and State shall be such office or
agency unless the Company, by written notice to you, shall designate the
principal office of a bank or trust company in such County and State as such
office of agency, in which case the principal office of such bank or trust
company shall thereafter be such office or agency.
SECTION 21. EXCHANGE AND REPLACEMENT OF NOTES.
Upon presentment of the Note for registration of transfer at the office
or agency maintained by the Company pursuant to Section 21, or upon surrender of
the Note for exchange at such office of agency, the Company, upon request, will
execute and deliver at its expense (except as provided below) a new Note or
Notes of the same series, in denominations of at least $100,000 and integral
multiples thereof, in an aggregate principal amount equal to the outstanding
principal amount of the surrendered Note. Each new Note shall be registered in
your name. Each new Note shall be dated and bear interest from the date to which
interest has been paid on the surrendered Note or dated the date of the
surrendered Note if no interest has been paid thereon. The Person in whose name
any registered Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes of this Agreement. Payment of or on account
of the principal, premium, if any, and interest on any registered Note shall be
made to or upon the written order of such registered holder. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any transfer other than transfers in connection
with Section 9A or 9B. Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Note and
(a) in the case of loss, theft or destruction, receipt of indemnity
reasonably satisfactory to it (provided that if you or your nominee is the
holder the Note, your agreement of indemnity shall be deemed to be
satisfactory), or
- 22 -
(b) in the case of mutilation, upon surrender and cancellation of the
Note, the Company at its expense will execute and deliver a new Note, dated and
bearing interest from the date to which interest has been paid on the lost,
stolen, destroyed or mutilated Note or dated the date of the lost, stolen,
destroyed or mutilated Note if no interest has been paid thereon.
SECTION 22. EVENTS OF DEFAULT; ACCELERATION.
If any of the following events ("Events of Default") shall occur:
(a) if the Company shall default in the payment of any principal of the
Note when the same becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise; or
(b) if the Company shall default in the payment of any interest on the
Note for more than 5 days after the same becomes due and payable; or
(c) if the Company shall default in the performance of or compliance
with any term contained in Sections 10 to 17, inclusive; or
(d) if the Company shall default in the performance of or compliance
with any term contained herein other than those referred to above in this
Section 22 and such default shall not have been remedied within 30 days after
the earlier of (i) any principal officer of the Company obtaining knowledge
thereof or (ii) written notice thereof having been given to the Company by any
holder of the Note, but if such default cannot reasonably be remedied within
such 30-day period but can be remedied within 60 days thereafter, it shall not
constitute an Event of Default hereunder if the Company shall commence to remedy
such default within such 30-day period and shall diligently continue until such
default is remedied; or
(e) if any representation or warranty made in writing by or on behalf
of the Company herein or pursuant hereto or otherwise in connection with the
transactions contemplated hereby shall prove to have been false or incorrect in
any material respect on the date as of which made; or
(f) if the Company or any Subsidiary shall default (as principal or
guarantor or other surety or otherwise) in the payment of any principal of or
premium, if any, or interest on any indebtedness in respect of borrowed money or
any capital lease obligation having an aggregate principal amount of not less
than $1,000,000 and such default shall continue for more than the period of
grace, if any, applicable thereto, or if the Company or any Subsidiary shall
default in the performance of or compliance with any term of any evidence of
such indebtedness or obligation or of any mortgage, indenture or other agreement
relating thereto having an aggregate principal amount of not less than
$1,000,000, and such default shall
- 23 -
continue for more than the period of grace, if any, specified therein and shall
not have been waived pursuant thereto; or
(g) if the Company or any Subsidiary shall make an assignment for the
benefit of creditors, or shall fail generally to pay its debts as such debts
become due, or shall apply for or consent to the appointment of or taking
possession by a trustee, receiver or liquidator (or other similar official) of
the Company or such Subsidiary or any substantial part of its property, or shall
commence a case or have an order to relief entered against it under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or state bankruptcy, insolvency or other similar law, or if the Company
or any Significant Subsidiary or its directors or majority shareholders shall
take any action looking to the dissolution or liquidation of the Company or such
Significant Subsidiary; or
(h) if, within 60 days after the commencement against the Company or
any Subsidiary of a case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy, insolvency or
other similar law, such case shall have been consented to or shall not have been
dismissed or all orders or proceedings thereunder affecting the operations or
the business of the Company or such Subsidiary stayed, or if the stay of any
such order or proceeding shall thereafter be set aside, or if within 60 days
after the entry of a decree appointing a trustee, receiver or liquidator (or
other similar official) of the Company or such Subsidiary or any substantial
part of its property, such appointment shall not have been vacated; or
(i) if a final judgment which, with other outstanding final judgments
against the Company and its Subsidiaries, exceeds an aggregate of $1,000,000
shall be rendered against the Company or any Subsidiary and if, within 60 days
after the entry thereof, such judgment shall not have been discharged, execution
thereof stayed pending appeal, or if said judgment shall not have been bonded
pursuant to an order of court within 60 days after the expiration of any such
stay, such judgment shall not have been discharged; or
(j) if any Banking Subsidiary shall become insolvent, or any receiver,
conservator, liquidating agent or governmental authority shall be appointed for
or take possession or charge of such Banking Subsidiary or all or substantially
all of its assets, or such Banking Subsidiary shall suspend payment of its
obligations;
then (i) upon the occurrence of any Event of Default (other than an Event of
Default specified in Clause (h) or (j) above ), you, at your option, may (unless
all defaults shall have theretofore been remedied), by written notice or notices
to the Company, declare all amounts outstanding under the Note to be due and
payable, whereupon the same shall forthwith mature and become due and payable in
an amount equal to the principal balance of the Note together with interest
accrued thereon, plus a Make-Whole Amount, (collectively the "Default Amount"),
without presentment, demand, protest or notice, all of which are hereby waived.
If
- 24 -
an Event of Default specified in Clause (h) or (j) above occurs and is
continuing, then the Default Amount shall ipso facto become and be immediately
due and payable without any declaration or other act on your part. At any time
after the principal of the Note has been declared due and payable and before any
judgment with respect thereto has been entered, such declaration and its
consequences may be rescinded and annulled with the consent of the holders of a
majority of the outstanding principal amount of the Note by the filing with the
Company of a written instrument or instruments to such effect; provided,
however, that no such rescission or annulment will be permitted unless all
arrears of interest and all other sums payable under the Note and under this
Agreement (other than amounts due by reason of acceleration) shall have been
duly paid; provided, further, that no such rescission shall extend to or affect
any subsequent default or Event of Default or impair any right consequent
thereon.
SECTION 23. ADDITIONAL REMEDIES ON DEFAULTS, ETC.
In case any one or more Events of Default shall occur and be
continuing, you shall have the right at your option, in addition to the remedies
described in Section 22, to proceed to protect and enforce your rights by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in the Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law and the Company
will pay such further amount as shall be sufficient to cover the cost and
expenses of collection, including (to the extent permitted by law), without
limitation, reasonable attorneys' fees, expenses and disbursements. No course of
dealing and no delay on your part in exercising any right shall operate as a
waiver thereof or otherwise prejudice your rights. No rights or remedy conferred
hereby or by the Note upon you shall be exclusive of any other right or remedy
referred to herein or therein or now or hereafter available at law, in equity,
by statute or otherwise.
SECTION 24. DEFINITIONS.
As used herein the following terms have the following respective
meanings:
"Affiliate": as applied to any Person, a spouse of such Person, any
relative (by blood, adoption or marriage) of such Person within the third
degree, any member, director, officer or employee of such Person, any
corporation, association, firm or other entity of which such Person is a member,
director, officer or employee, and any other Person directly or indirectly
controlling, controlled by or under direct or indirect common control with such
Person.
"Average Total Assets": average daily total assets of the Company and
its Subsidiaries determined in accordance with generally accepted accounting
principles on a
- 25 -
consolidated basis and on a basis consistent with that employed in the
preparation of the financial statements contained in the Disclosure Materials.
"Banking Subsidiary": any Subsidiary which is a "bank" as that term is
defined in the Bank Holding Company Act of 1956, as amended.
"Capital Leverage Ratio": the ratio (expressed as a percentage) of the
Company's Tier 1 Capital to quarterly average assets less quarterly average
assets disallowed for regulatory capital purposes.
"Closing": the meaning specified in Section 3.
"Common Stock": any class of capital stock other than Preferred Stock.
"Company Stock Dividend": any dividend or other distribution, direct
or indirect, on or on account of any shares of any class of stock of the Company
now or hereafter outstanding, except a dividend payable solely in shares of the
Company's Common Stock.
"Company Stock Payment": any Company Stock Dividend or Company Stock
Repurchase.
"Company Stock Repurchase": any redemption, retirement, purchase or
other acquisition, direct or indirect, of any shares of any class of stock of
the Company now or hereafter outstanding or of any warrants or rights to
purchase any such stock, except to the extent that the consideration for any
such redemption, retirement, purchase or acquisition consists of shares of the
Company's Common Stock and except to the extent that the aggregate amount of all
sums and property involved in or set apart for all such redemptions,
retirements, purchases or acquisitions subsequent to the date hereof does not
exceed the aggregate net cash proceeds received by the Company from sales
subsequent to the date hereof of shares of any class of stock of the Company.
"Consolidated Funded Indebtedness": Funded Indebtedness of the Company
and its Subsidiaries, determined in accordance with generally accepted
accounting principles on a consolidated basis.
"Consolidated Net Income": the net income (or loss) from operations and
security transactions of the Company and its Subsidiaries for the period in
question (taken as a cumulative whole), after deducting all operating expenses,
provisions for all taxes and reserves (including reserves for loan losses and
deferred income taxes) and all other property deductions, all determined in
accordance with generally accepted accounting principles on a consolidated
basis, after eliminating all inter-company items, provided that there shall be
excluded (a) the income (or loss) of any Person accrued prior to the date it
becomes a
- 26 -
Subsidiary or is acquired in any manner (whether by consolidation, merger,
purchase or otherwise) by the Company or a Subsidiary, and (b) any write-up of
any asset.
"Consolidated Net Worth": stockholders' equity of the Company and its
Subsidiaries, determined in accordance with generally accepted accounting
principles, on a consolidated basis and on a basis consistent with that employed
in preparing the financial statements contained in the Disclosure Materials.
"Disclosure Materials": the meaning specified in Section 5(d).
"Event of Default": the meaning specified in Section 22.
"Funded Indebtedness": all Indebtedness which matures by its terms
twelve months or more from the date of the creation thereof and all Indebtedness
which is directly or indirectly renewable or extendable, at the option of the
debtor, by its terms or by the terms of any instrument or agreement relating to
such Indebtedness, to a date twelve months or more from the date of the creation
thereof; provided that, for the purposes of this definition, Funded Indebtedness
shall not be deemed to include:
(a) Indebtedness of any Banking Subsidiary incurred in the
normal course of its business in respect of: (i) obligations to its
depositors or customers, (ii) repurchase agreements and reverse
repurchase agreements relating to investment grade securities, in each
case maturing not more than one (1) year from the date of acquisition;
(iii) obligations under bankers' acceptances, letters of credit or
equivalent instruments, (iv) obligations to any other bank in
connection with transactions in respect of Federal funds, or (v)
obligations to a Federal Home Loan Bank;
(b) Indebtedness of the Company to its Wholly-Owned
Subsidiaries or Indebtedness of any Wholly-Owned Subsidiary to the
Company or to any other Wholly-Owned Subsidiary;
(c) Indebtedness of any Subsidiary incurred in respect of
property acquired by it in the ordinary course of business for lease to
any other Person, provided that (i) liens securing such Indebtedness
shall be confined to the property purchased by the proceeds thereof and
the proceeds of such property and (ii) holders of such Indebtedness
shall have no recourse to other property or assets of the Company or
its Subsidiaries to satisfy such Indebtedness;
(d) Indebtedness of the Company or its Subsidiaries to the
Student Loan Marketing Association incurred in accordance with part B
of Title V of the Higher Education Act of 1965, as amended (the
"Student Loan Act"), provided that the
- 27 -
proceeds of such Indebtedness shall have been used only for the purpose
of making or purchasing loans pursuant to the terms of the Student Loan
Act; or
(e) Indebtedness of the Company or its Subsidiaries to any
Federal Intermediate Credit Bank pursuant to the terms of the Farm
Credit Act, as amended (the "Farm Credit Act"), provided that the
proceeds of such Indebtedness shall be used only for the purpose of
making or purchasing agricultural loans pursuant to the terms of the
Farm Credit Act.
"Indebtedness": as applied to any Person, without duplication, (i) any
liability, contingent or otherwise, of such person (A) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
person or only to a portion thereof), (B) evidenced by a note, debenture or
similar instrument or letter of credit (including purchase money obligations but
excluding undrawn documentary letters of credit for trade payables arising in
the ordinary course of business), or (C) for the payment of money relating to a
capitalized lease obligation (within the meaning of generally accepted
accounting principles) or other obligation relating to the deferred purchase
price of property (other than trade payables or accrued liabilities arising in
the ordinary course of business); (ii) any liability of others of the kind
described in the preceding Clause (i) which the person has guaranteed or which
is otherwise its legal liability; (iii) any obligation secured by a lien to
which the property or assets of such person are subject, whether or not the
obligations secured thereby shall have been assumed by or shall otherwise be
such person's legal liability (the amount of such obligation being deemed to be
the lesser of the fair value of such property or asset or the amount of the
obligation so secured); and (iv) any and all deferrals, renewals, extensions and
refundings of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (i), (ii) or (iii).
"Investment": with respect to any Person, any direct or indirect
advance, loan or other extension of credit to (including any guarantee of a loan
or other extension of credit) or investment in, capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others or otherwise), or purchase
of capital stock, bonds, notes, debentures or other securities issued by, any
other person.
"Lien": the meaning specified in Section 12.
"Make-Whole Amount": in connection with any prepayment or acceleration
of the Note, the excess, if any, of (i) the aggregate present value as of the
date of such prepayment or acceleration of each dollar of principal being
prepaid or accelerated and the amount of interest (exclusive of interest accrued
to the date of prepayment or acceleration) that would have been payable in
respect of such dollar if such prepayment had not been made, determined by
discounting such amounts at the Reinvestment Rate from the respective dates
- 28 -
on which they would have been payable, over (ii) 100% of the principal amount of
the outstanding Note being prepaid or accelerated. If the Reinvestment Rate is
equal to or higher than the interest rate of the Note being prepaid or
accelerated, the Make-Whole Amount shall be zero.
"Note": the meaning specified in Section 1.
"Officers' Certificate": a certificate executed on behalf of the
Company by its President or one of its Vice Presidents and its Treasurer or one
of its Assistant Treasurers.
"Person": a corporation, an association, a partnership, a joint
venture, a joint stock company, a trust, an organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
"Preferred Stock": any class of capital stock having a preferred right
over any other class of capital stock of the same issuer to receive a preferred
dividend on a cumulative basis or to receive a fixed distribution upon
liquidation.
"Reinvestment Rate": .50% plus the arithmetic mean of the two yields
under the heading "Week Ending" published in the Statistical Release under the
caption "Treasury Constant Maturities" for the maturity (rounded to the nearest
month) corresponding to the remaining term of the Note being prepaid. If no
maturity exactly corresponds to such remaining term, yields for the published
maturity next longer than the remaining term and for the published maturity next
shorter than the remaining term shall be calculated pursuant to the immediately
preceding sentence and the Reinvestment Rate shall be interpolated from such
yields on a straight-line basis, rounding in each of such relevant periods to
the nearest month. For the purposes of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of determination of
the Make-Whole Amount shall be used.
"Restricted Payment": any of the following: (i) the declaration or
payment of any dividend or any other distribution on Common Stock of the Company
or any Subsidiary of the Company or any payment made to the direct or indirect
holders (in their capacities as such) of Common Stock of the Company or any
Subsidiary of the Company (other than (x) dividends or distributions payable
solely in Common Stock or in options, warrants or other rights to purchase
Common Stock and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly-Owned Subsidiary of the
company), (ii) the purchase, redemption or other acquisition or retirement for
value of any Common Stock of the Company or any of its Subsidiaries, (iii) the
making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, of any
Indebtedness of the Company which is subordinated in right of payment to the
Note (other than Indebtedness of the Company acquired in anticipation of
- 29 -
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition), and (iv) the
making of any Investment.
"Significant Subsidiary": (i) ▇▇▇▇▇▇▇ County Bank and Trust Company,
(ii) Bank of Maryland, and (iii) any other Subsidiary having average total
assets, determined in accordance with generally accepted accounting principles
on a basis consistent with that employed in the preparation of the financial
statements referred to in Section 5(e), in an amount not less than 15% of
Average Total Assets, provided, however, that in calculating the ratio with
respect to any Subsidiary other than ▇▇▇▇▇▇▇ County Bank and Trust Company and
Bank of Maryland pursuant to (iii), the assets of such other Subsidiary shall
not be included in the denominator.
"Statistical Release": the then most recently published statistical
release designated "H.15(510)" or any successor publication which is published
weekly by the Federal Reserve System and which establishes yields on actively
traded U.S. Government Securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination hereunder,
then such other reasonably comparable index which shall be delegated by the
holder of the Note.
"Subsidiary": (a) each of the entities listed as Subsidiaries in
Exhibit C attached hereto; (b) any other corporation or entity which is a "bank"
as that term is defined in the Bank Holding Company Act of 1956, as amended, or
other financial institution, of which more than 50% of the outstanding Voting
Stock (other than directors' qualifying shares) is at the time owned by the
Company or by one or more of its Subsidiaries or by the Company and one or more
of its Subsidiaries; and (c) any other entity which is at the time included as a
subsidiary or affiliate in the consolidated financial statements of the Company
in accordance with generally accepted accounting principles.
"Voting Stock": stock of a class having ordinary voting power to elect
a majority of the board of directors of the corporation in question,
irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency.
"Wholly-Owned": as applied to any Subsidiary, a Subsidiary all of the
outstanding ownership interests or shares (other than directors' qualifying
shares) of every class of which are at the time owned by the Company or by one
or more Wholly-Owned Subsidiaries or by the Company and one or more Wholly-Owned
Subsidiaries.
SECTION 25. EXPENSES, ETC.
Whether or not the transactions contemplated hereby shall be
consummated, the Company will pay (a) all the costs and expenses of the
preparation of this Agreement, of the preparation and issue of the Note, of any
taxes (including any penalties and interest) payable
- 30 -
on the Note (the Company hereby agreeing to indemnify you in respect thereof,
such agreement to survive payment of the Notes), of furnishing all opinions by
counsel for the Company (including any opinions requested by your special
counsel as to any legal matter arising hereunder) and all certificates on behalf
of the Company and of the Company's performance of and compliance with all
agreements and conditions herein on its part to be performed or complied with;
(b) the cost of delivering to your special address for payments specified in
Schedule I hereto, insured to your satisfaction, the Note purchased by you at
the Closing and any Note delivered to you upon any exchange or delivery pursuant
to Section 21; (c) all reasonable out-of-pocket expenses incurred by you in
connection with the transactions contemplated by this Agreement and any proposed
or actual amendments or waivers hereunder and any proposed or actual work-out or
restructuring of the Notes or this Agreement, including, for purposes of this
Clause (c), the reasonable fees and expenses of your counsel. The Company will
also pay any broker's fee, finder's fee or commission payable in connection
herewith by reason of any action taken by the Company and agrees to indemnify
and hold you harmless against any claim for any such fee or commission.
SECTION 26. SURVIVAL OF AGREEMENTS, ETC.
All agreements, representations and warranties contained herein or made
in writing by or on behalf of the Company in connection with the transactions
contemplated hereby shall survive the execution and delivery of this Agreement,
any investigation at any time made by you or on your behalf, and the sale and
purchase of the Note and payment therefor and any sale or other disposition of
the Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant hereto or in connection with
the transactions contemplated hereby shall be deemed representations and
warranties of the Company hereunder, as well as of the individual making the
same.
SECTION 27. AMENDMENTS AND WAIVERS.
Any term of this Agreement or of the Note may be amended and the
observance of any term of this Agreement or of the Note may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the holders of at least 50% of the then
outstanding principal amount of the Note and that of the Company. Any amendment
or waiver effected in accordance with this Section 27 shall be binding upon you,
any future holder of the Note and the Company.
SECTION 28. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Note for your own account for
investment and not with a view to the distribution thereof or with any present
intention of selling any thereof, provided that the disposition thereof shall at
all times be within your control. You further represent and warrant that no part
of the funds to be used by you to purchase the Note
- 31 -
constitutes assets allocated to any separate account (as such term is defined in
Section 3 of ERISA) maintained by you. You will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of the
Note (each such action, a "Transfer") unless such Transfer is pursuant to an
available exemption from the registration provisions of the Securities Act of
1933, as amended, and the rules and regulations in effect thereunder (the
"Act"), and such Transfer is otherwise in compliance with all applicable state
or foreign securities laws. You acknowledge that (a) neither the offer nor sale
of the Note have been registered under the Act or any state or foreign
securities laws; (b) the Note is a "restricted security" under the Act; (c)
except pursuant to an available exemption from the registration provisions of
the Act and the applicable state or foreign securities laws, you may be required
to hold the Note indefinitely and to bear the economic risk of the investment in
the Note unless the offer and sale of such Note is subsequently registered under
the Act or an exemption from such registration thereafter becomes available and
all applicable state or foreign securities laws are complied with; and (d) it is
not anticipated that there will be any public market for the Note in the
foreseeable future. You represent that you are a "qualified institutional
buyer," as defined in the Act.
SECTION 29. PAYMENTS ON NOTES; NOTICE OF SALE, ETC.
So long as you or your nominee shall hold any Note, and notwithstanding
anything contained herein or in such Note to the contrary, the Company will pay
all sums becoming due on such Note for principal and interest as specified in
Schedule I hereto or at such other address as you may designate for such purpose
from time to time by written notice to the Company, without presentation of such
Note or making any notation thereon. Prior to any sale or other disposition of
any Note held by you or your nominee, you will endorse thereon (or on a paper
annexed thereto) the amount of principal paid or prepaid thereon and the last
date to which interest has been paid thereof.
SECTION 30. NOTICES, ETC.
All notices hereunder shall be in writing and shall be mailed by
registered mail, return receipt requested, addressed (a) if to you or your
nominee as holder of any Note, at:
TUNA & CO.
c/o State Street Bank & Trust
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or at such other address as you shall have furnished to the Company in writing,
or (b) if to any other holder of any Note, at such address as such holder shall
have furnished to the Company in writing, or, until any such holder so furnishes
an address to the Company, then to and at the address of the last holder of such
Note who has so furnished an address to the
- 32 -
Company, or (c) if to the Company, at its address as set forth at the beginning
of this Agreement, or at such other address as the Company shall have furnished
to you and each other holder of any Note in writing.
SECTION 31. REPRODUCTION OF DOCUMENTS.
This Agreement and all related documents, including (a) consents,
waivers and modifications which may subsequently be executed, (b) documents
received by you at the Closing (except the Note), and (c) financial statements,
certificates and other information previously or subsequently furnished to you,
may be reproduced by you by any complete and legible photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process and you
may destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction shall, to the extent permitted by
applicable law, be admissible in evidence as the original itself in any judicial
or administrative proceeding (whether or not the original is in existence and
whether or not the reproduction was made by you in the regular course of
business) and that any enlargement, facsimile or further reproduction of the
reproduction shall likewise be admissible in evidence.
SECTION 32. MISCELLANEOUS.
This Agreement and the Note shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland. This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not, and in particular, shall inure to the benefit of and be
enforceable by you or any subsequent holder or holders of the Note. Except as
stated in Section 26, this Agreement embodies the entire agreement and
understanding between you and the Company and supersedes all prior agreements
and understandings relating to the subject matter hereof. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof. This Agreement may be executed in any number of
counterparts, and by the different parties hereto on separate counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument.
- 33 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
WITNESS: ▇▇▇▇▇-▇▇▇▇▇ BANCSHARES, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL)
▇▇▇▇ ▇. ▇▇▇▇▇▇ (Name)
Vice President and Chief Financial Officer (Title)
[SIGNATURES CONTINUED ON NEXT PAGE]
- 34 -
WITNESS: ▇. ▇▇▇▇ PRICE NEW INCOME FUND, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Name)
Vice President (Title)
- 35 -
EXHIBIT A
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER
JURISDICTIONS OF THE UNITED STATES.
THIS NOTE IS NOT A DEPOSIT AND IS NOT INSURED BY A FEDERAL AGENCY.
▇▇▇▇▇-▇▇▇▇▇ BANCSHARES, INC.
7.48 % Senior Note due April 23, 2008
Issue Date: April 23, 1998
No. R-1 Principal Amount: $20,000,000
▇▇▇▇▇-▇▇▇▇▇ BANCSHARES, INC., a Maryland corporation (the "Company"),
for value received, hereby promises to pay to the order of:
***Tuna & Co.***
(the "Holder"), the principal sum of: TWENTY MILLION DOLLARS (the "Principal
Amount") on April 23, 2008, and to pay interest thereon at the rate of Seven and
48/100 percent (7.48 %) per annum, and, upon an Event of Default (as defined in
the Indenture), at a rate of 8.98 %, and to pay any premium due under the terms
of the Indenture. Interest on this Note will accrue from the date of issuance
until repayment of the principal and payment of all accrued interest and premium
in full and shall be computed on the basis of a 360-day year consisting of
twelve 30-day months.
The Company will pay accrued interest semi-annually in arrears on June
15 and December 15 of each year, commencing June 15, 1998 (each, a "Payment
Date"), to holders of record on the June 1 and December 1 (the "Record Date")
immediately preceding such Payment Date.
All payments or prepayments of principal and interest (and premium, if
any) and other sums due pursuant to this Note shall be made in lawful money of
the United States of America, with interest and principal payments to be made by
wire transfer of immediately available funds to such account as shown on
Schedule I of the Indenture or as shall have previously been designated to the
Company in writing not later than two (2) Business Days (as defined below) prior
to the date on which such payment becomes due.
If the due date of any payment under this Note would otherwise fall on
a day which is not a Business Day, such date will be extended to the immediately
succeeding Business Day and interest shall be payable at the rate set forth
herein for the period of the extension. The term
"Business Day" shall mean any day on which commercial banks in the State of
Maryland are not authorized or required to close.
The payment of the Principal Amount of this Note will be payable only
upon surrender of this Note to the Company at its principal office or agency of
the Company maintained for such purpose.
This Note is governed by the Indenture of even date herewith between
the Company and ▇. ▇▇▇▇ Price New Income Fund, Inc.. (the "Indenture") and
reference is made to the Indenture for further terms, covenants and conditions
governing the terms and conditions for the payment of the Principal Amount of
and interest on this Note. The Holder, by accepting this Note, agrees to and
shall be bound by the provisions of the Indenture. All capitalized terms not
otherwise defined herein shall have the meanings assigned to them in the
Indenture.
The registered holder of this Note may be treated as the owner hereof
for all purposes. This Note is valid only when executed by a duly authorized
officer of the Company and attested to by its Corporate Secretary or Assistant
Secretary.
This Note shall be governed by the laws of the State of Maryland, and,
where applicable, the laws of the United States.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its Corporate Seal.
ATTEST: ▇▇▇▇▇-▇▇▇▇▇ BANCSHARES, INC.
_______________________________ By:_____________________________________
(Name and Title)
- 37 -
EXHIBIT B
OPINION OF ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ 23, 1998
▇. ▇▇▇▇ Price New Income Fund, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: $20,000,000 Senior Note issued by ▇▇▇▇▇-▇▇▇▇▇ Bancshares,
Inc. (the "Loan")
Ladies and Gentlemen:
We have acted as counsel to ▇▇▇▇▇-▇▇▇▇▇ Bancshares, Inc. (the
"Borrower") in connection with the above-referenced loan. We are furnishing this
opinion to you pursuant to Section 4d of that certain Indenture dated April ___,
1998 (the "Indenture"), by and between the Borrower and ▇. ▇▇▇▇ Price New Income
Fund, Inc. (the "Purchaser"). Capitalized terms used herein and not defined
shall have the meanings given to such terms in the Indenture.
In rendering this opinion we have examined, among other
things, executed originals or copies certified to our satisfaction of the
following documents (hereinafter called the "Loan Documents"):
a. the Indenture;
b. the Note of even date herewith from the Borrower made
payable to the Purchaser.
We have also examined the following documents and agreements:
a. the Articles of Incorporation and Bylaws of the
Borrower, as well as directors' resolutions, evidence
of good standing and such other certificates and
consents of the officers or representatives of the
Borrower (collectively, the "Organizational
Documents");
b. the certificate of Borrower, a copy of which is
attached hereto as Exhibit A (the "Certificate"); and
- 38 -
c. such other documents and matters as we have deemed
necessary and appropriate to render the opinions set
forth in this letter, subject to the limitations,
assumptions, and qualifications noted below.
In basing the opinions and other matters set forth herein on
"our knowledge," the words "our knowledge" signify that, in the course of our
representation of the Borrower in matters with respect to which we have been
engaged by the Borrower as counsel, no information has come to our attention
that would give us actual knowledge or actual notice that any such opinions or
other matters are not accurate in all material respects or that any of the
foregoing documents, certificates, reports, and information on which we have
relied are not accurate in all material respects and complete. The words "our
knowledge" and similar language used herein are intended to be limited to the
knowledge of the lawyers within our firm who we reasonably believe have
knowledge of the affairs of the Borrower.
In reaching the opinions set forth below, we have assumed, and
to our knowledge there are no facts inconsistent with, the following:
a. each of the parties to the Loan Documents (other than the
Borrower) has duly and validly executed and delivered each instrument, document,
and agreement executed in connection with the Loan to which such party is a
signatory, and such party's obligations set forth therein are its legal, valid,
and binding obligations, enforceable in accordance with their respective terms;
b. each person executing any such instrument, document or
agreement on behalf of any such party (other than the Borrower) is duly
authorized to do so;
c. each natural person executing any such instrument, document
or agreement is legally competent to do so;
d. there are no oral or written modifications of or amendments
to the Loan Documents, and there has been no waiver of any of the provisions of
the Loan Documents, by actions or conduct of the parties or otherwise;
e. all documents submitted to us as originals are authentic,
all documents submitted to us as certified or photostatic copies conform to the
original documents, all signatures on all documents (other than the Borrower)
submitted to us for examination are genuine, and all public records reviewed are
accurate and complete.
Based on our review of the foregoing and subject to the
assumptions and qualifications set forth herein, it is our opinion that, as of
the date of this letter:
1. The Borrower is a corporation duly organized and validly
existing and in good standing under the laws of the State of Maryland.
- 39 -
2. The Borrower has the requisite power and authority to own
its current properties and conduct its business as now conducted, to borrow the
proceeds of the Loan and to execute and perform its obligations under the Loan
Documents.
3. The Loan Documents have been duly authorized by the
Borrower.
4. The Loan Documents have been duly executed and delivered by
the Borrower and constitute the valid and legally binding obligations of the
Borrower, enforceable against the Borrower in accordance with their terms,
subject to the following:
i) applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws affecting the rights of
creditors generally; and
ii) the exercise of judicial discretion in accordance
with general principles of equity and by concepts
of materiality, unconscionability, reasonableness,
good faith and fair dealing.
5. The execution and delivery of, and the performance of the
obligations under, the Loan Documents (i) will not conflict with the Borrower's
charter or bylaws, and (ii) to our knowledge, will not cause a violation, breach
or default under any other agreement or document to which the Borrower is a
party, and (iii) to our knowledge, will not conflict with or result in the
breach of any court decree or order of any governmental body binding on the
Borrower, or any statute, law, regulation or rule applicable to the Borrower, so
as to have a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of the Borrower.
6. Based upon the Certificate and our knowledge, other than
the filing of a proper Form D in accordance with Rule 503 of Regulation D and
any consent, approval or filing required under any state securities or Blue Sky
laws, the Borrower has taken all actions, and obtained all consents, approvals,
authorizations, and made all filings with all governmental authorities which are
required for the execution and delivery of the Loan Documents.
7. To our knowledge, and otherwise as based solely upon the
Certificate, there is no litigation, arbitration, or mediation pending before
any court, arbitrator, mediator, or administrative body, or threatened, against
the Borrower, or any of its properties, challenging the enforceability of the
Loan Documents.
8. Assuming that a proper Form D is filed in accordance with
Rule 503 of Regulation D and that the representations of the Purchaser in the
Indenture are true and correct (which fact will not be independently verified by
us), the offering, issuance and sale of the Note has complied with all
applicable requirements of the Securities Act of 1933.
The opinions set forth above are subject to the following
additional qualifications:
- 40 -
We express no opinion with respect to the enforceability of
(i) any self-help and nonjudicial remedies provided or reserved to the Purchaser
in the Loan Documents; (ii) any provisions of the Loan Documents which could be
construed to restrict the transferability of interests in Borrower; (iii) any
provisions of the Loan Documents imposing penalties, forfeitures, higher rates
of interest and/or late payments in the event of a default or upon a delinquency
in payment; (iv) any provisions of the Loan Documents restricting (or, in the
case of remedies, purporting to assure) the availability of legal or equitable
remedies or defenses; (v) any provisions of the Loan Documents purporting to
establish evidentiary standards; (vi) any provisions of the Loan Documents
purporting to waive any rights of Borrower; (vii) any provisions of the Loan
Documents relating to delay or omission of enforcement of remedies; (viii) any
provisions of the Loan Documents relating to the appointment of a receiver; (ix)
any provisions of the Loan Documents regarding severability; or (x) any
provisions of the Loan Documents purporting to waive unmatured rights.
The foregoing opinions are limited to the laws of the State of
Maryland and the laws of the United States and we do not express any opinion
herein concerning any other law. We assume no obligation to supplement this
opinion if any applicable laws change after the date hereof or if we become
aware of any facts that might change the opinions expressed herein after the
date hereof. The opinions set forth in this letter are limited to the matter set
forth in this letter and no other opinion should be inferred beyond the matters
expressly stated.
This opinion is being furnished to the Purchaser and its
counsel, solely for the Purchaser's benefit in connection with the transactions
contemplated by the Loan Documents.
This letter is to be interpreted in accordance with the Report
of the Special Joint Committee on Lawyers' Opinions in Commercial Transactions
of the Maryland State Bar Association, Inc. and The Bar Association of Baltimore
City dated January 18, 1989.
Very truly yours,
▇▇▇▇▇▇, FEINBLATT, ROTHMAN,
HOFFBERGER & ▇▇▇▇▇▇▇▇▇, LLC
By: __________________________________________
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
- 41 -
EXHIBIT C
SUBSIDIARIES
▇▇▇▇▇▇▇ County Bank and Trust Company, MD, 100%
Bank of Maryland, MD, 100% owned by ▇▇▇▇▇-▇▇▇▇▇ Merger Sub, Inc.
▇▇▇▇▇-▇▇▇▇▇ Merger Sub, Inc., MD, 100%
Carrollco Insurance, Inc., MD, 100% owned by ▇▇▇▇▇▇▇ County Bank
Skylight Investment Corporation, DEL, 100% owned by ▇▇▇▇▇▇▇ County Bank
▇▇▇▇ ▇▇▇▇▇▇ Loans, LLC, MD, 100%
Bay Insurance, LLC, MD, 100%
▇▇▇▇▇-▇▇▇▇▇ Capital Trust, DEL, common stock 100% owned by the Company,
preferred stock owned by investors
Concurrently with issuance of the Note, ▇▇▇▇▇-▇▇▇▇▇ Capital Trust, DEL, common
stock 100% owned by the Company, preferred stock owned by investors, is in the
process of formation
- 42 -
EXHIBIT D
FUNDED INDEBTEDNESS
▇▇▇▇▇-▇▇▇▇▇ Capital Trust: $20,000,000 in Junior Subordinated Deferrable
Interest Debentures issued by the Company in connection with the issuance by
▇▇▇▇▇-▇▇▇▇▇ Capital Trust of preferred securities.
Loan from NationsBank, N.A., et al to ▇▇▇▇ ▇▇▇▇▇▇ Loans, LLC, Guaranteed by the
Company, in the principal amount of $38,000,000 dated February 11, 1998
Concurrently with issuance of the Note, ▇▇▇▇▇-▇▇▇▇▇ Capital Trust II is in the
process of formation. $20,000,000 in Junior Subordinated Deferrable Interest
Debentures will be issued by the Company in connection with the issuance by
▇▇▇▇▇-▇▇▇▇▇ Capital Trust II of preferred securities.
- 43 -
EXHIBIT E
LIENS
Blanket security interest in all assets of ▇▇▇▇ ▇▇▇▇▇▇ Loans, LLC, securing loan
from NationsBank, N.A., et al, to ▇▇▇▇ ▇▇▇▇▇▇ Loans, LLC, Guaranteed by the
Company, in the principal amount of $38,000,000 dated February 11, 1998
- 44 -
EXHIBIT F
TRADEMARK CONFLICTS
Certain activities of ▇▇▇▇▇▇▇ County Bank and Trust Company and Bank of Maryland
are conducted under trade names using "▇▇▇▇▇-▇▇▇▇▇" as part of the trade name.
Other entities have used "▇▇▇▇▇- ▇▇▇▇▇" in connection with financial services
prior in time to the use by ▇▇▇▇▇▇▇ County Bank and Trust Company and Bank of
Maryland. ▇▇▇▇▇▇▇ County Bank and Trust Company is in negotiations with these
entities to purchase the rights in these trade names.
- 45 -