EXHIBIT 2.1
AGREEMENT AND PLAN OF SHARE EXCHANGE AND MERGERS
BY AND AMONG
▇▇▇▇▇-▇▇▇▇▇ BANCSHARES, INC.
▇▇▇▇▇-▇▇▇▇▇ MERGER SUB, INC.
BANK OF MARYLAND
STERLING BANCORP
and
STERLING BANK AND TRUST CO.
DATED AS OF OCTOBER 16, 1998
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TABLE OF CONTENTS
Page
----
RECITALS .................................................................... 1
A. Sterling................................................... 1
▇. ▇▇▇▇▇-▇▇▇▇▇................................................ 1
C. MDMS....................................................... 1
D. The Bank................................................... 1
E. BoM........................................................ 1
F. The Transactions........................................... 1
G. Stockholder Agreement...................................... 1
H. Board Action............................................... 2
ARTICLE I CERTAIN DEFINITIONS........................................ 2
1.1 Certain Definitions........................................ 2
ARTICLE II THE TRANSACTIONS........................................... 10
2.1 The Share Exchange......................................... 10
(A) The Share Exchange................................ 10
(B) Effectiveness of the Share Exchange............... 10
2.2 Cancellation of Sterling Stock Options..................... 10
2.3 MDMS and Sterling Merger................................... 11
(A) The Continuing Corporation........................ 11
(B) Charter; Bylaws; Directors; Officers.............. 11
(C) Outstanding Stock of the Continuing Corporation. . 11
(D) Outstanding Stock of Sterling. ................... 11
2.4 The Bank Merger............................................ 12
(A) The Continuing Bank............................... 12
(B) Charter; Bylaws; Directors; Officers.............. 12
(C) Outstanding Stock of the Continuing Bank.......... 12
(D) Outstanding Stock of the Bank..................... 12
2.5 Effective Date, Effective Time and Closing................. 12
ARTICLE III CONSIDERATION; EXCHANGE PROCEDURES......................... 13
3.1 Share Exchange Consideration............................... 13
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3.2 Rights as Stockholders; Stock Transfers.................... 13
3.3 Payment Procedures......................................... 13
(A) Deposit of Cash................................... 13
(B) Exchange of Shares for Cash....................... 13
(C) Status of Certificates............................ 14
(D) Dissenting Shares................................. 14
(E) Abandoned Property................................ 14
3.4 Adjustment Amount.......................................... 14
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS.................. 15
4.1 Conduct of Businesses Prior to the Effective Time.......... 15
4.2 Forbearances............................................... 16
ARTICLE V REPRESENTATIONS AND WARRANTIES............................. 18
5.1 Disclosure Schedules....................................... 18
5.2 Updating of Disclosure Schedule............................ 18
5.3 Representations and Warranties of Sterling................. 19
(A) Organization, Standing and Authority.............. 19
(B) Capital........................................... 19
(C) Subsidiaries...................................... 20
(D) Corporate Power................................... 20
(E) Corporate Authority............................... 20
(F) Regulatory Approvals; No Default.................. 21
(G) Financial Reports. ............................... 21
(H) Litigation........................................ 22
(I) Regulatory Matters................................ 22
(J) Compliance with Laws.............................. 23
(K) Contracts; Defaults............................... 23
(L) Employees......................................... 25
(M) Employee Benefit Plans............................ 25
(N) Labor Matters..................................... 28
(O) Environmental Matters............................. 28
(P) Tax Matters....................................... 29
(Q) Risk Management Instruments....................... 29
(R) Assets............................................ 30
(S) Books and Records................................. 30
(T) Insurance......................................... 31
(U) Year 2000......................................... 31
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(V) Asset Classification.............................. 31
(W) No Brokers........................................ 31
(X) Disclosure........................................ 32
5.4 Representations and Warranties of ▇▇▇▇▇-▇▇▇▇▇.............. 32
(A) Organization, Standing and Authority.............. 32
(B) Subsidiaries...................................... 32
(C) Corporate Power................................... 32
(D) Corporate Authority............................... 32
(E) Regulatory Approvals; No Defaults................. 33
(F) No Brokers........................................ 33
(G) Financial Capacity................................ 33
(H) Financial Statements.............................. 33
(I) Disclosure........................................ 34
ARTICLE VI COVENANTS.................................................. 34
6.1 Reasonable Best Efforts.................................... 34
6.2 Stockholder Approval....................................... 35
6.3 Press Releases............................................. 35
6.4 Access; Information........................................ 35
6.5 Certain Modifications; Restructuring Charges; Observation
Rights; Month End Financials............................. 36
6.6 Regulatory Applications.................................... 37
6.7 Indemnification............................................ 38
6.8 Notification of Certain Matters............................ 39
6.9 No Solicitation............................................ 39
6.10 Employee Benefits.......................................... 40
6.11 Leases..................................................... 42
6.12 Flood Insurance. ......................................... 42
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS............... 42
7.1 Conditions to Each Party's Obligation to Effect the
Transactions............................................. 42
(A) Stockholder Approval.............................. 42
(B) Regulatory Approvals.............................. 43
(C) No Injunction..................................... 43
7.2 Conditions to Obligation of Sterling and the Bank.......... 43
(A) Representations and Warranties.................... 43
(B) Performance of Obligations of ▇▇▇▇▇-▇▇▇▇▇......... 43
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(C) Payment........................................... 44
(D) Attorney's Opinion................................ 44
7.3 Conditions to Obligation of ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM...... 44
(A) Representations and Warranties.................... 44
(B) Performance of Obligations of Sterling............ 44
(C) Accountant's Letter............................... 44
(D) Agreements and Documents.......................... 44
(E) ▇▇▇▇▇▇▇ ▇▇▇▇▇ Stock............................... 45
(F) No Material Adverse Change........................ 45
(G) No Litigation..................................... 46
(H) Waiver or Release................................. 46
ARTICLE VIII TERMINATION................................................ 47
8.1 Termination................................................ 47
(A) Mutual Consent.................................... 47
(B) Sterling Breach................................... 47
(C) ▇▇▇▇▇-▇▇▇▇▇ Breach................................ 47
(D) Failure of Condition.............................. 48
(E) Delay............................................. 48
(F) No Approval....................................... 48
(G) Sterling Meeting.................................. 48
(H) Sterling Board.................................... 48
(I) Acquisition Proposal.............................. 49
8.2 Investigation.............................................. 49
8.3 Effect of Termination...................................... 49
ARTICLE IX MISCELLANEOUS............................................ 49
9.1 Non-Survival............................................... 49
9.2 Waiver; Amendment.......................................... 49
9.3 Extension; Waiver.......................................... 50
9.4 Counterparts............................................... 50
9.5 Governing Law.............................................. 50
9.6 Fees, Expenses and Other Payments.......................... 50
9.7 Notices.................................................... 51
9.8 Entire Understanding; No Third Party Beneficiaries......... 52
9.9 Interpretation; Effect..................................... 52
9.10 Assignment................................................. 53
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EXHIBIT A.................................................................... 56
EXHIBIT B.................................................................... 58
EXHIBIT C.................................................................... 59
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AGREEMENT AND PLAN OF SHARE EXCHANGE AND MERGERS
AGREEMENT AND PLAN OF SHARE EXCHANGE AND MERGERS ("Plan"), dated as of
the 16th day of October, 1998, by and among ▇▇▇▇▇-▇▇▇▇▇ Bancshares, Inc., a
Maryland corporation ("▇▇▇▇▇-▇▇▇▇▇"), ▇▇▇▇▇-▇▇▇▇▇ Merger Sub, Inc., a Maryland
corporation ("MDMS"), Bank of Maryland, a Maryland trust company ("BoM"),
Sterling Bancorp, a Maryland corporation ("Sterling"), and Sterling Bank and
Trust Co., a Maryland trust company
("the Bank").
RECITALS
A. Sterling. Sterling is a Maryland corporation, having
its principal place of business in Baltimore, Maryland.
▇. ▇▇▇▇▇-▇▇▇▇▇. ▇▇▇▇▇-▇▇▇▇▇ is a Maryland corporation, having
its principal place of business in Westminster, Maryland.
C. MDMS. MDMS is a Maryland corporation, having its principal
place of business in Westminster, Maryland.
D. The Bank. The Bank is a Maryland trust company, having its
principal place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇-▇▇▇▇.
E. BoM. BoM is a Maryland trust company, having its principal
place of business at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇.
F. The Transactions. ▇▇▇▇▇-▇▇▇▇▇ desires to acquire Sterling
through a share exchange whereby ▇▇▇▇▇-▇▇▇▇▇ will exchange $8,616,043.08 (as it
may be adjusted pursuant to Section 3.4) in cash (the "Aggregate Share Exchange
Consideration") for all of the issued and outstanding common stock of Sterling.
Then, Sterling will cancel all options and warrants to purchase Sterling capital
stock and pay the holders thereof $1,678,174.82 (as it may be adjusted pursuant
to Section 3.4) (the "Aggregate Option Cancellation Consideration"). Immediately
thereafter, Sterling will merge with and into MDMS. As soon thereafter as ▇▇▇▇▇-
▇▇▇▇▇ may deem appropriate, the Bank will merge with and into BoM.
G. Stockholder Agreement. As a condition and inducement to
▇▇▇▇▇- ▇▇▇▇▇'▇ willingness to enter into this Plan, ▇▇▇▇▇-▇▇▇▇▇ has entered into
Stockholder Agreements (the "Stockholder Agreements") with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Company, and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Shale ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustees of the Trust created
by an Irrevocable Trust Agreement dated December 1, 1997, FBO ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, (the "Stockholders") providing
that the Stockholders shall vote, or cause to be voted, their shares for
approval of the Transactions.
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H. Board Action. The respective Boards of Directors of each of
▇▇▇▇▇- ▇▇▇▇▇, MDMS, BoM, Sterling and the Bank have determined that it is in the
best interests of their respective companies and their stockholders to
consummate the Transactions.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements contained herein
the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. The following terms are used in
this Plan with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange
offer, proposal for a merger, consolidation or other business
combination involving Sterling or any of its Subsidiaries or any
proposal or offer to acquire in any manner a substantial equity
interest in, or a substantial portion of the assets or deposits of,
Sterling or any of its Subsidiaries, other than the Transactions.
"Adjustment Amount" has the meaning set forth in
Section 3.4(A).
"Affiliate" of a Person means a spouse of the Person;
a member of the immediate family of a Person; any corporation or
organization of which the Person is a general partner, directly or
indirectly either alone or with his or her spouse and the members of
his or her immediate family owns or controls 10 percent or more of any
class of equity securities; or any trust or other estate in which the
Person or the spouse of the Person was a grantor or creator or has a
substantial beneficial interest or as to which such Person or his or
her spouse serves as trustee or in a similar fiduciary capacity.
"Aggregate Option Cancellation Consideration" has the
meaning set forth in Recital F.
"Aggregate Share Exchange Consideration" has the
meaning set forth in Recital F.
"Asset Classification" has the meaning set forth in
Section 5.3(V).
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"Available for Sale Securities" has the meaning set
forth in Section 7.3(F).
"Balance Sheet" has the meaning set forth in Section
5.3(G).
"Bank" has the meaning set forth in the preamble to
this Plan.
"Bank Merger" has the meaning set forth in Section
2.4.
"Benefit Plan Affiliate" has the meaning set forth in
Section 5.3(M)(iii).
"BHC Act" means the federal Bank Holding Company Act
of 1956, as amended.
"BoM" has the meaning set forth in the preamble to
this Plan.
"Claims" has the meaning set forth in Section 6.7(A).
"Closing" has the meaning set forth in Section 2.5.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, or any successor law, and regulations issued by the IRS.
"Comprehensive Income and Accumulative Comprehensive
Income" has the meaning set forth in Section 7.3(F).
"Continuing Bank" has the meaning set forth in
Section 2.4(A).
"Continuing Corporation" has the meaning set forth in
Section 2.3(A).
"Contract" or "Contracts" means any agreement,
contract, obligation, promise, or undertaking (whether written or oral
and whether express or implied) that is legally binding.
"Controlled Group Benefit Plan" has the meaning set
forth in Section 5.3(M)(iii).
"Corporate Merger" has the meaning set forth in
Section 2.3(A).
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"Costs" has the meaning set forth in Section 6.7(A).
"Directors" means any director or former director of
Sterling or any if its Subsidiaries.
"Disclosure Schedule" has the meaning set forth in
Section 5.1.
"Dissenting Shares" has the meaning set forth in
Section 3.3(D).
"Dividend" has the meaning set forth in Section 2.2
(A).
"DOL" means the Department of Labor.
"Effective Date" has the meaning set forth in Section
2.5.
"Effective Time" has the meaning set forth in Section
2.5.
"Employee Benefit Plans" has the meaning set forth in
Section 5.3(M)(i).
"Employees" means any employee or former employee of
Sterling or any of its Subsidiaries.
"Environmental Laws" means all applicable local,
state and federal environmental, health and safety laws and
regulations, including, without limitation, the Resource Conservation
and Recovery Act, the Comprehensive Environmental Response,
Compensation, and Liability Act, the Clean Water Act, the Federal Clean
Air Act, and the Occupational Safety and Health Act, each as amended,
regulations promulgated thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Escrow Agent" has the meaning set forth in Section
3.3(A).
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder.
"Expenses" has the meaning set forth in Section 9.6
(A).
"FDIC" means the Federal Deposit Insurance
Corporation.
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"Federal Reserve Board" means the Board of Governors
of the Federal Reserve System.
"GAAP" means generally accepted accounting principles
as used by the Financial Accounting Standards Board and/or the American
Institute of Certified Public Accountants, consistently applied and
maintained throughout the periods indicated.
"Governmental Authority" means any court,
administrative agency or commission or other federal, state or local
governmental authority or instrumentality.
"Immediate family" of a Person means the following
(whether by the full or half blood or by adoption): such Person's
spouse, father, mother, children, brothers, sisters, and grandchildren;
the father, mother, brothers, and sisters of such Person's spouse; and
the spouse of a child, brother, or sister of such Person.
"Indemnified Party" has the meaning set forth in
Section 6.7(A).
"Insurance Amount" has the meaning set forth in
Section 6.7(B).
"Insurance Policies" has the meaning set forth in
Section 5.3(T).
"Interim Balance Sheet" has the meaning set forth in
Section 5.3(G).
"IRS" means the Internal Revenue Service.
"Knowledge" or "knowing": an individual will be
deemed to have "knowledge" of or to "know" a particular fact or other
matter if: (a) such individual is actually aware of such fact or other
matter; or (b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter. A Person (other than an
individual) will be deemed to have "knowledge" of or to "know" a
particular fact or other matter if any individual who is serving as a
director, officer, partner, executor, or trustee of such Person (or in
any similar capacity) has knowledge of or knew such fact or other
matter.
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"Liens" means any charge, mortgage, pledge, security
interest, restriction, claim, lien, or encumbrance.
"▇▇▇▇▇-▇▇▇▇▇" has the meaning set forth in the
preamble to this Plan.
"▇▇▇▇▇-▇▇▇▇▇ Board" means the Board of Directors of
▇▇▇▇▇-▇▇▇▇▇.
"▇▇▇▇▇-▇▇▇▇▇ SEC Reports" has the meaning set forth
in Section 5.4(H).
"Material Adverse Effect" means, with respect to
▇▇▇▇▇-▇▇▇▇▇ or Sterling, any effect that (a) is material and adverse to
the financial position, results of operations or business of
▇▇▇▇▇-▇▇▇▇▇ and its Subsidiaries taken as a whole or Sterling and its
Subsidiaries taken as a whole, respectively, or (b) would materially
impair the ability of either ▇▇▇▇▇-▇▇▇▇▇ or Sterling to perform its
obligations under this Plan or otherwise materially threaten or
materially impede the consummation of the Transactions; provided,
however, that a Material Adverse Effect shall not be deemed to include
the impact of (i) changes in banking and similar laws of general
applicability or interpretations thereof by courts or Governmental
Authorities, (ii) changes in GAAP or regulatory accounting requirements
applicable to banks and their holding companies generally and (iii) any
modifications or changes to valuation policies and practices in
connection with the Transactions or restructuring charges taken in
connection with the Transactions, in each case in accordance with GAAP.
"MDMS" has the meaning set forth in the preamble to
this Plan.
"MFA" means the Maryland Financial Institutions
Article.
"MGCL" means the Maryland General Corporation Law.
"NASD" means the National Association of Securities
Dealers, Inc.
"Option Cancellation" has the meaning set forth in
Section 2.2(A).
"Option Cancellation Agreements" has the meaning set
forth in Section 2.2(A).
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"Option Cancellation Consideration" has the meaning
set forth in Section 2.2(A).
"Ordinary Course of Business" means, with respect to
an action taken by any Person, (a) such action is consistent with the
past practices of such Person and is taken in the ordinary course of
the normal day-to-day operations of such Person; (b) such action is not
required by law or the Person's charter or by-laws to be authorized by
the board of directors of such Person (or by any Person or group of
Persons exercising similar authority) and is not required to be
specifically authorized by the parent company (if any) of such Person;
and (c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Other Plan" has the meaning set forth in Section 5.3
(M)(i).
"PBGC" means the Pension Benefit Guaranty
Corporation.
"Person" means any individual, bank, corporation,
partnership, association, joint-stock company, business trust or
unincorporated organization.
"Plan" has the meaning set forth in the preamble to
this Plan, as amended or modified from time to time in accordance with
Section 9.2.
"Previously Disclosed" by a party shall mean
information set forth in its Disclosure Schedule.
"Representatives" means, with respect to any Person,
such Person's directors, officers, employees, consultants, legal or
financial advisors or any representatives of such legal or financial
advisors.
"Retirement Plan" has the meaning set forth in
Section 5.3(M)(i).
"Rights" means, with respect to any Person,
securities or obligations convertible into or exercisable or
exchangeable for, or giving any person any right to subscribe for or
acquire, or any options, warrants, calls or commitments relating to, or
any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or
value of, shares of capital stock of such person.
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"SDAT" has the meaning set forth in Section 2.1(B).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Share Exchange" has the meaning set forth in Section
2.1(A).
"Share Exchange Consideration" has the meaning set
forth in Section 2.1(A).
"Sterling" has the meaning set forth in the preamble
to this Plan.
"Sterling Board" means the Board of Directors of
Sterling.
"Sterling Common Stock" means the common stock, par
value $.01 per share, of Sterling.
"Sterling Meeting" has the meaning set forth in
Section 6.2.
"Sterling Stock Options" means all Rights to purchase
shares of Sterling Common Stock.
"Sterling Termination Fee" has the meaning set forth
in Section 9.6(C).
"Stockholder Agreements" has the meaning set forth in
Recital G to this Plan.
"Subsidiary" and/or "Subsidiaries" means, with
respect to any Person (the "Owner"), any other Person of which
securities or other interests having the power to elect a majority of
that other Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of that
other Person (other than securities or other interests having such
power only upon the happening of a contingency that has not occurred),
are held by the Owner or one or more of its Subsidiaries.
"Superior Proposal" means a bona fide Acquisition
Proposal made by a third Person that the Sterling Board determines in
its good faith judgment to
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be more favorable to Sterling's stockholders than the Share Exchange
(based on the written opinion, with only customary qualifications, of
Sterling's independent financial advisor that the value of the
consideration to Sterling's stockholders provided for in such proposal
exceeds the value of the Share Exchange Consideration) and for which
financing, to the extent required, is then committed or which, in the
good faith judgment of the Sterling Board (based on the written advice
of Sterling's independent financial advisor), is reasonably capable of
being obtained by such third Person.
"Tax" and "Taxes" means all federal, state, local or
foreign taxes, charges, fees, levies or other assessments, however
denominated, including, without limitation, all net income, gross
income, gains, gross receipts, sales, use, ad valorem, goods and
services, capital, production, transfer, franchise, windfall profits,
license, withholding, payroll, employment, disability, employer health,
excise, estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties, fees,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
"Tax Returns" means any return, amended return or
other report (including elections, declarations, disclosures,
schedules, estimates and information returns) required to be filed with
respect to any Tax.
"Terminating ▇▇▇▇▇-▇▇▇▇▇ Breach" has the meaning set
forth in Section 8.1(C).
"Terminating Sterling Breach" has the meaning set
forth in Section 8.1(B).
"Transactions" means all of the transactions
contemplated by this Plan, including (a) the Share Exchange; (b) the
Option Cancellation; (c) the Corporate Merger; (d) the Bank Merger; (e)
the execution, delivery, and performance of the Stockholder Agreements;
(f) the performance by ▇▇▇▇▇-▇▇▇▇▇, MDMS, BoM, Sterling, and the Bank
of their respective covenants and obligations under this Plan; and (g)
▇▇▇▇▇-▇▇▇▇▇'▇ acquisition and ownership of the Sterling Common Stock
and exercise of control over Sterling and the Bank.
"Welfare Plan" has the meaning set forth in Section
5.3(M)(i).
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"Year 2000 Compliant" means information technology
that accurately processes date/time data (including, but not limited
to, calculating, comparing, and sequencing) from, into, and between the
years 1999 and 2000 and leap year calculations (Year 2000 is a leap
year). Year 2000 Compliant information technology, when used in
combination with other information technology, will accurately process
date/time data if the other information technology properly exchanges
date/time data with it.
ARTICLE II
THE TRANSACTIONS
2.1 The Share Exchange.
(A) The Share Exchange. At the Effective Time, each of
the outstanding shares of Sterling Common Stock shall be exchanged for $21.54
(as it may be adjusted pursuant to Section 3.4) in cash (the "Share Exchange
Consideration") to be paid by ▇▇▇▇▇-▇▇▇▇▇ in accordance with the MGCL and
▇▇▇▇▇-▇▇▇▇▇ shall become the sole stockholder of Sterling (the "Share
Exchange"). At any time prior to the Effective Time, ▇▇▇▇▇-▇▇▇▇▇ may change the
method of effecting the combination with Sterling (including, without
limitation, the provisions of this Article II) if and to the extent it deems
such change to be necessary, appropriate or desirable; provided, however, that
no such change shall (i) alter or change the amount or kind of consideration to
be issued to holders of Sterling Common Stock as provided for in this Plan, or
(ii) materially impede or delay consummation of the Transactions.
(B) Effectiveness of the Share Exchange. Subject to the
satisfaction or waiver of the conditions set forth in Article VII, the Share
Exchange shall become effective upon the filing in the office of the Maryland
State Department of Assessments and Taxation (the "SDAT") of articles of share
exchange or such later date and time as may be set forth in such articles. The
Share Exchange shall have the effects prescribed in the MGCL.
2.2 Cancellation of Sterling Stock Options.
(A) After the Effective Time and before the Corporate
Merger and the Bank Merger, ▇▇▇▇▇-▇▇▇▇▇ shall cause Sterling to cancel all
outstanding Sterling Stock Options (the "Option Cancellation") in consideration
of payment to the holders thereof of the Aggregate Option Cancellation
Consideration. For each share of Sterling Common Stock the holder of a Sterling
Stock Option is eligible to purchase, the holder shall receive $21.54 (as it may
be adjusted pursuant to Section 3.4) minus the price which, under the applicable
Sterling Stock Option agreement, the holder must pay to exercise the Sterling
Stock Option (the "Option
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Cancellation Consideration"). The Option Cancellation Consideration shall be
paid in accordance with the terms of the written agreements between Sterling and
the holders of the Sterling Stock Options (the "Option Cancellation
Agreements.")
(B) On the Effective Date, after the Effective Time and
before the Corporate Merger and the Bank Merger, ▇▇▇▇▇-▇▇▇▇▇ shall cause
Sterling to cause the Bank to declare and pay a cash dividend to Sterling of
such amount of cash as ▇▇▇▇▇-▇▇▇▇▇ deems appropriate or such lesser amount as is
approved by the appropriate federal banking authorities and the Maryland
Commissioner of Financial Regulation (the "Dividend").
(C) No later than the Effective Date, after the
Effective Time and before the Corporate Merger and the Bank Merger, ▇▇▇▇▇-▇▇▇▇▇
shall make a contribution of capital to Sterling in an amount equal to the
difference between the amount of cash required for the Option Cancellation and
the Dividend.
2.3 MDMS and Sterling Merger. As soon after the Effective Time
as ▇▇▇▇▇- ▇▇▇▇▇ may ▇▇▇▇ appropriate, but prior to the Bank Merger and not prior
to the Option Cancellation:
(A) The Continuing Corporation. Sterling shall be
merged with and into MDMS (the "Corporate Merger"), the separate existence of
Sterling shall cease and MDMS (the "Continuing Corporation") shall survive; the
name of the Continuing Corporation shall be "▇▇▇▇▇-▇▇▇▇▇ Merger Sub, Inc." and
the Continuing Corporation shall continue to conduct its business in
Westminster, Maryland. The Corporate Merger shall have the effects prescribed in
the MGCL.
(B) Charter; Bylaws; Directors; Officers. The charter
and bylaws of the Continuing Corporation shall be those of MDMS, as in effect
immediately prior to the Corporate Merger becoming effective. The directors and
officers of MDMS in office immediately prior to the Corporate Merger becoming
effective shall be the directors and officers of the Continuing Corporation, who
shall hold office until such time as their successors are elected and qualified.
(C) Outstanding Stock of the Continuing Corporation.
The amount of the capital stock of the Continuing Corporation shall be not less
than $100 and shall consist of not less than 100 issued and outstanding shares
of common stock, each of $1.00 par value, the issued and outstanding shares
shall remain issued and outstanding as shares of MDMS, and the holders thereof
shall retain their rights therein.
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(D) Outstanding Stock of Sterling. Promptly after the
Corporate Merger becomes effective, ▇▇▇▇▇-▇▇▇▇▇ shall deliver all of the
Sterling Common Stock to the Continuing Corporation for cancellation.
2.4 The Bank Merger. The Bank Merger is subject to the
approval of the Maryland Commissioner of Financial Regulation. As soon after the
Effective Time as ▇▇▇▇▇- ▇▇▇▇▇ may deem appropriate, but not prior to the Option
Cancellation or the Corporate Merger:
(A) The Continuing Bank. The Bank shall be merged with
and into BoM (the "Bank Merger"), the separate existence of the Bank shall cease
and BoM (the "Continuing Bank") shall survive; the name of the Continuing Bank
shall be "Bank of Maryland" and the Continuing Bank shall continue to conduct
the business of a commercial bank at BoM's main office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, and at the legally established branches of the
Bank and BoM, except the Bank's branches at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇-▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇. The Bank
Merger shall have the effects prescribed in the MGCL and the Maryland Financial
Institutions Article ("MFA").
(B) Charter; Bylaws; Directors; Officers. The charter
and bylaws of the Continuing Bank shall be those of BoM, as in effect
immediately prior to the Bank Merger becoming effective. The directors and
officers of BoM in office immediately prior to the Bank Merger becoming
effective shall be the directors and officers of the Continuing Bank, who shall
hold office until such time as their successors are elected and qualified.
(C) Outstanding Stock of the Continuing Bank. The
amount of the capital stock of the Continuing Bank shall be not less than
$3,290,170 and shall consist of not less than 329,017 issued and outstanding
shares of common stock, each of $10.00 par value, the issued and outstanding
shares shall remain issued and outstanding as shares of BoM, each of $10.00 par
value, and the holders thereof shall retain their rights therein.
(D) Outstanding Stock of the Bank. Promptly after the
Bank Merger becomes effective, MDMS shall deliver all of the issued and
outstanding shares of the capital stock of the Bank to the Continuing Bank for
cancellation. No preferred stock shall be issued in the Bank Merger.
2.5 Effective Date, Effective Time and Closing. Subject to the
satisfaction or waiver of the conditions set forth in Article VII which are
capable of being satisfied prior to Closing, the parties shall cause the
effective date of the Share Exchange (the "Effective Date") to occur on (A) the
5th business day to occur after the last of the conditions set forth in Article
VII shall have been satisfied or waived in accordance with the terms of this
Plan (or, at the election of ▇▇▇▇▇-▇▇▇▇▇, on any later business day of the month
in which such day occurs or
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any of the first 10 business days of the succeeding month) or (B) such other
date to which the parties may agree in writing. The time on the Effective Date
when the Share Exchange shall become effective is referred to as the "Effective
Time." The closing of the Share Exchange, the Option Cancellation, and the
Corporate Merger (the "Closing") shall take place whether or not regulatory
approval for the Bank Merger has been received at 10:00 a.m. on the Effective
Date at the offices of ▇▇▇▇▇▇, Feinblatt, Rothman, Hoffberger and ▇▇▇▇▇▇▇▇▇,
LLC, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇.
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.1 Share Exchange Consideration. At the Effective Time,
automatically by virtue of the Share Exchange and without any action on the part
of any Person, each share of Sterling Common Stock issued and outstanding
immediately prior to the Effective Time shall become and be converted into the
right to receive $21.54 (as it may be adjusted pursuant to Section 3.4) in cash
from ▇▇▇▇▇-▇▇▇▇▇.
3.2 Rights as Stockholders; Stock Transfers. At the Effective
Time, holders of Sterling Common Stock shall cease to be, and shall have no
rights as, stockholders of Sterling, other than to receive any dividend or other
distribution with respect to such Sterling Common Stock with a record date
occurring prior to the Effective Time and the consideration provided under this
Article III or with respect to dissenting shares, such rights as are provided
under the MGCL. After the Effective Time, there shall be no transfers on the
stock transfer books of Sterling of shares of Sterling Common Stock except for
transfers to ▇▇▇▇▇-▇▇▇▇▇.
3.3 Payment Procedures.
(A) Deposit of Cash. No later than the Closing,
▇▇▇▇▇-▇▇▇▇▇ shall cause cash to be deposited in escrow with an institution
mutually satisfactory to Sterling and ▇▇▇▇▇-▇▇▇▇▇ ("Escrow Agent") in an amount
equal to $8,616,043.08 (as it may be adjusted pursuant to Section 3.4) which is
the total Share Exchange Consideration for all of Sterling Common Stock.
(B) Exchange of Shares for Cash. Within 5 days after
the Effective Date, the Escrow Agent will send a notice and transmittal form to
each holder of a certificate evidencing Sterling Common Stock, advising such
holder of the procedure for surrendering to the Escrow Agent such certificate or
certificates in exchange for payment. Except with respect to any Dissenting
Shares, each holder of a certificate evidencing Sterling Common Stock, upon
surrender of such certificate to the Escrow Agent, together with such letter of
transmittal, shall be entitled to receive promptly in exchange for such
certificate $21.54 (as it may be adjusted
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pursuant to Section 3.4) per share of Sterling Common Stock represented by such
certificate. As promptly as practicable after each such holder's certificate has
been surrendered (but not more than 3 business days thereafter), the Escrow
Agent will mail to each holder of Sterling Common Stock whose certificates for
shares, which are not Dissenting Shares, have been surrendered to the Escrow
Agent, a check in the appropriate amount. No interest will be paid or accrued on
the cash payable upon surrender of such certificates. If payment for Sterling
Common Stock is to be made to any person other than the registered holder of the
Sterling Common Stock surrendered, the amount of any stock transfer or similar
taxes (whether imposed on the registered holder or such person) payable on
account of the transfer of the Sterling Common Stock will be deducted from the
amount to be paid by the Escrow Agent, or the Escrow Agent may refuse to make
such payment, unless satisfactory evidence of the payment of such taxes, or
exemption therefrom, is submitted to the Escrow Agent. Shares to which
dissenters rights have been properly perfected shall be treated by ▇▇▇▇▇-▇▇▇▇▇
in the manner provided by Section 3.3(D).
(C) Status of Certificates. At and after the Effective
Time, each outstanding certificate which previously represented shares of
Sterling Common Stock (except any Dissenting Shares, which Dissenting Shares
shall evidence only the rights specified in Section 3.3(D)) shall be deemed to
evidence only the right to receive cash in accordance with the provisions of
this Section 3.3 and shall not be deemed to confer upon the holder thereof any
voting, dividend or other rights of a stockholder of ▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇▇, the
Continuing Corporation, or the Continuing Bank. No interest on any amount
payable to any former holder of Sterling Common Stock shall accrue or be paid to
such holder for the period following the Effective Time.
(D) Dissenting Shares. Except for purposes of
determining the total number of shares of Sterling Common Stock issued and
outstanding immediately prior to the Effective Time, the provisions of Sections
3.1, 3.3(A), 3.3(B), 3.3(C) and 3.3(E) shall not apply to any shares of Sterling
Common Stock held by holders who elect dissenter and appraisal rights under the
MGCL ("Dissenting Shares"). Any holder of Dissenting Shares shall have in
consideration for the cancellation of such Dissenting Shares only such rights as
may be given to such holder under the MGCL, in the manner and subject to the
procedures and conditions therein provided, unless and until such holder shall
have failed to perfect, or shall have effectively withdrawn or lost, such
holder's right to appraisal of any payment for such holder's shares of Sterling
Common Stock under the MGCL, at which time such shares shall be canceled and
converted into the right to receive cash in the amount provided in Section
3.3(B) only, and no other consideration shall be paid.
(E) Abandoned Property. Notwithstanding the foregoing,
no party hereto shall be liable to any former holder of Sterling Common Stock
for any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
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3.4 Adjustment Amount.
(A) The total of the Aggregate Share Exchange
Consideration and the Aggregate Option Cancellation Consideration shall be
reduced by the "Adjustment Amount" if a duly executed written agreement by the
landlord of the Bank's Parole Shopping Center branch in form and substance
reasonably satisfactory to ▇▇▇▇▇-▇▇▇▇▇ consenting to the assignment of the
Parole Shopping Center branch lease to and occupancy of the Parole Shopping
Center branch location by BoM has not been delivered to ▇▇▇▇▇-▇▇▇▇▇ prior to the
Effective Date or if it has been so delivered, Sterling or its Subsidiaries have
paid consideration to the landlord in return for such consent. The Adjustment
Amount shall be either (as may be applicable) (i) the dollar value of the Bank's
Parole branch leasehold rights as set forth below as of the Effective Date (if a
month end) or as of the most recent month end preceding the Effective Date if
the Effective Date is not a month end:
================================================================================
September 30, 1998 $270,750
--------------------------------------------------------------------------------
October 31, 1998 268,850
--------------------------------------------------------------------------------
November 30, 1998 266,950
--------------------------------------------------------------------------------
December 31, 1998 265,050
--------------------------------------------------------------------------------
January 31, 1999 263,150
--------------------------------------------------------------------------------
February 28, 1999 261,250
================================================================================
or (ii) the value of the consideration paid to the landlord to secure the
consent to assignment.
(B) The Adjustment Amount shall be divided by 607,050,
the total number of outstanding shares of Sterling Common Stock plus the total
number of shares of Sterling Common Stock holders of Sterling Stock Options are
eligible to purchase, to derive the Share Exchange Consideration and Option
Cancellation Consideration reduction amount. For example, if the Effective Date
is October 30, 1998, the Adjustment Amount (assuming no payment has been made to
and no consent to assignment received from the landlord) is $270,750, the Share
Exchange Consideration and Option Cancellation Consideration reduction amount is
$.446, the Option Cancellation Consideration is $21.094 minus the price per
share of Sterling Common Stock which, under the applicable Sterling Stock Option
agreement, the holder must pay to exercise the Sterling Stock Option, and the
Share Exchange Consideration is $21.094. The amount paid to each holder of
Sterling Common Stock and Sterling Stock Option shall be rounded up or down to
the nearest whole cent.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Conduct of Businesses Prior to the Effective Time. Except
as expressly contemplated or permitted by this Plan, or as required by
applicable law, rule or regulation, during the period from the date of this Plan
to the Effective Time, Sterling shall, and shall cause each of its Subsidiaries
to, (A) conduct its business in the usual, regular and ordinary course
consistent with past practice, (B) use reasonable best efforts to maintain and
preserve intact its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees and (C)
take no action which would reasonably be expected to adversely affect or delay
the ability of ▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇▇, MDMS, the Bank or BoM to obtain any
approvals of any Governmental Authority required to consummate the Transactions
or to perform its covenants and agreements herein.
4.2 Forbearances. Except as expressly contemplated or
permitted by this Plan, or as required by applicable law, rule or regulation,
during the period from the date of this Plan to the Effective Time, Sterling
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of ▇▇▇▇▇-▇▇▇▇▇:
(A) other than in the Ordinary Course of Business, make
any advance or loan or incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for, the
obligations of any other Person;
(B) adjust, split, combine or reclassify any capital
stock; make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock; grant any stock appreciation rights; grant
any Person any Rights or modify any existing Rights, provided, however, that
7,500 Sterling Stock Options held by Messrs. ▇▇▇▇ and ▇▇▇▇▇▇▇ scheduled to
expire on December 13, 1998, may be extended to June 1999; or issue any
additional shares of capital stock except with respect to Sterling Stock Options
granted prior to the date hereof;
(C) sell, transfer, mortgage, encumber or otherwise
dispose of any of its properties or assets to any Person, or cancel, release or
assign any indebtedness to any Person or any claims held by any Person, except
(i) in the Ordinary Course of Business, (ii) pursuant to Contracts in force at
the date of this Plan or (iii) as Previously Disclosed;
(D) make any material acquisition or investment either
by purchase of stock or securities (other than purchases of U.S. Treasury
Securities and U.S. Agency obligations in the Ordinary Course of Business),
merger or consolidation, contributions to capital, property
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transfers, or purchases of any property or assets of any Person other than a
wholly owned Subsidiary;
(E) except for transactions in the Ordinary Course of
Business or with respect to the payment to the landlord of the Bank's Parole
Shopping Center branch contemplated by Section 3.4, enter into, terminate or
make any changes to any Contract, other than renewals of Contracts without
adverse changes of terms thereof;
(F) other than in the Ordinary Course of Business,
increase the compensation or fringe benefits of any Representative or pay any
pension or retirement allowance not required by any existing plan or agreement
to any Representative or become a party to, amend (except as required by law) or
commit itself to any pension, retirement, profit-sharing or welfare benefit plan
or agreement or employment agreement with or for the benefit of any
Representative or accelerate the vesting of any stock options or other
stock-based compensation;
(G) settle any claim, action or proceeding involving
money damages, except in the Ordinary Course of Business;
(H) amend its certificate of incorporation, bylaws or
similar governing documents;
(I) change its method of accounting as in effect at
June 30, 1998, except as required by changes in GAAP as concurred in by its
independent auditors;
(J) permit or allow its direct or indirect ownership of
the capital stock of any Subsidiary to be less than 100% of its respective total
capital stock other than shares of Bank capital stock owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇ on
the date hereof;
(K) except in the Ordinary Course of Business or
following prior consultation with ▇▇▇▇▇-▇▇▇▇▇, materially change its investment
securities portfolio policy, or the manner in which the portfolio is classified
or reported, except as may be required by GAAP or applicable regulatory
authorities;
(L) Knowingly take any action that is intended or may
reasonably be expected to result in any of its representations and warranties
set forth in this Plan being or becoming untrue in any material respect at any
time prior to the Effective Time, or in any of the conditions to the
Transactions set forth in Article VII not being satisfied or in a violation of
any provision of this Plan; or
(M) agree to, or make any commitment to, take any of
the actions prohibited by this Section 4.2.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Disclosure Schedules.
(A) On or prior to the date hereof, ▇▇▇▇▇-▇▇▇▇▇ has
delivered to Sterling a schedule and Sterling has delivered to ▇▇▇▇▇-▇▇▇▇▇ a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either (i) in
response to an express disclosure requirement hereof or (ii) as an exception to
one or more representations or warranties contained in Section 5.3 or 5.4 or to
one or more of its covenants contained in Article IV or VI; provided, that (a)
no such item is required to be set forth in a Disclosure Schedule as an
exception to a representation or warranty if its absence would not be reasonably
likely to result in the related representation or warranty being deemed untrue
or incorrect, 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 fact, event or
circumstance.
(B) The disclosures in the Disclosure Schedule, and
those in any supplement thereto, must relate only to the representations and
warranties in the Section of the Plan to which they expressly relate and not to
any other representation or warranty in this Plan.
(C) In the event of any inconsistency between the
statements in the body of this Plan and those in the Disclosure Schedule (other
than an exception expressly set forth as such in the Disclosure Schedule with
respect to a specifically identified representation or warranty), the statements
in the body of this Plan will control.
5.2 Updating of Disclosure Schedule. From the date of this
Plan to the Effective Date, each of ▇▇▇▇▇-▇▇▇▇▇ and Sterling agrees that it will
promptly inform the other in writing if any information set forth in its
Disclosure Schedule is not accurate and complete in all material respects as of
such later date and will promptly disclose to the other in writing any
information which arises after the date hereof and which would have been
required to be included in its Disclosure Schedule to make such Disclosure
Schedule accurate and complete in all material respects as of such later date;
provided, however, that none of such disclosures shall be deemed to modify,
amend or supplement its representations and warranties or its Disclosure
Schedule for purposes of any provision hereof unless the other shall have
consented thereto in writing. Material information and material inaccuracies
shall be reported and disclosed to the other promptly. Immaterial information
and immaterial inaccuracies shall be reported and disclosed on the tenth day of
each month after the date hereof.
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5.3 Representations and Warranties of Sterling. Except as
Previously Disclosed in a paragraph of its Disclosure Schedule corresponding to
the relevant paragraph below, Sterling hereby represents and warrants to
▇▇▇▇▇-▇▇▇▇▇ that, to the best of its knowledge:
(A) Organization, Standing and Authority. Sterling is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland. Sterling is duly qualified to do business and is in
good standing in the states of the United States and any foreign jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified. Sterling is a bank holding company
registered under the BHC Act. The Bank is a Maryland commercial bank with trust
powers duly organized, validly existing and in good standing under the laws of
the State of Maryland. The Bank is duly qualified to do business and is in good
standing in the states of the United States and any foreign jurisdictions where
its ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified. Sterling has made available to ▇▇▇▇▇-▇▇▇▇▇ a
complete and correct copy of the articles of incorporation and bylaws of
Sterling and the Bank and such articles and bylaws are in full force and effect
as of the date hereof.
(B) Capital. As of the date hereof, the authorized
capital stock of Sterling consists solely of 5,000,000 shares of Sterling Common
Stock, $.01 par value per share, of which no more than 400,002 shares were
outstanding on September 30, 1998. As of the date hereof, Sterling has
outstanding: (i) 50,447 Sterling Stock Options at the exercise price of $12.00
per share; (ii) 102,601 Sterling Stock Options at the exercise price of $13.10
per share; (iii) 23,800 Sterling Stock Options at the exercise price of $14.34
per share; (iv) 3,200 Sterling Stock Options at the exercise price of $16.30 per
share; and (v) 27,000 Sterling Stock Options at the exercise price of $16.25 per
share. As of the date hereof, the authorized capital stock of the Bank consists
solely of 2,000,000 shares of common stock, $10.00 par value per share, of which
no more than 263,278 shares were outstanding on September 30, 1998; all of these
are owned, beneficially and of record, by Sterling, with the exception of 50
shares owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇. The outstanding shares of Sterling Common Stock
and the Bank's common stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and subject to no preemptive rights
(and were not issued in violation of any preemptive rights). As of the date
hereof, there are no shares of Sterling Common Stock or Bank common stock
authorized and reserved for issuance (other than with respect to shares reserved
for future issuance upon the exercise of the Sterling Stock Options), neither
Sterling nor the Bank has any Rights issued or outstanding with respect to
Sterling Common Stock or Bank common stock, and neither Sterling nor the Bank
has any commitment to authorize, issue or sell any Sterling Common Stock or Bank
common stock or Rights, except pursuant to this Plan and as specified in this
Section.
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(C) Subsidiaries.
(i) (a) Sterling has Previously Disclosed a list
of all of its Subsidiaries together with the jurisdiction of organization and
principal business of each such Subsidiary, (b) Sterling owns, directly or
indirectly, all the issued and outstanding equity securities of each of
Sterling's Subsidiaries, (c) no equity securities of any of Sterling's
Subsidiaries are or may become required to be issued (other than to Sterling or
its wholly-owned Subsidiaries) by reason of any Rights or otherwise, (d) there
are no contracts, commitments, understandings or arrangements by which any of
Sterling's Subsidiaries is or may be bound to sell or otherwise transfer any
equity securities of any such Subsidiaries (other than to Sterling or Sterling's
wholly-owned Subsidiaries), (e) there are no contracts, commitments,
understandings, or arrangements relating to Sterling's rights to vote or to
dispose of such securities, and (f) all the equity securities of each Subsidiary
held by Sterling or its Subsidiaries are fully paid and nonassessable and are
owned by Sterling or Sterling's Subsidiaries free and clear of any Liens.
(ii) Sterling does not own beneficially, directly
or indirectly, any equity securities or similar interests of any Person, or any
interest in a partnership or joint venture of any kind, other than its
Subsidiaries.
(iii) Each of Sterling's Subsidiaries has been
duly organized and is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business and in
good standing in the jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified. The deposits of the
Bank are insured by the FDIC up to applicable limits.
(D) Corporate Power. Sterling and each of its
Subsidiaries has the corporate power and authority to carry on its business as
it is now being conducted and to own all its properties and assets; and each of
Sterling and the Bank has the corporate power and authority to execute, deliver
and perform its obligations under this Plan and to consummate the Transactions.
(E) Corporate Authority. Subject to receipt of the
requisite approval of the agreement of share exchange set forth in this Plan by
the holders of more than two-thirds of the outstanding shares of Sterling Common
Stock entitled to vote thereon, this Plan and the Transactions have been
authorized by all necessary corporate action of Sterling and the Bank. This Plan
is a valid and legally binding obligation of each of Sterling and the Bank,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles). The Sterling Board
has received the written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Associates, Inc. to the
effect that as of the date hereof the consideration to be received by the
holders of Sterling
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Common Stock in the Share Exchange is fair to the holders of Sterling Common
Stock from a financial point of view.
(F) Regulatory Approvals; No Default.
(i) No consents or approvals of, or filings or
registrations with, any Governmental Authority or with any third party are
required to be made or obtained by Sterling or any of its Subsidiaries in
connection with the execution, delivery or performance by Sterling of this Plan
or to consummate the Transactions except for (a) filings of applications or
notices with federal and Maryland banking authorities, (b) approval of this Plan
by the stockholders of Sterling, and (c) the filing of articles of share
exchange and merger with the SDAT pursuant to the MGCL. As of the date hereof,
Sterling is not aware of any reason why the approvals set forth in Section
7.1(B) will not be received without the imposition of a condition, restriction
or requirement of the type described in Section 7.1(B).
(ii) Subject to receipt of the regulatory
approvals referred to in the preceding paragraph, and expiration of related
waiting periods, the execution, delivery and performance of this Plan and the
consummation of the Transactions do not and will not (a) constitute a breach or
violation of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or Contract of Sterling
or of any of its Subsidiaries or to which Sterling or any of its Subsidiaries or
properties is subject or bound, (b) constitute a breach or violation of, or a
default under, the articles of incorporation or by-laws of Sterling or the Bank,
or (c) require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license, or Contract.
(G) Financial Reports.
(i) Sterling has delivered to ▇▇▇▇▇-▇▇▇▇▇: (a)
consolidated balance sheets of Sterling and its Subsidiaries as of December 31
in each of the years 1995 through 1996, and the related consolidated statements
of operations, changes in stockholders' equity, and cash flow for each of the
fiscal years then ended, together with the report thereon of ▇▇▇▇▇▇▇ & Company
for the year ended December 31, 1996 and the report of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. for
the year ended December 31, 1995, (b) a consolidated balance sheet of Sterling
and its Subsidiaries as of December 31, 1997 (including the notes thereto, the
"Balance Sheet"), and the related consolidated statements of operations, changes
in stockholders' equity, and cash flow for the fiscal year then ended, together
with the report thereon of ▇▇▇▇▇▇▇ & Co., independent certified public
accountants, and (c) an unaudited consolidated balance sheet of Sterling and its
Subsidiaries as of June 30, 1998 (the "Interim Balance Sheet"). Such financial
statements and notes fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of Sterling and its
Subsidiaries as at the respective dates of and for the
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periods referred to in such financial statements, all in accordance with GAAP,
subject, in the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of notes (that, if presented,
would not differ materially from those included in the Balance Sheet); the
financial statements referred to in this Section 5.3(G) reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No financial
statements of any Person other than Sterling and its Subsidiaries are required
by GAAP to be included in the consolidated financial statements of Sterling.
(ii) Sterling and its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that Sterling or any
Subsidiary was required to file since December 31, 1994 with (a) the Federal
Reserve Board, (b) the FDIC, (c) the Bank Insurance Fund, and (d) any state
banking commission or other Governmental Authority, and all other material
reports and statements required to be filed by Sterling or any Subsidiary since
December 31, 1994, and have paid all fees and assessments due and payable in
connection therewith, and no such report, registration or statement contains any
material misstatement or omission or is otherwise in material noncompliance with
any law, regulation or requirement.
(iii) Sterling and its Subsidiaries have no
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
(iv) Since December 31, 1997, (a) Sterling and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practice (excluding the incurrence of expenses
related to this Plan and the Transactions) and (b) no event has occurred or fact
or circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any paragraph of Section 5.3 or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to Sterling.
(H) Litigation. No litigation, claim or other
proceeding before any court or Governmental Authority is pending against
Sterling or any of its Subsidiaries and, to Sterling's knowledge, no such
litigation, claim or other proceeding has been threatened.
(I) Regulatory Matters.
(i) Neither Sterling nor any of its Subsidiaries
or properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar
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arrangement with, or a commitment letter or similar submission to, or
extraordinary supervisory letter from, any federal or state Governmental
Authority.
(ii) Neither Sterling nor any of its Subsidiaries
has been advised by any Governmental Authority that such Governmental Authority
is contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar submission.
(J) Compliance with Laws. Sterling and each of its
Subsidiaries:
(i) is in compliance with all applicable federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto or to the employees conducting
such businesses, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations,
orders and approvals of, and has made all filings, applications and
registrations with, all Governmental Authorities that are required in order to
permit them to own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to Sterling's knowledge,
no suspension or cancellation of any of them is threatened; and
(iii) has received, since December 31, 1994, no
notification or communication from any Governmental Authority (a) asserting that
Sterling or any of its Subsidiaries is not in compliance with any statutes,
regulations, or ordinances or (b) threatening to revoke any license, franchise,
permit, or governmental authorization (nor, to Sterling's knowledge, do any
grounds for any of the foregoing to exist).
(K) Contracts; Defaults. Neither Sterling nor any of
its Subsidiaries is a party to, bound by or subject to any written or oral:
(i) Contract that involves performance of services
(other than with respect to loans or deposits made in the Ordinary Course of
Business) or delivery of goods or materials by Sterling or its Subsidiaries of
an amount or value in excess of $15,000;
(ii) Contract that involves performance of
services or delivery of goods or materials to Sterling or its Subsidiaries of an
amount or value in excess of $15,000;
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(iii) Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
Sterling or its Subsidiaries in excess of $15,000;
(iv) Lease, rental or occupancy agreement,
license, installment and conditional sale agreement, or other Contract affecting
the ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $15,000 and with terms of less than one year);
(v) Licensing agreement or other Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former Representatives regarding the
appropriation or the non-disclosure of any of any intellectual property assets;
(vi) Joint venture, partnership, or other Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
Sterling or its Subsidiaries with any other Person;
(vii) Contract containing covenants that in any
way purport to restrict the business activity of Sterling or its Subsidiaries or
limit the freedom of Sterling or its Subsidiaries to engage in any line of
business or to compete with any Person;
(viii) Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments for
goods;
(ix) Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by Sterling or its Subsidiaries to be responsible for consequential damages;
(x) Contract for capital expenditures in excess of
$15,000;
(xi) Written warranty, guaranty, or other Contract
with respect to contractual performance extended by Sterling or its Subsidiaries
other than in the Ordinary Course of Business;
(xii) Contract with any Representative the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction of the nature contemplated by this Plan;
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(xiii) Contract with any Representative providing
any term of employment or compensation guarantee;
(xiv) Contract, including any stock option, stock
appreciation rights, employee stock ownership, restricted stock or stock
purchase plan or agreement, 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 or the value of any of the benefits of which will be
calculated on the basis of any of the Transactions;
(xv) Contract that involves any restriction on the
geographic area in which, or method by which, it may carry on its business
(other than as may be required by law or any regulatory agency); or
(xvi) Contract, other than this Plan, regarding
the capital stock of Sterling or the Bank, or both, or committing to dispose of
some or all of the capital stock or substantially all of the assets of Sterling
or the Bank, or both. Neither Sterling nor any of its Subsidiaries is in default
under any Contract to which it is a party, by which its respective assets,
business, or operations may be bound or affected, or under which it or its
respective assets, business, or operations receives benefits, and there has not
occurred any event that, with the lapse of time or the giving of notice or both,
would constitute such a default by Sterling or any of its Subsidiaries.
(L) Employees.
(i) Sterling has Previously Disclosed a complete
and accurate list of the following information for each currently employed
Employee and for each Director, including each employee on leave of absence or
layoff status: employer; name; job title; current compensation paid or payable
and any change in compensation since December 31, 1997; vacation accrued; and
service credited for purposes of vesting and eligibility to participate under
any Employee Benefit Plans.
(ii) Sterling also has Previously Disclosed a
complete and accurate list of the following information for each retired
Employee or Director, or their dependents, receiving benefits or scheduled to
receive benefits in the future: name, pension benefit, pension option election,
retiree medical insurance coverage, retiree life insurance coverage, and other
benefits.
(M) Employee Benefit Plans.
(i) Sterling and its Subsidiaries are not now, nor
have they ever been, a party to, a sponsor of, or a contributor to (a) any
employee pension benefit plan (as
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defined in Section 3(2) of ERISA) (a "Retirement Plan"), (b) any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) (a "Welfare Plan"),
or (c) any employment contract, written or unwritten, or any other contract,
policy or practice providing compensation or benefits not included in (a) or (b)
(an "Other Plan"). All Retirement Plans, Welfare Plans and Other Plans which
Sterling and its Subsidiaries are now or have ever been, a party to, a sponsor
of, or a contributor to are hereinafter collectively referred to as "Employee
Benefit Plans." Sterling and its Subsidiaries have not scheduled or agreed to
future increases of benefit levels or the creation of new benefits with respect
to any Employee Benefit Plan, nor have such increases or new benefits been
proposed to the Employees.
(ii) With respect to each Employee Benefit Plan,
Sterling has delivered or made available to ▇▇▇▇▇-▇▇▇▇▇ true, correct and
complete copies, including amendments, of the following (to the extent
applicable): (a) the current and most recent prior Employee Benefit Plan
document or other writing (including trust agreements, service provider
agreements, investment manager agreements and insurance contracts), (b) the
current and all prior Summary Plan Descriptions (including summaries of material
modifications thereto) or similar descriptions of Other Plans, (c) the two most
recently filed Form 5500s including all schedules and attachments, (d) the two
most recent determination letters issued by the IRS, (e) the two most recent
actuarial valuations and/or allocation reports, and (f) any current or prior
employee handbooks or policy manuals which refer to such Employee Benefit Plan.
(iii) The assets of Sterling and its Subsidiaries
are not subject to any liens under ERISA or the Code, and no event has occurred,
and no condition exists, which could subject Sterling and its Subsidiaries or
their assets to a future liability, obligation or lien on account of any
Controlled Group Benefit Plan. A "Controlled Group Benefit Plan" means any
Employee Benefit Plan which Sterling, or any entity which must be considered
together with Sterling under Section 414(b), (c), (m) or (o) of the Code (a
"Benefit Plan Affiliate"), maintains or at any time maintained, or to which
Sterling or any Benefit Plan Affiliate has at any time contributed or been
obligated to contribute.
(iv) No Controlled Group Benefit Plan is or at any
time was a "defined benefit plan" (within the meaning of ERISA Section 3(35)),
nor has Sterling or any Benefit Plan Affiliate ever maintained, sponsored or
been required to make contributions to any defined benefit plan. No Controlled
Group Benefit Plan is or at any time was a "multiemployer plan" (within the
meaning of ERISA Section 3(37)), nor has Sterling or any Benefit Plan Affiliate
ever maintained, sponsored or been required to make contributions to any
multiemployer plan. No Controlled Group Benefit Plan is or at any time was a
"multiple employer welfare arrangement" (within the meaning of ERISA Section
3(40)), nor has Sterling or any Benefit Plan Affiliate ever maintained,
sponsored or been required to make contributions to any such arrangement.
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(v) Each Employee Benefit Plan is, and has at all
times been, administered, maintained and operated in compliance with its terms
and in compliance with all applicable provisions of the Code, ERISA and all
other federal, state and local laws (and all rules and regulations promulgated
or proposed thereunder). Each Employee Benefit Plan which Sterling and its
Subsidiaries currently sponsors or contributes to can be amended or terminated
at any time without liability to Sterling or its Subsidiaries other than
honoring the Sterling Stock Options and with respect to accrued benefits under
any Employee Benefit Plan.
(vi) Sterling and its Subsidiaries have performed
all obligations required to be performed by them under any law or by the terms
of each Employee Benefit Plan, and all contributions or payments deducted by
Sterling and its Subsidiaries for tax purposes were properly deductible in the
year for which such deductions were claimed.
(vii) There are no actions, investigations or
claims of any kind (other than routine benefit claims made in the ordinary
course), pending or threatened, with respect to any Employee Benefit Plan, and
no events or omissions have occurred which could give rise to any such actions,
investigations or claims. There have been no audits or investigations of any
Employee Benefit Plan by any governmental agency.
(viii) Each Retirement Plan that is or was
intended to constitute a qualified plan under Code Section 401(a) is, and has at
all times been, qualified, in form and operation, under Code Section 401(a) and
is the subject of a favorable determination letter from the IRS.
(ix) With respect to any Retirement Plan which is
unfunded, Sterling and its Subsidiaries have adequately provided for, and their
financial statements accurately reflect (in accordance with GAAP consistently
applied), the amount of all accrued benefits under such Retirement Plan, and
such accrued benefits were computed based on actuarial methods, tables and
assumptions, each of which is itself reasonable.
(x) No Controlled Group Benefit Plan provides
health, medical, life insurance or similar benefits to retirees or other former
employees or their beneficiaries (except to the extent required under ERISA
Sections 601-608). Each Employee Benefit Plan covers only employees (or former
employees) of Sterling and its Subsidiaries.
(xi) The consummation of the Transactions will not
(a) entitle any current or former employee or officer of Sterling and its
Subsidiaries to severance pay, parachute payments, unemployment compensation or
any other payment, except as expressly provided in this Plan, or (b) accelerate
the time of payment or vesting or increase the amount of compensation due any
such employee or officer except as expressly provided in this Plan.
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(xii) With respect to any Employee Benefit Plan
that is funded wholly or partially through an insurance policy (including any
"stop loss" policy that applies to such Employee Benefit Plan), there will be no
liability of Sterling and its Subsidiaries as of the Effective Time under such
policy (or any ancillary agreement to such policy) in the nature of a
retroactive rate adjustment, loss sharing arrangement or other contingent
liability. The consummation of the transactions contemplated by this Plan will
not cause a revocation or material modification of any such insurance policy,
and all such policies can be assumed by ▇▇▇▇▇-▇▇▇▇▇ at its option. Section
5.3(M)(xii) of Sterling's Disclosure Schedule includes all insurance policies
described in this paragraph.
(xiii) Sterling and all Benefit Plan Affiliates
have at all times complied with the COBRA group health plan continuation of
coverage requirements under ERISA Sections 601-608 and the regulations
promulgated or proposed thereunder. Section 5.3(M)(xiii) of Sterling's
Disclosure Schedule lists all persons who (a) currently have or are entitled to
COBRA continuation coverage under any Employee Benefit Plan currently or
previously maintained by Sterling and all Benefit Plan Affiliates, specifying
the date such coverage or entitlement thereto began for each person and the date
the maximum required period of coverage for such person will end, and (b) are
eligible to elect such COBRA continuation coverage or to have it elected on
their behalf on account of a qualifying event which has already occurred or
which will occur prior to Closing.
(xiv) No loan is outstanding between Sterling and
its Subsidiaries and any Employees. No employer securities, employer real
property or other employer property is held as an asset of any Employee Benefit
Plan.
(N) Labor Matters. Neither Sterling nor any of its
Subsidiaries is a party to or is bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor is Sterling or any of its Subsidiaries the subject of a
proceeding asserting that it or any such Subsidiary has committed an unfair
labor practice (within the meaning of the National Labor Relations Act) or
seeking to compel Sterling or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any strike or
other labor dispute involving it or any of its Subsidiaries pending or, to
Sterling's knowledge, threatened, nor is Sterling aware of any activity
involving its or any of its Subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in other organizational activity.
(O) Environmental Matters. Neither the conduct nor
operation of Sterling or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them (including,
without limitation, in a fiduciary or agency capacity), or on which any of them
holds a Lien, violates or violated during the period of such ownership, lease or
operation Environmental Laws and no condition has existed or event has
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occurred with respect to any of them or any such property that, with notice or
the passage of time, or both, is reasonably likely to result in liability under
Environmental Laws. Neither Sterling nor any of its Subsidiaries has received
any notice from any person or entity that Sterling or its Subsidiaries or the
operation or condition of any property ever owned, leased, operated, or held as
collateral or in a fiduciary capacity by any of them are or were in violation of
or otherwise are alleged to have liability under any Environmental Law,
including, but not limited to, responsibility (or potential responsibility) for
the cleanup or other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or originating from
any such property.
(P) Tax Matters.
(i)(a) All Tax Returns that are required to be
filed (taking into account any extensions of time within which to file) by or
with respect to Sterling and its Subsidiaries have been duly filed and the
information therein reported is substantially correct, (b) all Taxes shown to be
due on the Tax Returns referred to in clause (a) have been paid in full, (c) the
federal income Tax Returns referred to in clause (a) have been examined by the
IRS or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired, (d) all deficiencies asserted or
assessments made as a result of such examinations have been paid in full, (e) no
issues that have been raised by the relevant taxing authority in connection with
the examination of any of the Tax Returns referred to in clause (a) are
currently pending, and (f) no waivers of statutes of limitation have been given
by or requested with respect to any Taxes of Sterling or its Subsidiaries.
Sterling has made available to ▇▇▇▇▇-▇▇▇▇▇ true and correct copies of the United
States federal income Tax Returns filed by Sterling and its Subsidiaries for
each of the three most recent fiscal years ended on or before December 31, 1997.
Neither Sterling nor any of its Subsidiaries has any liability with respect to
Taxes that accrued on or before December 31, 1997, in excess of the amounts
accrued with respect thereto that are reflected in the Balance Sheet.
(ii) No Tax is required to be withheld pursuant to
Section 1445 of the Code as a result of the Transactions.
(Q) Risk Management Instruments. All interest rate
swaps, caps, floors, option agreements, futures and forward contracts and other
similar risk management arrangements, whether entered into for Sterling's own
account, or for the account of one or more of Sterling's Subsidiaries or their
customers (all of which are listed on Sterling's Disclosure Schedule), were
entered into (i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and (ii) with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of Sterling or one of
its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization,
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moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors' rights or by general equity principles), and
are in full force and effect. Neither Sterling nor its Subsidiaries, nor to
Sterling's knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
(R) Assets. Sterling has Previously Disclosed to
▇▇▇▇▇-▇▇▇▇▇ a complete and accurate list of all real property, leaseholds, or
other interests therein owned by Sterling and its Subsidiaries. Sterling and its
Subsidiaries own (with good and marketable title in the case of real property,
subject only to the matters permitted by the following sentence) all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) that they purport to own located in the facilities owned or operated
by Sterling and its Subsidiaries or reflected as owned in the books and records
of Sterling and its Subsidiaries, including all of the properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet (except for assets
held under capitalized leases Previously Disclosed or not required to be
disclosed and personal property sold since the date of the Balance Sheet and the
Interim Balance Sheet, as the case may be, in the Ordinary Course of Business),
and all of the properties and assets purchased or otherwise acquired by Sterling
and its Subsidiaries since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the Ordinary
Course of Business). All property and assets reflected in the Balance Sheet and
the Interim Balance Sheet are free and clear of all Liens and are not, in the
case of real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (i) mortgages or security interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (ii)
mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (iii) Liens for current taxes not yet
due, and (iv) with respect to real property, (a) minor imperfections of title,
if any, none of which is substantial in amount, materially detracts from the
value or impairs the use of the property subject thereto, or impairs the
operations of Sterling or any Subsidiary, and (b) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto.
(S) Books and Records. The books of account, minute
books, stock record books, and other records of Sterling and its Subsidiaries,
all of which have been made available to ▇▇▇▇▇-▇▇▇▇▇, are complete and correct
and have been maintained in accordance with sound business practices and the
requirements of Section 13(b)(2) of the Exchange Act (regardless of whether or
not Sterling and its Subsidiaries are subject to that Section), including the
maintenance of an adequate system of internal controls. The minute books of
Sterling and its Subsidiaries contain accurate and complete records of all
meetings held of, and corporate
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action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of Sterling and its Subsidiaries, and no meeting of any
such stockholders, Board of Directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of those books and records will be in the possession of
Sterling and its Subsidiaries. The books and records of Sterling and its
Subsidiaries have been fully, properly and accurately maintained, and there are
no material inaccuracies or discrepancies of any kind contained or reflected
therein, and they fairly present the financial position of Sterling and its
Subsidiaries.
(T) Insurance. Sterling's Disclosure Schedule sets
forth all of the insurance policies, binders, or bonds maintained by Sterling or
its Subsidiaries ("Insurance Policies"). Sterling and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts as the
management of Sterling reasonably has determined to be prudent in accordance
with industry practices. All the Insurance Policies are in full force and
effect; Sterling and its Subsidiaries are not in default thereunder; and all
claims thereunder have been filed in due and timely fashion.
(U) Year 2000. Sterling and the Bank have complied with
all interagency statements issued through September 2, 1998, by the Federal
Financial Institutions Examination Council on the subject of Year 2000
compliance. Sterling and the Bank have exercised due care in assessing the Year
2000 compliance status of all material computer software, firmware and hardware
used in the Ordinary Course of Business and in assessing the Year 2000
compliance status of their customers and counterparties. Neither Sterling nor
its Subsidiaries has received a "Year 2000 Deficiency Letter" or criticism from
any Governmental Authority on the subject of Year 2000 compliance. Sterling and
its Subsidiaries have taken reasonable steps necessary for the data processing
systems used in the business of Sterling and its Subsidiaries to be Year 2000
Compliant on or before the end of 1999 and Sterling does not expect the future
cost of addressing such issues to be material.
(V) Asset Classification. Sterling has previously
disclosed a list, accurate and complete in all material respects, of the
aggregate amounts of loans, extensions of credit or other assets of it and its
Subsidiaries that have been classified by it as of September 30, 1998 (the
"Asset Classification"); and no amounts of loans, extensions of credit or other
assets that have been classified as of September 30, 1998 by any Governmental
Authority as "other loans specially mentioned", "substandard", "doubtful",
"loss", or words of similar import are excluded from the amounts disclosed in
the Asset Classification, other than amounts of loans, extensions of credit or
other assets that were charged off by it or a Subsidiary prior to September 30,
1998.
(W) No Brokers. Except for fees payable to ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & Associates, Inc., no action has been taken by Sterling that would
give rise to any valid claim
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against any party hereto for a brokerage commission, finder's fee or other like
payment with respect to the Transactions.
(X) Disclosure. The representations and warranties
contained in this Section 5.3 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 5.3 not misleading.
5.4 Representations and Warranties of ▇▇▇▇▇-▇▇▇▇▇. Except as
Previously Disclosed in a paragraph of its Disclosure Schedule corresponding to
the relevant paragraph below, ▇▇▇▇▇-▇▇▇▇▇ hereby represents and warrants to
Sterling that, to the best of its knowledge:
(A) Organization, Standing and Authority. ▇▇▇▇▇-▇▇▇▇▇,
MDMS and BoM are duly organized, validly existing and in good standing under the
laws of the State of Maryland. ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM are duly qualified to
do business and are in good standing in the states of the United States and
foreign jurisdictions where their respective ownership or leasing of property or
assets or the conduct of their respective business requires them to be so
qualified. ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM have in effect all federal, state, local,
and foreign governmental authorizations necessary for them to own or lease their
properties and assets and to carry on their respective businesses as it is now
conducted. ▇▇▇▇▇-▇▇▇▇▇ and MDMS are registered as bank holding companies under
the BHC Act. BoM is a trust company under the laws of the State of Maryland.
(B) Subsidiaries. Each of ▇▇▇▇▇-▇▇▇▇▇'▇ Subsidiaries
has been duly organized and is validly existing in good standing under the laws
of the jurisdiction of its organization, and is duly qualified to do business
and in good standing in the jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified and it
owns, directly or indirectly, all the issued and outstanding equity securities
of each of its Subsidiaries.
(C) Corporate Power. ▇▇▇▇▇-▇▇▇▇▇ and each of its
Subsidiaries has the corporate power and authority to carry on its business as
it is now being conducted and to own all its properties and assets; and each of
▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM has the corporate power and authority to execute,
deliver and perform its obligations under this Plan and to consummate the
Transactions.
(D) Corporate Authority. This Plan and the Transactions
have been authorized by all necessary corporate action of each of ▇▇▇▇▇-▇▇▇▇▇,
MDMS and BoM. This Plan and the Transactions are not required to be approved by
the shareholders of ▇▇▇▇▇-▇▇▇▇▇. The Bank Merger is subject to approval by MDMS,
its sole stockholder, and has been approved. This Plan is a valid and legally
binding agreement of each of ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM
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enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles).
(E) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or filings or
registrations with, any Governmental Authority or with any third party are
required to be made or obtained by ▇▇▇▇▇-▇▇▇▇▇ or any of its Subsidiaries in
connection with the execution, delivery or performance by ▇▇▇▇▇-▇▇▇▇▇ or any of
its Subsidiaries of this Plan or to consummate the Transactions except for (a)
the filing of applications and notices, as applicable, with federal and state
banking authorities, receipt of approval thereof and expiration of related
waiting periods; and (b) the filing of articles of share exchange and merger
with the SDAT pursuant to the MGCL. As of the date hereof, ▇▇▇▇▇-▇▇▇▇▇ is not
aware of any reason why the approvals set forth in Section 7.1(B) will not be
received without the imposition of a condition, restriction or requirement of
the type described in Section 7.1(B).
(ii) Subject to receipt of the regulatory
approvals referred to in the preceding paragraph and expiration of the related
waiting periods, the execution, delivery and performance of this Plan and the
consummation of the Transactions do not and will not (a) constitute a breach or
violation of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or Contract of
▇▇▇▇▇-▇▇▇▇▇ or of any of its Subsidiaries or to which ▇▇▇▇▇-▇▇▇▇▇ or any of its
Subsidiaries or properties is subject or bound, (b) constitute a breach or
violation of, or a default under, the articles of incorporation or by-laws (or
similar governing documents) of ▇▇▇▇▇-▇▇▇▇▇ or any of its Subsidiaries, or (c)
require any consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, or Contract.
(F) No Brokers. No action has been taken by ▇▇▇▇▇-▇▇▇▇▇
that would give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the Transactions.
(G) Financial Capacity. ▇▇▇▇▇-▇▇▇▇▇ has the financial
capacity to fund the cash payments for the Share Exchange Consideration and for
cancellation of the Sterling Stock Options. Based upon ▇▇▇▇▇-▇▇▇▇▇'▇ pro forma
financial analysis, immediately following consummation of the Transactions,
▇▇▇▇▇-▇▇▇▇▇, MDMS, and BoM each will continue to be "well-capitalized" as
defined in the appropriate capital regulation and guidance of its primary
federal regulator.
(H) Financial Statements.
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(i) ▇▇▇▇▇-▇▇▇▇▇ has filed and made available to
Sterling accurate and complete copies of all forms, reports, and documents
required to be filed by ▇▇▇▇▇- ▇▇▇▇▇ with the SEC since December 31, 1994,
(collectively, the "▇▇▇▇▇-▇▇▇▇▇ SEC Reports"). The ▇▇▇▇▇-▇▇▇▇▇ SEC Reports (a)
at the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
(b) did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such ▇▇▇▇▇-▇▇▇▇▇ SEC Reports or necessary in order to
make the statements in the ▇▇▇▇▇-▇▇▇▇▇ SEC Reports, in light of the
circumstances under which they were made, not misleading. Except for ▇▇▇▇▇-▇▇▇▇▇
Subsidiaries that are registered as brokers, dealers, investment advisors, or
associated persons thereof, none of the ▇▇▇▇▇-▇▇▇▇▇ Subsidiaries is required to
file any forms, reports or other documents with the SEC.
(ii) Each of the ▇▇▇▇▇-▇▇▇▇▇ Financial Statements
(including, in each case, any related notes) contained in the ▇▇▇▇▇-▇▇▇▇▇ SEC
Reports, complied, and each SEC Report filed after the date of this Agreement
until the Effective Time will comply, as to form in all material respects with
the applicable published rules and regulations of the SEC with respect thereto,
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC), and fairly presented the consolidated financial position of
▇▇▇▇▇-▇▇▇▇▇ and its Subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
(I) Disclosure. The representations and warranties
contained in this Section 5.4 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 5.4 not misleading.
ARTICLE VI
COVENANTS
6.1 Reasonable Best Efforts. Subject to the terms and
conditions of this Plan, each of Sterling, the Bank, ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM
agrees to use its reasonable best efforts in good faith to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or desirable, or advisable under applicable laws, so as to permit consummation
of the Transactions as promptly as practicable and otherwise to enable
consummation of the Transactions and shall cooperate fully with the other
parties hereto to that
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end. Except as expressly contemplated or permitted by this Plan, or as required
by applicable law, rule or regulation, during the period from the date of this
Plan to the Effective Time, ▇▇▇▇▇- ▇▇▇▇▇ shall, and shall cause each of its
Subsidiaries to, take no action which would reasonably be expected to adversely
affect or delay the ability of ▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇▇, MDMS, the Bank or BoM to
obtain any approvals of any Governmental Authority required to consummate the
Transactions or to perform its covenants and agreements herein. Prior to the
Effective Time, Sterling shall acquire all of the outstanding shares of Bank
common stock which it does not own.
6.2 Stockholder Approval. Subject to compliance by the
Sterling Board with its fiduciary duties, Sterling agrees to take, in accordance
with applicable law, and its articles of incorporation and by-laws, all action
necessary to convene an appropriate meeting of its stockholders to consider and
vote upon the approval and adoption of this Plan and any other matters required
to be approved by Sterling's stockholders for consummation of the Transactions
(including any adjournment or postponement, the "Sterling Meeting"), as promptly
as practicable after the date hereof. Sterling shall use its reasonable best
efforts to mail the notice of the Sterling Meeting within 30 days after the date
hereof. Subject to compliance with its fiduciary duties, the Sterling Board
shall recommend such approval, and shall cause Sterling to take all reasonable,
lawful action to solicit such approval by its stockholders. ▇▇▇▇▇-▇▇▇▇▇ shall
have the right to review in advance the proxy statement, and any amendments
thereto, to be delivered to Sterling's stockholders with respect to the Sterling
Meeting. The proxy statement, and any amendments thereto, shall not be delivered
to Sterling's stockholders without ▇▇▇▇▇-▇▇▇▇▇'▇ prior written approval which
shall not be unreasonably withheld.
6.3 Press Releases. Each of Sterling and ▇▇▇▇▇-▇▇▇▇▇ agrees
that it will not, nor will it permit its Subsidiaries to, without the prior
approval of the other party, issue any press release or written statement for
general circulation relating to the Transactions, except as otherwise required
by applicable law or regulation or NASD rules.
6.4 Access; Information.
(A) Each of Sterling and the Bank agrees that upon
reasonable notice and subject to applicable laws relating to the exchange of
information, it shall afford ▇▇▇▇▇- ▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇'▇ officers, employees,
counsel, accountants and other authorized representatives, such access during
normal business hours throughout the period prior to the Effective Time to the
books, records (including, without limitation, tax returns and work papers of
independent auditors, but only upon the consent of such auditors), properties,
personnel and to such other information as ▇▇▇▇▇-▇▇▇▇▇ may reasonably request
and, during such period, it shall furnish promptly to ▇▇▇▇▇-▇▇▇▇▇ (i) a copy of
each report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and (ii) all other
information concerning the business, properties and personnel of it as the other
may reasonably request.
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(B) ▇▇▇▇▇-▇▇▇▇▇ agrees that it will not, and will cause
its Representatives not to, use any information obtained pursuant to this
Section 6.4 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Plan) for any purpose unrelated to
the consummation of the Transactions. Subject to the requirements of law,
▇▇▇▇▇-▇▇▇▇▇ will keep confidential, and will cause its Representatives to keep
confidential, all information and documents obtained pursuant to this Section
6.4 (as well as any other information obtained prior to the date hereof in
connection with the entering into of this Plan) unless such information (i) was
already known to such party, (ii) becomes available to such party from other
sources not known by such party to be bound by a confidentiality obligation,
(iii) is disclosed with the prior written approval of the party to which such
information pertains or (iv) is or becomes readily ascertainable from published
information or trade sources. In the event that this Plan is terminated or the
Transactions shall otherwise fail to be consummated, ▇▇▇▇▇-▇▇▇▇▇ shall promptly
cause all copies of documents or extracts thereof containing information and
data as to another party hereto to be returned to the party which furnished the
same.
(C) No investigation by either party of the business
and affairs of the other shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Plan, or the conditions
to either party's obligation to consummate the Transactions.
6.5 Certain Modifications; Restructuring Charges;
Observation Rights; Month End Financials.
(A) Sterling shall consult with ▇▇▇▇▇-▇▇▇▇▇ with
respect to its loan, litigation and real estate valuation policies and practices
(including loan classifications and levels of reserves) and Sterling shall make
such modifications or changes to its policies and practices, if any, as may be
mutually agreed upon in order to conform such policies and practices to those of
▇▇▇▇▇-▇▇▇▇▇ or due to differing disposition plans of ▇▇▇▇▇-▇▇▇▇▇. Sterling shall
also consult with ▇▇▇▇▇-▇▇▇▇▇ with respect to the character, amount and timing
of restructuring charges to be taken by Sterling in connection with the
Transactions and shall take such charges in accordance with GAAP, as may be
mutually agreed upon. Such modifications and changes shall be made and such
charges taken at such date prior to the Effective Time as the parties shall
mutually agree, but no earlier than the date ▇▇▇▇▇-▇▇▇▇▇ advises Sterling in
writing that all of the conditions precedent to ▇▇▇▇▇-▇▇▇▇▇'▇ obligations
hereunder either have been satisfied or waived. No party's representations,
warranties and covenants contained in this Plan shall be deemed to be untrue or
breached in any respect for any purpose as a consequence of any modifications or
changes to such policies and practices which may be undertaken on account of
this Section 6.5.
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(B) During the period from the date of this Plan to the
Effective Time, an individual designated by ▇▇▇▇▇-▇▇▇▇▇ shall have the right to
attend all meetings of the Sterling Board and the board of directors of the Bank
in a nonvoting observer capacity, other than any part of any meeting at which
this Plan or the Transactions or any other Acquisition Proposal are discussed,
to receive notice of such meetings and to receive the information provided by
Sterling and the Bank to their respective boards of directors.
(C) During the period from the date of this Plan to the
Effective Time, Sterling shall prepare consolidated balance sheets of Sterling
and its Subsidiaries, and the related consolidated statements of operations, and
changes in stockholders' equity as of the last day of each month prior to the
15th day of the following month, provided, however, that the foregoing financial
reports shall be prepared for the month preceding the Effective Date on or prior
to the 8th day of the following month.
6.6 Regulatory Applications.
(A) ▇▇▇▇▇-▇▇▇▇▇ and Sterling and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts to
prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and Governmental
Authorities necessary to consummate the Transactions. ▇▇▇▇▇-▇▇▇▇▇ shall use its
reasonable best efforts to file applications with the Federal Reserve Board and
the Maryland Commissioner of Financial Regulation within 30 days after the date
hereof. Each of ▇▇▇▇▇- ▇▇▇▇▇ and Sterling shall have the right to review in
advance, and to the extent practicable each will consult with the other, in each
case subject to applicable laws relating to the exchange of information, with
respect to all written information submitted to any third party or any
Governmental Authority in connection with the Transactions. In exercising the
foregoing right, each of the parties hereto agrees to act reasonably and as
promptly as practicable. Each party hereto agrees that it will consult with the
other party hereto with respect to the obtaining of all material permits,
consents, approvals and authorizations of all third parties and Governmental
Authorities necessary or advisable to consummate the Transactions and each party
will keep the other party appraised of the status of material matters relating
to completion of the Transactions. Each party hereto agrees that it shall
deliver to the other promptly upon receipt copies of all correspondence from and
to Governmental Authorities relating to the Transactions.
(B) Each party agrees, upon request, to furnish the
other party with all information concerning itself, its Subsidiaries, its
Representatives and stockholders and such other matters as may be reasonably
necessary or advisable in connection with any filing, notice or application made
by or on behalf of such other party or any of its Subsidiaries to any third
party or Governmental Authority and with respect to the proxy statement to be
delivered to Sterling's stockholders with respect to the Sterling Meeting.
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6.7 Indemnification.
(A) Following the Effective Date and for a period of 6
years thereafter, MDMS shall indemnify, defend and hold harmless the Directors
and officers of Sterling and its Subsidiaries (each, an "Indemnified Party")
against all costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities or amounts paid in settlement
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, (collectively, "Claims") arising out of actions or omissions
occurring at or prior to the Effective Time, including, but not limited to, the
Transactions, regardless of whether such claim is asserted before, at or after
the Effective Time, to the fullest extent that Sterling or its Subsidiaries is
permitted to indemnify (and advance expenses to) its directors and officers
under the laws of the State of Maryland, the articles of incorporation or
by-laws of Sterling or its Subsidiaries all as in effect on the date hereof,
except as such indemnification (and advancement of expenses) may be waived or
released by an Indemnified Party; provided that for Claims covered by this
Section 6.7(A), any determination required to be made with respect to whether an
officer's or director's conduct complies with the standards set forth under
Maryland law, the articles of incorporation or by-laws of Sterling or its
Subsidiaries shall be made by independent counsel (which shall not be counsel
that provides material services to ▇▇▇▇▇-▇▇▇▇▇) selected by ▇▇▇▇▇-▇▇▇▇▇ and
reasonably acceptable to such officer or director; and provided, further, that
in the absence of applicable Maryland judicial precedent to the contrary, such
counsel, in making such determination, shall presume such officer's or
director's conduct complied with such standard and MDMS shall have the burden to
demonstrate that such officer's or director's conduct failed to comply with such
standard. To the extent a Claim is asserted before the Effective Time, MDMS
shall have no obligations under this Section unless appropriate notice was given
to Sterling's director's and officer's liability insurer as required by the
insurance policy prior to the Effective Time.
(B) For a period of 6 years from the Effective Time,
MDMS either shall permit Sterling to purchase a "tail" coverage on its existing
directors and officers insurance policy or shall use its reasonable best efforts
to provide that portion of director's and officer's liability insurance that
serves to reimburse the present and former officers and Directors of Sterling or
any of its Subsidiaries (determined as of the Effective Time) with respect to
Claims against such Directors and officers arising from facts or events which
occurred before the Effective Time, which insurance shall contain at least the
same coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by Sterling; provided,
however, that in no event shall MDMS be required to expend more than 200 percent
of the current amount expended by Sterling or its Subsidiaries (the "Insurance
Amount") to maintain or procure such directors and officers insurance coverage
for a comparable 6-year period; provided, further, that if MDMS is unable to
maintain or obtain the insurance called for by this Section 6.7(B), MDMS shall
use its reasonable best efforts to obtain as much comparable insurance as is
available for the Insurance Amount; provided, further, that officers and
Directors of Sterling
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or any Subsidiary may be required to make application and provide customary
representations and warranties to MDMS's insurance carrier for the purpose of
obtaining such insurance.
(C) Any Indemnified Party wishing to claim
indemnification under Section 6.7(A), upon learning of any Claim shall promptly
notify MDMS thereof; provided that the failure so to notify shall not affect the
obligations of MDMS under Section 6.7(A) unless and to the extent that MDMS is
actually prejudiced as a result of such failure.
(D) The obligations of MDMS pursuant to this Section
6.7 may be enforced directly by the Indemnified Parties.
(E) If MDMS or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any other entity, then and in each case,
proper provision shall be made so that the successors and assigns of MDMS shall
assume the obligations set forth in this Section 6.7.
6.8 Notification of Certain Matters. Each of Sterling and
▇▇▇▇▇-▇▇▇▇▇ shall give prompt notice to the other of any fact, event or
circumstance known to it that (A) is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in any Material Adverse Effect with respect to it or (B) would cause or
constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
6.9 No Solicitation. From the date of this Plan until the
Effective Time or the termination of this Plan pursuant to its terms, Sterling
agrees that it will not, and will not permit any of its Subsidiaries, or any of
its or their Representatives to, directly or indirectly, (A) initiate, solicit,
encourage or otherwise facilitate (including by way of furnishing information),
any inquiries or the making of any proposal or offer that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal, or (B) enter into or
maintain or continue discussions or negotiate with any Person in furtherance of
such inquiries or to obtain an Acquisition Proposal, or (C) agree to, approve,
recommend, or endorse any Acquisition Proposal, or authorize or permit any of
its or their Subsidiaries or Representatives to take any such action and, except
to the extent prohibited by contracts existing at the date of this Plan,
Sterling shall promptly notify ▇▇▇▇▇- ▇▇▇▇▇ of any such inquiries of proposals
received by Sterling or any of its Subsidiaries or Representatives relating to
any of such matters; provided, however, that nothing contained in this Plan
shall prohibit the Sterling Board from (i) furnishing information to, or
engaging in discussions or negotiations with, any Person in response to an
unsolicited bona fide written Acquisition Proposal; or (ii) recommending such an
unsolicited bona fide written Acquisition Proposal to the stockholders of
Sterling, if and only to the extent that (a) the Sterling Board concludes in
good faith (after consultation with its financial advisors) that such
Acquisition
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Proposal would constitute a Superior Proposal and (b) the Sterling Board
determines in good faith (after consultation with outside legal counsel) that
the failure to take such action would result in a breach by the Sterling Board
of its fiduciary duties to Sterling's stockholders under applicable law, and (c)
prior to furnishing such information to, or entering into discussions or
negotiations with, such Person, Sterling provides prompt written notice to
▇▇▇▇▇-▇▇▇▇▇ to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such Person (which notice shall identify the
nature and material terms of the proposal), and (d) prior to providing any
information or data to any Person in connection with an Acquisition Proposal by
any such Person, the Sterling Board receives from such Person an executed
confidentiality agreement with provisions no less favorable to Sterling than the
confidentiality agreement previously entered into between Sterling and
▇▇▇▇▇-▇▇▇▇▇ in connection with their consideration of the Transactions. Sterling
agrees that it will immediately cease and cause to be terminated any existing
activities, discussions, or negotiations with any parties regarding any
Acquisition Proposal. Sterling agrees to keep ▇▇▇▇▇-▇▇▇▇▇ fully and timely
informed of the status of any discussions, negotiations, furnishing of
non-public information, or other activities relating to an Acquisition Proposal.
6.10 Employee Benefits.
(A) Sterling and the Bank agree that neither
▇▇▇▇▇-▇▇▇▇▇ nor any of its Subsidiaries is under any obligation to continue the
employment of any employee of Sterling or the Bank after the Effective Date.
▇▇▇▇▇-▇▇▇▇▇ and its Subsidiaries may terminate the employment of any such
employee in their discretion.
(B) The Bank agrees to amend the Sterling Bank & Trust
Company Change-In-Control Protection Plan (as originally adopted as of May 19,
1998 and as amended pursuant to this Section, the "Protection Plan") prior to
the Effective Date to provide that no severance benefit shall be paid to any
Person unless that Person executes a "Release and Agreement" in the form
previously agreed to by ▇▇▇▇▇-▇▇▇▇▇. The Bank agrees to make no other amendments
to the Protection Plan, and warrants that no other amendments have been made.
(C) (i) Until 90 days after the first anniversary of
the Effective Date, ▇▇▇▇▇-▇▇▇▇▇ agrees to continue in effect the Protection
Plan, but only for the benefit of those 4 persons originally named as Executive
Officers in Section 1.10 of the Protection Plan. Sterling and the Bank hereby
warrant that no other persons are identified as Executive Officers under Section
1.10 and agree not to identify any other persons as Executive Officers under
Section 1.10.
(ii) Subject to Section 6.10(D), ▇▇▇▇▇-▇▇▇▇▇
agrees to pay (or cause to be paid) a severance benefit equal to 3 months base
salary to any person who was a full time employee of the Bank on the day before
the Effective Date and whose employment with the Continuing Bank is
involuntarily terminated during the 120 day period following the effective
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date of the Bank Merger. The payment obligation under this Section 6.10(C)(ii)
will not apply to: (a) the 4 persons who are covered by the Protection Plan, (b)
any employee who is terminated for "Just Cause" as that term is defined in the
Protection Plan and as determined by ▇▇▇▇▇- ▇▇▇▇▇, or (c) any employee whose
most recent date of hire by the Bank is after October 1, 1998.
(iii) On the Effective Date, ▇▇▇▇▇-▇▇▇▇▇ agrees to
pay a retention bonus to such of the Sterling employees as determined by
Sterling after consultation with ▇▇▇▇▇-▇▇▇▇▇ in an aggregate amount not to
exceed $75,000, provided that no bonus will be paid to any person whose
employment with the Bank terminates for any reason before the Effective Date.
(D) ▇▇▇▇▇-▇▇▇▇▇ has no obligation to pay a severance
benefit under Section 6.10(C)(ii) to any person unless that person executes a
"Release and Agreement" in the form previously agreed to by ▇▇▇▇▇-▇▇▇▇▇.
(E) At ▇▇▇▇▇-▇▇▇▇▇'▇ option, the Bank shall pay the
foregoing severance benefits and retention bonuses on the Effective Date, prior
to the Effective Time.
(F) Except as provided in Section 6.10(C), ▇▇▇▇▇-▇▇▇▇▇
and its Subsidiaries are under no obligation to continue any fringe benefit or
employee benefit plan or practice of Sterling or its Subsidiaries after the
Effective Date.
(G) (i) Following the Effective Time, ▇▇▇▇▇-▇▇▇▇▇ shall
provide generally to officers and employees of Sterling and its Subsidiaries who
continue to be employed by ▇▇▇▇▇-▇▇▇▇▇ or any of its Subsidiaries employee
benefits under employee benefit plans of ▇▇▇▇▇-▇▇▇▇▇ or its Subsidiaries on
terms and conditions which are no less favorable than those then provided by
▇▇▇▇▇-▇▇▇▇▇ and its Subsidiaries to their similarly situated officers and
employees, except as otherwise expressly set forth in this Plan.
(ii) For purposes of participation and vesting
(but not benefit accrual) under any employee benefit plans of ▇▇▇▇▇-▇▇▇▇▇ and
its Subsidiaries, service by the employees of Sterling and its Subsidiaries
prior to the Effective Time shall be treated as service with ▇▇▇▇▇-▇▇▇▇▇ or its
Subsidiaries, as applicable.
(iii) With respect to employees of Sterling and
its Subsidiaries and their dependents covered under the Sterling health
insurance plan at the Effective Time, there shall be no waiting period
applicable to such persons under any health insurance plan which covers them
after the Effective Time as employees of ▇▇▇▇▇-▇▇▇▇▇ or its Subsidiaries (unless
they terminate employment and are subsequently reemployed). Any health insurance
plan of ▇▇▇▇▇-▇▇▇▇▇ or its Subsidiaries which covers such employees and their
dependents after the Effective Time shall treat their coverage under the
Sterling health insurance plan as "creditable
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coverage" as required by ERISA Section 701 for purposes of any preexisting
condition exclusion provision. Amounts previously paid by such employees and
their dependents towards satisfaction of the required deductible under the
Sterling health insurance plan for the coverage year beginning in 1998 will
count towards satisfaction of the deductible under the plan which covers them
after the Effective Time as employees of ▇▇▇▇▇-▇▇▇▇▇ or its Subsidiaries for the
coverage year thereunder beginning in 1999.
(iv) ▇▇▇▇▇-▇▇▇▇▇ shall honor all accrued leave
earned by the employees of Sterling and its Subsidiaries to the extent it has
not been taken by the Effective Time. Such accrued leave must be taken within 1
year after the Effective Date.
(v) The Sterling 401(k) profit sharing plan shall
be terminated by the Bank before the Effective Time and all assets and benefits
thereunder distributed to the participants in such plan in accordance with and
to the extent permitted by Code Section 401(k).
6.11 Leases. Between the date of this Plan and the Effective
Time, Sterling shall use its reasonable best efforts to obtain the consent of
the landlords of the Bank's Timonium and Parole Shopping Center leases to the
assignment of such leases to BoM, and Sterling and ▇▇▇▇▇-▇▇▇▇▇ shall use their
reasonable best efforts to seek resolution of issues concerning relocation of
the Bank branch within the Parole Shopping Center and the availability of
drive-thru teller facilities in a manner which is reasonably satisfactory to
▇▇▇▇▇-▇▇▇▇▇.
6.12 Flood Insurance. Between the date of this Plan and the
Effective Time, Sterling shall conduct a review of its real estate secured loans
to determine whether such loans are required to be covered by flood insurance
pursuant to the federal Flood Disaster Protection Act of 1973, as amended, and
applicable regulations and shall procure and pay for such insurance if required.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
7.1 Conditions to Each Party's Obligation to Effect the
Transactions. The respective obligation of each of ▇▇▇▇▇-▇▇▇▇▇ and Sterling to
consummate the Transactions is subject to the fulfillment or written waiver by
▇▇▇▇▇-▇▇▇▇▇ and Sterling prior to the Effective Time of each of the following
conditions:
(A) Stockholder Approval. This Plan and the Share
Exchange shall have been duly adopted by at least two-thirds of all of the
outstanding shares of Sterling Common Stock and by at least a majority of the
shares of Sterling Common Stock present in person or by proxy at the Sterling
Meeting and held by Persons other than Sterling Directors and their
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Affiliates, Sterling present and former officers and their Affiliates, and
holders of Sterling Stock Options and their Affiliates.
(B) Regulatory Approvals. All regulatory approvals
required to consummate the Share Exchange, Option Cancellation and Corporate
Merger shall have been obtained and shall remain in full force and effect and
all statutory waiting periods in respect thereof shall have expired and no such
approvals shall contain any conditions, restrictions or requirements which the
▇▇▇▇▇-▇▇▇▇▇ Board reasonably determines in good faith would (i) following the
Effective Time, have a Material Adverse Effect on ▇▇▇▇▇-▇▇▇▇▇ and its
Subsidiaries taken as a whole or (ii) reduce the benefits of the Transactions to
such a degree that ▇▇▇▇▇-▇▇▇▇▇ would not have entered into this Plan had such
conditions, restrictions or requirements been known at the date hereof.
(C) No Injunction. No Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the Transactions.
7.2 Conditions to Obligation of Sterling and the Bank. The
obligation of Sterling and the Bank to consummate the Transactions is also
subject to the fulfillment or written waiver by Sterling prior to the Effective
Time of each of the following conditions:
(A) Representations and Warranties. The representations
and warranties of ▇▇▇▇▇-▇▇▇▇▇ set forth in this Plan shall be true and correct
in all material respects as of the date of this Plan and as of the Effective
Date as though made on and as of the Effective Date (except that representations
and warranties that by their terms speak as of the date of this Plan or some
other date shall be true and correct as of such date), (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, (i) all "Material Adverse Effect" qualifications and other
materiality qualifications contained in such representations and warranties
shall be disregarded and (ii) any update of or modification to the ▇▇▇▇▇-▇▇▇▇▇
Disclosure Schedule made or purported to have been made after the date of this
Plan shall be disregarded) and Sterling shall have received a certificate, dated
the Effective Date, signed on behalf of ▇▇▇▇▇-▇▇▇▇▇ by the Chief Financial
Officer of ▇▇▇▇▇-▇▇▇▇▇ to such effect.
(B) Performance of Obligations of ▇▇▇▇▇-▇▇▇▇▇.
▇▇▇▇▇-▇▇▇▇▇ shall have performed in all material respects all obligations
required to be performed by it under this Plan at or prior to the Effective
Time, and Sterling shall have received a certificate, dated the Effective Date,
signed on behalf of ▇▇▇▇▇-▇▇▇▇▇ by the Chief Financial Officer of ▇▇▇▇▇-▇▇▇▇▇ to
such effect.
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(C) Payment. ▇▇▇▇▇-▇▇▇▇▇ shall have delivered to the
Escrow Agent the Aggregate Share Exchange Consideration and a certificate to
this effect by the Escrow Agent shall have been delivered to Sterling.
(D) Attorney's Opinion. An opinion dated as of the
Effective Date, from ▇▇▇▇▇▇, Feinblatt, Rothman, Hoffberger & ▇▇▇▇▇▇▇▇▇, LLC,
substantially in the form of Exhibit A shall have been delivered to Sterling and
shall be in full force and effect.
7.3 Conditions to Obligation of ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM. The
obligation of ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM to consummate the Transactions is also
subject to the fulfillment or written waiver by ▇▇▇▇▇-▇▇▇▇▇ prior to the
Effective Time of each of the following conditions:
(A) Representations and Warranties. The representations
and warranties of Sterling set forth in this Plan shall be true and correct in
all material respects as of the date of this Plan and as of the Effective Date
as though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Plan or some other
date shall be true and correct as of such date) (it being understood that, for
purposes of determining the accuracy of such representations and warranties, (i)
all "Material Adverse Effect" qualifications and other materiality
qualifications contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the Sterling Disclosure
Schedule made or purported to have been made after the date of this Plan shall
be disregarded) and ▇▇▇▇▇-▇▇▇▇▇ shall have received a certificate, dated the
Effective Date, signed on behalf of Sterling by the Chief Executive Officer and
the Chief Financial Officer of Sterling to such effect.
(B) Performance of Obligations of Sterling. Sterling
shall have performed in all material respects all obligations required to be
performed by it under this Plan at or prior to the Effective Time, and
▇▇▇▇▇-▇▇▇▇▇ shall have received a certificate, dated the Effective Date, signed
on behalf of Sterling by the Chief Executive Officer and the Chief Financial
Officer of Sterling to such effect.
(C) Accountant's Letter. ▇▇▇▇▇▇▇ & Company or such
other accounting firm as is acceptable to the parties shall have furnished to
▇▇▇▇▇-▇▇▇▇▇ a letter substantially in the form of Exhibit B, dated not more than
5 days prior to the Effective Date concerning the results of the performance of
certain agreed upon procedures.
(D) Agreements and Documents. The following agreements
and documents shall have been delivered to ▇▇▇▇▇-▇▇▇▇▇, and shall be in full
force and effect:
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(i) An opinion dated as of the Effective Date,
from Housley Kantarian & ▇▇▇▇▇▇▇▇▇, P. C., counsel to Sterling, substantially in
the form attached as Exhibit C.
(ii) Option Cancellation Agreements duly executed
in the form previously agreed to by ▇▇▇▇▇-▇▇▇▇▇ by the holders of all Sterling
Stock Options and Sterling to cancel all Sterling Stock Options as provided in
Section 2.2.
(iii) The written resignations of all officers and
directors of Sterling effective upon the time of the Corporate Merger, and the
written resignations of all directors of the Bank and such officers of the Bank
as are identified by ▇▇▇▇▇-▇▇▇▇▇ prior to the Effective Date effective upon the
time of the Corporate Merger, provided, however, that such resignations shall
not affect the rights of such officers and directors, if any, under Section
6.10, including, but not limited to, the Protection Plan;
(iv) Such other documents as ▇▇▇▇▇-▇▇▇▇▇ may
reasonably request for the purpose of evidencing the accuracy of any of
Sterling's representations and warranties, evidencing the performance by
Sterling of, or the compliance by Sterling with, any covenant or obligation
required to be performed or complied with by Sterling, evidencing the
satisfaction of any condition referred to in this Section 7, or otherwise
facilitating the consummation or performance of any of the Transactions.
(E) ▇▇▇▇▇▇▇ ▇▇▇▇▇ Stock. ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ shares of
common stock of the Bank shall have been acquired by Sterling.
(F) No Material Adverse Change. There shall have been
no change in the business, condition, capitalization, assets, liabilities,
operations, financial performance or prospects of Sterling since the date of
this Plan which, individually or in the aggregate, has had or might reasonably
be expected to result in a Material Adverse Effect on Sterling.
Without limiting the generality of the foregoing
paragraph, Sterling shall be deemed to have suffered a Material Adverse Effect
if its consolidated stockholders' equity is less than the applicable amount set
forth below as of the date of the accountant's letter referenced in Section
7.3(C). For purposes of determining consolidated stockholders' equity,
Sterling's Expenses (excluding the cost of flood insurance as described in
Section 6.12 and any Adjustment Amount paid to the Bank's Parole Shopping Center
Landlord as contemplated in Section 3.4) shall not be deducted from its
consolidated stockholders' equity, consolidated stockholders' equity shall not
be increased by any amounts paid to Sterling in connection with the exercise of
any Sterling Stock Options after the date hereof or any other contributions to
Sterling's capital after the date hereof, and consolidated stockholders' equity
shall be neither increased nor decreased by increases or decreases after August
31, 1998, in realized or unrealized
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gains or losses in Sterling's Available for Sale Securities as defined in
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which became effective for fiscal
years beginning after December 15, 1993, or other items included in
Comprehensive Income and Accumulative Comprehensive Income as defined in
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," which became effective for fiscal years beginning after December 15,
1997. If the accountant's letter is issued as of one of the first 8 calendar
days of a month, the consolidated stockholders' equity for this purpose and the
accountant's letter shall be measured as of the month end prior to the
immediately preceding month end and shall be compared to the applicable amount
set forth below for the same month end; if the accountant's letter is issued on
any other day, the consolidated stockholders' equity shall be measured as of the
immediately preceding month end and shall be compared to the applicable amount
set forth below for the same month end. For example, if the accountant's letter
is dated December 8, 1998, the consolidated stockholders' equity of Sterling
shall be determined and reflected in the accountant's letter as of October 31,
1998, and shall be compared to the applicable amount set forth below as of
October 31, 1998, $6,926,000.
================================================================================
October 31, 1998 6,926,000
--------------------------------------------------------------------------------
November 30, 1998 6,901,000
--------------------------------------------------------------------------------
December 31, 1998 6,869,000
--------------------------------------------------------------------------------
January 31, 1999 6,844,000
--------------------------------------------------------------------------------
February 28, 1999 6,804,000
================================================================================
(G) No Litigation. There shall not be pending or
threatened any suit, action, proceeding or investigation: (i) challenging or
seeking to restrain or prohibit the consummation of the Transactions; (ii)
relating to the Transactions and seeking to obtain from ▇▇▇▇▇-▇▇▇▇▇ or any of
its Subsidiaries or Sterling or any of its Subsidiaries, Directors or Employees
any damages; (iii) seeking to prohibit or limit in any respect ▇▇▇▇▇-▇▇▇▇▇'▇
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of Sterling or the Bank; (iv) which
would adversely affect the right of MDMS or BoM to own the assets or operate the
business of Sterling or the Bank; or (v) which if adversely determined, could
have a Material Adverse Effect on Sterling.
(H) Waiver or Release. Either (i) the holders of at
least 50% of the outstanding principal amount of the Note ( as defined in that
certain Indenture dated April 23, 1998, between ▇▇▇▇▇-▇▇▇▇▇ and ▇. ▇▇▇▇ Price
New Income Fund, Inc.) shall have waived Section 10 (d) of the Indenture as to
the Bank; (ii) the Maryland Commissioner of Financial Regulation and Federal
Reserve Board shall have released the Bank from its agreement not to
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declare and issue dividends; or (iii) all regulatory approvals required to
consummate the Bank Merger shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall have
expired and no such approvals shall contain any conditions, restrictions or
requirements which the ▇▇▇▇▇-▇▇▇▇▇ Board reasonably determines in good faith
would (a) following the Effective Time, have a Material Adverse Effect on
▇▇▇▇▇-▇▇▇▇▇ and its Subsidiaries taken as a whole or (b) reduce the benefits of
the Transactions to such a degree that ▇▇▇▇▇-▇▇▇▇▇ would not have entered into
this Plan had such conditions, restrictions or requirements been known at the
date hereof.
ARTICLE VIII
TERMINATION
8.1 Termination. This Plan may be terminated, and the
Transactions may be abandoned:
(A) Mutual Consent. At any time prior to the Effective
Time, by the mutual consent of ▇▇▇▇▇-▇▇▇▇▇ and Sterling, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board.
(B) Sterling Breach. At any time prior to the Effective
Time, by ▇▇▇▇▇-▇▇▇▇▇ (provided it is not in material breach of any of its
representations, warranties, covenants or agreements set forth herein), upon a
breach of any covenant or agreement on the part of Sterling set forth in this
Plan, or if any representation or warranty of Sterling shall have become untrue,
in either case such that the conditions set forth in Section 7.3(A) or Section
7.3(B) would not be satisfied (a "Terminating Sterling Breach"); provided that,
if such Terminating Sterling Breach is curable by Sterling through the exercise
of reasonable efforts within 30 days after ▇▇▇▇▇-▇▇▇▇▇ gives written notice to
Sterling of the breach and for so long during such 30 day period as Sterling
continues to exercise such reasonable efforts, ▇▇▇▇▇-▇▇▇▇▇ may not terminate
this Plan under this subsection;
(C) ▇▇▇▇▇-▇▇▇▇▇ Breach. At any time prior to the
Effective Time, by Sterling (provided it is not in material breach of any of its
representations, warranties, covenants or agreements set forth herein), upon
breach of any covenant or agreement on the part of ▇▇▇▇▇-▇▇▇▇▇ set forth in this
Plan, or if any representation or warranty of ▇▇▇▇▇-▇▇▇▇▇ shall have become
untrue, in either case such that the conditions set forth in Section 7.2(A) or
Section 7.2(B) would not be satisfied (a "Terminating ▇▇▇▇▇-▇▇▇▇▇ Breach");
provided that, if such Terminating ▇▇▇▇▇-▇▇▇▇▇ Breach is curable by ▇▇▇▇▇-▇▇▇▇▇
through the exercise of their reasonable efforts within 30 days after Sterling
gives written notice to ▇▇▇▇▇-▇▇▇▇▇ of the breach and for so long during such 30
day period as ▇▇▇▇▇-▇▇▇▇▇ continues to exercise such reasonable efforts,
Sterling may not terminate this Plan under this subsection;
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(D) Failure of Condition. At any time prior to the
Effective Time, (i) by ▇▇▇▇▇-▇▇▇▇▇, if its Board of Directors determines by vote
of a majority of members of its entire Board, if any of the conditions in
Section 7.1 or Section 7.3 has not been satisfied as of the Effective Time or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of ▇▇▇▇▇-▇▇▇▇▇ to comply with its obligations under this Plan) and
▇▇▇▇▇- ▇▇▇▇▇ has not waived such condition on or before the Effective Time; or
(ii) by Sterling, if its Board of Directors determines by vote of a majority of
members of its entire Board, if any of the conditions in Section 7.1 or Section
7.2 has not been satisfied as of the Effective Time or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sterling
to comply with its obligations under this Plan) and Sterling has not waived such
condition on or before the Effective Time;
(E) Delay. At any time prior to the Effective Time, by
▇▇▇▇▇-▇▇▇▇▇ or Sterling, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event that the Share
Exchange is not consummated by March 31, 1999, except to the extent that the
failure of the Share Exchange then to be consummated arises out of or results
from the action or inaction of the party seeking to terminate pursuant to this
Section 8.1(E).
(F) No Approval. By Sterling or ▇▇▇▇▇-▇▇▇▇▇, if its
Board of Directors so determines by a vote of a majority of the members of its
entire Board, in the event the approval of any Governmental Authority required
for consummation of the Transactions shall have been denied by final
nonappealable action of such Governmental Authority.
(G) Sterling Meeting. At any time prior to the
Effective Time, by either ▇▇▇▇▇-▇▇▇▇▇ or Sterling, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, if the vote
of the stockholders of Sterling in favor of this Plan as provided in Section
7.1(A) shall not have been obtained at the Sterling Meeting (including any
adjournment or postponement thereof) provided that the right to terminate this
Plan under this subsection shall not be available to Sterling if it has not
complied with its obligations under Section 6.2;
(H) Sterling Board. At any time prior to the Effective
Time, by ▇▇▇▇▇-▇▇▇▇▇, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, if (i) the Sterling Board withdraws
or modifies its recommendation of this Plan or the Transactions in a manner
materially adverse to ▇▇▇▇▇-▇▇▇▇▇ or shall have resolved or publicly announced
or disclosed to any third party its intention to do any of the foregoing or the
Sterling Board shall have recommended to the stockholders of Sterling any
Acquisition Proposal or resolved to do so; (ii) a tender offer or exchange offer
for 25 percent or more of the outstanding shares of Sterling Common Stock is
commenced or a registration statement with respect thereto shall have been filed
and the Sterling Board, within 10 days after such tender offer
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or exchange offer is so commenced, either fails to recommend against acceptance
of such tender or exchange offer by its stockholders or takes no position with
respect to the acceptance of such tender or exchange offer by its stockholders;
(I) Acquisition Proposal. At any time prior to the
Effective Time, by Sterling, if its Board of Directors so determines by vote of
a majority of the members of its entire Board, if the Sterling Board shall have
determined to recommend an Acquisition Proposal to its stockholders after
determining, pursuant to Section 6.9, that such Acquisition Proposal constitutes
a Superior Proposal, and Sterling gives ▇▇▇▇▇-▇▇▇▇▇ at least 5 days prior notice
of its intention to effect such termination pursuant to this subsection.
8.2 Investigation. The right of any party hereto to terminate
this Plan pursuant to this Section shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any party hereto,
any Person controlling any such party or any of their respective
Representatives, whether prior to or after the execution of this Plan.
8.3 Effect of Termination. In the event of the termination of
this Plan pursuant to Section 8.1, this Plan shall forthwith become void, there
shall be no liability on the part of ▇▇▇▇▇-▇▇▇▇▇ or Sterling or any of their
respective Representatives, stockholders or affiliates to the other and all
rights and obligations of any party hereto shall cease, except that nothing
herein shall relieve any party from liability for any willful breach by a party
of any of its representations, warranties, covenants or agreements in this Plan;
and provided that the provisions of Sections 6.3 (Press Releases), 6.4 (Access;
Information), and Article IX of this Plan and any confidentiality agreement will
remain in full force and effect and survive any termination of this Plan.
ARTICLE IX
MISCELLANEOUS
9.1 Non-Survival. Except for any agreement or covenant to be
performed by a party following the Effective Time, which shall survive the
Effective Time, the representations, warranties, agreements and covenants
contained in this Plan shall not survive the Effective Time.
9.2 Waiver; Amendment. Prior to the Effective Time, any
provision of this Plan may be (A) waived by the party benefitted by the
provision, or (B) amended or modified at any time, by an agreement in writing
between the parties hereto executed in the same manner as this Plan, except that
after the Sterling Meeting, this Plan may not be amended if it would violate the
MGCL or reduce the consideration to be received by Sterling stockholders in the
Share Exchange.
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9.3 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.
9.4 Counterparts. This Plan may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.5 Governing Law. This Plan shall be governed by, and
interpreted in accordance with, the laws of the State of Maryland applicable to
contracts made and to be performed entirely within such State (except to the
extent that mandatory provisions of Federal law are applicable).
9.6 Fees, Expenses and Other Payments.
(A) Except as otherwise set forth in this Section, all
costs, legal fees, accounting fees, filing fees and other expenses incurred in
connection with or related to the Transactions ("Expenses") incurred by the
parties hereto shall be borne solely and entirely by the party which has
incurred such Expenses, whether or not the Transactions are consummated.
(B) If this Plan is terminated (i) by either
▇▇▇▇▇-▇▇▇▇▇ or Sterling pursuant to Section 8.1(G) as a result of the failure to
receive the vote for approval of this Plan and the Transactions by the
stockholders of Sterling at the Sterling Meeting required by Section 7.1 (A),
(ii) by ▇▇▇▇▇-▇▇▇▇▇ if it shall exercise the right specified in Section 8.1(H),
or (iii) by Sterling, if it shall exercise the right specified in Section
8.1(I), Sterling shall pay to ▇▇▇▇▇- ▇▇▇▇▇ reasonable documented Expenses of
▇▇▇▇▇-▇▇▇▇▇ within 10 business days after such termination.
(C) If this Plan is terminated (i) by ▇▇▇▇▇-▇▇▇▇▇ if it
shall exercise the right specified in Section 8.1(H), or (ii) by Sterling, if it
shall exercise the right specified in Section 8.1(I), and either (a) Sterling
enters into a written agreement respecting an Acquisition Proposal within 12
months after the date this Plan is terminated pursuant to Sections 8.1(H) or (I)
or (b) shareholders holding 50% or more of the Sterling Common Stock shall have
accepted the tender offer or exchange offer contemplated in Section 8.1(H)(ii)
within such 12 month period, then in such event Sterling shall pay to
▇▇▇▇▇-▇▇▇▇▇, in addition to the payment of
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Expenses described in Section 9.6(B), a termination fee of $525,000.00 in cash
(the "Sterling Termination Fee") within 1 business day after the event described
in this Section 9.6(C)(a) or (b).
(D) In no event shall Sterling be required to pay any
amount to ▇▇▇▇▇- ▇▇▇▇▇ pursuant to Sections 9.6(B) or (C) if, immediately prior
to the termination of this Plan, ▇▇▇▇▇-▇▇▇▇▇ was in material breach of any of
its obligations under this Plan.
(E) If Sterling fails to promptly pay to ▇▇▇▇▇-▇▇▇▇▇
any fee or Expense due hereunder, Sterling shall pay the costs and expenses
(including reasonable documented legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee at the
highest prime rate published in the Money Rates Section of The Wall Street
Journal from time to time from the date such fee was required to be paid until
it is paid in full.
(F) Any payment required to be made pursuant to this
section shall be made by wire transfer of immediately available funds to an
account designated by ▇▇▇▇▇-▇▇▇▇▇ in the notice of demand for payment delivered
pursuant to this Section.
9.7 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
(A) if to ▇▇▇▇▇-▇▇▇▇▇, MDMS or BoM to:
▇▇▇▇▇-▇▇▇▇▇ Bancshares, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, Feinblatt, Rothman,
Hoffberger & ▇▇▇▇▇▇▇▇▇, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attn: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(B) if to Sterling or the Bank, to:
Sterling Bancorp
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Housley Kantarian & ▇▇▇▇▇▇▇▇▇, P.C.
Suite 700
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
(▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.8 Entire Understanding; No Third Party Beneficiaries. This
Plan represents the entire understanding of the parties hereto with reference to
the Transactions and supersedes any and all other oral or written agreements
heretofore made. Nothing in this Plan expressed or implied, is intended to
confer upon any person, other than the parties hereto or their respective
successors, any rights, remedies, obligations or liabilities under or by reason
of this Plan except as specifically set forth herein.
9.9 Interpretation; Effect. When a reference is made in this
Plan to Sections, Exhibits or Schedules, such reference shall be to a Section
of, or Exhibit or Schedule to, this Plan unless otherwise indicated. The
headings contained in this Plan are for reference purposes only and are not part
of this Plan. Whenever the words "include," "includes" or "including" are used
in this Plan, they shall be deemed to be followed by the words "without
limitation". No provision of this Plan shall be construed to require Sterling,
▇▇▇▇▇-▇▇▇▇▇ or any of their respective Subsidiaries, affiliates or directors to
take any action which would violate applicable law (whether statutory or common
law), rule or regulation.
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9.10 Assignment. No party may assign any of its rights or
obligations hereunder by operation of law or otherwise without the prior written
consent of the other party.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan
to be executed in counterparts by their duly authorized officers, all as of the
day and year first above written.
ATTEST: STERLING BANCORP
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL)
-------------------------- --------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President
STERLING BANK AND TRUST CO.
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ (SEAL)
-------------------------- --------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President
▇▇▇▇▇-▇▇▇▇▇ BANCSHARES, INC.
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (SEAL)
-------------------------- --------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
▇▇▇▇▇-▇▇▇▇▇ MERGER SUB, INC.
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (SEAL)
-------------------------- --------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
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BANK OF MARYLAND
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ By:/s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (SEAL)
-------------------------- -----------------------
H. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President
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EXHIBIT A
Ladies and Gentlemen:
We have acted as counsel to ▇▇▇▇▇-▇▇▇▇▇ Bancorp, Inc., ▇▇▇▇▇-▇▇▇▇▇ Merger Sub,
Inc., and Bank of Maryland (collectively, "▇▇▇▇▇-▇▇▇▇▇") in connection with the
Agreement and Plan of Share Exchange and Mergers dated ____________, 1998 (the
"Plan") between ▇▇▇▇▇-▇▇▇▇▇ and Sterling Bancorp and Sterling Bank and Trust Co.
(collectively "Sterling"). This is the opinion contemplated by Section 7.2(D) of
the Plan. All capitalized terms used in this opinion without definition have the
respective meanings given to them in the Plan or the Accord referred to below.
This Opinion Letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The law covered by the opinions expressed herein
is limited to the Federal Law of the United States and the Law of the State of
Maryland.
Based on the foregoing, our opinion is as follows:
1. Assuming due authorization of the Plan by Sterling and the Bank, the Plan is
enforceable against ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM in accordance with its terms,
except that enforcement against ▇▇▇▇▇-▇▇▇▇▇, MDMS and BoM may be limited by (a)
bankruptcy, insolvency, moratorium, reorganization or similar laws effecting the
rights of creditors generally, (b) equitable principles limiting the right to
specific performance or other similar equitable relief, or (c) considerations of
public policy.
2. Neither the execution and delivery of the Plan nor the performance of
▇▇▇▇▇-▇▇▇▇▇'▇, MDMS' and BoM's obligations thereunder (a) violates any provision
of the certificate of incorporation or bylaws (or other governing instrument) of
▇▇▇▇▇-▇▇▇▇▇, MDMS or BoM or (b) violates any statute, law, regulation or rule,
or any judgment, decree or order of any court or Governmental Authority
applicable to ▇▇▇▇▇-▇▇▇▇▇, MDMS or BoM.
3. Except for approval by the Maryland Commissioner of Financial Regulation, the
Federal Reserve Board, and the FDIC, no consent, approval or authorization of,
or declaration, filing or registration with, any Governmental Authority is
required in connection with the execution, delivery and performance of the Plan
or the consummation of the Transactions.
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To our actual knowledge, there is no proceeding by or before any court or
Governmental Authority pending or overtly threatened against or involving
▇▇▇▇▇-▇▇▇▇▇, MDMS or BoM that questions or challenges the validity of the Plan
or any action taken or to be taken by ▇▇▇▇▇- ▇▇▇▇▇, MDMS or BoM pursuant to the
Plan or in connection with the Transactions, and to our actual knowledge neither
▇▇▇▇▇-▇▇▇▇▇, MDMS or BoM is subject to any judgment, order or decree having
prospective effect.
Very truly yours,
------------------------
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EXHIBIT B
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EXHIBIT C
Ladies and Gentlemen:
[We have acted as counsel to Sterling Bancorp and Sterling Bank & Trust Co.
(collectively, "Sterling") in connection with the Agreement and Plan of Share
Exchange and Mergers dated ____________, 1998 (the "Plan") between Sterling and
▇▇▇▇▇-▇▇▇▇▇ Bancshares, Inc., ▇▇▇▇▇- ▇▇▇▇▇ Merger Sub, Inc., and Bank of
Maryland (collectively "▇▇▇▇▇-▇▇▇▇▇"). This is the opinion contemplated by
Section 7.3(D)(i) of the Plan. All capitalized terms used in this opinion
without definition have the respective meanings given to them in the Plan or the
Accord referred to below.
This Opinion Letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The law covered by the opinions expressed herein
is limited to the Federal Law of the United States and the Law of the State of
Maryland. or, similar introduction]
Based on the foregoing, our opinion is as follows:
1. Assuming due authorization of the Plan by ▇▇▇▇▇-▇▇▇▇▇, MDMS and BOM, the Plan
is enforceable against Sterling and the Bank in accordance with its terms,
except that the enforceablity of the obligations of Sterling and the Bank may be
limited by (a) bankruptcy, insolvency, moratorium, reorganization or similar
laws effecting the rights of creditors generally, (b) equitable principles
limiting the right to specific performance or other similar equitable relief, or
(c) considerations of public policy.
2. The authorized capital stock of Sterling Bancorp consists of 5,000,000 shares
of common stock, $.01 par value. The authorized capital stock of the Bank
consists of 2,000,000 shares of common stock, $10.00 par value.
3. Each of Sterling Bancorp and the Bank is a corporation validly existing and
in good standing under the laws of its jurisdiction of incorporation. All of the
outstanding shares of capital stock of each of Sterling Bancorp and the Bank
have been duly authorized and are nonassessable and were not issued in violation
of the preemptive rights of any Person.
4. Neither the execution and delivery of the Plan nor the consummation of any or
all of the Transactions violates any federal or Maryland statute, law,
regulation or rule, or any judgment,
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decree or order of any court or other Governmental Authority applicable to
Sterling Bancorp or the Bank.
5. Neither the execution and delivery of the Plan nor the consummation of any or
all of the Transactions violates any provision of the certificate of
incorporation or bylaws (or other governing instrument) of Sterling Bancorp or
the Bank.
6. Except for approval by the Maryland Commissioner of Financial Regulation, the
Federal Reserve Board, and the FDIC, no consent, approval or authorization of,
or declaration, filing or registration with, any Governmental Authority is
required in connection with the execution, delivery and performance of the Plan
or the consummation of the Transactions.
To our actual knowledge, except as set forth in Section 5.3(H) of the Disclosure
Schedule, there is no proceeding by or before any court or Governmental
Authority pending or overtly threatened against or involving Sterling Bancorp or
the Bank or that questions or challenges the validity of the Plan or any action
taken or to be taken by Sterling Bancorp or the Bank pursuant to the Plan or in
connection with the Transactions, and to our actual knowledge neither Sterling
Bancorp or the Bank is subject to any judgment, order or decree having
prospective effect.
[Counsel may expressly exclude any opinions as to choice of law and anti-trust
matters and may add other qualifications and explanations of the basis of its
opinions as are consistent with the Legal Opinion Accord prepared by the Section
of Business Law of the American Bar Association.]
The Accord is changed for purposes of this Opinion Letter pursuant to ss.21 of
the Accord as follows:
The Primary Lawyer Group shall include all lawyers presently at our firm who
have given substantive attention to the affairs of Sterling Bancorp or Sterling
Bank since __________.
Very truly yours,
------------------------
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