AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
F&M BANCORP
AND
MONOCACY BANCSHARES, INC.
DATED AS OF SEPTEMBER 4, 1998
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 4, 1998, by
and between F&M Bancorp, a Maryland corporation ("Buyer"), and Monocacy
Bancshares, Inc., a Maryland corporation (the "Company"). (Buyer and the
Company are sometimes collectively referred to herein as the "Constituent
Corporations".)
WHEREAS, the Boards of Directors of Buyer and the Company have
determined that it is in the best interests of their respective companies
and their stockholders to consummate the business combination transaction
provided for herein in which the Company will, subject to the terms and
conditions set forth herein, merge (the "Merger") with and into Buyer; and
WHEREAS, as soon as practicable after the execution and delivery
of this Agreement, Farmers & Mechanics National Bank, a banking association
organized under the laws of the United States and a wholly owned subsidiary
of Buyer ("Buyer Bank," and sometimes referred to herein as the "Surviving
Bank"), and Taneytown Bank & Trust Company, a Maryland-chartered commercial
bank and a wholly owned subsidiary of the Company (the "Company Bank"),
will enter into a Subsidiary Agreement and Plan of Merger in substantially
the form set forth on Exhibit A hereto (the "Bank Merger Agreement")
providing for the merger (the "Subsidiary Merger") of the Company Bank with
and into Buyer Bank, and it is intended that the Subsidiary Merger be
consummated immediately following the consummation of the Merger; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that
the Merger will be accounted for as a pooling of interests transaction.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending
to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the Maryland General Corporation Law (the
"MGCL"), at the Effective Time (as defined in Section 1.2 hereof), the
Company shall merge with and into Buyer. Buyer shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") in
the Merger, and shall continue its corporate existence under the laws of
the State of Maryland. The name of the Surviving Corporation shall
continue to be F&M Bancorp. Upon consummation of the Merger, the separate
corporate existence of the Company shall terminate.
1.2. Effective Time. The Merger shall become effective as set
forth in the articles of merger (the "Articles of Merger") which shall be
filed with the State Department of Assessments and Taxation (the
"Department") on the Closing Date (as defined in Section 10.1 hereof). The
term "Effective Time" shall be the date and time when the Merger becomes
effective, as set forth in the Articles of Merger.
1.3. Effects of the Merger. At and after the Effective Time,
the Merger shall have the effects set forth in Section 3-114 of the MGCL.
1.4. Conversion of Company Common Stock. (a) At the Effective
Time, subject to Section 2.2(e) hereof, each share of the common stock, par
value $5.00 per share, of the Company (the "Company Common Stock") issued
and outstanding immediately prior to the Effective Time (other than shares
of Company Common Stock held directly or indirectly by Buyer or the Company
or any of their respective Subsidiaries (as defined below) (except for
Trust Account Shares and DPC Shares, as such terms are defined in Section
1.4(b) hereof)) shall, by virtue of this Agreement and without any action
on the part of the holder thereof, be converted into and exchangeable for a
number of shares of the common stock, par value $5.00 per share, of Buyer
("Buyer Common Stock") equal to the quotient obtained by dividing the Share
Number (as hereinafter defined) by the number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time (such
quotient being hereinafter referred to as the "Exchange Ratio"). The
"Share Number" shall be 2,219,753, provided, however, that (i) if the
Average Closing Price (as hereinafter defined) is less than $34.425 then
the Share Number shall be increased to the extent necessary so that the
product of the Share Number and the Average Closing Price shall equal
$76,415,000, provided, that in no event shall the Share Number be greater
than 2,281,753, and (ii) if the Average Closing Price is greater than
$46.575, then the Share Number shall be reduced to the extent necessary so
that the product of the Share Number and the Average Closing Price shall
equal $103,384,996, provided, that in no event shall the Share Number be
less than 2,157,753. As used herein, "Average Closing Price" shall mean
the average of the last reported sale prices per share of Buyer Common
Stock as reported on The Nasdaq Market's National Market ("Nasdaq/NMS") (as
reported in The Wall Street Journal or, if not reported therein, in another
mutually agreed upon authoritative source) for the 15 consecutive trading
days ending on the fifth business day prior to the Closing Date (as
hereinafter defined). All of the shares of Company Common Stock converted
into Buyer Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist,
and each certificate (each a "Certificate") previously representing any
such shares of Company Common Stock shall thereafter only represent the
right to receive (i) the number of whole shares of Buyer Common Stock and
(ii) the cash in lieu of fractional shares into which the shares of Company
Common Stock represented by such Certificate have been converted pursuant
to this Section 1.4(a) and Section 2.2(e) hereof. Certificates previously
representing shares of Company Common Stock shall be exchanged for
certificates representing whole shares of Buyer Common Stock and cash in
lieu of fractional shares issued in consideration therefor upon the
surrender of such Certificates in accordance with Section 2.2 hereof,
without any interest thereon. If, between the date of this Agreement and
the Effective Time, the outstanding shares of Buyer Common Stock shall be
changed into a different number or class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or a stock dividend thereon shall be declared with
a record date within said period, the Exchange Ratio shall be adjusted
accordingly.
(b) At the Effective Time, all shares of Company Common
Stock that are owned directly or indirectly by Buyer or the Company or any
of their respective Subsidiaries (other than shares of Company Common Stock
(x) held directly or indirectly in trust accounts, managed accounts and the
like or otherwise held in a fiduciary capacity for the benefit of third
parties (any such shares, and shares of Buyer Common Stock which are
similarly held, whether held directly or indirectly by Buyer or the
Company, as the case may be, being referred to herein as "Trust Account
Shares") and (y) held by Buyer or the Company or any of their respective
Subsidiaries in respect of a debt previously contracted (any such shares of
Company Common Stock, and shares of Buyer Common Stock which are similarly
held, whether held directly or indirectly by Buyer or the Company, being
referred to herein as "DPC Shares")) shall be cancelled and shall cease to
exist and no stock of Buyer or other consideration shall be delivered in
exchange therefor. All shares of Buyer Common Stock that are owned by the
Company or any of its Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become authorized but unissued shares of Buyer Common Stock.
1.5. Stock Options. (a) At the Effective Time, each option
granted by the Company (a "Company Option") to purchase shares of Company
Common Stock which is outstanding and unexercised (whether vested or
unvested) immediately prior thereto shall be assumed by Buyer and converted
automatically into an option (a "Buyer Option") to purchase shares of Buyer
Common Stock in an amount and at an exercise price determined as provided
below (and otherwise subject to the terms of the Company's 1994 Stock
Incentive Plan and the Company's 1997 Independent Directors' Stock Option
Plan (collectively, the "Company Plans")):
(1) the number of shares of Buyer Common Stock to be
subject to the new option shall be equal to the product of the
number of shares of Company Common Stock subject to the original
option and the Exchange Ratio, provided that any fractional
shares of Buyer Common Stock resulting from such multiplication
shall be rounded down to the nearest whole share; and
(2) the exercise price per share of Buyer Common Stock
under the new option shall be equal to the exercise price per
share of Company Common Stock under the original option divided
by the Exchange Ratio, provided that such exercise price shall be
rounded up to the nearest whole cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be
and is intended to be effected in a manner which is consistent with Section
424(a) of the Code and, to the extent it is not so consistent, such Section
424(a) shall override anything to the contrary contained herein. The
duration and other terms of the new option shall be the same as the
original option, except that all references to the Company shall be deemed
to be references to Buyer.
(b) Buyer shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Buyer Common Stock
for delivery upon exercise of Buyer Options, and, at or prior to the
Effective Time, Buyer shall file a registration statement on Form S-8 (or
other appropriate form) with respect to the shares of Buyer Common Stock
subject to Buyer Options, and shall use its best efforts to maintain the
effectiveness of such registration statement for so long as any Buyer
Options remain outstanding.
1.6. Buyer Common Stock. Except for shares of Buyer Common
Stock owned by the Company or any of its Subsidiaries (other than Trust
Account Shares and DPC Shares), which shall constitute authorized but
unissued shares of Buyer Common Stock as contemplated by Section 1.4
hereof, the shares of Buyer Common Stock issued and outstanding immediately
prior to the Effective Time shall be unaffected by the Merger and such
shares shall remain issued and outstanding.
1.7. Articles of Incorporation. At the Effective Time, the
Articles of Incorporation of Buyer, as in effect at the Effective Time,
shall be the Articles of Incorporation of the Surviving Corporation.
1.8. By-Laws. At the Effective Time, the By-Laws of Buyer, as
in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended in accordance with
applicable law.
1.9. Directors and Officers. Except as contemplated by Section
7.13 hereof, the directors and officers of Buyer immediately prior to the
Effective Time shall be the directors and officers of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
1.10. Tax Consequences; Accounting Treatment. It is intended
that the Merger shall (i) constitute a reorganization within the meaning of
Section 368(a) of the Code, and that this Agreement shall constitute a
"plan of reorganization" for purposes of Section 368 of the Code, and (ii)
be accounted for as a "pooling-of-interests" under GAAP (as defined
herein).
ARTICLE II
EXCHANGE OF SHARES
2.1. Buyer to Make Shares Available. At or prior to the
Effective Time, Buyer shall deposit, or shall cause to be deposited, with a
bank or trust company (which may be a Subsidiary of Buyer) (the "Exchange
Agent"), selected by Buyer and reasonably satisfactory to the Company, for
the benefit of the holders of Certificates, for exchange in accordance with
this Article II, certificates representing the shares of Buyer Common Stock
and the cash in lieu of fractional shares (such cash and certificates for
shares of Buyer Common Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange Fund")
to be issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in
exchange for outstanding shares of Company Common Stock.
2.2. Exchange of Shares. (a) As soon as practicable after the
Effective Time, and in no event more than five business days thereafter,
the Exchange Agent shall mail to each holder of record of a Certificate or
Certificates a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent)
advising such holder of the effectiveness of the Merger and instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing the shares of Buyer Common Stock and the cash in
lieu of fractional shares into which the shares of Company Common Stock
represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement. The Company shall have the right to review
both the letter of transmittal and the instructions not less than five (5)
business days prior to the Effective Time and provide reasonable comments
thereon. Upon surrender of a Certificate for exchange and cancellation to
the Exchange Agent, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole
shares of Buyer Common Stock to which such holder of Company Common Stock
shall have become entitled pursuant to the provisions of Article I hereof
and (y) a check representing the amount of cash in lieu of fractional
shares, if any, which such holder has the right to receive in respect of
the Certificate surrendered pursuant to the provisions of this Article II,
and the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on the cash in lieu of fractional shares
and unpaid dividends and distributions, if any, payable to holders of
Certificates.
(b) Whenever a dividend or other distribution is declared
by Buyer on Buyer Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares of Buyer Common Stock issuable pursuant to the
Merger. No dividends or other distributions declared at or after the
Effective Time with respect to Buyer Common Stock and payable to the
holders of record thereof shall be paid to the holder of any unsurrendered
Certificate until the holder thereof shall surrender such Certificate in
accordance with this Article II. After the surrender of a Certificate in
accordance with this Article II, the record holder thereof shall be
entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to
shares of Buyer Common Stock represented by such Certificate. No holder of
an unsurrendered Certificate shall be entitled, until the surrender of such
Certificate, to vote the shares of Buyer Common Stock into which his
Company Common Stock shall have been converted.
(c) If any certificate representing shares of Buyer Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
the issuance thereof that the Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and
otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other
taxes required by reason of the issuance of a certificate representing
shares of Buyer Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or required for any other reason, or
shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
(d) After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the shares of Company Common
Stock which were issued and outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates representing such shares
are presented for transfer to the Exchange Agent, they shall be cancelled
and exchanged for certificates representing shares of Buyer Common Stock as
provided in this Article II.
(e) Notwithstanding anything to the contrary contained
herein, no certificates or scrip representing fractional shares of Buyer
Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to Buyer Common
Stock shall be payable on or with respect to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote or
to any other rights of a stockholder of Buyer. In lieu of the issuance of
any such fractional share, Buyer shall pay to each former stockholder of
the Company who otherwise would be entitled to receive a fractional share
of Buyer Common Stock an amount in cash determined by multiplying (i) the
Average Closing Price by (ii) the fraction of a share of Buyer Common Stock
to which such holder would otherwise be entitled to receive pursuant to
Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains unclaimed
by the stockholders of the Company for six months after the Effective Time
shall be delivered by the Exchange Agent to Buyer. Any stockholders of the
Company who have not theretofore complied with this Article II shall
thereafter be entitled to look to Buyer for payment of their shares of
Buyer Common Stock, cash in lieu of fractional shares and unpaid dividends
and distributions on Buyer Common Stock deliverable in respect of each
share of Company Common Stock such stockholder holds as determined pursuant
to this Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of Buyer, the Company, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Company Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Buyer, the posting by such person of a bond in such amount as
Buyer reasonably may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the shares of
Buyer Common Stock, cash in lieu of fractional shares and unpaid dividends
and distributions deliverable in respect thereof pursuant to this
Agreement.
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
3.1. Disclosure Schedules. Prior to the execution and delivery
of this Agreement, the Company has delivered to Buyer, and Buyer has
delivered to the Company, a schedule (in the case of the Company, the
"Company Disclosure Schedule," and in the case of Buyer, the "Buyer
Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more of such party's representations or warranties
contained in Article IV, in the case of the Company, or Article V, in the
case of Buyer, or to one or more of such party's covenants contained in
Article VI; provided, however, that notwithstanding anything in this
Agreement to the contrary (a) no such item is required to be set forth in
the Disclosure Schedule as an exception to a representation or warranty if
its absence would not result in the related representation or warranty
being deemed untrue or incorrect under the standard established by Section
3.2, and (b) the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission
by a party that such item represents a material exception or material fact,
event or circumstance or that such item has had or would have a Material
Adverse Effect (as defined herein) with respect to either the Company or
Buyer, respectively.
3.2. Standards. (a) No representation or warranty of the
Company contained in Article IV or of Buyer in Article V shall be deemed
untrue or incorrect for any purpose under this Agreement, including for
purposes of Section 8.2(a) and Section 8.3(a), and no party hereto shall be
deemed to have breached a representation or warranty for any purpose under
this Agreement, in any case as a consequence of the existence or absence of
any fact, circumstance or event unless such fact, circumstance or event,
individually or when taken together with all other facts, circumstances or
events inconsistent with any representations or warranties contained in
Article IV, in the case of the Company, or Article V, in the case of Buyer,
has had or is reasonably likely to have a Material Adverse Effect with
respect to the Company or Buyer, respectively.
(b) As used in this Agreement, the term "Material Adverse
Effect" means, with respect to Buyer or the Company, as the case may be, a
material adverse effect on (i) the business, results of operations or
financial condition of such party and its Subsidiaries taken as a whole,
other than any such effect attributable to or resulting from (x) any change
in banking or similar laws, rules or regulations of general applicability
or interpretations thereof by courts or governmental authorities, (y) any
change in GAAP (as defined herein) or regulatory accounting principles
applicable to banks or their holding companies generally, or (z) any action
or omission of the Company or Buyer or any Subsidiary of either of them
taken with the prior written consent of the other party hereto or (ii) the
ability of such party and its Subsidiaries to consummate the transactions
contemplated hereby. As used in this Agreement, the word "Subsidiary" when
used with respect to any party means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated
with such party for financial reporting purposes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer as follows:
4.1. Corporate Organization. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland. The Company has the corporate power and authority to
own or lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such qualification necessary. The Company is duly registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended
(the "BHC Act"). The Articles of Incorporation and By-laws of the Company,
copies of which have previously been delivered to Buyer, are true, complete
and correct copies of such documents as in effect as of the date of this
Agreement.
(b) The Company Bank is a commercial bank duly organized,
validly existing and in good standing under the laws of the State of
Maryland. The deposit accounts of the Company Bank are insured by the
Federal Deposit Insurance Corporation (the "FDIC") through the Bank
Insurance Fund ("BIF") and/or the Savings Association Insurance Fund
("SAIF") to the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been paid when
due by the Company Bank. Each of the Company's other Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization. Each of the
Company's Subsidiaries has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it
is now being conducted and is duly qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or the location of the properties and assets owned or leased by
it makes such qualification necessary. Except as set forth in Section
4.1(b) of the Company Disclosure Schedule, the articles of incorporation,
by-laws and similar governing documents of each Subsidiary of the Company,
copies of which have previously been delivered to Buyer, are true, complete
and correct copies of such documents as in effect as of the date of this
Agreement.
(c) Except as set forth in Section 4.1(c) of the Company
Disclosure Schedule, the minute books of the Company and each of its
Subsidiaries contain true, complete and accurate records in all material
respects of all meetings and other corporate actions held or taken since
December 31, 1995 of their respective stockholders and Boards of Directors
(including committees of their respective Boards of Directors).
4.2. Capitalization. (a) The authorized capital stock of the
Company consists of 4,000,000 shares of Company Common Stock. As of the
date of this Agreement, there are (x) 1,799,005 shares of Company Common
Stock outstanding and (y) no shares of Company Common Stock reserved for
issuance upon exercise of outstanding stock options or otherwise except for
(i) 390,309 shares of Company Common Stock reserved for issuance pursuant
to the Company Option Plans and described in Section 4.2(a) of the
Disclosure Schedule which is being delivered to Buyer concurrently herewith
(the "Company Disclosure Schedule") and (ii) 358,002 shares of Company
Common Stock reserved for issuance upon exercise of the option issued to
Buyer pursuant to the Stock Option Agreement, dated September 4, 1998,
between Buyer and the Company (the "Company Option Agreement"). All of the
issued and outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, with no
personal liability attaching to the ownership thereof. Except as referred
to above or reflected in Section 4.2(a) of the Company Disclosure Schedule,
and except for the Company Option Agreement, the Company does not have and
is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of Company Common Stock or any other equity security
of the Company or any securities representing the right to purchase or
otherwise receive any shares of Company Common Stock or any other equity
security of the Company. The number of shares subject to each option to
purchase Company Common Stock granted and the price at which each such
option may be exercised are set forth in Section 4.2(a) of the Company
Disclosure Schedule. The names of the optionees, the date of each option
to purchase Company Common Stock granted, and the expiration date of each
such option under the Company Option Plans are set forth in Section 4.2(a)
of the Company Disclosure Schedule.
(b) Section 4.2(b) of the Company Disclosure Schedule sets
forth a true and correct list of all of the Subsidiaries of the Company.
Except as set forth in Section 4.2(b) of the Company Disclosure Schedule,
the Company owns, directly or indirectly, all of the issued and outstanding
shares of the capital stock of each of such Subsidiaries, free and clear of
all liens, charges, encumbrances and security interests whatsoever, and all
of such shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No Subsidiary of the Company has or is
bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of
such Subsidiary or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security
of such Subsidiary. Assuming compliance by Buyer with Section 1.5 hereof,
at the Effective Time, there will not be any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character by
which the Company or any of its Subsidiaries will be bound calling for the
purchase or issuance of any shares of the capital stock of the Company or
any of its Subsidiaries.
4.3. Authority; No Violation. (a) The Company has full
corporate power and authority to execute and deliver this Agreement and the
Company Option Agreement (this Agreement and the Company Option Agreement,
collectively, the "Company Documents") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of each of the
Company Documents and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved by the Board of
Directors of the Company. The Board of Directors of the Company has
directed that this Agreement and the transactions contemplated hereby be
submitted to the Company's stockholders for approval at a meeting of such
stockholders and, except for the approval of the Merger and this Agreement
by the requisite vote of the Company's stockholders, no other corporate
proceedings on the part of the Company are necessary to approve the Company
Documents and to consummate the transactions contemplated hereby and
thereby. Without limiting the foregoing, the Board of Directors of the
Company has adopted a resolution declaring that this Agreement, the Merger
and the transactions contemplated hereby and thereby are advisable on
substantially the terms set forth herein and that such proposed
transactions be submitted for consideration at a special meeting of the
stockholders of the Company. Each of the Company Documents has been duly
and validly executed and delivered by the Company and (assuming due
authorization, execution and delivery by Buyer) this Agreement constitutes
a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) The Company Bank has full corporate power and authority
to execute and deliver the Bank Merger Agreement and to consummate the
transactions contemplated thereby. The execution and delivery of the Bank
Merger Agreement and the consummation of the transactions contemplated
thereby will be duly and validly approved by the Board of Directors of the
Company Bank. Upon the due and valid approval of the Bank Merger Agreement
by the Board of Directors of the Company Bank and by the Company as the
sole stockholder of the Company Bank, no other corporate proceedings on the
part of the Company Bank will be necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and
delivery by the Company Bank, will be duly and validly executed and
delivered by the Company Bank and will (assuming due authorization,
execution and delivery by Buyer Bank) constitute a valid and binding
obligation of the Company Bank, enforceable against the Company Bank in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity
and by bankruptcy, insolvency and similar laws affecting creditors' rights
and remedies generally.
(c) Except as set forth in Section 4.3(c) of the Company
Disclosure Schedule, neither the execution and delivery of the Company
Documents by the Company or the Bank Merger Agreement by the Company Bank,
nor the consummation by the Company or the Company Bank, as the case may
be, of the transactions contemplated hereby or thereby, nor compliance by
the Company or the Company Bank, as the case may be, with any of the terms
or provisions hereof or thereof, will (i) violate any provision of the
Articles of Incorporation or By-Laws of the Company or the articles of
incorporation, by-laws or similar governing documents of any of its
Subsidiaries, or (ii) assuming that the consents and approvals referred to
in Section 4.4 hereof are duly obtained prior to the Effective Time, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to the Company or any of its
Subsidiaries, or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss
of any benefit under, constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of the Company or any of its Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party, or
by which they or any of their respective properties or assets may be bound
or affected.
4.4. Consents and Approvals. Except for (a) the filing of
applications and notices, as applicable, with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") under the BHC Act and
the Office of the Comptroller of the Currency under the Bank Merger Act and
approval of such applications and notices, (b) the filing with the
Securities and Exchange Commission (the "SEC") of a joint proxy statement
in definitive form relating to the meetings of the Company's stockholders
and Buyer's stockholders to be held in connection with this Agreement and
the transactions contemplated hereby (the "Proxy Statement") and the filing
and declaration of effectiveness of the registration statement on Form S-4
(the "S-4") in which the Proxy Statement will be included as a prospectus,
(c) the approval of the Merger and this Agreement by the requisite vote of
the stockholders of the Company, (d) the filing of the Articles of Merger
with the Department pursuant to the MGCL, (e) the filings required by or in
connection with the Bank Merger Agreement, (f) the approval of the Bank
Merger Agreement by the Company as the sole stockholder of the Company
Bank, (g) authorization for quotation of Buyer Common Stock to be issued in
the Merger on the Nasdaq/NMS, (h) approval of the transactions contemplated
by this Agreement and the Bank Merger Agreement by the Maryland
Commissioner of Financial Regulation and/or filings in connection therewith
pursuant to the Financial Institutions Article of the Annotated Code of
Maryland, (i) filings under state securities and blue sky laws, (j) filings
with or approvals of the State Insurance Commissioner and (k) such filings,
authorizations or approvals as may be set forth in Section 4.4 of the
Company Disclosure Schedule, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") or
with any third party are necessary in connection with (1) the execution and
delivery by the Company of the Company Documents, (2) the consummation by
the Company of the Merger and the other transactions contemplated hereby
and thereby, (3) the execution and delivery by the Company Bank of the Bank
Merger Agreement, and (4) the consummation by the Company Bank of the
Subsidiary Merger and the transactions contemplated thereby.
4.5. Reports. The Company and each of its Subsidiaries have
timely filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1995 with (i) the Federal Reserve
Board, (ii) the FDIC, (iii) any state banking commissions or any other
state regulatory authority (each a "State Regulator") and (iv) the National
Association of Securities Dealers, Inc. and any other self-regulatory
organization ("SRO") (collectively, the "Regulatory Agencies"), and have
paid all fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a Regulatory Agency in the
regular course of the business of the Company and its Subsidiaries, and
except as set forth in Section 4.5 of the Company Disclosure Schedule, no
Regulatory Agency has initiated any proceeding or investigation into the
business or operations of the Company or any of its Subsidiaries since
December 31, 1995. There is no unresolved material violation, criticism,
or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of the Company or any of its
Subsidiaries.
4.6. Financial Statements. The Company has previously made
available to Buyer copies of (a) the consolidated balance sheets of Company
and its Subsidiaries as of December 31 for the fiscal years 1996 and 1997,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the fiscal years 1995 through 1997, inclusive, as
reported in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997 filed with the SEC under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), in each case accompanied by
the audit report of ▇▇▇▇▇▇▇ & Company, independent public accountants with
respect to the Company, and (b) the unaudited consolidated statements of
financial condition of the Company and its Subsidiaries as of June 30, 1998
and June 30, 1997 and the related unaudited consolidated statements of
income and comprehensive income, stockholders' equity and cash flows for
the six-month periods then ended as reported in the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1998 filed with the SEC
under the Exchange Act. The December 31, 1997 consolidated balance sheet
of the Company (including the related notes, where applicable) fairly
presents the consolidated financial position of the Company and its
Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 4.6 (including the related notes, where
applicable) fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount),
and the financial statements to be filed with the SEC after the date hereof
will fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the results of
the consolidated operations and consolidated financial position of the
Company and its Subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth; each of such statements (including the
related notes, where applicable) comply, and the financial statements to be
filed with the SEC after the date hereof will comply, with applicable
accounting requirements and with the published rules and regulations of the
SEC with respect thereto; and each of such statements (including the
related notes, where applicable) has been, and the financial statements to
be filed with the SEC after the date hereof will be, prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied
during the periods involved, except as indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Form 10-Q. The books
and records of the Company and its Subsidiaries have been, and are being,
maintained in accordance with applicable legal and accounting requirements.
4.7. Broker's Fees. Neither the Company nor any Subsidiary of
the Company nor any of their respective officers or directors has employed
any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by the Company Documents or the Bank Merger Agreement, except
that the Company has engaged, and will pay a fee or commission to, RP
Financial LC in accordance with the terms of a letter agreement between RP
Financial LC and the Company, a true, complete and correct copy of which
has been previously delivered by the Company to Buyer.
4.8. Absence of Certain Changes or Events. (a) Except as may
be set forth in Section 4.8(a) of the Company Disclosure Schedule and
except in connection with the execution of the Company Documents and the
Bank Merger Agreement, or as disclosed in any Company Report (as defined in
Section 4.12) filed with the SEC prior to the date of this Agreement, since
December 31, 1997, there has been no change or development or combination
of changes or developments which, individually or in the aggregate, has had
or is reasonably likely to have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 4.8(b) of the Company
Disclosure Schedule and except in connection with the execution of the
Company Documents and the Bank Merger Agreement, since December 31, 1997,
the Company and its Subsidiaries have carried on their respective
businesses in the ordinary course consistent with their past practices.
(c) Except as set forth in Section 4.8(c) of the Company
Disclosure Schedule, since June 30, 1998, neither the Company nor any of
its Subsidiaries has (i) increased the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any executive
officer, employee, or director from the amount thereof in effect as of June
30, 1998 (which amounts have been previously disclosed to Buyer), granted
any severance or termination pay, entered into any contract to make or
grant any severance or termination pay, or paid any bonus other than year-
end bonuses for fiscal 1998 as listed in Section 4.8 of the Company
Disclosure Schedule, (ii) suffered any strike, work stoppage, slow-down, or
other labor disturbance, (iii) been a party to a collective bargaining
agreement, contract or other agreement or understanding with a labor union
or organization, or (iv) had any union organizing activities.
4.9. Legal Proceedings. (a) Except as set forth in Section 4.9
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any, and there are no pending or, to the
Company's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations
of any nature against the Company or any of its Subsidiaries or challenging
the validity or propriety of the transactions contemplated by any of the
Company Documents or the Bank Merger Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon the Company, any of its Subsidiaries or
the assets of the Company or any of its Subsidiaries.
4.10. Taxes. (a) Except as set forth in Section 4.10(a) of the
Company Disclosure Schedule, each of the Company and its Subsidiaries (i)
has duly and timely filed (including applicable extensions granted without
penalty) all Tax Returns (as hereinafter defined) required to be filed on
or prior to the date hereof and will duly and timely file all Tax Returns
after the date hereof and prior to the Effective Time, and such Tax Returns
are or will be true, correct and complete, and (ii) has paid or will pay in
full or to the extent necessary made or will make adequate provision in the
financial statements of the Company (in accordance with GAAP) for all Taxes
(as hereinafter defined). Except as set forth in Section 4.10(a) of the
Company Disclosure Schedule, no deficiencies for any Taxes have been
proposed, asserted, assessed or, to the knowledge of the Company,
threatened against or with respect to the Company or any of its
Subsidiaries. Except as set forth in Section 4.10(a) of the Company
Disclosure Schedule, (i) there are no liens for Taxes upon the assets of
either the Company or its Subsidiaries except for statutory liens for
current Taxes not yet due, (ii) neither the Company nor any of its
Subsidiaries has requested any extension of time within which to file any
Tax Returns in respect of any fiscal year which have not since been filed
and no request for waivers of the time to assess any Taxes are pending or
outstanding, (iii) with respect to each taxable period of the Company and
its Subsidiaries, the federal and state income Tax Returns of the Company
and its Subsidiaries have been audited by the Internal Revenue Service or
appropriate state tax authorities or the time for assessing and collecting
income Tax with respect to such taxable period has closed and such taxable
period is not subject to review, (iv) neither the Company nor any of its
Subsidiaries has filed or been included in a combined, consolidated or
unitary income Tax Return other than one in which the Company was the
parent of the group filing such Tax Return, (v) neither the Company nor any
of its Subsidiaries is a party to any agreement providing for the
allocation or sharing of Taxes (other than the allocation of federal income
taxes as provided by Regulation 1.1552-1(a)(1) under the Code), (vi)
neither the Company nor any of its Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code (or any
similar or corresponding provision or requirement of state, local or
foreign income Tax law), by reason of the voluntary change in accounting
method (nor has any taxing authority proposed in writing any such
adjustment or change of accounting method), (vii) neither the Company nor
any of its Subsidiaries has filed a consent pursuant to Section 341(f) of
the Code, (viii) neither the Company nor any of its Subsidiaries has made
any payment or will be obligated to make any payment (by contract or
otherwise) which will not be deductible by reason of Section 280G of the
Code and (ix) none of the Company, any of its Subsidiaries or any entity
acquired by the Company or its Subsidiaries is or was (a) a domestic
building and loan association, (b) a mutual savings bank or (c) a
cooperative bank without capital stock organized and operated for mutual
purposes and without profit, which has taken a deduction for additions to a
reserve for bad debts under Section 593 of the Code.
(b) For the purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies, penalties or other assessments imposed by
any United States federal, state, local or foreign taxing authority,
including, but not limited to income, excise, property, sales, transfer,
franchise, payroll, withholding, social security or other taxes, including
any interest, penalties or additions attributable thereto. For purposes of
this Agreement, "Tax Return" shall mean any return, report, information
return or other document (including any related or supporting information)
with respect to Taxes.
4.11. Employees. (a) Section 4.11(a) of the Company Disclosure
Schedule sets forth a true and complete list of each deferred compensation
plan, incentive compensation plan, equity compensation plan, "welfare"
plan, fund or program (within the meaning of section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")); "pension"
plan, fund or program (within the meaning of section 3(2) of ERISA); each
employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that
is sponsored, maintained or contributed to or required to be contributed to
(the "Plans") by the Company, any of its Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with the Company would be deemed a "single employer" within the
meaning of Section 4001 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), for the benefit of any employee or former
employee of the Company, any Subsidiary or any ERISA Affiliate.
(b) The Company has heretofore made available to Buyer true
and complete copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial report for such Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the Internal Revenue Service (if applicable) for
such Plan.
(c) Except as set forth in Section 4.11(c) of the Company
Disclosure Schedule, (i) each of the Plans has been operated and
administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code, (ii) each
of the Plans intended to be "qualified" within the meaning of Section
401(a) of the Code either (1) has received a favorable determination letter
from the IRS, or (2) is or will be the subject of an application for a
favorable determination letter, and the Company is not aware of any
circumstances likely to result in the revocation or denial of any such
favorable determination letter, (iii) with respect to each Plan which is
subject to Title IV of ERISA, the present value of accrued benefits under
such Plan, based upon the actuarial assumptions used for funding purposes
in the most recent actuarial report prepared by such Plan's actuary with
respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current
or former employees of the Company, its Subsidiaries or any ERISA Affiliate
beyond their retirement or other termination of service, other than (w)
coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in
Section 3(2) of ERISA, (y) deferred compensation benefits accrued as
liabilities on the books of the Company, its Subsidiaries or the ERISA
Affiliates or (z) benefits the full cost of which is borne by the current
or former employee (or his beneficiary), (v) no liability under Title IV of
ERISA has been incurred by the Company, its Subsidiaries or any ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to the Company, its Subsidiaries or an ERISA
Affiliate of incurring a material liability thereunder, (vi) no Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA, (vii) all contributions or other amounts payable by the Company, its
Subsidiaries or any ERISA Affiliates as of the Effective Time with respect
to each Plan in respect of current or prior plan years have been paid or
accrued in accordance with generally accepted accounting practices and
Section 412 of the Code, (viii) neither the Company, its Subsidiaries nor
any ERISA Affiliate has engaged in a transaction in connection with which
the Company, its Subsidiaries or any ERISA Affiliate could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a tax imposed pursuant to Section 4975 or 4976 of the Code, (ix) there
are no pending, or, to the best knowledge of the Company, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf
of or against any of the Plans or any trusts related thereto and (x) the
consummation of the transactions contemplated by this Agreement or the Bank
Merger Agreement will not (y) entitle any current or former employee or
officer of the Company or any ERISA Affiliate to severance pay, termination
pay or any other payment or benefit, except as expressly provided in this
Agreement or (z) accelerate the time of payment or vesting or increase the
amount or value of compensation or benefits due any such employee or
officer.
4.12. SEC Reports. The Company has previously made available to
Buyer an accurate and complete copy of each (a) final registration
statement, prospectus, report, schedule and definitive proxy statement
filed since January 1, 1996 by the Company with the SEC pursuant to the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange
Act (the "Company Reports") and (b) communication mailed by the Company to
its stockholders since January 1, 1996, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made,
not misleading, except that information as of a later date shall be deemed
to modify information as of an earlier date. Except as set forth in
Section 4.12 of the Company Disclosure Schedule, the Company has timely
filed all Company Reports and other documents required to be filed by it
under the Securities Act and the Exchange Act, and, as of their respective
dates, all Company Reports complied with the published rules and
regulations of the SEC with respect thereto.
4.13. Company Information. The information relating to the
Company and its Subsidiaries which is provided to Buyer by the Company
specifically for inclusion in the Proxy Statement and the S-4, or in any
other document filed with any other regulatory agency in connection
herewith, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light
of the circumstances in which they are made, not misleading.
4.14. Compliance with Applicable Law. The Company and each of
its Subsidiaries hold, and have at all times held, all licenses,
franchises, permits and authorizations necessary for the lawful conduct of
their respective businesses under and pursuant to all, and have complied
with and are not in default in any respect under any, applicable law,
statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries has received notice of, any
violations of any of the above.
4.15. Certain Contracts. (a) Except as set forth in Section
4.15(a) of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is a party to or bound by any contract, arrangement,
commitment or understanding (whether written or oral) (i) with respect to
the employment of any directors, officers, employees or consultants, (ii)
which, upon the consummation of the transactions contemplated by this
Agreement or the Bank Merger Agreement, will (either alone or upon the
occurrence of any additional acts or events) result in any payment or
benefits (whether of severance pay or otherwise) becoming due, or the
acceleration or vesting of any rights to any payment or benefits, from
Buyer, the Company, the Surviving Corporation, the Surviving Bank or any of
their respective Subsidiaries to any officer, director, consultant or
employee thereof, (iii) which is a material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of
this Agreement that has not been filed or incorporated by reference in the
Company Reports, (iv) which is a consulting agreement (including data
processing, software programming and licensing contracts) not terminable on
60 days or less notice involving the payment of more than $50,000 per
annum, in the case of any such agreement with an individual, or $100,000
per annum, in the case of any other such agreement, (v) which materially
restricts the conduct of any line of business by the Company or any of its
Subsidiaries or (vi) (including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan) any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the Bank Merger Agreement, or the value
of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement or the Bank Merger
Agreement. Each contract, arrangement, commitment or understanding of the
type described in this Section 4.15(a), whether or not set forth in Section
4.15(a) of the Company Disclosure Schedule, is referred to herein as a
"Company Contract". The Company has previously delivered or made available
to Buyer true and correct copies of each Company Contract.
(b) Except as set forth in Section 4.15(b) of the Company
Disclosure Schedule, (i) each Company Contract is valid and binding and in
full force and effect, (ii) the Company and each of its Subsidiaries has
performed all obligations required to be performed by it to date under each
Company Contract, (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a default on the
part of the Company or any of its Subsidiaries under any such Company
Contract, and (iv) no other party to such Company Contract is, to the
knowledge of the Company, in default in any respect thereunder.
4.16. Agreements with Regulatory Agencies. Neither the Company
nor any of its Subsidiaries is subject to any cease-and-desist or other
order issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding with, or is a party to any commitment letter
or similar undertaking to, or is subject to any order or directive by, or
is a recipient of any extraordinary supervisory letter from, or has adopted
any board resolutions at the request of (each, whether or not set forth on
Section 4.16 of the Company Disclosure Schedule, a "Regulatory Agreement"),
any Regulatory Agency or other Governmental Entity that restricts the
conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, nor has the
Company or any of its Subsidiaries been advised in writing by any
Regulatory Agency or other Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
4.17. Investment Securities. Section 4.17 of the Company
Disclosure Schedule sets forth the book and market value as of July 31,
1998 of the investment securities and securities available for sale of the
Company and its Subsidiaries.
4.18. Intellectual Property. The Company and each of its
Subsidiaries owns or possesses valid and binding licenses and other rights
to use without payment all patents, copyrights, trade secrets, trade names,
servicemarks and trademarks used in its businesses; and neither the Company
nor any of its Subsidiaries has received any notice of conflict with
respect thereto that asserts the right of others.
4.19. State Takeover Laws; Articles of Incorporation. (a) The
Board of Directors of the Company has approved this Agreement, the Stock
Option Agreement and the transaction contemplated hereby prior to the date
of this Agreement such that the provisions of Section 3-602 of the MGCL
will not, assuming the accuracy of the representations contained in Section
5.15 hereof, apply to this Agreement, the Bank Merger Agreement or the
Company Option Agreement or any of the transactions contemplated hereby or
thereby.
(b) The Board of Directors of the Company has approved this
Agreement and the transactions contemplated hereby by a vote of at least
eighty percent of all of the members of the Board of Directors such that
the 80% vote requirement of clause (A) of paragraph a(9) of Article Eighth
of the Company's Articles of Incorporation will not apply to this Agreement
and the transactions contemplated hereby.
4.20. Administration of Fiduciary Accounts. The Company and
each of its Subsidiaries has properly administered all accounts for which
it acts as a fiduciary, including but not limited to accounts for which it
serves as a trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor, in accordance with the terms of the
governing documents and applicable state and federal law and regulation and
common law. Neither the Company nor any of its Subsidiaries nor any of
their respective directors, officers or employees has committed any breach
of trust with respect to any such fiduciary account, and the accountings
for each such fiduciary account are true and correct and accurately reflect
the assets of such fiduciary account.
4.21. Environmental Matters. Except as set forth in Section
4.21 of the Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries and to the
best knowledge of the Company, the Participation Facilities and the Loan
Properties (each as hereinafter defined) are, and have been, in compliance
with all applicable federal, state and local laws including common law,
regulations and ordinances and with all applicable decrees, orders and
contractual obligations relating to pollution or the discharge of, or
exposure to Hazardous Materials (as hereinafter defined) in the environment
or workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending
or, to the best knowledge of the Company, threatened, before any
Governmental Entity or other forum in which the Company, any of its
Subsidiaries or to the best knowledge of the Company, any Participation
Facility or any Loan Property, has been or, with respect to threatened
proceedings, may be, named as a defendant (x) for alleged noncompliance
(including by any predecessor), with any Environmental Laws, or (y)
relating to the release, threatened release or exposure to any Hazardous
Material whether or not occurring at or on a site owned, leased or operated
by the Company or any of its Subsidiaries, any Participation Facility or
any Loan Property;
(c) During the period of (x) the Company's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) the Company's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) the
Company's or any of its Subsidiaries' holding of a security interest in a
Loan Property, to the best knowledge of the Company, there has been no
release of Hazardous Materials in, on, under or affecting any such
property. Prior to the period of (x) the Company's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) the Company's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) the
Company's or any of its Subsidiaries' holding of a security interest in a
Loan Property, to the best knowledge of the Company, there was no release
or threatened release of Hazardous Materials in, on, under or affecting any
such property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this
Section 4.21: (x) "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or other regulated
substances or materials, (y) "Loan Property" means any property in which
the Company or any of its Subsidiaries holds a security interest, and,
where required by the context, said term means the owner or operator of
such property; and (z) "Participation Facility" means any facility in which
the Company or any of its Subsidiaries participates in the management and,
where required by the context, said term means the owner or operator of
such property.
4.22. Derivative Transactions. Except as set forth in Section
4.22 of the Company Disclosure Schedule, since December 31, 1997, neither
Company nor any of its Subsidiaries has engaged in transactions in or
involving forwards, futures, options on futures, swaps or other derivative
instruments except (i) as agent on the order and for the account of others,
or (ii) as principal for purposes of hedging interest rate risk on U.S.
dollar-denominated securities and other financial instruments. None of the
counterparties to any contract or agreement with respect to any such
instrument is in default with respect to such contract or agreement and no
such contract or agreement, were it to be a Loan (as defined below) held by
the Company or any of its Subsidiaries, would be classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or
words of similar import. The financial position of the Company and its
Subsidiaries on a consolidated basis under or with respect to each such
instrument has been reflected in the books and records of the Company and
such Subsidiaries in accordance with GAAP consistently applied, and no open
exposure of the Company or any of its Subsidiaries with respect to any such
instrument (or with respect to multiple instruments with respect to any
single counterparty) exceeds $100,000.
4.23. Opinion. Prior to the execution of this Agreement, the
Company has received an opinion from RP Financial LC to the effect that, as
of the date hereof and based upon and subject to the matters set forth
therein, the consideration to be received by the stockholders of the
Company pursuant to this Agreement is fair to the Company's stockholders
from a financial point of view. Such opinion has not been amended or
rescinded as of the date of this Agreement.
4.24. Approvals. As of the date of this Agreement, the Company
knows of no reason why all regulatory approvals required for the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger and the Subsidiary Merger) should not be obtained.
4.25. Loan Portfolio. (a) Except as set forth in Section 4.25
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any written or oral (i) loan agreement, note or
borrowing arrangement (including, without limitation, leases, credit
enhancements, commitments, guarantees and interest-bearing assets)
(collectively, "Loans"), other than any Loan the unpaid principal balance
of which does not exceed $50,000, under the terms of which the obligor is,
as of the date of this Agreement, over 90 days delinquent in payment of
principal or interest or in default of any other provision, or (ii) Loan
with any director, executive officer or five percent or greater stockholder
of the Company or any of its Subsidiaries, or to the knowledge of the
Company, any person, corporation or enterprise controlling, controlled by
or under common control with any of the foregoing. Section 4.25 of the
Company Disclosure Schedule sets forth (i) all of the Loans in original
principal amount in excess of $50,000 of the Company or any of its
Subsidiaries that as of the date of this Agreement are classified by any
bank examiner (whether regulatory or internal) as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans", "Watch
List" or words of similar import, together with the principal amount of and
accrued and unpaid interest on each such Loan and the identity of the
borrower thereunder, (ii) by category of Loan (i.e., commercial, consumer,
etc.), all of the other Loans of the Company and its Subsidiaries that as
of the date of this Agreement are classified as such, together with the
aggregate principal amount of and accrued and unpaid interest on such Loans
by category and (iii) each asset of the Company that as of the date of this
Agreement is classified as "Other Real Estate Owned" and the book value
thereof. The Company shall promptly inform Buyer in writing of any Loan
that becomes classified in the manner described in the previous sentence,
or any Loan the classification of which is changed, at any time after the
date of this Agreement.
(b) Each Loan in original principal amount in excess of
$50,000 (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to
the extent secured, has been secured by valid liens and security interests
which have been perfected and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
4.26. Accounting for the Merger; Reorganization. As of the date
of this Agreement, the Company has no reason to believe that the Merger
will fail to qualify (i) for pooling-of-interests treatment under GAAP or
(ii) as a reorganization under Section 368(a) of the Code.
4.27. Ownership of Company Common Stock. Immediately prior to
the Effective Time, none of the Company or its Subsidiaries will
beneficially own, directly or indirectly, any Company Common Stock that
will be cancelled, pursuant to Section 1.4(b) hereof, at the Effective
Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby represents and warrants to the Company as follows:
5.1. Corporate Organization. (a) Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Maryland. Buyer has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary. Buyer is duly
registered as a bank holding company under the BHC Act. The Articles of
Incorporation and By-laws of Buyer, copies of which have previously been
made available to the Company, are true, complete and correct copies of
such documents as in effect as of the date of this Agreement.
(b) Buyer Bank is a banking association duly organized,
validly existing and in good standing under the laws of the United States.
The deposit accounts of Buyer Bank are insured by the FDIC through the BIF
and the SAIF to the fullest extent permitted by law, and all premiums and
assessments required in connection therewith have been paid by Buyer Bank.
Each of Buyer's other Subsidiaries is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation.
Each Subsidiary of Buyer has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it
is now being conducted, and is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary. The articles of
incorporation and by-laws of Buyer Bank, copies of which have previously
been made available to the Company, are true, complete and correct copies
of such documents as in effect as of the date of this Agreement.
(c) The minute books of Buyer and each of its Subsidiaries
contain true, complete and accurate records in all material respects of all
meetings and other corporate actions held or taken since December 31, 1995
of their respective stockholders and Boards of Directors (including
committees of their respective Boards of Directors).
5.2. Capitalization. (a) As of the date of this Agreement, the
authorized capital stock of Buyer consists of 50,000,000 shares of Buyer
Common Stock. As of August 10, 1998, there were 6,395,629 shares of Buyer
Common Stock issued and outstanding. As of the date of this Agreement, no
shares of Buyer Common Stock were reserved for issuance, except that (i)
60,775 shares of Buyer Common Stock were reserved for issuance pursuant to
Buyer's dividend reinvestment and stock purchase plans and (ii) 129,259
shares of Buyer Common Stock were reserved for issuance upon the exercise
of stock options pursuant to the Buyer 1983 Incentive Stock Option Plan, as
amended, the Buyer 1995 Stock Option Plan and the Buyer Employee Stock
Purchase Plan (collectively, the "Buyer Stock Plans"). All of the issued
and outstanding shares of Buyer Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. As
of the date of this Agreement, except as referred to above or reflected in
Section 5.2(a) of the Buyer Disclosure Schedule, Buyer does not have and is
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of Buyer Common Stock or any other equity securities
of Buyer or any securities representing the right to purchase or otherwise
receive any shares of Buyer Common Stock. The shares of Buyer Common Stock
to be issued pursuant to the Merger will be duly authorized and validly
issued and, at the Effective Time, all such shares will be fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(b) Section 5.2(b) of the Buyer Disclosure Schedule sets
forth a true and correct list of all of Buyer Subsidiaries as of the date
of this Agreement. Except as set forth in Section 5.2(b) of the Buyer
Disclosure Schedule, as of the date of this Agreement, Buyer owns, directly
or indirectly, all of the issued and outstanding shares of capital stock of
each of the Subsidiaries of Buyer, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such shares are
duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, no Subsidiary of
Buyer has or is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character with any party that is
not a direct or indirect Subsidiary of Buyer calling for the purchase or
issuance of any shares of capital stock or any other equity security of
such Subsidiary or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security
of such Subsidiary.
5.3. Authority; No Violation. (a) Buyer has full corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of Buyer. The
Board of Directors of Buyer has directed that this Agreement and the
transactions contemplated hereby be submitted to Buyer's stockholders for
approval at a meeting of such stockholders and, except for the adoption of
this Agreement by the requisite vote of Buyer's stockholders, no other
corporate proceedings on the part of Buyer are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. Without
limiting the foregoing, the Board of Directors of Buyer has adopted a
resolution declaring that this Agreement, the Merger and the transactions
contemplated hereby and thereby are advisable on substantially the terms
set forth herein and that such proposed transactions be submitted for
consideration at a special meeting of the stockholders of Buyer. This
Agreement has been duly and validly executed and delivered by Buyer and
(assuming due authorization, execution and delivery by the Company) this
Agreement constitutes a valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Buyer Bank has full corporate power and authority to
execute and deliver the Bank Merger Agreement and to consummate the
transactions contemplated thereby. The execution and delivery of the Bank
Merger Agreement and the consummation of the transactions contemplated
thereby will be duly and validly approved by the Board of Directors of
Buyer Bank. Upon the due and valid approval of the Bank Merger Agreement
by Buyer as the sole stockholder of Buyer Bank, and by the Board of
Directors of Buyer Bank, no other corporate proceedings on the part of
Buyer Bank will be necessary to consummate the transactions contemplated
thereby. The Bank Merger Agreement, upon execution and delivery by Buyer
Bank, will be duly and validly executed and delivered by Buyer Bank and
will (assuming due authorization, execution and delivery by the Company
Bank) constitute a valid and binding obligation of Buyer Bank, enforceable
against Buyer Bank in accordance with its terms, except as enforcement may
be limited by general principles of equity whether applied in a court of
law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) Except as set forth in Section 5.3(c) of the Buyer
Disclosure Schedule, neither the execution and delivery of this Agreement
by Buyer or the Bank Merger Agreement by Buyer Bank, nor the consummation
by Buyer or Buyer Bank, as the case may be, of the transactions
contemplated hereby or thereby, nor compliance by Buyer or Buyer Bank, as
the case may be, with any of the terms or provisions hereof or thereof,
will (i) violate any provision of the Articles of Incorporation or By-Laws
of Buyer, or the articles of incorporation or by-laws or similar governing
documents of any of its Subsidiaries or (ii) assuming that the consents and
approvals referred to in Section 5.4 are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to Buyer or any of its Subsidiaries or any of
their respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the respective properties
or assets of Buyer or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Buyer or any of its Subsidiaries is a party, or by which they or any of
their respective properties or assets may be bound or affected.
5.4. Consents and Approvals. Except for (a) the filing of
applications and notices, as applicable, with the Federal Reserve Board
under the BHC Act and the Office of the Comptroller of the Currency under
the Bank Merger Act, and approval of such applications and notices, (b) the
filing with the SEC of the Proxy Statement and the filing and declaration
of effectiveness of the S-4, (c) the approval of the Merger and this
Agreement by the requisite vote of the stockholders of Buyer, (d) the
filing of the Articles of Merger with the Department pursuant to the MGCL,
(e) such filings and approvals as are required to be made or obtained under
the securities or "Blue Sky" laws of various states in connection with the
issuance of the shares of Buyer Common Stock pursuant to this Agreement,
(f) filings required by the Bank Merger Agreement, (g) the approval of the
Bank Merger Agreement by the stockholder of Buyer Bank, (h) authorization
for quotation of Buyer Common Stock to be issued in the Merger on the
Nasdaq/NMS, (i) approval of the transactions contemplated by this Agreement
and the Bank Merger Agreement by the Maryland Commissioner of Financial
Regulation and/or filings in connection therewith pursuant to the Financial
Institutions Article of the Annotated Code of Maryland, (j) filings with
the State Insurance Commissioner and (k) such filings, authorizations or
approvals as may be set forth in Section 5.4 of the Buyer Disclosure
Schedule, no consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary in connection
with (1) the execution and delivery by Buyer of this Agreement, (2) the
consummation by Buyer of the Merger and the other transactions contemplated
hereby, (3) the execution and delivery by Buyer Bank of the Bank Merger
Agreement, and (4) the consummation of Buyer Bank of the transactions
contemplated by the Bank Merger Agreement.
5.5. Reports. Buyer and each of its Subsidiaries have timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since December 31, 1995 with any state banking regulatory
agency or authority (each a "State Regulator") or any Regulatory Agency,
and have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Regulatory Agency
or State Regulator in the regular course of the business of Buyer and its
Subsidiaries, and except as set forth in Section 5.5 of the Buyer
Disclosure Schedule, no Regulatory Agency or State Regulator has initiated
any proceeding or investigation into the business or operations of Buyer or
any of its Subsidiaries since December 31, 1995. There is no unresolved
violation, criticism, or exception by any Regulatory Agency with respect to
any report or statement relating to any examinations of Buyer or any of its
Subsidiaries.
5.6. Financial Statements. Buyer has previously delivered to
the Company copies of (a) the consolidated balance sheets of Buyer and its
Subsidiaries as of December 31 for the fiscal years 1996 and 1997 and the
related consolidated statements of income, changes in shareholders' equity
and cash flows for the fiscal years 1995 through 1997, inclusive, as
reported in Buyer's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 filed with the SEC under the Exchange Act, in each case
accompanied by the audit report of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, independent public
accountants with respect to Buyer, and (b) the unaudited consolidated
balance sheet of Buyer and its Subsidiaries as of June 30, 1998 and June
30, 1997 and the related unaudited consolidated statements of income and
comprehensive income, changes in shareholders' equity and cash flows for
the six-month periods then ended as reported in Buyer's Quarterly Report on
Form 10-Q for the period ended June 30, 1998 filed with the SEC under the
Exchange Act. The December 31, 1997 consolidated balance sheet of Buyer
(including the related notes, where applicable) fairly presents the
consolidated financial position of Buyer and its Subsidiaries as of the
date thereof, and the other financial statements referred to in this
Section 5.6 (including the related notes, where applicable) fairly present
and the financial statements to be filed with the SEC after the date hereof
will fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the results of
the consolidated operations and changes in shareholders' equity and
consolidated financial position of Buyer and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth;
each of such statements (including the related notes, where applicable)
comply, and the financial statements to be filed with the SEC after the
date hereof will comply, with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto; and
each of such statements (including the related notes, where applicable) has
been, and the financial statements to be filed with the SEC after the date
hereof will be, prepared in accordance with GAAP consistently applied
during the periods involved, except as indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Form 10-Q. The books
and records of Buyer and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and any other applicable legal and
accounting requirements.
5.7. Broker's Fees. Neither Buyer nor any Subsidiary of Buyer,
nor any of their respective officers or directors, has employed any broker
or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by
this Agreement, the Company Option Agreement or the Bank Merger Agreement,
except that Buyer has engaged, and will pay a fee or commission to, Wheat
First Securities, Inc..
5.8. Absence of Certain Changes or Events. Except as may be set
forth in Section 5.8 of the Buyer Disclosure Schedule, or as disclosed in
any Buyer Report (as defined in Section 5.12) filed with the SEC prior to
the date of this Agreement, since December 31, 1997, there has been no
change or development or combination of changes or developments which,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on Buyer.
5.9. Legal Proceedings. (a) Except as set forth in Section 5.9
of the Buyer Disclosure Schedule, neither Buyer nor any of its Subsidiaries
is a party to any and there are no pending or, to Buyer's knowledge,
threatened, material legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against Buyer or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by this Agreement or the Bank
Merger Agreement.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Buyer, any of its Subsidiaries or the
assets of Buyer or any of its Subsidiaries.
5.10. Taxes. Except as set forth in Section 5.10 of the Buyer
Disclosure Schedule, each of Buyer and its Subsidiaries (i) has duly and
timely filed (including applicable extensions granted without penalty) all
Tax Returns required to be filed on or prior to the date hereof and will
duly and timely file all Tax Returns after the date hereof and prior to the
Effective Time, and such Tax Returns are or will be true, correct and
complete, and (ii) has paid or will pay in full or to the extent necessary
made or will make adequate provision in the financial statements of Buyer
(in accordance with GAAP) for all Taxes. Except as set forth in Section
5.10 of the Buyer Disclosure Schedule, no deficiencies for any Taxes have
been proposed, asserted, assessed or, to the knowledge of Buyer, threatened
against or with respect to Buyer or any of its Subsidiaries. Except as set
forth in Section 5.10 of the Buyer Disclosure Schedule, (i) there are no
liens for Taxes upon the assets of either Buyer or its Subsidiaries except
for statutory liens for current Taxes not yet due, (ii) neither Buyer nor
any of its Subsidiaries has requested any extension of time within which to
file any Tax Returns in respect of any fiscal year which have not since
been filed and no request for waivers of the time to assess any Taxes are
pending or outstanding, (iii) with respect to each taxable period of Buyer
and its Subsidiaries, the federal and state income Tax Returns of Buyer and
its Subsidiaries have been audited by the Internal Revenue Service or
appropriate state tax authorities or the time for assessing and collecting
income Tax with respect to such taxable period has closed and such taxable
period is not subject to review, (iv) neither Buyer nor any of its
Subsidiaries has filed or been included in a combined, consolidated or
unitary income Tax Return other than one in which Buyer was the parent of
the group filing such Tax Return, (v) neither Buyer nor any of its
Subsidiaries is a party to any agreement providing for the allocation or
sharing of Taxes (other than the allocation of federal income taxes as
provided by Regulation 1.1552-1(a)(1) under the Code), (vi) neither Buyer
nor any of its Subsidiaries is required to include in income any adjustment
pursuant to Section 481(a) of the Code (or any similar or corresponding
provision or requirement of state, local or foreign income Tax law), by
reason of the voluntary change in accounting method (nor has any taxing
authority proposed in writing any such adjustment or change of accounting
method), (vii) neither Buyer nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code, and (viii) neither Buyer
nor any of its Subsidiaries has made any payment or will be obligated to
make any payment (by contract or otherwise) which will not be deductible by
reason of Section 280G of the Code.
5.11. Employees. (a) Section 5.11(a) of the Buyer Disclosure
Schedule sets forth a true and complete list of each deferred compensation
plan, incentive compensation plan, equity compensation plan, "welfare"
plan, fund or program (within the meaning of section 3(1) of the ERISA);
"pension" plan, fund or program (within the meaning of section 3(2) of
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each
case, that is sponsored, maintained or contributed to or required to be
contributed to as of the date of this Agreement (the "Buyer Plans") by
Buyer, any of its Subsidiaries or by any trade or business, whether or not
incorporated (a "Buyer ERISA Affiliate"), all of which together with Buyer
would be deemed a "single employer" within the meaning of Section 4001 of
ERISA, for the benefit of any employee or former employee of Buyer, any
Subsidiary or any ERISA Affiliate.
(b) Except as set forth in Section 5.11(b) of the Buyer
Disclosure Schedule, (i) each of the Buyer Plans has been operated and
administered in accordance with its terms and applicable law, including but
not limited to ERISA and the Code, (ii) each of the Buyer Plans intended to
be "qualified" within the meaning of Section 401(a) of the Code has either
(1) received a favorable determination letter from the IRS, or (2) is or
will be the subject of an application for a favorable determination letter,
and Buyer is not aware of any circumstances likely to result in the
revocation or denial of any such favorable determination letter, (iii) with
respect to each Buyer Plan which is subject to Title IV of ERISA, the
present value of accrued benefits under such Buyer Plan, based upon the
actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by such Buyer Plan's actuary with respect to such
Buyer Plan, did not, as of its latest valuation date, exceed the then
current value of the assets of such Buyer Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current
or former employees of Buyer, its Subsidiaries or any ERISA Affiliate
beyond their retirement or other termination of service, other than (w)
coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in
Section 3(2) of ERISA, (y) deferred compensation benefits accrued as
liabilities on the books of Buyer, its Subsidiaries or the ERISA Affiliates
or (z) benefits the full cost of which is borne by the current or former
employee (or his beneficiary), (v) no liability under Title IV of ERISA has
been incurred by Buyer, its Subsidiaries or any Buyer ERISA Affiliate that
has not been satisfied in full, (vi) no Buyer Plan is a "multiemployer
pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all
contributions or other amounts payable by Buyer, its Subsidiaries or any
ERISA Affiliate as of the Effective Time with respect to each Plan in
respect of current or prior plan years have been paid or accrued in
accordance with generally accepted accounting practices and Section 412 of
the Code, (viii) neither Buyer, its Subsidiaries nor any ERISA Affiliate
has engaged in a transaction in connection with which Buyer, its
Subsidiaries or any ERISA Affiliate could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code, (ix) there are no
pending, or, to the best knowledge of Buyer, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or against
any of the Buyer Plans or any trusts related thereto and (x) the
consummation of the transactions contemplated by this Agreement or the Bank
Merger Agreement will not (y) entitle any current or former employee or
officer of Buyer or any ERISA Affiliate to severance pay, termination pay
or any other payment or benefit, except as expressly provided in this
Agreement or (z) accelerate the time of payment or vesting or increase in
the amount or value of compensation or benefits due any such employee or
officer.
5.12. SEC Reports. Buyer has previously made available to the
Company an accurate and complete copy of each (a) final registration
statement, prospectus, report, schedule and definitive proxy statement
filed since January 1, 1996 by Buyer with the SEC pursuant to the
Securities Act or the Exchange Act (the "Buyer Reports") and (b)
communication mailed by Buyer to its stockholders since January 1, 1996,
and no such registration statement, prospectus, report, schedule, proxy
statement or communication contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that
information as of a later date shall be deemed to modify information as of
an earlier date. Buyer has timely filed all Buyer Reports and other
documents required to be filed by it under the Securities Act and the
Exchange Act, and, as of their respective dates, all Buyer Reports complied
with the published rules and regulations of the SEC with respect thereto.
5.13. Buyer Information. The information relating to Buyer and
its Subsidiaries which is provided to Buyer by the Company for inclusion in
the Proxy Statement and the S-4, or in any other document filed with any
other regulatory agency in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they
are made, not misleading.
5.14. Compliance with Applicable Law. Buyer and each of its
Subsidiaries holds, and has at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and
are not in default in any respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to Buyer or any of its Subsidiaries, and neither Buyer nor any of
its Subsidiaries knows of, or has received notice of violation of, any
violations of any of the above.
5.15. Ownership of Company Common Stock; Affiliates and
Associates. (a) Except for the Company Option Agreement, neither Buyer
nor any of its affiliates or associates (as such terms are defined under
the Exchange Act), (i) beneficially owns, directly or indirectly, or (ii)
is a party to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of, in each case, any shares of
capital stock of the Company (other than Trust Account Shares and DPC
Shares); and
(b) Neither Buyer nor any of its Subsidiaries is an
"affiliate" (as such term is defined in MGCL section 3-601) or an
"associate" (as such term is defined in MGCL section 3-601) of the Company
or an "Interested Stockholder" (as such term is defined in MGCL section 3-
601) of the Company.
5.16. Agreements with Regulatory Agencies. Neither Buyer nor
any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of (each, whether or not set forth in
Section 5.16 of the Buyer Disclosure Schedule, a "Buyer Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor
has Buyer or any of its Subsidiaries been advised by any Regulatory Agency
or other Governmental Entity that it is considering issuing or requesting
any Regulatory Agreement.
5.17. Investment Securities. Section 5.17 of the Buyer
Disclosure Schedule sets forth the book and market value of July 31, 1998
of the investment securities and securities available for sale of Buyer and
its Subsidiaries.
5.18. Intellectual Property. Except as set forth in Section
5.18 of the Buyer Disclosure Schedule, Buyer and each of its Subsidiaries
owns or possesses valid and binding licenses and other rights to use
without payment all patents, copyrights, trade secrets, trade names,
servicemarks and trademarks used in its businesses; and neither Buyer nor
any of its Subsidiaries has received any notice of conflict with respect
thereto that asserts the right of others.
5.19. Approvals. As of the date of this Agreement, Buyer knows
of no reason why all regulatory approvals required for the consummation of
the transactions contemplated hereby (including, without limitation, the
Merger and the Subsidiary Merger) should not be obtained.
5.20. Administration of Fiduciary Accounts. Buyer and each of
its Subsidiaries has properly administered all accounts for which it acts
as a fiduciary, including but not limited to accounts for which it serves
as a trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor, in accordance with the terms of the
governing documents and applicable state and federal law and regulation and
common law. Neither Buyer nor any of its Subsidiaries nor any of their
respective directors, officers or employees has committed any breach of
trust with respect to any such fiduciary account, and the accountings for
each such fiduciary account are true and correct and accurately reflect the
assets of such fiduciary account.
5.21. Accounting for the Merger; Reorganization. As of the date
hereof, (i) after consulting with its independent auditors, Buyer has no
reason to believe that the Merger will fail to qualify for pooling-of-
interests treatment under GAAP. Buyer has no reason to believe that the
Merger will fail to qualify as a reorganization under Section 368(a) of the
Code. Buyer has no plan or intention to reacquire any shares of Buyer
Common Stock issued in the Merger that would cause the Merger to fail to
qualify as a reorganization under Section 368(a). Buyer has no plan or
intention to sell or otherwise dispose of any of the assets of the Company
or any of its Subsidiaries after the Effective Time except for dispositions
permitted under Section 368(a) of the Code. There is no intercorporate
indebtedness existing between Buyer or any of its Subsidiaries on the one
hand and the Company or any of its Subsidiaries on the other that was
issued, settled, acquired or will be settled at a discount. It is
understood and agreed that counsel to Seller and counsel to Buyer each have
the right to seek additional representations, warranties and covenants from
the parties to this Agreement in connection with the issuance of tax
opinions to be rendered in connection with the Merger.
5.22. Opinion. Prior to the execution of this Agreement, Buyer
has received an opinion from Wheat First Securities, Inc. to the effect
that as of the date thereof and based upon and subject to the matters set
forth therein, the Exchange Ratio is fair from a financial point of view to
stockholders of Buyer. Such opinion has not been amended or rescinded as
of the date of this Agreement.
5.23. Environmental Matters. Except as set forth in Section
5.23 of the Buyer Disclosure Schedule:
(a) Each of Buyer and its Subsidiaries and to the best
knowledge of Buyer, the Participation Facilities and the Loan Properties
(each as hereinafter defined) are, and have been, in compliance with all
applicable federal, state and local laws including common law, regulations
and ordinances and with all applicable decrees, orders and contractual
obligations relating to pollution or the discharge of, or exposure to
Hazardous Materials (as hereinafter defined) in the environment or
workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending
or, to the best knowledge of Buyer, threatened, before any Governmental
Entity or other forum in which Buyer, any of its Subsidiaries or to the
best knowledge of Buyer, any Participation Facility or any Loan Property,
has been or, with respect to threatened proceedings, may be, named as a
defendant (x) for alleged noncompliance (including by any predecessor),
with any Environmental Laws, or (y) relating to the release, threatened
release or exposure to any Hazardous Material whether or not occurring at
or on a site owned, leased or operated by Buyer or any of its Subsidiaries,
any Participation Facility or any Loan Property;
(c) During the period of (x) Buyer's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Buyer's or any of its Subsidiaries' participation in
the management of any Participation Facility, or (z) Buyer's or any of its
Subsidiaries' holding of a security interest in a Loan Property, to the
best knowledge of Buyer, there has been no release of Hazardous Materials
in, on, under or affecting any such property. Prior to the period of (x)
Buyer's or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) Buyer's or any of its
Subsidiaries' participation in the management of any Participation
Facility, or (z) Buyer's or any of its Subsidiaries' holding of a security
interest in a Loan Property, to the best knowledge of Buyer, there was no
release or threatened release of Hazardous Materials in, on, under or
affecting any such property, Participation Facility or Loan Property; and
(d) The following definitions apply for purposes of this
Section 5.23: (x) "Hazardous Materials" means any chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or other regulated
substances or materials, (y) "Loan Property" means any property in which
Buyer or any of its Subsidiaries holds a security interest, and, where
required by the context, said term means the owner or operator of such
property; and (z) "Participation Facility" means any facility in which
Buyer or any of its Subsidiaries participates in the management and, where
required by the context, said term means the owner or operator of such
property.
5.24. Derivative Transactions. Except as set forth in Section
5.24 of the Buyer Disclosure Schedule, since December 31, 1997, neither
Buyer nor any of its Subsidiaries has engaged in transactions in or
involving forwards, futures, options on futures, swaps or other derivative
instruments except (i) as agent on the order and for the account of others,
or (ii) as principal for purposes of hedging interest rate risk on U.S.
dollar-denominated securities and other financial instruments. None of the
counterparties to any contract or agreement with respect to any such
instrument is in default with respect to such contract or agreement and no
such contract or agreement, were it to be a Loan (as defined below) held by
Buyer or any of its Subsidiaries, would be classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or
words of similar import. The financial position of Buyer and its
Subsidiaries on a consolidated basis under or with respect to each such
instrument has been reflected in the books and records of Buyer and such
Subsidiaries in accordance with GAAP consistently applied, and no open
exposure of Buyer or any of its Subsidiaries with respect to any such
instrument (or with respect to multiple instruments with respect to any
single counterparty) exceeds $100,000.
5.25. Loan Portfolio. (a) Except as set forth in Section 5.25
of the Buyer Disclosure Schedule, neither Buyer nor any of its Subsidiaries
is a party to any written or oral (i) loan agreement, note or borrowing
arrangement (including, without limitation, leases, credit enhancements,
commitments, guarantees and interest-bearing assets) (collectively,
"Loans"), other than Loans the unpaid principal balance of which does not
exceed $100,000, under the terms of which the obligor is, as of the date of
this Agreement, over 90 days delinquent in payment of principal or interest
or in default of any other provision, or (ii) Loan with any director,
executive officer or five percent or greater stockholder of Buyer or any of
its Subsidiaries, or to the knowledge of Buyer, any person, corporation or
enterprise controlling, controlled by or under common control with any of
the foregoing. Section 5.25 of the Buyer Disclosure Schedule sets forth
(i) all of the Loans in original principal amount in excess of $100,000 of
Buyer or any of its Subsidiaries that as of the date of this Agreement are
classified by any bank examiner (whether regulatory or internal) as "Other
Loans Specially Mentioned", "Special Mention", "Substandard", "Doubtful",
"Loss", "Classified", "Criticized", "Credit Risk Assets", "Concerned
Loans", "Watch List" or words of similar import, together with the
principal amount of and accrued and unpaid interest on each such Loan and
the identity of the borrower thereunder, (ii) by category of Loan (i.e.,
commercial, consumer, etc.), all of the other Loans of Buyer and its
Subsidiaries that as of the date of this Agreement are classified as such,
together with the aggregate principal amount of and accrued and unpaid
interest on such Loans by category and (iii) each asset of Buyer that as of
the date of this Agreement is classified as "Other Real Estate Owned" and
the book value thereof. Buyer shall promptly inform the Company in writing
of any Loan that becomes classified in the manner described in the previous
sentence, or any Loan the classification of which is changed, at any time
after the date of this Agreement.
(b) Each Loan in original principal amount in excess of
$100,000 (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to
the extent secured, has been secured by valid liens and security interests
which have been perfected and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
5.26. Vote Required. The affirmative vote of the holders of
two-thirds of the total votes entitled to vote of Buyer Common Stock is the
only vote of the holders of any class or series of Buyer capital stock
necessary to approve this Agreement and the transactions contemplated
hereby.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Covenants of the Company. During the period from the date
of this Agreement and continuing until the Effective Time, except as
expressly contemplated or permitted by this Agreement, the Bank Merger
Agreement or the Company Option Agreement or with the prior written consent
of Buyer, the Company and its Subsidiaries shall carry on their respective
businesses in the ordinary course consistent with past practice and
consistent with prudent banking practice. The Company will use its
commercially reasonable efforts to (x) preserve its business organization
and that of its Subsidiaries intact, (y) keep available to itself and Buyer
the present services of the employees of the Company and its Subsidiaries
and (z) preserve for itself and Buyer the goodwill of the customers of the
Company and its Subsidiaries and others with whom business relationships
exist. Without limiting the generality of the foregoing, and except as set
forth on Section 6.1 of the Company Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by Buyer, the
Company shall not, and shall not permit any of its Subsidiaries to:
(a) solely in the case of the Company, declare or pay any
dividends on, or make other distributions in respect of, any of its capital
stock, other than normal quarterly dividends not in excess of $0.12 per
share of Company Common Stock;
(b) (i) split, combine or reclassify any shares of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock except upon the exercise or fulfillment of rights or options
issued or existing pursuant to employee benefit plans, programs or
arrangements, all to the extent outstanding and in existence on the date of
this Agreement and in accordance with their present terms, and except
pursuant to the Company Option Agreement, or (ii) repurchase, redeem or
otherwise acquire (except for the acquisition of Trust Account Shares and
DPC Shares, as such terms are defined in Section 1.4(b) hereof) any shares
of the capital stock of the Company or any Subsidiary of the Company, or
any securities convertible into or exercisable for any shares of the
capital stock of the Company or any Subsidiary of the Company;
(c) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with
respect to any of the foregoing, other than (i) the issuance of Company
Common Stock pursuant to stock options or similar rights to acquire Company
Common Stock granted pursuant to the Company Option Plans and outstanding
prior to the date of this Agreement, in each case in accordance with their
present terms and (ii) pursuant to the Company Option Agreement;
(d) amend its Articles of Incorporation, By-laws or other
similar governing documents;
(e) authorize or permit any of its officers, directors,
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its Subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate,
encourage or facilitate any inquiries relating to, or the making of any
proposal which constitutes, a "takeover proposal" (as defined below), or
(ii) recommend or endorse any takeover proposal, or enter into, encourage
or facilitate any discussions or negotiations regarding, or furnish to any
person any information with respect to, the making of any proposal that
constitutes, or may reasonably be expected to lead to or constitute an
effort to facilitate, any proposal relating to or involving a takeover
proposal; provided, however, that the Company may communicate information
about any such takeover proposal to its stockholders if, in the judgment of
the Company's Board of Directors, based upon the advice of outside counsel,
such communication is required under applicable law; provided, further,
however, that nothing contained in this Section 6.1(e) shall prohibit the
Board of Directors of the Company from (i) to the extent applicable,
complying with Rule 14e-2 and/or Rule 14d-9 promulgated under the Exchange
Act or (ii) furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited, written
bona fide proposal regarding a takeover proposal if, and only to the extent
that (A) the Board of Directors of the Company concludes in good faith,
after consultation with and based upon the advice of outside counsel, that
it is legally required to furnish such information or enter into such
discussions or negotiations in order to comply with its fiduciary duties to
stockholders under applicable law, (B) prior to taking such action, the
Company receives from such person or entity an executed confidentiality
agreement and an executed standstill agreement, each in reasonably
customary form (provided that such agreement is at least as limiting as any
such agreement between Buyer and the Company), and (C) the Board of
Directors of the Company, after consultation with and based upon the advice
of its financial advisor, concludes in good faith that the proposal
regarding the takeover proposal contains an offer of consideration that is
greater than the consideration set forth herein (a "Superior Takeover
Proposal"). The Company will immediately cease and cause to be terminated
any existing activities, discussions or negotiations previously conducted
with any parties other than Buyer with respect to any of the foregoing.
The Company will take all actions necessary or advisable to inform the
appropriate individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.1(e). The Company
will notify Buyer immediately if any such inquiries or takeover proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with,
the Company, and the Company will promptly inform Buyer in writing of all
of the relevant details with respect to the foregoing. Without limiting
the foregoing, it is understood that any violation of the restrictions set
forth in the first sentence of this Section 6.1(e) by any officer or
director of the Company or any Subsidiary thereof or any investment banker,
attorney or other advisor, representative or agent of the Company or any
Subsidiary thereof, acting on behalf of or at the request of the Board of
Directors of the Company, shall be deemed to be a breach of this Section
6.1(e) by the Company. As used in this Agreement, "takeover proposal"
shall mean any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the Company or any
Subsidiary of the Company or any proposal or offer to acquire in any manner
a substantial equity interest in, or a substantial portion of the assets
of, the Company or any Subsidiary of the Company other than the
transactions contemplated or permitted by this Agreement, the Bank Merger
Agreement and the Company Option Agreement;
(f) make any capital expenditures other than those which
(i) are made in the ordinary course of business or are necessary to
maintain existing assets in good repair and (ii) in any event are in an
amount of no more than $100,000 in the aggregate;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof or otherwise acquire any assets, which would be
material, individually or in the aggregate, to the Company, other than in
connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary course of business
consistent with prudent banking practices;
(i) take any action that is intended or may reasonably be
expected to result in any of the conditions to the Merger set forth in
Article VIII not being satisfied;
(j) change its methods of accounting in effect at June 30,
1998, except as required by changes in GAAP or regulatory accounting
principles as concurred to by the Company's independent auditors;
(k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any
employee benefit plan (including, without limitation, any Plan) or any
agreement, arrangement, plan or policy between the Company or any
Subsidiary of the Company and one or more of its current or former
directors, officers or employees or (ii) except for normal increases in the
ordinary course of business consistent with past practice or except as
required by applicable law, increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any Plan or agreement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or
performance units or shares);
(l) take or cause to be taken any action which would
disqualify the Merger as a "pooling of interests" for accounting purposes
or a tax free reorganization under Section 368(a) of the Code, provided,
however, that nothing contained herein shall limit the ability of Buyer to
exercise its rights under the Company Option Agreement;
(m) other than activities in the ordinary course of
business consistent with past practice, sell, lease, encumber, assign or
otherwise dispose of, or agree to sell, lease, encumber, assign or
otherwise dispose of, any of its material assets, properties or other
rights or agreements;
(n) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or
other entity;
(o) file any application to relocate or terminate the
operations of any banking office of it or any of its Subsidiaries;
(p) make any equity investment or commitment to make such
an investment in real estate or in any real estate development project,
other than in connection with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt restructurings in the ordinary course
of business consistent with prudent banking practices;
(q) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract,
agreement or lease for goods, services or office space to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or their respective properties is bound;
(r) other than in prior consultation with Buyer,
restructure or materially change its investment securities portfolio or its
gap position, through purchases, sales or otherwise, or the manner in which
the portfolio is classified or reported;
(s) other than in prior consultation with Buyer, make,
purchase or renew, or commit to make, purchase or renew, any loan or loans,
or extend any line of credit, to any borrower and its affiliates in an
aggregate principal amount greater than $500,000 or in an amount which,
when aggregated with any existing indebtedness to the Company and its
Subsidiaries and lines of credit from the Company and its Subsidiaries of
such borrower and its affiliates, would exceed $500,000; or
(t) agree to do any of the foregoing.
6.2. Covenants of Buyer. During the period from the date of
this Agreement and continuing until the Effective Time, except as expressly
contemplated or permitted by this Agreement, the Bank Merger Agreement or
the Company Option Agreement or with the prior written consent of the
Company, Buyer and its Subsidiaries shall carry on their respective
businesses in the ordinary course consistent with prudent banking practice.
Buyer will use its best efforts to (x) preserve its business organization
and that of its Subsidiaries intact, (y) keep available to itself and the
Company the present services of the employees of Buyer and its Subsidiaries
and (z) preserve for itself and the Company the goodwill of the customers
of Buyer and its Subsidiaries and others with whom business relationships
exist. Without limiting the generality of the foregoing, and except as set
forth on Section 6.2 of the Buyer Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by the Company,
Buyer shall not, and shall not permit any of its Subsidiaries to:
(a) solely in the case of Buyer, declare or pay any
extraordinary or special dividends on or make any other extraordinary or
special distributions in respect of any of its capital stock; provided,
however, that nothing contained herein shall prohibit Buyer from increasing
the quarterly cash dividend on Buyer Common Stock;
(b) take any action that is intended or may reasonably be
expected to result in any of the conditions to the Merger set forth in
Article VIII not being satisfied;
(c) change its methods of accounting in effect at June 30,
1998, except in accordance with changes in GAAP or regulatory accounting
principles as concurred to by Buyer's independent auditors;
(d) take or cause to be taken any action which would
disqualify the Merger as a "pooling of interests" for accounting purposes
or a tax free reorganization under Section 368(a) of the Code, provided,
however, that nothing contained herein shall limit the ability of Buyer to
exercise its rights under the Company Option Agreement;
(e) knowingly take any action that would result in a
failure to maintain the authorization for quotation of Buyer Comon Stock on
the Nasdaq/NMS;
(f) enter into any agreement relating to a merger,
acquisition or similar transaction which would prevent or adversely
decrease the probability of the consummation of the transactions
contemplated by this Agreement;
(g) enter into any agreement contemplating the acquisition
of Buyer or Buyer Bank, whether by merger or otherwise, unless the other
party thereto expressly agrees to be bound by the terms of this Agreement;
or
(h) agree to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Regulatory Matters. (a) Buyer and the Company shall
promptly prepare and file with the SEC the Proxy Statement and Buyer shall
promptly prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a prospectus. Each of the Company and Buyer
shall use all reasonable efforts to have the S-4 declared effective under
the Securities Act as promptly as practicable after such filing, and each
of the Company and Buyer shall thereafter mail the Proxy Statement to each
of its respective stockholders. Buyer shall also use all reasonable
efforts to obtain all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement and the Bank Merger Agreement, and the Company shall furnish all
information concerning the Company and the holders of Company Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and
use their commercially reasonable efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including without limitation the Merger and
the Subsidiary Merger) (it being understood that any amendments to the S-4
or a resolicitation of proxies as consequence of a subsequent proposed
merger, stock purchase or similar acquisition by Buyer or any of its
Subsidiaries shall not violate this covenant). The Company and Buyer shall
have the right to review in advance, and to the extent practicable each
will consult the other on, in each case subject to applicable laws relating
to the exchange of information, all the information relating to the Company
or Buyer, as the case may be, and any of their respective Subsidiaries,
which appears in any filing made with, or written materials submitted to,
any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with each
other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters relating
to completion of the transactions contemplated herein.
(c) Buyer and the Company shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries,
directors, officers and stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Proxy Statement,
the S-4 or any other statement, filing, notice or application made by or on
behalf of Buyer, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement.
(d) Buyer and the Company shall promptly furnish each other
with copies of written communications received by Buyer or the Company, as
the case may be, or any of their respective Subsidiaries, Affiliates or
Associates (as such terms are defined in Rule 12b-2 under the Exchange Act
as in effect on the date of this Agreement) from, or delivered by any of
the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
(e) The information supplied by the Company for inclusion
in the S-4 shall not, at the time the S-4 is declared effective, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by the Company for
inclusion in the Proxy Statement shall not, at the date the Proxy Statement
(or any supplement thereto) is first mailed to stockholders, at the time of
the Company's stockholders meeting or at the Effective Time contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made not
misleading. If at any time prior to the Effective Time, any event or
circumstance relating to the Company or any of its affiliates, or its or
their respective officers or directors, should be discovered by the Company
that should be set forth in an amendment to the S-4 or a supplement to the
Proxy Statement, the Company shall promptly inform Buyer thereof in
writing. All documents that the Company is responsible for filing with the
SEC in connection with the transactions contemplated herein will comply as
to form in all material respects with applicable requirements of the
Securities Act and the rules and regulations thereunder and the Exchange
Act and the rules and regulations thereunder.
(f) The information supplied by Buyer for inclusion in the
S-4 shall not, at the time the S-4 is declared effective, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by Buyer for inclusion in
the Proxy Statement shall not, at the date the Proxy Statement (or any
supplement thereto) is first mailed to stockholders, at the time of the
Buyer's stockholders meeting or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If at any
time prior to the Effective Time, any event or circumstance relating to
Buyer or any of its affiliates, or to their respective officers or
directors, should be discovered by Buyer that should be set forth in an
amendment to the S-4 or a supplement to the Proxy Statement, Buyer shall
promptly inform the Company thereof in writing. All documents that Buyer
is responsible for filing with the SEC in connection with the transactions
contemplated hereby will comply as to form in all material respects with
the applicable requirements of the Securities Act and the rules and
regulations thereunder and the Exchange Act and the rules and regulations
thereunder.
7.2. Access to Information. (a) Upon reasonable notice and
subject to applicable laws relating to the exchange of information, the
Company shall, and shall cause each of its Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of
Buyer, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments,
records, officers, employees, accountants, counsel and other
representatives and, during such period, the Company shall, and shall cause
its Subsidiaries to, make available to Buyer (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of Federal securities laws
or Federal or state banking laws (other than reports or documents which the
Company is not permitted to disclose under applicable law) and (ii) all
other information concerning its business, properties and personnel as
Buyer may reasonably request. Neither the Company nor any of its
Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of the Company's customers, jeopardize any attorney-client privilege
or contravene any law, rule, regulation, order, judgment, decree, fiduciary
duty or binding agreement entered into prior to the date of this Agreement.
Buyer will hold, and will cause its officers, directors, employees,
accountants, counsel and other representatives to hold, all such
information in confidence to the extent required by, and in accordance
with, the provisions of the confidentiality agreement, dated July 29, 1998,
by and among the Company, Buyer, the Company Bank and Buyer Bank (the
"Confidentiality Agreement").
(b) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, Buyer shall, and shall cause its
Subsidiaries to, afford to the officers, employees, accountants, counsel
and other representatives of the Company, access, during normal business
hours during the period prior to the Effective Time, to such information
regarding Buyer and its Subsidiaries as shall be reasonably necessary for
the Company to fulfill its obligations pursuant to this Agreement to assist
in the preparation of the Proxy Statement or which may be reasonably
necessary for the Company to confirm that the representations and
warranties of Buyer contained herein are true and correct and that the
covenants of Buyer contained herein have been performed in all material
respects. Neither Buyer nor any of its Subsidiaries shall be required to
provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of Buyer's customers,
jeopardize any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will
make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(c) All information furnished by Buyer to the Company or
its representatives pursuant hereto shall be held in confidence to the
extent required by, and in accordance with the provisions of the
Confidentiality Agreement.
(d) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
7.3. Stockholder Meetings. (a) The Company and Buyer each
shall take all steps necessary to duly call, give notice of, convene and
hold a meeting of its stockholders to be held as soon as is reasonably
practicable after the date on which the S-4 becomes effective for the
purpose of voting upon the approval of this Agreement and the consummation
of the transactions contemplated hereby. The Company and Buyer each will,
through its Board of Directors, except in the case of the Company as
provided in Section 7.3(b) hereof, recommend to its stockholders approval
of this Agreement and the transactions contemplated hereby and such other
matters as may be submitted to its stockholders in connection with this
Agreement. The Company and Buyer shall coordinate and cooperate with
respect to the foregoing matters with a view towards, among other things,
holding their stockholders meetings on the same day.
(b) Notwithstanding the provisions of Section 7.3(a) above,
the Board of Directors of the Company may withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Buyer, the approval
or recommendation by such Board of Directors or such committee of the
Merger or this Agreement if the Company receives an unsolicited, written
bona fide proposal regarding a takeover proposal, and (i) the Board of
Directors of the Company concludes in good faith that it is required to
take such action, but only after consultation with and based upon the
advice of outside counsel that the failure to take such action would result
in a violation of any fiduciary duties of the Board of Directors to its
stockholders under applicable law, and (ii) the Board of Directors of the
Company, after consultation with and based upon the advice of its financial
advisor, concludes in good faith that such takeover proposal is a Superior
Takeover Proposal.
7.4. Legal Conditions to Merger. Each of Buyer and the Company
shall, and shall cause its Subsidiaries to, use their commercially
reasonable efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger or the Subsidiary Merger and, subject to the
conditions set forth in Article VIII hereof, to consummate the transactions
contemplated by this Agreement and (b) to obtain (and to cooperate with the
other party to obtain) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity and any other third party which
is required to be obtained by the Company or Buyer or any of their
respective Subsidiaries in connection with the Merger and the Subsidiary
Merger and the other transactions contemplated by this Agreement, and to
comply with the terms and conditions of such consent, authorization, order
or approval.
7.5. Affiliates. (a) Each of Buyer and the Company shall use
its commercially reasonable efforts to cause each director, executive
officer and other person who is an "affiliate" (for purposes of Rule 145
under the Securities Act and for purposes of qualifying the Merger for
"pooling-of-interests" accounting treatment) of such party to deliver to
the other party hereto, as soon as practicable after the date of this
Agreement, a written agreement, in the form of Exhibit 7.5(a) hereto (in
the case of affiliates of Buyer) or 7.5(b) hereto (in the case of
affiliates of the Company).
(b) Buyer shall use its commercially reasonable efforts to
publish, not later than 15 days after the end of the first full calendar month
following the month in which the Effective Time occurs, financial results
covering at least 30 days of post-Merger combined operations as
contemplated by SEC Accounting Series Release No. 135.
7.6. Stock Exchange Listing. Buyer shall use all commercially
reasonable efforts to cause the shares of Buyer Common Stock to be issued
in the Merger to be authorized for quotation on the Nasdaq/NMS, subject to
official notice of issuance, as of the Effective Time.
7.7. Employee Benefit Plans; Existing Agreements. (a) As soon
as practicable following the Effective Time, the employees of the Company
and its Subsidiaries (the "Company Employees") shall be entitled to
participate in Buyer's employee benefit plans in which similarly situated
employees of Buyer or its Subsidiaries participate, to the same extent as
comparable employees of Buyer or its Subsidiaries (it being understood that
inclusion of Company Employees in Buyer's employee benefit plans may occur
at different times with respect to different plans).
(b) With respect to each Buyer Plan, for purposes of
determining eligibility to participate, vesting, and entitlement to
benefits, including for severance benefits and vacation entitlement (but
not for accrual of pension benefits), service with the Company (or
predecessor employers to the extent the Company provides past service
credit) shall be treated as service with Buyer; provided however, that such
service shall not be recognized to the extent that such recognition would
result in a duplication of benefits. Such service also shall apply for
purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any preexisting condition limitations.
Company Employees shall be given credit for amounts paid under a
corresponding benefit plan during the same period for purposes of applying
deductibles, copayments and out-of-pocket maximums as though such amounts
had been paid in accordance with the terms and conditions of the Buyer
Plan.
(c) Following the Effective Time, Buyer shall honor and
shall cause the Surviving Bank to honor in accordance with their terms all
employment, severance and other compensation agreements and arrangements
existing prior to the execution of this Agreement which are between the
Company and any director, officer or employee thereof and which have been
disclosed in the Company Disclosure Schedule and previously have been made
available to Buyer.
7.8. Indemnification. (a) In the event of any threatened or
actual claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, including, without limitation,
any such claim, action, suit, proceeding or investigation in which any
person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or
officer of the Company or any of its Subsidiaries (the "Indemnified
Parties") is, or is threatened to be, made a party based in whole or in
part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director or officer of the Company, any of the
Subsidiaries of the Company or any of their respective predecessors or (ii)
this Agreement or any of the transactions contemplated hereby, whether in
any case asserted or arising before or after the Effective Time, the
parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, Buyer shall indemnify and hold harmless, as and to the
extent permitted by Maryland law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any
claim, suit, proceeding or investigation to each Indemnified Party to the
fullest extent permitted by law upon receipt of any undertaking required by
applicable law), judgments, fines and amounts paid in settlement in
connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, proceeding or investigation (whether asserted
or arising before or after the Effective Time), the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation with
Buyer; provided, however, that (1) Buyer shall have the right to assume the
defense thereof and upon such assumption Buyer shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by any Indemnified Party in connection with
the defense thereof, except that if Buyer elects not to assume such defense
or counsel for the Indemnified Parties reasonably advises that there are
issues which raise conflicts of interest between Buyer and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory
to them after consultation with Buyer, and Buyer shall pay the reasonable
fees and expenses of such counsel for the Indemnified Parties, (2) Buyer
shall in all cases be obligated pursuant to this paragraph to pay for only
one firm of counsel for all Indemnified Parties, (3) Buyer shall not be
liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld) and (4) Buyer shall have no
obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination
shall have become final and nonappealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim Indemnification
under this Section 7.8, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Buyer thereof, provided
that the failure to so notify shall not affect the obligations of Buyer
under this Section 7.8 except to the extent such failure to notify
prejudices Buyer. Buyer's obligations under this Section 7.8 shall
continue in full force and effect for a period of six (6) years from the
Effective Time; provided, however, that all rights to indemnification in
respect of any claim (a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim.
(b) Prior to the Effective Time the Company shall purchase,
and for a period of six years after the Effective Time, Buyer shall use its
commercially reasonable efforts to maintain, directors and officers
liability insurance "tail" or "runoff" coverage with respect to wrongful
acts and/or omissions committed or allegedly committed prior to the
Effective Time. Such coverage shall have an aggregate coverage limit over
the term of such policy in an amount no less than the annual aggregate
coverage limit under the Company's existing directors and officers
liability policy, and in all other respects shall be at least comparable to
such existing policy.
(c) In the event Buyer or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Buyer assume the obligations set forth in this section.
(d) The provisions of this Section 7.8 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party and
his or her heirs and representatives.
7.9. Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out
the purposes of this Agreement or the Bank Merger Agreement or to vest the
Surviving Corporation or the Surviving Bank with full title to all
properties, assets, rights, approvals, immunities and franchises of any of
the parties to the Merger or the Subsidiary Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by
Buyer.
7.10. Advice of Changes. Buyer and the Company shall promptly
advise the other party of any change or event having a Material Adverse
Effect on it or which it believes would or would be reasonably likely to
cause or constitute a material breach of any of its representations,
warranties or covenants contained herein. From time to time prior to the
Effective Time (and on the date prior to the Closing Date), each party will
promptly supplement or amend the Disclosure Schedules delivered in
connection with the execution of this Agreement to reflect any matter
which, if existing, occurring or known at the date of this Agreement, would
have been required to be set forth or described in such Disclosure
Schedules or which is necessary to correct any information in such
Disclosure Schedules which has been rendered inaccurate thereby. No
supplement or amendment to such Disclosure Schedules shall have any effect
for the purpose of determining satisfaction of the conditions set forth in
Sections 8.2(a) or 8.3(a) hereof, as the case may be, or the compliance by
the Company or Buyer, as the case may be, with the respective covenants and
agreements of such parties contained herein.
7.11. Current Information. During the period from the date of
this Agreement to the Effective Time, the Company will cause one or more of
its designated representatives to confer on a regular and frequent basis
(not less than monthly) with representatives of Buyer and to report the
general status of the ongoing operations of the Company and its
Subsidiaries. The Company will promptly notify Buyer of any material
change in the normal course of business or in the operation of the
properties of the Company or any of its Subsidiaries and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the
threat of significant litigation involving the Company or any of its
Subsidiaries, and will keep Buyer fully informed of such events.
7.12. Execution and Authorization of Bank Merger Agreement. As
soon as reasonably practicable after the date of this Agreement, (a) Buyer
shall (i) cause the Board of Directors of Buyer Bank to approve the Bank
Merger Agreement, (ii) cause Buyer Bank to execute and deliver the Bank
Merger Agreement, and (iii) approve the Bank Merger Agreement as the sole
stockholder of Buyer Bank, and (b) the Company shall (i) cause the Board of
Directors of the Company Bank to approve the Bank Merger Agreement, (ii)
cause the Company Bank to execute and deliver the Bank Merger Agreement,
and (iii) approve the Bank Merger Agreement as the sole stockholder of the
Company Bank.
7.13. Directorship. Prior to Closing, Buyer shall take all
action as may be necessary or appropriate to cause ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇
▇. ▇▇▇▇ (or any other person or persons designated by the Board of
Directors of the Company and acceptable to the Buyer) to be directors of
each of Buyer and Buyer Bank as of the Effective Time for three year terms,
each to hold office in accordance with the charter and bylaws of Buyer or
Buyer Bank, as the case may be, in each case until their respective
successors are duly elected or appointed and qualified.
7.14. Coordination of Dividends. After the date of this
Agreement each of Buyer and the Company shall coordinate with the other the
declaration of any dividends in respect of Buyer Common Stock and the
Company Common Stock and the record dates and payments dates relating
thereto, it being the intention of the parties that the holders of Buyer
Common Stock or Company Common Stock shall not receive more than one
dividend, or fail to receive one dividend, for any single calendar quarter
with respect to their shares of Buyer Common Stock and/or Company Common
Stock and any shares of Buyer Common Stock any holder of Company Common
Stock receives in exchange therefor in the Merger.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the holders of Company Common
Stock under applicable law and by the requisite vote of the holders of
Buyer Common Stock under applicable law.
(b) Nasdaq/NMS Listing. The shares of Buyer Common Stock
which shall be issued to the stockholders of the Company upon consummation
of the Merger shall have been authorized for quotation on the Nasdaq/NMS,
subject to official notice of issuance.
(c) Other Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby (including the Merger and
the Subsidiary Merger) shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall
have expired (all such approvals and the expiration of all such waiting
periods being referred to herein as the "Requisite Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the S-4
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger, the Subsidiary Merger or any of
the other transactions contemplated by this Agreement or the Bank Merger
Agreement shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, restricts or makes
illegal consummation of the Merger or the Subsidiary Merger.
8.2. Conditions to Obligations of Buyer. The obligation of
Buyer to effect the Merger is also subject to the satisfaction or waiver by
Buyer at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Subject to Section
3.2, the representations and warranties of the Company set forth in this
Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date. Buyer shall have received a certificate signed on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer
of the Company to the foregoing effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date,
and Buyer shall have received a certificate signed on behalf of the Company
by the Chief Executive Officer and the Chief Financial Officer of the
Company to such effect.
(c) No Pending Governmental Actions. No proceeding
initiated by any federal agency or state banking authority seeking an
Injunction shall be pending.
(d) Federal Tax Opinion. Buyer shall have received an
opinion of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to Buyer
("Buyer's Counsel"), in form and substance reasonably satisfactory to
Buyer, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the
Merger will be treated as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, Buyer's Counsel may require
and rely upon representations and covenants, including those contained in
certificates of officers of Buyer, Buyer Bank, the Company, the Company
Bank and others, including certain stockholders of the Company who own 5%
or more of the outstanding shares of Company Common Stock, reasonably
satisfactory in form and substance to such counsel; provided, however, that
the failure to obtain any such representation or covenant from a
stockholder of the Company who owns 5% or more of the outstanding shares of
Company Common Stock that is not, in the reasonable judgment of Buyer's
Counsel, necessary in order for Buyer's Counsel to render such opinion
shall not be grounds for Buyer's Counsel to refuse to deliver such opinion.
(e) Pooling of Interests. Buyer shall have received a
letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP addressed to Buyer, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment.
8.3. Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger is also subject to the satisfaction or
waiver by the Company at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. Subject to Section
3.2, the representations and warranties of Buyer set forth in this
Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date. The Company shall have received a certificate signed on
behalf of Buyer by the Chief Executive Officer and the Chief Financial
Officer of Buyer to the foregoing effect.
(b) Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of Buyer by the Chief
Executive Officer and the Chief Financial Officer of Buyer to such effect.
(c) No Pending Governmental Actions. No proceeding
initiated by any federal agency or state banking authority seeking an
Injunction shall be pending.
(d) Federal Tax Opinion. The Company shall have received
an opinion of Miles & Stockbridge P.C. (the "Company's Counsel"), in form
and substance reasonably satisfactory to the Company, dated as of the
Effective Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the
Merger and the Subsidiary Merger will be treated as reorganizations within
the meaning of Section 368(a) of the Code and that accordingly for federal
income tax purposes:
(i) No gain or loss will be recognized by the Company
as a result of the Merger;
(ii) No gain or loss will be recognized by the Company
Bank as a result of the Subsidiary Merger (except to the extent
the Company Bank or Buyer Bank may be required to recognize
income due to the recapture of bad debt reserves as a result of
the Subsidiary Merger);
(iii) No gain or loss will be recognized by the
stockholders of the Company who exchange all of their Company
Common Stock solely for Buyer Common Stock pursuant to the Merger
(except with respect to cash received in lieu of a fractional
share interest in Buyer Common Stock); and
(iv) The aggregate tax basis of Buyer Common Stock
received by stockholders who exchange all of their Company Common
Stock solely for Common Stock pursuant to the Merger will be the
same as the aggregate tax basis of the Company Common Stock
surrendered in exchange therefor (reduced by any amount allocable
to a fractional share interest for which cash is received).
In rendering such opinion, the Company's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Buyer, Buyer Bank, the Company, the Company Bank and others,
including certain stockholders of the Company who own 5% or more of the
outstanding shares of Company Common Stock, reasonably satisfactory in form
and substance to such counsel; provided, however, that the failure to
obtain any such representation or covenant from a stockholder of the
Company who owns 5% or more of the outstanding shares of Company Common
Stock that is not, in the reasonable judgment of the Company's Counsel,
necessary in order for the Company's Counsel to render such opinion shall
not be grounds for the Company's Counsel to refuse to deliver such opinion.
(e) Pooling of Interests. Buyer shall have received a
letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP addressed to Buyer, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the stockholders of both
the Company and Buyer:
(a) by mutual consent of the Company and Buyer in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Buyer or the Company upon written notice to
the other party (i) 60 days after the date on which any request or
application for a Requisite Regulatory Approval shall have been denied by
any Governmental Entity which must grant such Requisite Regulatory
Approval, unless within the 60-day period following such denial or
withdrawal a petition for rehearing or an amended application has been
filed with the applicable Governmental Entity, provided, however, that no
party shall have the right to terminate this Agreement pursuant to this
Section 9.1(b)(i) if such denial shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein or (ii) if any Governmental
Entity of competent jurisdiction shall have issued a final nonappealable
order enjoining or otherwise prohibiting the Merger or the Subsidiary
Merger;
(c) by either Buyer or the Company if the Merger shall not
have been consummated on or before June 30, 1999, unless the failure of the
Closing to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(d) by either Buyer or the Company (provided that the
terminating party shall not be in material breach of any of its obligations
under Section 7.3) if any approval of the stockholders of either of the
Company or Buyer required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a
duly held meeting of such stockholders or at any adjournment or
postponement thereof;
(e) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the representations or warranties set
forth in this Agreement on the part of the other party, which breach is not
cured within thirty days following written notice to the party committing
such breach, or which breach, by its nature, cannot be cured prior to the
Closing; provided, however, that neither party shall have the right to
terminate this Agreement pursuant to this Section 9.1(e) unless the breach
of representation or warranty, together with all other such breaches, would
entitle the party receiving such representation not to consummate the
transactions contemplated hereby under Section 8.2(a) (in the case of a
breach of representation or warranty by the Company) or Section 8.3(a) (in
the case of a breach of representation or warranty by Buyer);
(f) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of the other party, which breach shall not have
been cured within thirty days following receipt by the breaching party of
written notice of such breach from the other party hereto, or which breach,
by its nature, cannot be cured prior to the Closing;
(g) by Buyer, if the Board of Directors of the Company does
not publicly recommend in the Proxy Statement that the Company's
stockholders approve this Agreement or if, after recommending in the Proxy
Statement that stockholders approve this Agreement, the Board of Directors
of the Company shall have withdrawn, modified or amended such
recommendation in any respect materially adverse to Buyer; or
(h) by the Company, if the Board of Directors of Buyer does
not publicly recommend in the Proxy Statement that Buyer's stockholders
approve this Agreement or if, after recommending in the Proxy Statement
that stockholders approve this Agreement, the Board of Directors of Buyer
shall have withdrawn, modified or amended such recommendation in any
respect materially adverse to the Company.
9.2. Effect of Termination; Expenses. In the event of
termination of this Agreement by either Buyer or the Company as provided in
Section 9.1, this Agreement shall forthwith become void and have no effect
except (i) the last sentence of Section 7.2(a), and Sections 7.2(c), 9.2
and 10.4, shall survive any termination of this Agreement, and that
notwithstanding anything to the contrary contained in this Agreement, no
party shall be relieved or released from any liabilities or damages arising
out of its willful breach of any provision of this Agreement.
9.3. Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Merger by
the stockholders of either the Company or Buyer; provided, however, that
after any approval of the transactions contemplated by this Agreement by
the Company's stockholders, there may not be, without further approval of
such stockholders, any amendment of this Agreement which reduces the amount
or changes the form of the consideration to be delivered to the Company
stockholders hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Board of Directors, may, to the extent legally allowed, (a) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in a written instrument signed
on behalf of such party, but such extension or waiver or failure to insist
on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1. Closing. Subject to the terms and conditions of this
Agreement and the Bank Merger Agreement, the closing of the Merger (the
"Closing") will take place at 10:00 a.m. on the first day which is (a) the
last business day of a month and (b) at least two business days after the
satisfaction or waiver (subject to applicable law) of the latest to occur
of the conditions set forth in Article VIII hereof (other than those
conditions which relate to actions to be taken at the Closing)(the "Closing
Date"), at the offices of Buyer's Counsel unless another time, date or
place is agreed to in writing by the parties hereto.
10.2. Alternative Structure. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, Buyer
shall be entitled to revise the structure of the Merger and/or the
Subsidiary Merger and related transactions in order to (x) substitute a
subsidiary of Buyer as a Constituent Corporation in the Merger or (y)
provide that a different entity shall be the surviving corporation in a
merger provided that each of the transactions comprising such revised
structure shall (i) fully qualify as, or fully be treated as part of, one
or more tax-free reorganizations within the meaning of Section 368(a) of
the Code, and not change the amount of consideration to be received by such
stockholders, (ii) be properly treated for financial reporting purposes as
a pooling of interests, (iii) be capable of consummation in as timely a
manner as the structure contemplated herein and (iv) not otherwise be
prejudicial to the interests of the stockholders of the Company. This
Agreement and any related documents shall be appropriately amended in order
to reflect any such revised structure.
10.3. Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement (other
than pursuant to the Company Option Agreement which shall terminate in
accordance with its terms) shall survive the Effective Time, except for
those covenants and agreements contained herein and therein which by their
terms apply in whole or in part after the Effective Time.
10.4. Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid
by the party incurring such expense, provided, however, that the costs and
expenses of printing and mailing the Proxy Statement to the stockholders of
the Company and Buyer, and all filing and other fees paid to the SEC or any
other Governmental Entity in connection with the Merger, the Subsidiary
Merger and the other transactions contemplated hereby, shall be borne
equally by Buyer and the Company, provided, further, however, that nothing
contained herein shall limit either party's rights to recover any
liabilities or damages arising out of the other party's willful breach of
any provision of this Agreement.
10.5. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail
(return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Buyer, to:
F&M Bancorp
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
and
(b) if to the Company, to:
Monocacy Bancshares, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman of the Board of Directors
with a copy to:
Miles & Stockbridge P.C.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
10.6. Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". The phrases "the date of
this Agreement", "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to September 4, 1998.
10.7. Counterparts. This Agreement may be executed by facsimile
or otherwise in counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
10.8. Entire Agreement. This Agreement (including the documents
and the instruments referred to herein), together with the Confidentiality
Agreement, the Stock Option Agreement and the Bank Merger Agreement,
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof.
10.9. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Maryland, without
regard to any applicable conflicts of law.
10.10. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained
in the last sentence of Section 7.2(a) and in Section 7.2(c) of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of the last
sentence of Section 7.2(a) and Section 7.2(c) of this Agreement and to
enforce specifically the terms and provisions thereof in any court of the
United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.
10.11. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as
is enforceable.
10.12. Publicity. Except as otherwise required by law or the
rules of the Nasdaq/NMS, so long as this Agreement is in effect, neither
Buyer nor the Company shall, or shall permit any of its Subsidiaries to,
issue or cause the publication of any press release or other public
announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be unreasonably
withheld.
10.13. Assignment; No Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective
successors and assigns. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
IN WITNESS WHEREOF, Buyer and the Company have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
F&M BANCORP
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & Chief Executive Officer
Attest:
___________________________
Name:
MONOCACY BANCSHARES, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
_____________________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board of Directors
Attest:
Name:______________________
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER . . . . . . . . . . . . . . 2
1.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Effects of the Merger . . . . . . . . . . . . . . . . . . . . 2
1.4. Conversion of Company Common Stock . . . . . . . . . . . . . . 2
1.5. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6. Buyer Common Stock . . . . . . . . . . . . . . . . . . . . . . 4
1.7. Articles of Incorporation . . . . . . . . . . . . . . . . . . 5
1.8. By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.9. Directors and Officers . . . . . . . . . . . . . . . . . . . . 5
1.10. Tax Consequences; Accounting Treatment . . . . . . . . . . . 5
ARTICLE II
EXCHANGE OF SHARES . . . . . . . . . . . . . 5
2.1. Buyer to Make Shares Available . . . . . . . . . . . . . . . . 5
2.2. Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES . . . . . . . . . 8
3.1. Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . 8
3.2. Standards . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . 9
4.1. Corporate Organization . . . . . . . . . . . . . . . . . . . . 9
4.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . 10
4.3. Authority; No Violation . . . . . . . . . . . . . . . . . . 11
4.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . 13
4.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 14
4.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . 15
4.8. Absence of Certain Changes or Events . . . . . . . . . . . . 15
4.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 16
4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.12. SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . 19
4.13. Company Information. . . . . . . . . . . . . . . . . . . . 19
4.14. Compliance with Applicable Law . . . . . . . . . . . . . . 19
4.15. Certain Contracts. . . . . . . . . . . . . . . . . . . . . 19
4.16. Agreements with Regulatory Agencies . . . . . . . . . . . . 20
4.17. Investment Securities . . . . . . . . . . . . . . . . . . . 21
4.18. Intellectual Property . . . . . . . . . . . . . . . . . . . 21
4.19. State Takeover Laws; Articles of Incorporation . . . . . . 21
4.20. Administration of Fiduciary Accounts . . . . . . . . . . . 21
4.21. Environmental Matters . . . . . . . . . . . . . . . . . . . 22
4.22. Derivative Transactions. . . . . . . . . . . . . . . . . . 23
4.23. Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.24. Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 23
4.25. Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . 23
4.26. Accounting for the Merger; Reorganization . . . . . . . . . 24
4.27. Ownership of Company Common Stock . . . . . . . . . . . . . 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . 25
5.1. Corporate Organization . . . . . . . . . . . . . . . . . . . 25
5.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . 26
5.3. Authority; No Violation . . . . . . . . . . . . . . . . . . 26
5.4. Consents and Approvals . . . . . . . . . . . . . . . . . . . 28
5.5. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6. Financial Statements . . . . . . . . . . . . . . . . . . . . 29
5.7. Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . 30
5.8. Absence of Certain Changes or Events . . . . . . . . . . . . 30
5.9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 30
5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11. Employees . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.12. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . 32
5.13. Buyer Information . . . . . . . . . . . . . . . . . . . . . 33
5.14. Compliance with Applicable Law . . . . . . . . . . . . . . 33
5.15. Ownership of Company Common Stock; Affiliates and Associates 33
5.16. Agreements with Regulatory Agencies . . . . . . . . . . . . 33
5.17. Investment Securities . . . . . . . . . . . . . . . . . . . 34
5.18. Intellectual Property . . . . . . . . . . . . . . . . . . . 34
5.19. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.20. Administration of Fiduciary Accounts . . . . . . . . . . . 34
5.21. Accounting for the Merger; Reorganization . . . . . . . . . 34
5.22. Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.23. Environmental Matters . . . . . . . . . . . . . . . . . . . 35
5.24. Derivative Transactions. . . . . . . . . . . . . . . . . . 36
5.25. Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . 36
5.26. Vote Required. . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . 38
6.1. Covenants of the Company . . . . . . . . . . . . . . . . . . 38
6.2. Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . 43
7.1. Regulatory Matters. . . . . . . . . . . . . . . . . . . . . 43
7.2. Access to Information . . . . . . . . . . . . . . . . . . . 45
7.3. Stockholder Meetings . . . . . . . . . . . . . . . . . . . . 47
7.4. Legal Conditions to Merger . . . . . . . . . . . . . . . . . 47
7.5. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.6. Stock Exchange Listing . . . . . . . . . . . . . . . . . . . 48
7.7. Employee Benefit Plans; Existing Agreements . . . . . . . . 48
7.8. Indemnification . . . . . . . . . . . . . . . . . . . . . . 49
7.9. Additional Agreements . . . . . . . . . . . . . . . . . . . 50
7.10. Advice of Changes . . . . . . . . . . . . . . . . . . . . . 51
7.11. Current Information . . . . . . . . . . . . . . . . . . . . 51
7.12. Execution and Authorization of Bank Merger Agreement . . . 51
7.13. Directorship . . . . . . . . . . . . . . . . . . . . . . . 51
7.14. Coordination of Dividends . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
CONDITIONS PRECEDENT . . . . . . . . . . . . 52
8.1. Conditions to Each Party's Obligation To Effect the Merger . 52
8.2. Conditions to Obligations of Buyer . . . . . . . . . . . . . 53
8.3. Conditions to Obligations of the Company . . . . . . . . . . 54
ARTICLE IX
TERMINATION AND AMENDMENT . . . . . . . . . . 56
9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . 56
9.2. Effect of Termination; Expenses . . . . . . . . . . . . . . 57
9.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.4. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . . 58
10.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.2. Alternative Structure . . . . . . . . . . . . . . . . . . . 58
10.3. Nonsurvival of Representations, Warranties and Agreements . 59
10.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.6. Interpretation . . . . . . . . . . . . . . . . . . . . . . 60
10.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 60
10.8. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 61
10.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 61
10.10. Enforcement of Agreement . . . . . . . . . . . . . . . . . 61
10.11. Severability . . . . . . . . . . . . . . . . . . . . . . . 61
10.12. Publicity . . . . . . . . . . . . . . . . . . . . . . . . 61
10.13. Assignment; No Third Party Beneficiaries . . . . . . . . . 61