As filed with the Securities and Exchange Commission on September 5, 1995
Registration No. 33-60637
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CRESTAR FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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Virginia 6711 54-0722175
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
919 EAST MAIN STREET
P.O. BOX 26665
RICHMOND, VIRGINIA 23261-6665
(804) 782-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN C. CLARK, III
CORPORATE SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
CRESTAR FINANCIAL CORPORATION
919 EAST MAIN STREET
P.O. BOX 26665
RICHMOND, VIRGINIA 23261-6665
(804) 782-7445
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
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LATHAN M. EWERS, JR. JAMES J. WINN, JR.
HUNTON & WILLIAMS PIPER & MARBURY L.L.P.
951 EAST BYRD STREET 36 SOUTH CHARLES STREET
RICHMOND, VIRGINIA 23219-4074 BALTIMORE, MARYLAND 21201-3018
(804) 788-8269 (410) 576-1675
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. ( )
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
CRESTAR FINANCIAL CORPORATION
CROSS-REFERENCE SHEET
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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and Outside
Front Cover.................................... Facing Page; Cross Reference Sheet; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front Cover Page of Prospectus; Table of Contents; Available
Information; Incorporation of Certain Information by Reference
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.................. Summary; Comparative Per Share Data
4. Terms of the Transaction....................... Summary; The Merger; Comparative Rights of Stockholders; Annex I; Annex
II; Annex III
5. ProForma Financial Information................. Pro Forma Condensed Financial Information
6. Material Contracts with the Company Being
Acquired....................................... Not Applicable
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters................................... Not Applicable
8. Interests of Named Experts and Counsel......... Not Applicable
9. Disclosure of Commission's Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
10. Information with Respect to S-3
Registrants.................................... Available Information; Incorporation of Certain Information by
Reference; Summary
11. Incorporation of Certain Information by
Reference...................................... Incorporation of Certain Information by Reference
12. Information with Respect to S-2 or S-3
Registrants.................................... Not Applicable
13. Incorporation of Certain Information by
Reference...................................... Not Applicable
14. Information with Respect to Registrants Other
than S-2 or S-3 Registrants.................... Not Applicable
15. Information with Respect
to S-3 Companies............................... Available Information; Incorporation of Certain Information by
Reference; Summary; Supervision and Regulation; Business of Loyola;
Price Range of Loyola Common Stock and Dividend Policy; Experts
16. Information with Respect to S-2 or S-3
Companies...................................... Not Applicable
17. Information with Respect to Companies other
than S-2 or S-3 Companies...................... Not Applicable
18. Information if Proxies, Consents or Authori-
zations are to be Solicited.................... Incorporation of Certain Information By Reference; Summary --
Stockholder Meeting; The Merger; Summary -- No Appraisal Rights
19. Information if Proxies, Consents or Authori-
zations are not to be Solicited, or in an
Exchange Offer................................. Not Applicable
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<PAGE>
[Loyola Letterhead]
September , 1995
Dear Fellow Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Loyola Capital Corporation ("Loyola") on October 17, 1995
at 2:00 p.m., Eastern Time, at The University of Baltimore, Langsdale
Auditorium, 1420 Maryland Avenue at Oliver Street, Baltimore, Maryland. This is
a very important meeting regarding your investment in Loyola.
At the Special Meeting you will be asked to consider and vote upon the
Agreement and Plan of Merger, dated as of May 16, 1995, by and between Loyola
and Crestar Financial Corporation ("Crestar"), and related Plan of Merger
(together, the "Agreement"), pursuant to which, among other things, Loyola will
be merged with and into Crestar (the "Merger"). In connection with the Merger,
each share of Loyola Common Stock outstanding immediately prior to consummation
of the Merger will, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and represent the right to receive a
fraction of a share of Crestar Common Stock determined in accordance with the
Agreement (the "Exchange Ratio"), as described in the accompanying Proxy
Statement/Prospectus. Based on the closing price of Crestar Common Stock on the
New York Stock Exchange on August 25, 1995 of $53.875, each share of Loyola
Common Stock would have been exchanged for 0.640 shares of Crestar Common Stock,
if such price had been the "Average Closing Price" (as defined in the
Agreement). Such number of shares of Crestar Common Stock may increase or
decrease depending on the Average Closing Price of Crestar Common Stock. Cash
will be paid in lieu of fractional shares of Crestar Common Stock.
Your Board of Directors unanimously recommends that you vote in favor of
the Agreement and the Merger, which the Board believes is in the best interests
of Loyola and its stockholders. The Board of Directors has received the opinion
of Alex. Brown & Sons Incorporated that the Exchange Ratio is fair to
stockholders of Loyola from a financial point of view.
The exchange of Loyola Common Stock for Crestar Common Stock (other than
for cash paid in lieu of fractional shares) will be a tax-free transaction for
federal income tax purposes.
We have enclosed a Notice of the Special Meeting, a Proxy
Statement/Prospectus containing a discussion of the Agreement and the Merger and
a proxy card to record your vote on the matter. Please complete, sign and date
the enclosed proxy card and return it as soon as possible in the envelope
provided. If you decide to attend the Special Meeting, you may vote your shares
in person whether or not you have previously submitted a proxy. It is important
to understand that the Agreement and Merger must be approved by the holders of a
majority of all outstanding shares of Loyola Common Stock and that the failure
to vote will have the same effect as a vote against the proposal. On behalf of
the Board, thank you for your attention to this important matter.
Very truly yours,
/s/ Joseph W. Mosmiller
Joseph W. Mosmiller
Chairman of the Board and Chief
Executive Officer
<PAGE>
LOYOLA CAPITAL CORPORATION
1300 NORTH CHARLES STREET
BALTIMORE, MARYLAND 21201
(410) 332-7210
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 1995
TO THE STOCKHOLDERS OF LOYOLA CAPITAL CORPORATION:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders has been
called by the Board of Directors of Loyola Capital Corporation ("Loyola") and
will be held at The University of Baltimore, Langsdale Auditorium, 1420 Maryland
Avenue at Oliver Street, Baltimore, Maryland, on October 17, 1995 at 2:00 p.m.
for the purpose of considering and voting upon the following matters:
1. PROPOSED MERGER. To consider and vote upon the Agreement and
Plan of Merger dated as of May 16, 1995 and a related Plan of Merger
(together, the "Agreement") providing for the merger of Loyola with and
into Crestar Financial Corporation (the "Merger"). In connection with the
Merger, each share of Loyola Common Stock outstanding immediately prior to
consummation of the Merger will, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent
the right to receive a fraction of a share of Crestar Common Stock
determined in accordance with the Agreement, as described in the
accompanying Proxy Statement/Prospectus. The Agreement is attached to the
accompanying Proxy Statement/Prospectus as ANNEX I; and
2. OTHER BUSINESS. To consider and vote upon such other matters
as may properly come before the meeting or any adjournments or
postponements thereof.
Only those holders of Loyola common stock of record at the close of
business on August 3, 1995 shall be entitled to notice of and to vote at the
Special Meeting or any adjournments or postponements thereof. The affirmative
vote of the holders of a majority of the issued and outstanding shares of Loyola
Common Stock entitled to vote at the meeting is required to approve the Merger.
By Order of the Board of Directors,
/s/ Linda A. Stadtler
Linda A. Stadtler
Secretary
September , 1995
Baltimore, Maryland
THE BOARD OF DIRECTORS OF LOYOLA UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
LOYOLA COMMON STOCK VOTE TO APPROVE THE PROPOSED MERGER.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES WILL BE REPRESENTED AT THE MEETING. STOCKHOLDERS ATTENDING THE MEETING
MAY PERSONALLY VOTE ON ALL MATTERS WHICH ARE CONSIDERED, IN WHICH EVENT THE
SIGNED PROXIES ARE REVOKED. ANY PROXY MAY BE REVOKED BY YOU IN WRITING OR IN
PERSON AT ANY TIME.
<PAGE>
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
OF
LOYOLA CAPITAL CORPORATION
TO BE HELD ON OCTOBER 17, 1995
PROSPECTUS OF
CRESTAR FINANCIAL CORPORATION
COMMON STOCK
PAR VALUE $5.00
This Proxy Statement/Prospectus is being furnished to the holders of common
stock, par value $0.10 per share (the "Loyola Common Stock"), of Loyola Capital
Corporation, a Maryland corporation ("Loyola"), in connection with the
solicitation of proxies by the Loyola Board of Directors (the "Loyola Board")
for use at the Special Meeting of Loyola stockholders to be held at 2:00 p.m. on
October 17, 1995, at The University of Baltimore, Langsdale Auditorium, 1420
Maryland Avenue at Oliver Street, Baltimore, Maryland (the "Loyola Stockholder
Meeting" or the "Special Meeting").
At the Loyola Stockholder Meeting, stockholders of record of Loyola Common
Stock as of the close of business on August 3, 1995, will consider and vote upon
a proposal to approve the Agreement and Plan of Merger (the "Agreement"), dated
as of May 16, 1995, by and between Crestar Financial Corporation ("Crestar"),
and Loyola, pursuant to which, among other things, Loyola will merge with and
into Crestar (the "Merger"). Upon consummation of the Merger, which is expected
to occur in late December, 1995 or early January, 1996, each outstanding share
of Loyola Common Stock (other than shares held directly by Crestar, excluding
shares held in a fiduciary capacity or in satisfaction of a debt previously
contracted) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into and represent the right to receive a
number of shares of Crestar common stock, par value $5.00 per share (the
"Crestar Common Stock"), determined by the average closing price of Crestar
Common Stock (the "Average Closing Price") as reported on the New York Stock
Exchange ("NYSE") for each of the 10 trading days ending on the tenth day prior
to the Closing Date (as defined herein). The exchange ratio ("Exchange Ratio")
shall be calculated as follows: (i) if the Average Closing Price is between
$43.478 and $46.375, the Exchange Ratio shall be 0.690; (ii) if the Average
Closing Price is greater than $46.375, the Exchange Ratio shall be the quotient
of (a) $32.00 divided by (b) the Average Closing Price, rounded to the nearest
one-one thousandth of a share, provided that the Exchange Ratio shall not be
less than 0.640; and (iii) if the Average Closing Price is less than $43.478,
the Exchange Ratio shall be the quotient of (a) $30.00 divided by (b) the
Average Closing Price, rounded to the nearest one-one thousandth of a share,
provided that the Exchange Ratio shall not be greater than 0.750, subject to
adjustment as set forth in the Agreement. Based on the closing price of Crestar
Common Stock on the NYSE on August 25, 1995 of $53.875, each share of Loyola
Common Stock would have been exchanged for 0.640 shares of Crestar Common Stock
if such price had been the Average Closing Price. Such number of shares of
Crestar Common Stock may increase or decrease depending on the Average Closing
Price. Cash will be paid in lieu of fractional shares of Crestar Common Stock.
An identical number of rights to purchase Participating Cumulative Preferred
Stock, Series C of Crestar (each a "Right") will be attached to and will trade
with shares of Crestar Common Stock. Based on a maximum Exchange Ratio of 0.750,
a maximum of approximately 6,900,000 shares of Crestar Common Stock and related
Rights may be issued to holders of Loyola Common Stock in accordance with the
Agreement, including shares issuable upon the exercise of outstanding options to
purchase Loyola Common Stock. See "The Merger -- Determination of Exchange Ratio
and Exchange for Crestar Common Stock." For a description of the Agreement,
which is included herein in its entirety as ANNEX I to this Proxy
Statement/Prospectus, see "The Merger." Crestar expects that sometime after the
Merger Loyola Federal Savings Bank, a federally chartered stock savings bank
("Loyola F.S.B."), may be merged into one of Crestar's three wholly owned bank
subsidiaries including Crestar Bank MD ("Crestar Bank MD"), a Maryland banking
corporation (the "Bank Merger").
The information presented in this Proxy Statement/Prospectus concerning
Loyola has been supplied by Loyola and the information concerning Crestar has
been supplied by Crestar.
This Proxy Statement/Prospectus and the accompanying proxy card are first
being mailed to stockholders of Loyola on or about September , 1995.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF CRESTAR COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
The date of this Proxy Statement/Prospectus is September , 1995.
<PAGE>
TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION........................................................ 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................ 1
SUMMARY...................................................................... 2
Parties to the Merger...................................................... 2
The Merger................................................................. 2
The Exchange Ratio......................................................... 3
Stockholder Meeting........................................................ 3
Vote Required; Record Date................................................. 3
Reasons For The Merger; Recommendation of the Loyola Board................. 4
Opinion of Financial Advisor............................................... 4
No Appraisal Rights........................................................ 5
Conditions to Consummation................................................. 5
Business of Loyola and Crestar Pending the Merger.......................... 5
Waiver and Amendment; Termination.......................................... 5
Interests of Certain Persons in the Merger................................. 5
Resale of Crestar Common Stock............................................. 6
Certain Federal Income Tax Consequences of the Merger...................... 6
Effective Time............................................................. 6
Stock Option Agreement..................................................... 6
Market Prices Prior to Announcement of the Merger.......................... 7
Comparative Per Share Data................................................. 7
Selected Financial Data.................................................... 9
Selected Financial Data -- Crestar, Loyola and Chase MD................... 13
GENERAL INFORMATION.......................................................... 16
THE MERGER................................................................... 17
General.................................................................... 17
Background of the Merger................................................... 17
Reasons for the Merger; Recommendation of the Loyola Board................. 18
Opinion of Financial Advisor............................................... 19
Effective Time of the Merger............................................... 22
Determination of Exchange Ratio and Exchange for Crestar Common Stock...... 22
Business of Loyola and Crestar Pending the Merger.......................... 22
Conditions to Consummation of the Merger................................... 24
Stock Option Agreement..................................................... 24
Waiver and Amendment; Termination.......................................... 25
Accounting Treatment....................................................... 26
Operations After the Merger................................................ 26
Interests of Certain Persons in the Merger................................. 26
Stock Options.............................................................. 28
Effect on Loyola Employee Benefits Plans................................... 29
Certain Federal Income Tax Consequences.................................... 30
PRO FORMA CONDENSED FINANCIAL INFORMATION.................................... 31
CAPITALIZATION............................................................... 38
PRO FORMA CONDENSED FINANCIAL INFORMATION -- CRESTAR, LOYOLA AND CHASE MD.... 40
BUSINESS OF CRESTAR.......................................................... 42
RECENT DEVELOPMENTS.......................................................... 42
BUSINESS OF LOYOLA........................................................... 42
PRICE RANGE OF LOYOLA COMMON STOCK AND DIVIDEND POLICY....................... 43
LOYOLA SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS....................... 45
SUPERVISION AND REGULATION OF CRESTAR........................................ 46
Bank Holding Companies..................................................... 46
Capital Requirements....................................................... 46
Limits on Dividends and Other Payments..................................... 47
Banks...................................................................... 48
Other Safety and Soundness Regulations..................................... 49
DESCRIPTION OF CRESTAR CAPITAL STOCK......................................... 49
Common Stock............................................................... 49
Preferred Stock............................................................ 49
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i
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Rights..................................................................... 50
Virginia Stock Corporation Act............................................. 50
COMPARATIVE RIGHTS OF STOCKHOLDERS........................................... 51
Capitalization............................................................. 51
Amendment of Articles or Bylaws............................................ 51
Required Stockholder Vote for Certain Actions.............................. 52
Director Nominations....................................................... 52
Directors and Classes of Directors; Vacancies and Removal of Directors..... 52
Anti-Takeover Provisions................................................... 53
Preemptive Rights.......................................................... 54
Assessment................................................................. 54
Conversion; Redemption; Sinking Fund....................................... 54
Liquidation Rights......................................................... 54
Dividends and Other Distributions.......................................... 55
Special Meetings of Stockholders........................................... 55
Indemnification............................................................ 55
Stockholder Proposals...................................................... 56
Stockholder Inspection Rights; Stockholder Lists........................... 56
Stockholder Rights Plan.................................................... 56
Dissenters' Rights......................................................... 56
RESALE OF CRESTAR COMMON STOCK............................................... 57
EXPERTS...................................................................... 57
LEGAL OPINION................................................................ 57
OTHER MATTERS................................................................ 57
ANNEX I -- Agreement and Plan of Merger dated as of May 16, 1995
and related Plan of Merger.
ANNEX II -- Stock Option Agreement dated as of April 27, 1995.
ANNEX III -- Fairness Opinion of Alex. Brown & Sons Incorporated.
</TABLE>
ii
<PAGE>
AVAILABLE INFORMATION
Crestar and Loyola are subject to the reporting and informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Reports,
proxy statements and other information filed with the SEC can be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional Offices
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611-2511 or Seven World Trade Center (13th Floor), New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Such reports, proxy statements and other information also
may be inspected at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005 for Crestar and at the offices of the National
Association of Securities Dealers, Inc. located at 1735 K Street, N.W.,
Washington, D.C. 20006 for Loyola. As permitted by the Rules and Regulations of
the SEC, this Proxy Statement/Prospectus does not contain all the information
set forth in the Registration Statement on Form S-4, of which this Proxy
Statement/Prospectus is a part, and exhibits thereto (together with the
amendments thereto, the "Registration Statement"), which has been filed by
Crestar with the SEC under the Securities Act of 1933, as amended (the "1933
Act"), with respect to Crestar Common Stock and to which reference is hereby
made.
No person has been authorized to give any information or to make any
representation other than as contained herein in connection with the offer
contained in this Proxy Statement/Prospectus, and if given or made, such
information or representation must not be relied upon as having been authorized
by Crestar or Loyola. This Proxy Statement/Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, nor does it constitute an offer to or
solicitation of any person in any jurisdiction to whom it would be unlawful to
make such an offer or solicitation. Neither the delivery of this Proxy
Statement/Prospectus nor the distribution of any of the securities to which this
Proxy Statement/Prospectus relates shall, at any time, imply that the
information herein is correct as of any time subsequent to the date hereof.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
RELATING TO CRESTAR AND LOYOLA THAT ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. CRESTAR DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM
CRESTAR'S INVESTOR RELATIONS DEPARTMENT, CRESTAR FINANCIAL CORPORATION, 919 EAST
MAIN STREET, RICHMOND, VIRGINIA 23261-6665, (804) 782-7152. LOYOLA DOCUMENTS ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST FROM THE SECRETARY, LOYOLA CAPITAL
CORPORATION, 1300 NORTH CHARLES STREET, BALTIMORE, MARYLAND, 21201-5705, (410)
332-7210. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUESTS
SHOULD BE MADE BY OCTOBER 9, 1995.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Crestar with the SEC are incorporated by
reference in this Proxy Statement/Prospectus: (i) Crestar's Annual Report on
Form 10-K for the year ended December 31, 1994, including Crestar's Form 10-K/A
Amendment No. 1 to Form 10-K for the year ended December 31, 1994, and Crestar's
Form 10-K/A Amendment No. 2 to Form 10-K for the year ended December 31, 1994,
containing 1994 annual reports for the Crestar Employees' Thrift and Profit
Sharing Plan and the Crestar Merger Plan for Transferred Employees,
respectively; (ii) Crestar's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1995 and June 30, 1995; (iii) the description of Crestar Common
Stock in Crestar's registration statement filed under the Exchange Act with
respect to Crestar Common Stock, including all amendments and reports filed for
the purpose of updating such description; and (iv) the description of the Rights
in Crestar's registration statement on Form 8-A filed under the Exchange Act
with respect to the Rights, including all amendments and reports filed for the
purpose of updating such description.
The following documents filed by Loyola with the SEC are incorporated by
reference in this Proxy Statement/Prospectus: (i) Loyola's Annual Report on Form
10-K for the year ended December 31, 1994, including Loyola's Form 10-K/A
amendment to Form 10-K for the year ended December 31, 1994; (ii) Loyola's
Quarterly Reports on Form 10-Q for the periods ended March 31, 1995 and June 30,
1995, including Loyola's Form 10-Q/A amendment to Form 10-Q for the period ended
March 31, 1995; and (iii) Loyola's Current Reports on Form 8-K dated April 28,
1995, and May 16, 1995.
All documents filed by Crestar and Loyola pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the date of the Loyola Stockholder Meeting are hereby incorporated by
reference in this Proxy Statement/Prospectus and shall be deemed a part hereof
from the date of filing of such documents. Any statement contained in any
supplement hereto or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
the Registration Statement and this Proxy Statement/Prospectus to the extent
that a statement contained herein, in any supplement hereto or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement, this Proxy
Statement/Prospectus or any supplement hereto.
Also incorporated by reference herein is the Agreement and Plan of Merger
by and between Crestar and Loyola, dated as of May 16, 1995, which is attached
to this Proxy Statement/Prospectus as ANNEX I.
1
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ALL RESPECTS BY THE INFORMATION
APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, THE ANNEXES HERETO AND THE DOCUMENTS REFERRED TO HEREIN.
STOCKHOLDERS ARE URGED TO CAREFULLY READ ALL SUCH INFORMATION.
PARTIES TO THE MERGER
CRESTAR. Crestar is the holding company for Crestar Bank (Virginia),
Crestar Bank N.A. (Washington, D.C.) and Crestar Bank MD (Maryland). At June 30,
1995 Crestar had approximately $14.6 billion in total assets, $11.1 billion in
total deposits and $1.2 billion in total stockholders' equity.
In 1963, six Virginia banks combined to form United Virginia Bankshares
Incorporated ("UVB"), a bank holding company formed under the Bank Holding
Company Act of 1956 (the "BHCA"). UVB (parent company of United Virginia Bank)
extended its operations into the District of Columbia by acquiring NS&T Bank,
N.A. on December 27, 1985 and into Maryland by acquiring Bank of Bethesda on
April 1, 1986. On September 1, 1987, UVB became Crestar Financial Corporation
and its bank subsidiaries adopted their present names.
Crestar serves customers through a network of 349 banking offices and 293
automated teller machines (as of March 31, 1995). Crestar offers a broad range
of banking services, including various types of deposit accounts and
instruments, commercial and consumer loans, trust and investment management
services, bank credit cards and international banking services. Crestar's
subsidiary, Crestar Insurance Agency, Inc., offers a variety of personal and
business insurance products. Securities brokerage and investment banking
services are offered by Crestar's subsidiary, Crestar Securities Corporation.
Mortgage loan origination, servicing and wholesale lending are offered by
Crestar Mortgage Corporation, and investment advisory services are offered by
Capitoline Investment Services Incorporated, both of which are subsidiaries of
Crestar Bank. These various Crestar subsidiaries provide banking and non-banking
services throughout Virginia, Maryland and Washington, D.C., as well as certain
non-banking services to customers in other states.
Crestar had pending at the date of this Proxy Statement/Prospectus the
purchase of certain of the assets and the assumption of specified liabilities
relating to the six branches of the Chase Manhattan Bank of Maryland ("Chase
MD").
The executive offices of Crestar are located in Richmond, Virginia at
Crestar Center, 919 East Main Street. Regional headquarters are located in
Norfolk and Roanoke, Virginia and in Washington, D.C. Crestar's principal
Operations Center is located in Richmond. See "Business of Crestar."
LOYOLA. Loyola is the holding company for Loyola F.S.B., a federally
chartered stock savings bank which was founded in 1879 and is headquartered in
Baltimore, Maryland. At June 30, 1995, Loyola had approximately $2.6 billion in
total assets, $1.5 billion in total deposits, and $175.7 million in total
stockholders' equity. Loyola serves customers through a network of 35 banking
centers and 17 automated teller machines spread across the Baltimore-Washington
corridor and on Maryland's Eastern Shore. Lending facilities are located in
south central Pennsylvania, central Delaware, eastern South Carolina, southern
Florida, Alabama and Virginia. Loyola F.S.B. is a financial intermediary which
accepts deposits from the general public and invests such deposits, together
with other borrowings, primarily in real estate loans secured by liens on
residential and other real property and in consumer and other loans. Loyola,
through subsidiaries, also engages in investment counseling and securities
brokerage activities, develops real estate and provides real estate appraisals
and insurance brokerage services.
The executive offices of Loyola are located at 1300 North Charles Street,
Baltimore, Maryland 21201-5705. See "Business of Loyola."
THE MERGER
Pursuant to the Agreement, at the Effective Time (as defined herein) of the
Merger, Loyola will merge into Crestar in accordance with the Plan of Merger
whereby the separate existence of Loyola will cease. At the Effective Time of
the Merger, each outstanding share of Loyola Common Stock (other than shares
held directly by Crestar, excluding shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
represent the right to receive a number of shares of Crestar Common Stock and an
identical number of Rights, determined by the Exchange Ratio, subject to
adjustment as set forth in the Agreement. Cash will be paid in lieu of
fractional shares of Crestar Common Stock. At the Effective Time of the Merger
each share of Loyola Common Stock held by Crestar, excluding shares held in a
fiduciary capacity or in satisfaction of a debt previously
2
<PAGE>
contracted, shall be canceled, retired and cease to exist, and no exchange or
payment shall be made with respect thereto. Crestar does not directly hold any
shares of Loyola Common Stock.
THE EXCHANGE RATIO
The number of shares of Crestar Common Stock and Rights to be delivered for
each share of Loyola Common Stock will be determined by the average closing
price of Crestar Common Stock as reported on the NYSE for each of the ten
trading days ending on the tenth day prior to the Closing Date. The exchange
ratio ("Exchange Ratio") shall be calculated as follows: (i) if the Average
Closing Price is between $43.478 and $46.375, the Exchange Ratio shall be 0.690;
(ii) if the Average Closing Price is greater than $46.375, the Exchange Ratio
shall be the quotient of (a) $32.00 divided by (b) the Average Closing Price,
rounded to the nearest one-one thousandth of a share, provided that the Exchange
Ratio shall not be less than 0.640; and (iii) if the Average Closing Price is
less than $43.478, the Exchange Ratio shall be the quotient of (A) $30.00
divided by (B) the Average Closing Price, rounded to the nearest one-one
thousandth of a share, provided that the Exchange Ratio shall not be greater
than 0.750, subject to possible adjustment as set forth in the Agreement. See
"The Merger -- Termination" below. The Exchange Ratio would be appropriately
adjusted to reflect any consolidation, split-up, other subdivisions or
combinations of Crestar Common Stock, any dividend payable in Crestar Common
Stock, or any capital reorganization involving the reclassification of Crestar
Common Stock subsequent to the date of the Agreement. Loyola may terminate the
Agreement at any time during the five-day period prior to the fifth day prior to
the Closing Date, if the Average Closing Price is less than $40.00; provided,
however, that Crestar shall have the option of preventing termination on such
ground by increasing the consideration to be received by holders of Loyola
Common Stock by adjusting the Exchange Ratio to a number equal to the quotient,
the numerator of which is the product of $40.00 times the Exchange Ratio then in
effect and the denominator of which is the Average Closing Price. See "The
Merger -- Determination of Exchange Ratio and Exchange for Crestar Common
Stock."
At the Effective Time of the Merger, each outstanding and unexercised
option to purchase Loyola Common Stock (the "Loyola Options"), other than the
option held by Crestar as described under "Summary Stock Option Agreement,"
shall be converted as to each whole share subject to such Loyola Option into an
option (each, an "Exchange Option") to purchase such number of shares of Crestar
Common Stock and Rights at an exercise price determined as follows: (i) the
number of shares of Crestar Common Stock to be subject to the Exchange Option
shall be equal to the product of (A) the number of shares of Loyola Common Stock
subject to the Loyola Option multiplied by (B) the Exchange Ratio, the product
being rounded, if necessary, up or down, to the nearest whole share; and (ii)
the per share exercise price under the Exchange Option shall be equal to (A) the
per share exercise price under the Loyola Option divided by (B) the Exchange
Ratio, with any fractional cent rounded to the nearest whole cent. The Exchange
Option shall otherwise have the same duration and other terms as the Loyola
Option. Adjustments to any Loyola Options which are "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
shall be effected in a manner consistent with Section 424(a) of the Code.
STOCKHOLDER MEETING
The Loyola Stockholder Meeting will be held on October 17, 1995 at 2:00
p.m., at The University of Baltimore, Langsdale Auditorium, 1420 Maryland Avenue
at Oliver Street, Baltimore, Maryland, for the purpose of considering and voting
upon (i) a proposal to approve the Agreement and related Plan of Merger and (ii)
such other business as may properly come before the meeting or any adjournments
or postponements thereof.
VOTE REQUIRED; RECORD DATE
Only Loyola stockholders of record at the close of business on August 3,
1995 (the "Record Date") will be entitled to notice of and to vote at the Loyola
Stockholder Meeting or any adjournments or postponements thereof. Each holder of
shares of Loyola Common Stock on the Record Date is entitled to cast one vote
per share, in person or by properly executed proxy, on any matter that may
properly come before the Loyola Stockholder Meeting. The presence, in person or
by properly executed proxy, of the holders of a majority of the shares of Loyola
Common Stock outstanding on the Record Date is necessary to constitute a quorum
at the Loyola Stockholder Meeting.
The affirmative vote of the holders of a majority of the shares outstanding
on such date is required to approve the Merger. Under the rules of the New York
Stock Exchange, the proposal to adopt the Agreement is considered a "non-
discretionary item" whereby brokerage firms may not vote in their discretion on
behalf of their clients if such clients have not furnished voting instructions.
Abstentions and such broker "non-votes"will be considered in determining the
presence of a quorum at the Loyola Stockholder Meeting but will not be counted
as a vote cast for a proposal. BECAUSE THE REQUIRED VOTE
3
<PAGE>
OF LOYOLA STOCKHOLDERS TO APPROVE THE MERGER IS BASED UPON THE TOTAL NUMBER OF
OUTSTANDING SHARES OF LOYOLA COMMON STOCK, THE FAILURE TO SUBMIT A PROXY CARD
(OR THE FAILURE TO VOTE IN PERSON AT THE LOYOLA STOCKHOLDER MEETING), THE
ABSTENTION FROM VOTING AND ANY BROKER NON-VOTE WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE MERGER. Cumulative voting is not permitted. As of the Record
Date, there were 8,112,300 shares of Loyola Common Stock entitled to be voted,
held by approximately 3,722 stockholders of record.
The directors of Loyola have agreed with Crestar to recommend the approval
of the Merger to the stockholders of Loyola, and the directors and executive
officers of Loyola have agreed to vote the shares of Loyola Common Stock
beneficially owned by them, and with respect to which they have the power to
vote, in favor of the Merger. At the Record Date, the directors and executive
officers of Loyola beneficially owned with power to vote 9.3% of the outstanding
shares of Loyola Common Stock, significantly less than the majority of shares
outstanding required to approve the Merger. See "Loyola Security Ownership of
Certain Beneficial Owners."
All shares of Loyola Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. If no instructions are
indicated, such shares of Loyola Common Stock will be voted to approve the
Merger.
Loyola does not know of any matters other than as described in the Notice
of the Special Meeting that are to be considered at the Special Meeting. If any
other matter or matters are properly presented for action at the Loyola
Stockholder Meeting, the persons named in the enclosed form of proxy and acting
thereunder will have the discretion to vote such matters in accordance with
their best judgment, unless such authorization is withheld. Any holder of Loyola
Common Stock giving a proxy may revoke it at any time before it is exercised by:
(i) filing written notice of revocation on or prior to the date of the Loyola
Stockholder Meeting with the secretary of Loyola (Linda A. Stadtler, Secretary,
Loyola Capital Corporation, 1300 North Charles Street, Baltimore, Maryland
21201-5705); (ii) submitting a duly executed proxy bearing a later date; or
(iii) appearing at the Loyola Stockholder Meeting and notifying the Secretary of
his or her intention to vote in person; however, attendance at the Loyola
Stockholder Meeting will not in and of itself have the effect of revoking the
proxy. Proxies solicited by this Proxy Statement/Prospectus may be exercised
only at the Loyola Stockholder Meeting and any adjournments or postponements
thereof.
The Board of Directors of Crestar has approved the Merger. Approval of the
Merger by Crestar stockholders is not required by the Virginia Stock Corporation
Act (the "VSCA").
REASONS FOR THE MERGER; RECOMMENDATION OF THE LOYOLA BOARD
The Loyola Board believes that the terms of the Merger and the Agreement
are advisable and are fair to, and in the best interests of, Loyola and its
stockholders and has unanimously adopted the Agreement. In considering the terms
and conditions of the Merger, the Loyola Board considered, among other things:
the financial terms of the Merger; the fact that the Merger would qualify as a
tax-free reorganization under the Code; the financial condition and history of
performance of Crestar; the advantage of risk diversification associated with
ownership in an institution operating in a broader geographic area; the opinion
of its financial advisor, Alex. Brown & Sons Incorporated ("Alex. Brown"), that
the consideration to be received in the Merger is fair to the holders of Loyola
Common Stock from a financial point of view; and the operational and competitive
benefits of the Merger. The Loyola Board also considered that the historical
dividends per share and net income per share of the Crestar Common Stock to be
received by the holders of Loyola Common Stock, after giving effect to the
Exchange Ratio, represent a substantial increase in the historical dividends per
share and net income per share of Loyola Common Stock, although there can be no
assurance that pro forma amounts are indicative of future dividends or income
per share of Crestar. See "The Merger -- Background to the Merger," " -- Reasons
for the Merger; Recommendation of the Loyola Board," and " -- Opinion of
Financial Advisor."
THE LOYOLA BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF LOYOLA COMMON
STOCK VOTE TO APPROVE THE PROPOSED MERGER.
OPINION OF FINANCIAL ADVISOR
Loyola has received the opinion of Alex. Brown that the Exchange Ratio is
fair to the holders of Loyola Common Stock from a financial point of view. Alex.
Brown's opinion is directed only to the Exchange Ratio and does not constitute a
recommendation to any holders of Loyola Common Stock as to how such holders
should vote at the Loyola Stockholder Meeting or as to any other matter. Alex.
Brown will be paid a fee for its services at the closing of the Merger. For
additional information concerning Alex. Brown and its opinion, see "The
Merger -- Opinion of Financial Advisor." The opinion of such firm, which sets
forth the assumptions made, matters considered and limits on the review
undertaken, is attached as ANNEX III to this Proxy Statement/Prospectus.
4
<PAGE>
NO APPRAISAL RIGHTS
Holders of Loyola Common Stock entitled to vote on the Agreement and the
related Plan of Merger will not receive appraisal rights in accordance with
Title 3, Subtitle 2 of the Maryland General Corporation Law (the "MGCL") even if
they dissent from the Merger.
CONDITIONS TO CONSUMMATION
Consummation of the Merger would be accomplished by the statutory merger of
Loyola into Crestar. The Merger is contingent upon the approvals of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), the
Office of Thrift Supervision (the "OTS"), the State Corporation Commission of
Virginia (the "SCC") and Maryland Bank Commissioner (the "MBC"), which approvals
have been or will be applied for and are expected to be received. The Merger is
also subject to other usual conditions, including receipt by Crestar and Loyola
of the legal opinions of Piper & Marbury L.L.P., counsel to Loyola, and of
Hunton & Williams, counsel to Crestar, that the Merger will constitute a
tax-free reorganization under Section 368(a)(1)(A) of the Code and receipt by
Crestar of a letter from KPMG Peat Marwick LLP stating that the Merger may be
accounted for under the pooling-of-interests accounting method. See "The
Merger -- Conditions to Consummation of the Merger."
BUSINESS OF LOYOLA AND CRESTAR PENDING THE MERGER
Pursuant to the terms of the Agreement, Loyola has agreed not to take
certain actions relating to the operation of its business pending consummation
of the Merger, including the payment of cash dividends, other than the regular
quarterly cash dividend not exceeding $0.12 per share of Loyola Common Stock,
without the prior approval of Crestar, except as otherwise permitted by the
Agreement. Pursuant to the terms of the Agreement, Crestar has agreed that it
will conduct its operations only in the ordinary course of business consistent
with past practice and that it will not take certain actions. See "The
Merger -- Business of Loyola and Crestar Pending the Merger."
WAIVER AND AMENDMENT; TERMINATION
Loyola and Crestar may amend or modify the Agreement at any time, except
that, after the vote by the stockholders of Loyola, no such amendment or
modification may be made which reduces or changes the form and amount of
consideration payable pursuant to the Agreement without further stockholder
approval. If at any time before the Effective Time of the Merger, a material
term of the Agreement or Plan of Merger is amended, the Loyola Board will
postpone or reschedule the Loyola Stockholder Meeting (or, if necessary, call
additional stockholder meetings), to vote on the Agreement and Plan of Merger,
as amended, and resolicit proxies for use at such meeting. For these purposes,
each of the following will be deemed to constitute an amendment to a material
term of the Agreement or the Plan of Merger: (i) an amendment to the Exchange
Ratio adverse to Loyola stockholders; (ii) a change in the income tax treatment
of the Merger as a tax-free reorganization; or (iii) any other change that would
materially adversely affect the holders of Loyola Common Stock.
Loyola and Crestar each has the right, acting unilaterally, to terminate
the Agreement should the Merger not be consummated by March 31, 1996 and prior
to that time upon the occurrence of certain events. See "The Merger -- Waiver
and Amendment; Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Loyola's management and the Loyola Board have interests
in the Merger in addition to their interests as stockholders of Loyola
generally. These include, among other things, provisions in the Agreement
requiring Crestar to honor existing employment agreements, including their
severance provisions, the offering to all members of the Loyola Board of a
position on the Crestar Baltimore, Maryland local advisory board,
indemnification for Loyola directors and officers, and eligibility for certain
Crestar employee benefits. Payments that certain officers of Loyola may receive
as a result of (i) the termination of their employment and (ii) the exercise of
Loyola Options held by them, upon consummation of the Merger, will not differ
substantially from payments to be received if the Merger were not consummated.
The following table sets forth certain benefits that the executive officers of
Loyola may receive as a result of the Merger. For additional information
concerning the employment agreements, including the amount that could be paid
following a change of control of Loyola, see "The Merger -- Interests of Certain
Persons in the Merger." All Loyola Options are issued pursuant to plans approved
by the stockholders of Loyola.
5
<PAGE>
<TABLE>
<CAPTION>
EMPLOYMENT
AGREEMENT OPTION
NAME PAYMENT(a) VALUE(b)
<S> <C> <C>
Joseph W. Mosmiller............................... $1,600,000 $4,117,874
James C. Johnson.................................. 1,200,000 3,437,390
Thomas R. Marvel.................................. 607,000 2,193,270
James V. McAveney................................. 612,000 1,975,502
Charles C. Schmitt................................ 610,000 2,219,566
William A. Wycoff................................. 606,000 2,357,897
</TABLE>
(a) Aggregate payments which would be made under employment agreements assuming
the termination of employment under the change in control provisions of the
employment agreements.
(b) Calculated assuming conversion of Loyola Options pursuant to the Merger to
give effect to an Exchange Ratio of 0.640, and by multiplying (x) the number
of shares of Loyola Common Stock subject to the Loyola Option by (y) the
difference between the closing price of Loyola Common Stock of $32.375 per
share on August 16, 1995, and the exercise price of such Loyola Option.
RESALE OF CRESTAR COMMON STOCK
Shares of Crestar Common Stock received in the Merger will be freely
transferable by the holders thereof, except for those shares held by those
holders who may be deemed to be "affiliates" (generally including directors,
executive officers and ten percent or more stockholders) of Loyola or Crestar
under applicable federal securities laws. See "Resale of Crestar Common Stock."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Crestar and Loyola have received the opinions of Hunton & Williams, counsel
to Crestar, and Piper & Marbury L.L.P., counsel to Loyola, to the effect that
the Merger will qualify as a tax-free "reorganization" as defined in Section
368(a) of the Code with the result that Loyola stockholders will not recognize
gain or loss on the exchange of Loyola Common Stock for Crestar Common Stock
(including the associated Rights), except with respect to the receipt of cash by
Loyola stockholders in lieu of fractional shares. A condition to consummation of
the Merger is the receipt by Crestar and Loyola of opinions from Piper & Marbury
L.L.P., and from Hunton & Williams, as of the Effective Date of the Merger (as
defined below), as to the qualification of the Merger as a tax-free
reorganization and certain other federal income tax consequences of the Merger.
See "The Merger -- Certain Federal Income Tax Consequences."
EFFECTIVE TIME
The Merger shall become effective on the date and time specified in the
Articles of Merger for the Merger to be filed with the State Department of
Assessments and Taxation of Maryland and the SCC (the "Effective Date" and the
"Effective Time," respectively); provided that the Effective Time shall not be
earlier than December 28, 1995. The Effective Time of the Merger is expected to
occur in late December, 1995 or early January, 1996.
STOCK OPTION AGREEMENT
Crestar and Loyola have entered into a Stock Option Agreement, dated as of
April 27, 1995 (the "Option Agreement"), pursuant to which Loyola issued to
Crestar an option (the "Option") to purchase up to 1,613,442 shares of Loyola
Common Stock at a purchase price of $25.00 per share. The Option may be
exercised in whole or in part, at one or more closings, before the Option
Agreement is terminated, if a Purchase Event (as defined therein) shall have
occurred and be continuing, unless Crestar shall have breached in any material
respect any material covenant or representation contained in the Agreement and
such breach has not been cured. The Option Agreement provides that to the extent
that it shall have not been exercised, the Option shall terminate (i) on the
Effective Date of the Merger; (ii) upon the termination of the Agreement in
accordance with the provisions thereof (other than a termination resulting from
a willful breach by Loyola of certain specified covenants contained therein or,
following the occurrence of a Purchase Event (as defined therein), failure of
Loyola's stockholders to approve the Merger by the vote required under
applicable law); or (iii) 12 months after termination of the Agreement due to a
willful breach by Loyola of certain specified covenants contained therein or,
following the occurrence of a Purchase Event (as defined therein), failure of
Loyola's stockholders to approve the Merger by the vote required under
6
<PAGE>
applicable law. The Stock Option Agreement is attached hereto as ANNEX II. See
also "The Merger -- Stock Option Agreement."
MARKET PRICES PRIOR TO ANNOUNCEMENT OF THE MERGER
The following table discloses the price per share of Crestar Common Stock
and Loyola Common Stock based on the last reported sales prices per share of
Crestar Common Stock on the NYSE Composite Transactions Tape and of Loyola
Common Stock on The Nasdaq National Market on (i) March 24, 1995, one month
prior to the date the Loyola Board Meeting was held to consider the binding
letter agreement between Crestar and Loyola relating to the Merger dated April
27, 1995 (the "Binding Letter Agreement") and prior to an increase in the price
of Loyola Common Stock believed to be due to takeover rumors during the early
part of April, 1995, (ii) on April 27, 1995, the last day prior to the public
announcement of the execution of the Binding Letter Agreement, and (iii) on
August 25, 1995 the latest practicable date prior to the mailing of this Proxy
Statement/Prospectus. See "Price Range of Loyola Common Stock and Dividend
Policy" for information concerning recent market prices of the Loyola Common
Stock.
<TABLE>
<CAPTION>
EQUIVALENT
HISTORICAL PRO FORMA
CRESTAR LOYOLA LOYOLA(A)
<S> <C> <C> <C>
March 24, 1995...................................................... $42.125 $22.875 $29.993
April 27, 1995...................................................... 45.50 32.125 31.395
August 25, 1995..................................................... 53.875 33.25 34.480
</TABLE>
(a) Computed by multiplying the historical sale price of Crestar Common Stock by
an assumed Exchange Ratio of 0.712 for March 24, 1995, 0.690 for April 27,
1995 and 0.640 for August 25, 1995.
COMPARATIVE PER SHARE DATA
The following table presents historical and pro forma per share data for
Crestar, and historical and equivalent pro forma per share data for Loyola. The
pro forma combined per Crestar common share amounts give effect to an assumed
Exchange Ratio of 0.640 shares of Crestar Common Stock for each share of Loyola
Common Stock (based on the last sale price of Crestar Common Stock on August 25,
1995 of $53.875). The equivalent pro forma per Loyola common share amounts allow
comparison of historical information regarding one share of Loyola Common Stock
to the corresponding data regarding what one share of Loyola Common Stock will
equate to in the combined corporation; such amounts are computed by multiplying
the pro forma combined per Crestar common share amounts by an assumed Exchange
Ratio of 0.640. As discussed in "The Merger -- Determination of Exchange Ratio
and Exchange for Crestar Common Stock," the final Exchange Ratio will be
determined based on the Average Closing Price for Crestar Common Stock. The
following table is based on the assumption that all issued and outstanding
shares of Loyola Common Stock are converted into shares of Crestar Common Stock.
The Merger is reflected under the pooling-of-interests method of accounting and
pro forma information is derived accordingly.
The per share data included in the following table should be read in
conjunction with the consolidated financial statements of Crestar and the
consolidated financial statements of Loyola incorporated by reference herein and
the notes accompanying all such financial statements. The data presented below
are not necessarily indicative of the results of operations which would have
been obtained if the Merger had been consummated in the past or which may be
obtainable in the future.
7
<PAGE>
COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Book Value Per Share at Period End(1):
Crestar historical............................................. $32.57 $29.29 $30.16 $28.32 $25.24
Loyola historical.............................................. 21.67 20.15 20.90 19.50 18.22
Pro forma combined per Crestar common share(2):
Based on a 0.640 exchange ratio............................. 32.11 29.55 30.47 28.58 25.65
Based on a 0.750 exchange ratio............................. 31.45 28.95 29.84 28.00 25.10
Equivalent pro forma per Loyola common share:
Based on a 0.640 exchange ratio............................. 20.55 18.91 19.50 18.29 16.41
Based on a 0.750 exchange ratio............................. 23.59 21.72 22.38 21.00 18.83
Cash Dividends Declared Per Common Share(1):
Crestar historical............................................. $ .85 $ .73 $ 1.53 $ 1.14 $ .80
Loyola historical.............................................. .24 .20 .40 .24 .22
Pro forma combined per Crestar common share(2):
Based on a 0.640 exchange ratio............................. .85 .73 1.53 1.14 .80
Based on a 0.750 exchange ratio............................. .85 .73 1.53 1.14 .80
Equivalent pro forma per Loyola common share:
Based on a 0.640 exchange ratio............................. .54 .47 .98 .73 .51
Based on a 0.750 exchange ratio............................. .64 .55 1.15 .86 .60
Net Income Per Share:
Crestar historical............................................. $ 2.44 $ 2.19 $ 4.47 $ 3.68 $ 2.32
Loyola historical.............................................. .97 .83 1.74 1.42 1.30
Pro forma combined per Crestar common share(2):
Based on a 0.640 exchange ratio............................. 2.32 2.08 4.24 3.49 2.34
Based on a 0.750 exchange ratio............................. 2.27 2.03 4.15 3.42 2.28
Equivalent pro forma per Loyola common share:
Based on a 0.640 exchange ratio............................. 1.49 1.33 2.72 2.24 1.50
Based on a 0.750 exchange ratio............................. 1.70 1.53 3.11 2.56 1.71
</TABLE>
(1) Pro forma combined book value per share and cash dividends declared per
share for Crestar and Loyola do not reflect exercise of options to acquire
shares of Loyola Common Stock. Options to acquire 1,076,717 Loyola common
shares at an average price per share of $8.17 were outstanding at June 30,
1995. Assumed exercise of these options does not have a significant impact
upon the combined stockholders' equity of Crestar and Loyola or the pro
forma combined cash dividends declared per share.
(2) Pro forma combined book value per Crestar common share at June 30, 1995
represents combined common stockholders' equity amounts, less amounts
representing material, non-recurring adjustments expected to be recorded in
conjunction with the Merger, divided by pro forma combined period-end common
shares outstanding. Certain material, non-recurring adjustments of
approximately $25 million, on an after-tax basis, are expected to be
recorded in conjunction with the Merger. These adjustments include
approximately $11 million for the tax liability arising from the recapture
of tax bad debt reserves at December 31, 1987 of Loyola (which becomes
payable upon the merger of Loyola F.S.B. into a bank), approximately $5
million for the settlement of obligations under existing employment
contracts, severance pay for involuntary terminations, early retirement and
related employee benefits; approximately $3 million associated with branch
closings; and approximately $6 million of expenses related to effecting the
Merger.
Additional non-recurring adjustments include an increase in the allowance
for loan losses of approximately $2 million and an increase in the reserve
for foreclosed properties of approximately $1 million. Such adjustments will
be taken to recognize Crestar's accelerated disposition strategy with
respect to specific loans and foreclosed properties. The impact of each of
the adjustments described above has been reflected in the Pro Forma
Condensed Statement of Financial Condition as of June 30, 1995. The loan
loss provision and write-down of foreclosed properties ultimately recorded
will be based on the facts, circumstances and external events operative at
the time, and may be more or less than the amounts reflected in the pro
forma information.
Pro forma combined book value per Crestar common share at June 30, 1994 and
December 31, 1994 and 1993 represents combined common stockholder's equity
amounts, divided by pro forma combined period-end common shares outstanding.
(3) Pro forma combined dividends declared per Crestar common share represent
historical dividends per share declared by Crestar.
8
<PAGE>
(4) Pro forma combined net income per Crestar common share represents combined
net income available to common stockholders, divided by pro forma combined
average primary common shares outstanding.
SELECTED FINANCIAL DATA
The following consolidated financial data of Crestar and consolidated
financial data of Loyola is qualified in its entirety by the information
included in the documents incorporated in this Proxy Statement/Prospectus by
reference. Interim financial results for Crestar, in the opinion of Crestar
management, reflect all adjustments necessary for a fair presentation of the
results of operations, including adjustments related to completed acquisitions.
All such adjustments are of a normal nature. Interim financial results for
Loyola, in the opinion of Loyola management, reflect all adjustments necessary
for a fair presentation of the results of operations. The results of operations
for an interim period are not necessarily indicative of results that may be
expected for a full year or any other interim period. The Merger is reflected
under the pooling-of-interests method of accounting and pro forma information is
derived accordingly. See "Incorporation of Certain Information by Reference."
SELECTED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
EARNINGS: (1)
Net interest income
Crestar................................ $ 304.8 $ 285.6 $ 581.8 $ 527.0 $ 482.1 $ 421.1 $ 414.2
Loyola................................. 35.5 33.1 67.3 61.9 66.1 62.3 49.1
Crestar and Loyola pro forma........... 340.3 318.7 649.2 588.9 548.2 483.5 463.3
Provision for loan losses
Crestar................................ 23.6 18.9 29.7 48.8 99.2 209.5 131.1
Loyola................................. 0.4 0.4 0.7 3.1 7.1 11.4 11.5
Crestar and Loyola pro forma............. 24.0 19.2 30.3 51.9 106.3 220.9 142.5
Net interest income after provision for
loan losses
Crestar................................ 281.2 266.7 552.1 478.2 382.9 211.6 283.1
Loyola................................. 35.0 32.8 66.7 58.8 59.0 50.9 37.7
Crestar and Loyola pro forma........... 316.2 299.5 618.8 537.1 441.9 262.5 320.8
Noninterest income
Crestar................................ 134.2 128.1 254.3 248.3 218.4 233.8 166.8
Loyola................................. 5.6 6.4 12.7 11.5 15.5 14.2 17.7
Crestar and Loyola pro forma........... 139.8 134.5 266.9 259.8 233.9 248.1 184.5
Noninterest expense
Crestar................................ 275.5 271.3 551.7 523.0 501.8 405.6 378.8
Loyola................................. 26.4 27.3 54.3 49.9 55.6 46.5 41.1
Crestar and Loyola pro forma........... 301.9 298.6 606.0 572.9 557.4 452.1 420.0
Income before income taxes
Crestar................................ 139.9 123.6 254.7 203.5 99.5 39.8 71.1
Loyola................................. 14.1 11.8 25.1 20.4 18.9 18.7 14.2
Crestar and Loyola pro forma........... 154.1 135.4 279.8 223.9 118.4 58.5 85.3
Income tax expense
Crestar................................ 47.0 40.5 85.6 63.0 19.7 6.1 9.9
Loyola................................. 5.7 4.7 10.0 8.2 7.5 8.0 7.2
Crestar and Loyola pro forma........... 52.7 45.2 95.6 71.1 27.1 14.1 17.1
Net income
Crestar................................ 93.0 83.1 169.1 140.5 79.8 33.8 61.1
Loyola (2)............................. 8.4 7.1 15.0 12.3 11.4 10.6 7.0
Crestar and Loyola pro forma........... 101.4 90.2 184.1 152.8 91.2 44.4 68.2
Net income applicable to common shares
Crestar................................ 93.0 83.1 169.1 138.3 77.3 31.2 58.5
Loyola (2)............................. 8.4 7.1 15.0 12.3 11.4 10.6 7.0
Crestar and Loyola pro forma........... 101.4 90.2 184.1 150.5 88.7 41.8 65.5
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA:
Net income (primary)
Crestar................................ $ 2.44 $ 2.19 $ 4.47 $ 3.68 $ 2.32 $ 0.98 $ 1.87
Loyola (2), (3)........................ 0.97 0.83 1.74 1.42 1.30 1.18 0.75
Crestar and Loyola pro forma (4)....... 2.32 2.08 4.24 3.49 2.28 1.11 1.76
Net income (fully diluted)
Crestar................................ 2.43 2.19 4.47 3.67 2.32 0.98 1.87
Loyola (2), (3)........................ 0.97 0.82 1.73 1.42 1.29 1.18 0.75
Crestar and Loyola pro forma (4)....... 2.32 2.08 4.24 3.49 2.28 1.11 1.76
Dividends declared
Crestar (5)............................ 0.85 0.73 1.53 1.14 0.80 0.86 1.32
Loyola (3)............................. 0.24 0.20 0.40 0.24 0.22 0.00 0.00
Crestar and Loyola pro forma (6)....... 0.85 0.73 1.53 1.14 0.80 0.86 1.32
Book value
Crestar................................ 32.57 29.29 30.16 28.32 25.24 23.23 23.15
Loyola (3)............................. 21.67 20.15 20.90 19.50 18.22 16.59 14.74
Crestar and Loyola pro forma (4),
(7)................................. 32.11 29.55 30.47 28.58 25.65 23.62 23.13
Average primary shares (thousands)
Crestar................................ 38,134 37,901 37,864 37,587 33,286 31,921 31,218
Loyola (3)............................. 8,714 8.626 8,646 8,620 8,776 9,002 9,432
Crestar and Loyola pro forma (4)....... 43,711 43,421 43,398 43,103 38.903 37,682 37,254
Average fully diluted shares (thousands)
Crestar................................ 38,198 37,904 37,867 37,665 33,369 31,946 31,238
Loyola (3)............................. 8,745 8,654 8,660 8,630 8,811 9,040 9,433
Crestar and Loyola pro forma (4)....... 43,795 43,442 43,409 43,189 39,008 37,732 37,275
SELECTED PERIOD-END BALANCES:
Total assets
Crestar................................ $14,631.9 $14,325.2 $14,010.0 $13,286.9 $12,674.7 $11,828.3 $11,881.2
Loyola................................. 2,579.7 2,235.9 2,472.8 2,367.2 1,785.9 2,002.9 2,078.3
Crestar and Loyola pro forma (7)....... 17,208.6 16,561.1 16,482.9 15,654.1 14,460.6 13,831.2 13,959.5
Loans (net of unearned income)
Crestar................................ 9,796.1 8,588.8 9,285.6 7,287.1 6,581.7 7,065.8 7,680.2
Loyola................................. 2,067.9 1,695.3 1,966.0 1,605.8 1,298.4 1,614.0 1,773.5
Crestar and Loyola pro forma........... 11,864.1 10,284.1 11,251.6 8,893.0 7,880.2 8,679.8 9,453.8
Allowance for loan losses
Crestar................................ 222.9 226.7 219.2 211.0 205.0 210.0 149.4
Loyola................................. 14.8 14.1 13.7 14.6 15.2 14.3 14.0
Crestar and Loyola pro forma (7)....... 239.8 240.8 232.9 225.6 220.2 224.3 163.4
Nonperforming assets (8)
Crestar................................ 83.1 102.4 94.9 96.8 220.8 350.0 237.2
Loyola................................. 15.4 25.9 21.3 31.9 40.8 49.5 34.7
Crestar and Loyola pro forma (7) 97.6 128.3 116.2 128.7 261.6 399.5 271.9
Total deposits
Crestar................................ 11,116.7 11,396.5 10,913.2 10,165.8 9,581.5 8,889.6 8,506.1
Loyola................................. 1,518.3 1,423.8 1,469.9 1,425.5 1,466.5 1,615.7 1,566.2
Crestar and Loyola pro forma........... 12,634.9 12,820.3 12,383.1 11,591.2 11,048.0 10,505.3 10,072.2
Long-term debt
Crestar................................ 384.6 222.4 367.0 191.2 210.4 161.9 168.4
Loyola................................. 321.1 341.5 348.2 412.9 124.0 121.5 11.1
Crestar and Loyola pro forma........... 705.7 564.0 715.1 604.0 334.4 283.4 179.6
Common shareholders' equity
Crestar................................ 1,229.0 1,104.7 1,126.1 1,062.5 913.9 749.9 726.3
Loyola................................. 175.7 162.7 169.1 157.0 149.1 140.6 133.7
Crestar and Loyola pro forma (7) 1,378.2 1,267.3 1,295.2 1,219.4 1,063.0 890.5 860.0
Total shareholders' equity
Crestar................................ 1,229.0 1,104.7 1,126.1 1,062.5 958.9 794.9 771.3
Loyola................................. 175.7 162.7 169.1 157.0 149.1 140.6 133.7
Crestar and Loyola pro forma (7) 1,378.2 1,267.3 1,295.2 1,219.4 1,108.0 935.5 905.0
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES:
Total assets
Crestar................................ $13,935.6 $13,487.9 $13,632.0 $12,585.4 $11,920.4 $11,440.7 $11,673.7
Loyola................................. 2,497.9 2,277.4 2,321.1 1,979.9 1,877.4 2,083.4 2,136.3
Crestar and Loyola pro forma........... 16,433.4 15,765.3 15,953.1 14,565.3 13,797.8 13,524.1 13,810.0
Loans (net of unearned income)
Crestar................................ 9,583.6 7,908.7 8,305.3 6,836.5 6,725.3 7,275.3 7,767.2
Loyola................................. 1,996.7 1,565.1 1,701.5 1,396.6 1,386.8 1,629.1 1,732.2
Crestar and Loyola pro forma........... 11,580.3 9,473.8 10,006.8 8,233.1 8,112.1 8,904.4 9,499.4
Total deposits
Crestar................................ 10,946.3 10,765.2 10,876.2 9,682.8 9,540.6 8,596.9 8,296.8
Loyola................................. 1,530.8 1,451.8 1,463.2 1,470.0 1,576.3 1,649.2 1,563.3
Crestar and Loyola pro forma........... 12,477.1 12,217.0 12,339.4 11,152.8 11,116.9 10,246.1 9,860.1
Long-term debt
Crestar................................ 368.1 203.4 234.9 215.4 185.9 162.8 170.1
Loyola................................. 332.8 371.9 353.4 248.2 121.9 97.9 3.0
Crestar and Loyola pro forma........... 709.4 583.7 588.3 463.6 307.8 260.7 173.1
Common shareholders' equity
Crestar................................ 1,188.6 1,085.4 1,099.2 994.8 794.6 744.1 731.7
Loyola................................. 172.4 159.5 162.6 152.6 146.4 137.7 132.6
Crestar and Loyola pro forma........... 1,361.0 1,244.9 1,261.8 1,147.4 941.0 881.8 864.3
Total shareholders' equity
Crestar................................ 1,188.6 1,085.4 1,099.2 1,038.7 839.6 789.1 776.7
Loyola................................. 172.4 159.5 162.6 152.6 146.4 137.7 132.6
Crestar and Loyola pro forma........... 1,361.0 1,244.9 1,261.8 1,191.3 986.0 926.8 909.3
RATIOS:
Return on average assets
Crestar................................ 1.33% 1.23% 1.24% 1.12% 0.67% 0.30% 0.52%
Loyola................................. 0.68 0.63 0.65 0.62 0.61 0.51 0.33
Crestar and Loyola pro forma........... 1.23 1.14 1.15 1.03 0.64 0.31 0.47
Return on average shareholders' equity
Crestar................................ 15.64 15.31 15.38 13.53 9.50 4.28 7.87
Loyola................................. 9.80 8.94 9.25 8.04 7.79 7.72 5.31
Crestar and Loyola pro forma........... 14.90 14.49 14.59 12.64 9.00 4.51 7.21
Return on average common shareholders'
equity
Crestar................................ 15.64 15.31 15.38 13.90 9.73 4.19 7.99
Loyola................................. 9.80 8.94 9.25 8.04 7.79 7.72 5.31
Crestar and Loyola pro forma........... 14.90 14.49 14.59 13.12 9.43 4.74 7.58
Net interest margin (9)
Crestar................................ 4.94 4.77 4.83 4.78 4.67 4.29 4.22
Loyola................................. 2.92 3.00 3.03 3.28 3.74 3.13 2.41
Crestar and Loyola pro forma........... 4.64 4.52 4.55 4.57 4.54 4.11 3.93
Nonperforming assets to loans and
foreclosed properties at period end
Crestar................................ 0.85 1.19 1.02 1.32 3.32 4.90 3.08
Loyola................................. 0.74 1.51 1.08 1.96 3.08 3.00 1.94
Crestar and Loyola pro forma (7) 0.82 1.24 1.03 1.44 3.28 4.54 2.87
Net charge-offs to average loans
Crestar................................ 0.53 0.48 0.45 0.95 1.69 2.07 0.99
Loyola................................. (0.07) 0.11 0.09 0.26 0.45 0.68 0.30
Crestar and Loyola pro forma........... 0.43 0.42 0.39 0.83 1.48 1.82 0.86
Allowance for loan losses to loans at
period end
Crestar................................ 2.28 2.64 2.64 2.89 3.11 2.97 1.94
Loyola................................. 0.72 0.83 0.70 0.91 1.17 0.89 0.79
Crestar and Loyola pro forma (7) 2.02 2.34 2.07 2.54 2.79 2.58 1.73
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for loan losses to
nonperforming loans at period end
Crestar................................ 321% 293% 287% 264% 144% 78% 68%
Loyola................................. 187 129 150 126 124 112 86
Crestar and Loyola pro forma (7) 310 273 273 247 143 79 69
Allowance for loan losses to
nonperforming assets at period end
Crestar................................ 268 221 231 218 93 60 63
Loyola................................. 96 54 64 46 37 29 40
Crestar and Loyola pro forma (7) 246 188 200 175 84 56 60
Total shareholders' equity to total
assets at period end
Crestar................................ 8.40 7.71 8.04 8.00 7.57 6.72 6.49
Loyola................................. 6.81 7.27 6.84 6.63 8.35 7.02 6.43
Crestar and Loyola pro forma (7) 8.01 7.65 7.86 7.79 7.66 6.76 6.48
CAPITAL RATIOS AT PERIOD END:
Tier 1 risk-adjusted capital
Crestar................................ 8.9 9.3 9.4 10.5 10.4 7.9 7.5
Loyola................................. 9.5 10.3 9.5 9.6 10.8 8.2 7.3
Crestar and Loyola pro forma (7)....... 9.0 9.4 9.4 10.4 10.4 8.0 7.5
Total risk-adjusted capital
Crestar................................ 12.6 12.0 13.3 13.5 13.7 10.6 10.1
Loyola................................. 10.3 11.0 10.2 10.3 11.8 8.8 8.0
Crestar and Loyola pro forma (7)....... 12.3 11.9 13.0 13.1 13.5 10.4 10.0
Tier 1 leverage
Crestar................................ 7.8 7.5 7.9 7.9 7.7 6.7 6.2
Loyola................................. 6.0 6.4 5.9 5.7 7.4 6.1 5.5
Crestar and Loyola pro forma (7)....... 7.5 7.3 7.6 7.5 7.6 6.6 6.2
</TABLE>
NOTES TO SELECTED FINANCIAL DATA
(UNAUDITED)
(1) Amounts may not add due to rounding.
(2) Net income and primary and fully diluted net income per share for the
year ended December 31, 1992 does not include the cumulative effect of
a change in accounting principle resulting from the adoption by Loyola,
effective January 1, 1992, of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
cumulative effect of adopting SFAS 109 on Loyola's net income and
primary and fully diluted net income per share was an increase of $2.8
million and $0.31 and $0.31, respectively, for the year ended December
31, 1992.
(3) Per share data for Loyola has been retroactively adjusted to reflect a
two-for-one stock split issued in September 1992.
(4) Based on an Exchange Ratio of 0.640 for conversion of Loyola Common
Stock into Crestar Common Stock. See "Summary -- The Exchange Ratio"
and "The Merger -- Determination of Exchange Ratio and Exchange for
Crestar Common Stock" for additional discussion regarding calculation
of the Exchange Ratio.
(5) In April 1991, Crestar announced that, thereafter, its dividend
declaration would be made in the month following the end of each
quarter instead of in the last month of each quarter. As a result, 1991
included only three dividend declarations; however, four dividend
payments were made.
(6) Pro forma dividends declared represent historical dividends per share
declared by Crestar.
(7) Ratios derived from the Pro Forma Condensed Statement of Financial
Condition as of June 30, 1995 reflect certain material, non-recurring
adjustments of approximately $25 million, on an after-tax basis,
expected to be recorded in conjunction with the Merger. These
adjustments include approximately $11 million for the tax liability
associated with the tax bad debt reserves of Loyola (which becomes
payable upon the merger of Loyola F.S.B. into a bank), approximately $5
million for the settlement of obligations under existing employment
contracts, severance pay for
12
<PAGE>
involuntary terminations, early retirement and related employee
benefits; approximately $3 million associated with branch closings; and
approximately $6 million of expenses related to effecting the Merger.
Additional non-recurring adjustments include an increase in the
allowance for loan losses of approximately $2 million and an increase
in the reserve for foreclosed properties of approximately $1 million.
Such adjustments will be taken to recognize Crestar's accelerated
disposition strategy with respect to specific loans and foreclosed
properties. The impact of each of the adjustments described above has
been reflected in the Pro Forma Condensed Statement of Financial
Condition as of June 30, 1995. The loan loss provision and write-down
of foreclosed properties ultimately recorded will be based on the
facts, circumstances and external events operative at the time, and may
be more or less than the amounts reflected in the pro forma financial
information as of June 30, 1995.
(8) Nonperforming assets include nonaccrual loans, restructured loans and
foreclosed properties.
(9) Net interest margin is calculated on a taxable equivalent basis, using
a tax rate of 35% for 1995, 1994 and 1993 and 34% for 1992, 1991 and
1990.
SELECTED FINANCIAL DATA -- CRESTAR, LOYOLA AND CHASE MD
The following consolidated financial data presents on a historical basis
selected unaudited financial data for Crestar and Loyola, and unaudited pro
forma amounts for both (a) Crestar and Loyola combined, and (b) Crestar, Loyola
and Chase MD combined, as of June 30, 1995. The consolidated financial data of
Crestar and the consolidated financial data of Loyola is qualified in its
entirety by the information included in the documents incorporated in this Proxy
Statement/Prospectus by reference. The Merger is reflected under the
pooling-of-interests method of accounting and the pro forma selected financial
data is derived accordingly. See "Incorporation of Certain Information by
Reference."
The Chase MD purchase agreement will involve the purchase of certain of the
assets and the assumption of specified liabilities of Chase MD by Crestar in a
transaction expected to be completed during the fourth quarter of 1995.
Additional assets and liabilities of Chase MD will be excluded from the purchase
transaction, and therefore have been excluded from the pro forma data for Chase
MD presented in the following table under the caption "Crestar, Loyola and Chase
MD pro forma". Such pro forma data has been based on the pro forma statement of
financial condition of Crestar, Loyola and Chase MD combined, including
adjustments related to the purchase of selected assets and liabilities of Chase
MD by Crestar. See "Pro Forma Condensed Financial Information -- Crestar, Loyola
and Chase MD."
The historical statements of operations for Chase MD are not material in
comparison to the historical statements of operations for Crestar, or in
comparison to the pro forma statements of operations for Crestar and Loyola
combined.
SELECTED FINANCIAL DATA -- CRESTAR, LOYOLA AND CHASE MD
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1995
<S> <C>
(DOLLARS IN MILLIONS)
SELECTED PERIOD-END BALANCES:
Total assets
Crestar............................................................. $14,631.9
Loyola.............................................................. 2,579.7
Crestar and Loyola pro forma (1).................................... 17,208.6
Crestar, Loyola and Chase MD pro forma (1).......................... 17,663.3
Loans (net of unearned income)
Crestar............................................................. 9,796.1
Loyola.............................................................. 2,067.9
Crestar and Loyola pro forma........................................ 11,864.1
Crestar, Loyola and Chase MD pro forma.............................. 12,125.2
Allowance for loan losses
Crestar............................................................. 222.9
Loyola.............................................................. 14.8
Crestar and Loyola pro forma (1).................................... 239.8
Crestar, Loyola and Chase MD pro forma (1).......................... 242.8
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1995
(DOLLARS IN MILLIONS)
<S> <C>
Nonperforming assets (2)
Crestar............................................................. $ 83.1
Loyola.............................................................. 15.4
Crestar and Loyola pro forma (1).................................... 97.6
Crestar, Loyola and Chase MD pro forma (1).......................... 97.6
Total deposits
Crestar............................................................. 11,116.7
Loyola.............................................................. 1,518.3
Crestar and Loyola pro forma........................................ 12,634.9
Crestar, Loyola and Chase MD pro forma.............................. 13,068.7
Long-term debt
Crestar............................................................. 384.6
Loyola.............................................................. 321.1
Crestar and Loyola pro forma........................................ 705.7
Crestar, Loyola and Chase MD pro forma.............................. 705.7
Common shareholders' equity
Crestar............................................................. 1,229.0
Loyola.............................................................. 175.7
Crestar and Loyola pro forma (1).................................... 1,378.2
Crestar, Loyola and Chase MD pro forma (1).......................... 1,378.2
Total shareholders' equity
Crestar............................................................. 1,229.0
Loyola.............................................................. 175.7
Crestar and Loyola pro forma (1).................................... 1,378.2
Crestar, Loyola and Chase MD pro forma (1).......................... 1,378.2
SELECTED RATIOS:
Nonperforming assets to loans and foreclosed properties at period end
Crestar............................................................. 0.85%
Loyola.............................................................. 0.74
Crestar and Loyola pro forma (1).................................... 0.82
Crestar, Loyola and Chase MD pro forma (1).......................... 0.80
Allowance for loan losses to loans at period end
Crestar............................................................. 2.28
Loyola.............................................................. 0.72
Crestar and Loyola pro forma (1).................................... 2.02
Crestar, Loyola and Chase MD pro forma (1).......................... 2.00
Allowance for loan losses to nonperforming loans at period end
Crestar............................................................. 321
Loyola.............................................................. 187
Crestar and Loyola pro forma (1).................................... 310
Crestar, Loyola and Chase MD pro forma (1).......................... 314
Allowance for loan losses to nonperforming assets at period end
Crestar............................................................. 268
Loyola.............................................................. 96
Crestar and Loyola pro forma (1).................................... 246
Crestar, Loyola and Chase MD pro forma (1).......................... 249
Total shareholders' equity to total assets at period end
Crestar............................................................. 8.40
Loyola.............................................................. 6.81
Crestar and Loyola pro forma (1).................................... 8.01
Crestar, Loyola and Chase MD pro forma (1).......................... 7.80
Capital ratios at period end:
Tier 1 risk-adjusted capital
Crestar............................................................. 8.9
Loyola.............................................................. 9.5
Crestar and Loyola pro forma (1).................................... 9.0
Crestar, Loyola and Chase MD pro forma (1).......................... 8.6
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1995
(DOLLARS IN MILLIONS)
<S> <C>
Total risk-adjusted capital
Crestar............................................................. 12.6%
Loyola.............................................................. 10.3
Crestar and Loyola pro forma (1).................................... 12.3
Crestar, Loyola and Chase MD pro forma (1).......................... 12.1
Tier 1 leverage
Crestar............................................................. 7.8
Loyola.............................................................. 6.0
Crestar and Loyola pro forma (1).................................... 7.5
Crestar, Loyola and Chase MD pro forma (1).......................... 7.3
</TABLE>
NOTES TO SELECTED FINANCIAL DATA -- CRESTAR, LOYOLA AND CHASE MD
(UNAUDITED)
(1) Ratios derived from the Pro Forma Condensed Statement of Financial
Condition as of June 30, 1995 reflect certain material, non-recurring
adjustments of approximately $25 million, on an after-tax basis,
expected to be recorded in conjunction with the Merger with Loyola.
These adjustments include approximately $11 million for the tax
liability associated with the tax bad debt reserves of Loyola (which
becomes payable upon the merger of Loyola F.S.B. into a bank),
approximately $5 million for the settlement of obligations under
existing employment contracts, severance pay for involuntary
terminations, early retirement and related employee benefits;
approximately $3 million associated with branch closings; and
approximately $6 million of expenses related to effecting the Merger
with Loyola.
Additional non-recurring adjustments relating to the Merger with Loyola
include an increase in the allowance for loan losses of approximately
$2 million and an increase in the reserve for foreclosed properties of
approximately $1 million. Such adjustments will be taken to recognize
Crestar's accelerated disposition strategy with respect to specific
loans and foreclosed properties. The impact of each of the adjustments
described above has been reflected in the Pro Forma Condensed Statement
of Financial Condition as of June 30, 1995. The loan loss provision and
write-down of foreclosed properties ultimately recorded will be based
on the facts, circumstances and external events operative at the time,
and may be more or less than the amounts reflected in the pro forma
financial information as of June 30, 1995.
(2) Nonperforming assets include nonaccrual loans, restructured loans and
foreclosed properties.
15
<PAGE>
GENERAL INFORMATION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Loyola Board, to be voted at the Loyola
Stockholder Meeting to be held at The University of Baltimore, Langsdale
Auditorium, 1420 Maryland at Oliver Street, Baltimore, Maryland, on October 17,
1995, at 2:00 p.m. and at any adjournment thereof. At the Loyola Stockholder
Meeting, stockholders will consider and vote upon: (i) the Agreement and the
related Plan of Merger, pursuant to which Loyola will merge with and into
Crestar, and Crestar will succeed to the business of Loyola; and (ii) such other
matters as may properly come before the Special Meeting or any adjournments or
postponements thereof. Only stockholders of record of Loyola at the close of
business on August 3, 1995 are entitled to notice of and to vote at the Special
Meeting. This Proxy Statement/Prospectus is being mailed to all such holders of
record of Loyola Common Stock on or about September , 1995.
The holders of the Loyola Common Stock are entitled to one vote for each
share outstanding in such holder's name on the books of Loyola. Cumulative
voting is not permitted. The affirmative vote of the holders of a majority of
the outstanding shares entitled to vote is required for approval of the Merger.
Under rules of the New York Stock Exchange, the proposal to adopt the
Agreement is considered a "non-discretionary item" whereby brokerage firms may
not vote in their discretion on behalf of their clients if such clients have not
furnished voting instructions. Abstentions and such broker "non-votes" will be
considered in determining the presence of a quorum at the Special Meeting but
will not be counted as a vote cast for a proposal. BECAUSE THE PROPOSAL TO ADOPT
THE AGREEMENT IS REQUIRED TO BE APPROVED BY THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF LOYOLA COMMON STOCK, ABSTENTIONS AND BROKER "NON-VOTES"
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THIS PROPOSAL.
The proxies solicited hereby, if properly signed and returned and not
revoked prior to their use, will be voted in accordance with the instructions
given thereon by the stockholders. If no instructions are so specified, the
proxies will be voted FOR the proposed Merger, and otherwise at the discretion
of the proxies. Any stockholder giving a proxy has the power to revoke it at any
time before it is exercised by (i) filing written notice of revocation with the
Secretary of Loyola (Linda A. Stadtler, Secretary, Loyola Capital Corporation,
1300 North Charles Street, Baltimore, Maryland 21201-5705); (ii) submitting a
duly executed proxy bearing a later date; or (iii) appearing at the Loyola
Stockholder Meeting and notifying the Secretary of his or her intention to vote
in person; however, attendance at the Loyola Stockholder Meeting will not in and
of itself have the effect of revoking the proxy. Proxies solicited by this Proxy
Statement/Prospectus may be exercised only at the Loyola Stockholder Meeting and
any adjournments or postponements of the Loyola Stockholder Meeting and will not
be used for any other meeting.
The accompanying proxy is being solicited by the Loyola Board. The cost of
such solicitation will be borne by Loyola. In addition to the use of the mails,
proxies may be solicited by personal interview, telephone or telegram by
directors, officers and employees of Loyola or Crestar without additional
compensation. Arrangements may also be made with brokerage houses and
custodians, nominees and fiduciaries for forwarding of solicitation material to
beneficial owners of stock held of record by such persons and obtaining proxies
from the beneficial owners of Loyola Common Stock entitled to vote at the Loyola
Stockholder Meeting, and Loyola will reimburse such persons for their reasonable
expenses incurred in doing so.
The Loyola Board has no information that other matters will be brought
before the meeting. If, however, other matters are presented, the accompanying
proxy will be voted in accordance with the recommendations of the Loyola Board
with respect to such matters.
As of the Record Date, the directors and executive officers of Loyola and
their affiliates beneficially owned a total of 785,556 shares (representing 9.3%
of the outstanding shares of Loyola Common Stock), and the directors of Crestar
owned no Loyola Common Stock. The Loyola directors have agreed with Crestar to
recommend that Loyola stockholders vote in favor of the Merger, and the
directors and executive officers have agreed to vote shares beneficially owned
by such directors and executive officers, and shares with respect to which they
have the power to vote, in favor of the Merger. See "Loyola Security Ownership
of Certain Beneficial Owners."
For the reasons described below, the Loyola Board has adopted the
Agreement, believes the Merger is in the best interest of Loyola and its
stockholders and recommends that stockholders of Loyola vote FOR approval of the
Agreement. In making its recommendation, the Loyola Board considered, among
other things, the opinion of Alex. Brown that the Exchange Ratio was fair to
holders of Loyola Common Stock from a financial point of view. See "The
Merger -- Background of the Merger," " -- Reasons for the Merger; Recommendation
of the Loyola Board," and " Opinion of Financial Advisor."
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The address of Crestar is 919 East Main Street, Richmond, Virginia
23261-6665, and its telephone number is (804) 782-5000. The address of Loyola is
1300 North Charles Street, Baltimore, Maryland 21201-5705, and its telephone
number is (410) 332-7210.
THE MERGER
The detailed terms of the Merger are contained in the Agreement and Plan of
Merger, attached as ANNEX I to this Proxy Statement/Prospectus. The following
discussion describes the material features of the proposed Merger and the terms
of the Agreement. This description is qualified by reference to the Agreement
which is incorporated by reference herein.
GENERAL
The Agreement provides that, subject to the satisfaction or waiver of the
conditions set forth therein, Loyola will be merged with and into Crestar. In
connection with the Merger, each share of Loyola Common Stock outstanding
immediately prior to consummation of the Merger will, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into and
represent the right to receive a fraction of a share of Crestar Common Stock and
an identical number of Rights determined in accordance with the Agreement, as
described in this Proxy Statement/Prospectus. Based on the closing price of
Crestar Common Stock on the New York Stock Exchange on August 25, 1995 of
$53.875, each share of Loyola Common Stock would have been exchanged for 0.640
shares of Crestar Common Stock, if such price had been the Average Closing
Price. Such number of shares of Crestar Common Stock may increase or decrease
depending on the Average Closing Price of Crestar Common Stock. Cash will be
paid in lieu of fractional shares of Crestar Common Stock.
Based upon the capitalization of Crestar and Loyola as of June 30, 1995,
Loyola stockholders would own approximately 12% of the outstanding Crestar
Common Stock following consummation of the Merger. Based upon the financial
statements of Crestar and Loyola at June 30, 1995, upon consummation of the
Merger, the percentage of total assets and the percentage of total liabilities
represented by Loyola in the combined entity would each be approximately 15%.
AS DISCUSSED BELOW IN "REASONS FOR THE MERGER; RECOMMENDATION OF THE LOYOLA
BOARD," THE LOYOLA BOARD HAS CONCLUDED THAT THE TERMS OF THE MERGER AND THE
AGREEMENT ARE ADVISABLE AND ARE FAIR TO, AND IN THE BEST INTERESTS OF, LOYOLA
AND ITS STOCKHOLDERS.
BACKGROUND OF THE MERGER
Since Loyola is one of the larger independent financial institutions in
Maryland, its management has been informally approached from time to time by
other financial institutions seeking to initiate or expand their activities in
Maryland. In March, 1994, pursuant to inquiries initiated by a large
out-of-market depository holding company, management held a few informal
discussions with representatives of that institution. The indication of interest
expressed at these informal meetings caused management of Loyola to report the
discussions to the Loyola Board.
The Loyola Board appointed a Special Projects Committee (the "Committee")
on March 15, 1994, initially composed of three independent directors and later
expanded in January, 1995 to include all of the independent directors of Loyola,
to monitor the discussions and evaluate these discussions against the objectives
of Loyola. Further, management of Loyola developed a five year plan intended to
provide some basis for the Loyola Board to compare potential values generated
through remaining independent against possible merger proposals. For purposes of
this comparison, only the first two years of the five-year plan were used
because of the difficulty in forecasting interest rates beyond two years.
Indicated book values (and related deal values) at the end of the two-year
period discounted to the present were used as the basis for comparison, and the
indicated discounted book values (and related deal values) were lower than the
current book value (and current deal value). Finally, an estimate of value of
Loyola was obtained from a financial advisor to inform the Loyola Board of
ranges of value which might be achieved by the stockholders of Loyola in a
merger of Loyola with another depository institution. The larger depository
holding company requested access to certain financial and other information from
Loyola, and some information was sent to them. Based upon the indication of
value proffered by the larger depository holding company, it appeared that a
potential merger would result in a significant increase in shareholder value.
The potential suitor's interest in Loyola, however, appeared to wane, and these
preliminary discussions produced no tangible results.
In September, 1994, after management of Loyola was approached by
representatives of Crestar, the Loyola Board decided to establish a more formal
process for the project. It engaged Piper & Marbury L.L.P. as its legal counsel,
and directed management to interview and hire a financial advisor for the
project. After conducting interviews with several firms, Alex. Brown was engaged
as financial advisor for the project. As such, Alex. Brown assisted management
in identifying financial
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institutions who would be likely candidates for acquiring Loyola, worked with
management of Loyola and its counsel in preparing a Confidential Offering
Memorandum (the "Memorandum") for delivery to the potential acquirors, prepared
an analysis of Loyola and the market for its securities to provide a basis for
evaluating any offers received by Loyola, and assisted management of Loyola to
develop a Dutch auction process in the event the Loyola Board ultimately decided
that a merger was in the best interests of Loyola, its stockholders and its
other constituents. The Dutch auction process involved several steps including
the identification of potential acquirors, an informal approach to the potential
acquirors to determine their interest in participating in the process, the
delivery of the Memorandum to those potential acquirors which indicated a desire
to participate in the process, the receipt of preliminary indications of
interest from the potential acquirors, the detailed on-site due diligence by
potential acquirors with indications of interest of a magnitude deemed
acceptable to the Loyola Board, and the receipt of final bid proposals. While it
was initially anticipated that the Memorandum would be delivered to potential
acquirors in December, 1994 and that the entire process would be concluded with
an agreement by early 1995, market conditions for bank stocks and appetite for
acquisitions from potential acquirors had deteriorated during the fourth quarter
of 1994, and Alex. Brown recommended to Loyola that the process be delayed until
the market recovered.
By late February, 1995, the Board had determined that the market had
recovered sufficiently for the process to commence again. After receiving a full
report from Alex. Brown, the Loyola Board authorized an approach to ten
potential acquirors (six, including Crestar, were in-market institutions and
four were out-of-market institutions). Eight of the ten prospective acquirors,
including Crestar, expressed an initial interest in an affiliation with Loyola,
and received copies of the Memorandum.
After the review period only Crestar, however, submitted a preliminary
indication of value to Loyola. The other seven were contacted by Alex. Brown
concerning their failure to give a preliminary indication of value, and most
indicated various internal reasons for not wishing to continue in the process.
The preliminary indication of value received from Crestar was $28 a share;
however, the Committee agreed to invite Crestar to conduct due diligence only if
the preliminary indication of value was increased to at least $30 a share. After
agreeing to the increase, Crestar conducted extensive due diligence at Loyola.
At the conclusion of due diligence, negotiations on price and other issues
continued, culminating in an announcement on April 27, 1995 that Loyola and
Crestar had entered into the Binding Letter Agreement on price and general
principles to govern the remaining issues. The Loyola Board approved the
Agreement on May 16, 1995.
REASONS FOR THE MERGER; RECOMMENDATION OF THE LOYOLA BOARD
The Loyola Board believes that the terms of the Merger and the Agreement
are advisable and are fair to, and in the best interests of, Loyola and its
stockholders. As explained below, this conclusion is supported by the opinion of
its independent financial advisor that the consideration to be received in the
Merger is fair to Loyola's stockholders from a financial point of view. In
considering the terms and conditions of the Agreement, the Loyola Board
considered a number of factors. The Loyola Board did not assign any relative or
specific weights to the factors considered. The material factors considered
were:
(i) THE FINANCIAL TERMS AND STRUCTURE OF THE MERGER. The Loyola Board
was of the view that, based on historical and anticipated trading ranges
for Crestar Common Stock, the value of the consideration to be received by
Loyola stockholders resulting from the Exchange Ratio represented a fair
multiple of Loyola's per share book value and earnings. The Loyola Board
also considered that, under the proposed Exchange Ratio and based on the
Loyola Board's belief that Crestar would continue to pay dividends at its
current rate, the Merger would result in a substantial increase in dividend
income to Loyola stockholders, although there can be no assurance that
current dividends are indicative of future dividends. See
"Summary -- Comparative Per Share Data." The Loyola Board also considered
that the Merger would qualify as a tax-free reorganization under the Code.
See " -- Certain Federal Income Tax Consequences."
(ii) THE NON-FINANCIAL TERMS OF THE MERGER. The Loyola Board
considered the social and economic effect on the employees, depositors and
customers of, and others dealing with Loyola and on the communities in
which Loyola is located or operates.
(iii) CERTAIN FINANCIAL AND OTHER INFORMATION CONCERNING CRESTAR. The
Loyola Board considered the business and financial condition of Crestar and
its favorable position among its peer group of national and regional
financial institutions in terms of profitability, capital adequacy and
asset quality. The Loyola Board also considered that the historical
dividends per share and net income per share of Crestar Common Stock to be
received by Loyola stockholders after giving effect to the Exchange Ratio,
would represent a substantial increase in the historical dividends per
share and net income per share of Loyola Common Stock, although there can
be no assurance that pro forma amounts are indicative of future dividends
or income per share of Crestar. The Loyola Board further considered the
reputation and business practices of Crestar and its management as they
would affect the employees of Loyola.
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(iv) OTHER POSSIBLE ALTERNATIVES. The Loyola Board considered, based
in part on the advice of Alex. Brown, possible alternatives to the
transaction with Crestar. These alternatives included remaining an
independent institution and possible affiliations with others. As part of
the Dutch auction process that was employed, several potential acquirors
other than Crestar were approached regarding a possible affiliation with
Loyola.
(v) OPINION OF FINANCIAL ADVISOR. The Loyola Board considered the
opinion of Alex. Brown as to the fairness of the consideration to be
received in the Merger to Loyola stockholders from a financial point of
view. See " -- Opinion of Financial Advisor."
(vi) CERTAIN OTHER CONSIDERATIONS. The Loyola Board further determined
that the addition of resources resulting from the Merger will enable Loyola
to provide a wider and improved array of financial services to consumers
and businesses and to achieve added flexibility in dealing with the
changing competitive environment in its market area. In addition, the
Loyola Board concluded that the Merger will help provide Loyola with the
financial resources needed to meet the competitive challenges arising from
recent and anticipated changes in the banking and financial services
industry.
THE LOYOLA BOARD BELIEVES THAT THE MERGER AND THE AGREEMENT ARE ADVISABLE
AND ARE FAIR TO, AND IN THE BEST INTEREST OF, LOYOLA AND ITS STOCKHOLDERS. THE
LOYOLA BOARD UNANIMOUSLY RECOMMENDS THAT LOYOLA'S STOCKHOLDERS VOTE FOR THE
AGREEMENT AND THE MERGER CONTEMPLATED THEREBY.
OPINION OF FINANCIAL ADVISOR
Loyola retained Alex. Brown to act as Loyola's financial advisor in
connection with the Merger. Alex. Brown has historically provided, and continues
to provide, certain other financial advisory and agency services to Loyola.
Alex. Brown was selected to act as Loyola's financial advisor based upon its
qualifications, expertise and reputation, as well as Alex. Brown's prior
investment banking relationship and familiarity with Loyola. Alex. Brown was the
co-financial advisor and designated co-managing underwriter for Loyola's
conversion from mutual to stock ownership in 1986, was one of the designated
brokers for Loyola's stock repurchase program, served as financial advisor for a
proposed private placement of Loyola debt, and maintains a primary trading
market in Loyola Common Stock. Alex. Brown regularly publishes research reports
regarding the financial services industry and the businesses and securities of
publicly-owned companies in that industry.
On April 24, 1995, at the meeting at which the Loyola Board approved and
adopted the Binding Letter Agreement, Alex. Brown delivered a written opinion to
the Loyola Board that, as of such date, the Exchange Ratio to be received by the
stockholders of Loyola, 0.690 shares of Crestar Common Stock for each share of
Loyola Common Stock (subject to adjustment as detailed in the Binding Letter
Agreement), was fair to the stockholders of Loyola from a financial point of
view (the "Opinion"). The Opinion was updated as of May 16, 1995, the date as of
which the Agreement was executed, and as of the date of this Proxy
Statement/Prospectus (the "Updated Opinion" and together with the Opinion the
"Opinions"). No limitations were imposed by the Loyola Board upon Alex. Brown
with respect to the investigations made or procedures followed by it in
rendering the Opinions.
THE FULL TEXT OF THE UPDATED OPINION, WHICH SETS FORTH ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS
ANNEX III TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. LOYOLA STOCKHOLDERS ARE URGED TO READ THE UPDATED OPINION IN ITS
ENTIRETY. THE FOLLOWING SUMMARY OF THE OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE UPDATED OPINION.
In rendering the Opinions, Alex. Brown (i) reviewed the Binding Letter
Agreement and subsequently the Agreement, certain publicly available business
and financial information concerning Loyola and Crestar, and certain internal
financial analyses and forecasts for Loyola and Crestar prepared by their
respective managements; (ii) held discussions with members of senior management
of Loyola and Crestar regarding the past and current business operations,
financial condition, and future prospects of their organizations; (iii) reviewed
the reported price and trading activity for Loyola Common Stock and Crestar
Common Stock and compared certain financial and stock market information for
each of Loyola and Crestar with similar information for certain other financial
institutions, the securities of which are publicly traded; (iv) reviewed the
financial terms of certain recent business combinations in the financial
institutions industry which Alex. Brown deemed comparable in whole or in part;
and (v) performed such other studies and analyses as Alex. Brown considered
appropriate.
Alex. Brown relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its Opinions. With respect to the financial
forecasts provided by Loyola and Crestar and reviewed by Alex. Brown in
rendering its Opinions, Alex. Brown assumed that such financial forecasts were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the
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management of each of Loyola and Crestar as to the future financial performance
of Loyola and Crestar. Alex. Brown did not make an independent evaluation or
appraisal of the assets or liabilities of Loyola or Crestar nor was it furnished
with any such appraisal.
The summary set forth below does not purport to be a complete description
of the analyses performed by Alex. Brown in this regard. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors discussed below, Alex. Brown believes that its analyses must be
considered as a whole and that selecting portions of its analyses, and of the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. No
one of the analyses performed by Alex. Brown was assigned a greater significance
than any other. In performing its analyses, Alex. Brown made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond Loyola's or Crestar's
control. The analyses performed by Alex. Brown are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. In preparing the Opinions,
Alex. Brown, using publicly available information, compared selected financial
information, including book value, tangible book value, latest twelve months
("LTM") earnings, 1995 estimated earnings, 1996 estimated earnings, asset
quality ratios and loan loss reserve levels, for Loyola and two peer groups of
savings bank organizations.
The first peer group comprised all savings banks in the United States that
possessed asset bases in excess of $500 million (the "National Comparables
Group"). The National Comparables Group was then segmented into those savings
banks headquartered in the Mid-Atlantic Region (Delaware, Maryland, Pennsylvania
and Virginia) (the "Regional Comparables Group"). The second peer group
comprised the Regional Comparables Group and included Maryland Federal Bancorp
(MD); Parkvale Financial Corporation, PennFirst Bancorp, Inc., Sovereign Bancorp
and York Financial Corp. (PA); and Charter Federal Savings Bank, Virginia Beach
Federal Financial, Virginia First Federal and Washington Federal Savings (VA).
Since Loyola's stock price began to increase, and such increase was believed to
be due to takeover rumors during the early part of April, the trading multiple
comparisons are as of March 24, 1995, one month prior to the date the Loyola
Board meeting was held to approve the Binding Letter Agreement. As of March 24,
1995, the relative multiples implied by the market price of Loyola's Common
Stock and the mean market price of the common stock of the National Comparables
Group and the Regional Comparables Group, respectively, to such selected
financial data was: (i) to LTM earnings 12.6x for Loyola and 10.3x and 9.6x for
the National Comparables Group and Regional Comparables Group, respectively;
(ii) to 1995 Institutional Brokerage Estimation Service ("I/B/E/S") estimated
earnings per share, 12.2x for Loyola and 9.8x and 8.3x for the National
Comparables Group and the Regional Comparables Group, respectively; (iii) to
1996 I/B/E/S estimated earnings per share, 11.0x for Loyola and 9.2x and 7.5x
for the National Comparables Group and Regional Comparables Group, respectively;
(iv) to stated book value, 107% for Loyola and 105% and 113% for the National
Comparables Group and the Regional Comparables Group, respectively; (v) to
tangible book value, 112% for Loyola and 110% and 123% for the National
Comparables Group and the Regional Comparables Group, respectively; and (vi) to
total assets, 7.4% for Loyola and 8.6% and 7.5% for the National Comparables
Group and Regional Comparables Group, respectively.
ANALYSIS OF COMPARABLE ACQUISITION TRANSACTIONS. In preparing the Opinions,
Alex. Brown analyzed certain comparable merger and acquisition transactions for
savings banks based upon the acquisition price relative to stated book value,
stated tangible book value, LTM earnings, total assets and the premiums to core
deposits and market price. The market price premium is measured against the
market price of the common stock one month prior to the acquisition announcement
(or, in Loyola's case, on March 24, 1995). The analysis included a review and
comparison of the mean multiples represented by a sampling of recently effected
or pending savings bank acquisitions nationwide having a transaction value
between $100 million and $1 billion which were announced since January 1, 1993
(a total of 37 transactions), as segmented into: (i) transactions announced
since January 1, 1995 (4) ("1995 Transactions"); (ii) transactions in which the
selling savings bank was headquartered in the Mid-Atlantic Region (4) (the
"Regional Transactions"); (iii) transactions in which the selling savings bank
achieved a return on average assets between 0.50% and 1.00% in the year of its
announced acquisition (11) (the "Profitability-Segmented Transactions"); and
(iv) transactions in which the selling savings bank possessed nonperforming
assets between 1.00% and 4.00% of its total assets (20) (the "Asset-Quality
Segmented Transactions").
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The relative multiples implied by the Exchange Ratio ($32.00 implied per
share value to Loyola stockholders) and each of the comparable acquisition
transaction segmentations, respectively, are provided in the following table:
<TABLE>
<CAPTION>
PURCHASE PRICE TO:
TANGIBLE CORE
BOOK BOOK LTM DEPOSITS MARKET
TRANSACTION GROUP VALUE VALUE ASSETS EPS PREMIUM PREMIUM
<S> <C> <C> <C> <C> <C> <C>
CONSIDERATION ($32.00 PER SHARE)............. 150.6% 158.9% 11.4% 17.8X 8.6% 41.4%
Comparable Acquisition Transactions:
(a)Nationwide -- Mean....................... 163.4% 175.1% 13.5% 14.5x 8.1% 37.9%
High...................................... 218.6% 218.6% 20.4% 33.3x 14.1% 181.0%
Low....................................... 113.6% 132.8% 6.7% 8.1x 1.0% 1.8%
(b)Recent Transactions -- Mean.............. 174.1% 176.6% 15.4% NM 10.3% 34.3%
High...................................... 197.1% 197.1% 20.4% 33.3x 13.2% 57.6%
Low....................................... 139.4% 139.4% 8.0% 20.1x 8.1% 13.6%
(c)Regional Transactions -- Mean............ 163.4% 176.6% 13.7% 15.7x 9.2% 35.1%
High...................................... 182.9% 191.1% 20.4% 33.3x 12.6% 52.9%
Low....................................... 151.5% 154.6% 8.0% 13.3x 7.3% 7.8%
(d)Profitability-Segmented -- Mean.......... 164.6% 179.2% 12.1% 15.7x 8.0% 34.3%
High...................................... 197.1% 207.4% 17.8% 28.6x 13.2% 158.0%
Low....................................... 113.6% 147.5% 7.3% 10.9x 4.4% 8.1%
(e)Asset-Quality Segmented -- Mean.......... 162.9% 174.9% 13.2% 16.8x 7.6% 33.2%
High...................................... 205.4% 212.5% 18.8% 32.8x 13.2% 178.5%
Low....................................... 113.6% 142.2% 6.7% 8.8x 1.0% 1.8%
</TABLE>
Alex. Brown concluded from its review of comparable acquisition
transactions, as segmented, that relative multiples implied by the Exchange
Ratio, (i) with regard to each of the six measures evaluated was comfortably in
the range of each of the aforementioned segmentations; and (ii) with regard to
market premiums and the latest twelve-month earnings multiples, were in excess
of the mean transaction multiples of each of the aforementioned segmentations.
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis, Alex.
Brown estimated the present value of the future dividend streams that Loyola
could produce over a two year period, under different assumptions as to required
equity levels, if Loyola performed in accordance with management's forecasts and
certain variants thereof. Alex. Brown also estimated the terminal value for
Loyola's common equity after the two year period by applying book value
(150%-185%) and earnings (13.0-16.0 times) acquisition multiples currently being
received by savings bank institutions with similar profitability ratios as
Loyola is projected to have during its calendar year ended December 31, 1996.
The range of multiples used reflected a variety of scenarios regarding the
growth and profitability prospects of Loyola. The dividend streams and terminal
values were then discounted to present values using discount rates ranging from
12.5% to 15.0%, which reflect different assumptions regarding the required rates
of returns of holders or prospective buyers of Loyola's common equity. Alex.
Brown concluded from its discounted cash flow analysis that the consideration
indicated by the Exchange Ratio on the date the Agreement was executed ($32
indicated per share value to Loyola stockholders) exceeded the present value of
the future dividend streams that Loyola could produce over a two-year period.
REFERENCE RANGE. Based in part on the several analyses discussed above,
Alex. Brown developed, for purposes of its Opinions, a reference range for the
value of Loyola common equity of $28.00 to $34.00 per share of Loyola Common
Stock. The values reflected in the foregoing reference range were considered
along with the other analyses performed by Alex. Brown and were not intended to
represent the price at which 100% of Loyola Common Stock could actually be sold.
The foregoing reference ranges were based in part on the application of economic
and financial models and are not necessarily indicative of actual values; which
may be significantly more or less than such estimates. The reference ranges do
not purport to be appraisals.
COMPENSATION OF FINANCIAL ADVISOR. Pursuant to the terms of an engagement
letter dated September 30, 1994, Loyola has paid Alex. Brown a fee of $300,000
for acting as financial advisors in connection with the Merger, including
rendering the Opinion. In addition, Loyola has agreed to pay Alex. Brown a fee
of 0.70% of the aggregate consideration received by Loyola stockholders in the
Merger less the $300,000 in fees already paid to Alex. Brown. This fee is
payable to Alex. Brown upon consummation of the Merger, and is estimated to be
approximately $1.7 million. Whether or not the Merger is consummated, Loyola
also has agreed to indemnify Alex. Brown and certain related persons against
certain liabilities relating to or arising out of its engagement.
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EFFECTIVE TIME OF THE MERGER
The Merger is expected to be consummated in late December, 1995 or early
January, 1996. The Merger will be effective on the date (the "Effective Date")
and the time (the "Effective Time") specified in the Articles of Merger that are
to be filed with the State Department of Assessments and Taxation of Maryland
and the SCC as soon as practicable following satisfaction of all the conditions
to the consummation of the Merger set forth in the Agreement; provided that the
Effective Time shall not be earlier than December 28, 1995. Either Loyola or
Crestar, acting unilaterally, may terminate the Agreement if the Merger has not
been consummated by March 31, 1996.
Until the Effective Time of the Merger occurs, Loyola stockholders will
retain their rights as stockholders to vote on matters submitted to them by the
Loyola Board.
DETERMINATION OF EXCHANGE RATIO AND EXCHANGE FOR CRESTAR COMMON STOCK
Crestar valued Loyola Common Stock for purposes of the exchange at the
Exchange Ratio. The Exchange Ratio was determined through negotiations between
Loyola and Crestar, and was directly related to stock market conditions
generally, and more specifically, to the market value of Crestar Common Stock.
The valuation of Loyola Common Stock was based upon the potential value of
Loyola Common Stock, the nature of Loyola's savings and loan association
businesses, and Loyola's deposit base, market share and market franchise in and
around Maryland and Washington, D.C. Each share of Loyola Common Stock (other
than shares held directly by Crestar, excluding shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the number of shares of Crestar Common Stock, and an identical
number of Rights, determined by the Exchange Ratio which is determined by the
Average Closing Price, subject to adjustment in certain circumstances. The
Exchange Ratio at the Effective Time of the Merger shall be adjusted to reflect
any consolidation, split-up, other subdivisions or combinations of Crestar
Common Stock, any dividend payable in Crestar Common Stock, or any capital
reorganization involving the reclassification of Crestar Common Stock subsequent
to the date of the Agreement. At June 30, 1995, there were 8,111,600 shares of
Loyola Common Stock outstanding. In addition, options to purchase an additional
1,076,717 shares of Loyola Common Stock were outstanding at June 30, 1995. Based
on the Loyola Common Stock and options to purchase Loyola Common Stock
outstanding as of June 30, 1995, and assuming a maximum Exchange Ratio of 0.750,
Crestar would issue 6,083,700 shares of Crestar Common Stock in exchange for
Loyola Common Stock, and convert the outstanding options to purchase Loyola
Common Stock into 807,538 outstanding options to purchase Crestar Common Stock.
Based on a minimum Exchange Ratio of 0.640, Crestar would issue 5,191,424 shares
of Crestar Common Stock, and convert outstanding options to purchase Loyola
Common Stock into 689,099 outstanding options to purchase Crestar Common Stock.
Based on the $53.875 closing price of Crestar Common Stock on the NYSE on August
25, 1995, the Exchange Ratio would have been 0.640, the minimum Exchange Ratio,
if such closing price had been the Average Closing Price. The aggregate number
of shares of Crestar Common Stock to be issued in connection with the Merger,
and the number of options to purchase Loyola Common Stock that will be converted
into options to purchase Crestar Common Stock, will vary to the extent that any
outstanding options to purchase Loyola Common Stock are exercised prior to the
Effective Time of the Merger. See " -- Effect on Loyola Employee Benefit Plans"
below.
Following the Effective Time of the Merger, former holders of shares of
Loyola Common Stock will be mailed a Letter of Transmittal which will set forth
the procedures that should be followed for exchange of Loyola Common Stock for
Crestar Common Stock.
Stockholders of Loyola who receive Crestar Common Stock and the associated
Rights will be entitled to receive certificates representing the number of whole
shares of Crestar Common Stock for which such shares have been submitted for
exchange and cash in lieu of any fractional share interest on the basis of the
Exchange Ratio.
BUSINESS OF LOYOLA AND CRESTAR PENDING THE MERGER
Loyola has agreed that until the Effective Time of the Merger it will and
will cause each of its subsidiaries to conduct their respective operations only
in the ordinary course of business consistent with past practices (subject to
the terms of the Agreement described below) and will use its best efforts to
preserve intact their respective business organizations, keep available the
services of their officers and employees and maintain satisfactory relationships
with licensors, suppliers, distributors, customers, clients and others having
business relationships with them. Loyola has also agreed that it will not, and
will not permit any of its subsidiaries to, take any action, engage in any
transactions or enter into any agreement which would adversely affect or delay
in any material respect the ability of Crestar or Loyola to obtain any necessary
approvals, consents or waivers of any Governmental Entity (as defined in the
Agreement) or third party required for the Merger or to perform its
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covenants and agreements on a timely basis under the Agreement. In this
connection, Loyola has agreed that, without the prior written consent of
Crestar, it will not and will not permit any of its subsidiaries to: (i) other
than in the ordinary course of business consistent with past practice, incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other person, or
make any loan or advance; (ii) adjust, split, combine or reclassify any capital
stock; make, declare or pay any dividend on Loyola Common Stock other than the
regular quarterly cash dividend not exceeding $0.12 per share of Loyola Common
Stock; 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, or grant any stock appreciation rights, or convert any options into stock
appreciation rights, or grant any person any right to acquire any shares of its
capital stock, except for dividends paid by any of the wholly-owned subsidiaries
of Loyola to Loyola or any of its wholly-owned subsidiaries; or issue any
additional shares of capital stock except pursuant to the exercise of stock
options outstanding as of the date of the Agreement which were granted under
Loyola's 1986 Stock Option Plan, as amended; (iii) sell, transfer, mortgage,
encumber or otherwise dispose of any of its material properties or assets to any
person other than a direct or indirect wholly-owned subsidiary of Loyola, or
cancel, release or assign any material indebtedness of any person or any claims
held by any Person, except pursuant to contracts or agreements in force at the
date of the Agreement; (iv) other than portfolio investments in the ordinary
course of business consistent with past practice, make any material investment
either by purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other person other than
a wholly-owned subsidiary of Loyola; (v) enter into or terminate any material
contract or agreement, or make any change in any of its material leases or
contracts, other than renewals of contracts and leases without material adverse
changes of terms; (vi) except as permitted under the current year's budget or as
otherwise provided in the Agreement, increase in any manner the compensation or
fringe benefits of its employees (including employees, former employees,
director and former directors) or pay any pension or retirement allowance not
required by any existing plan or agreement to any such employees, or become a
party to, amend, modify 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 employee, or adopt, amend or modify any bonus, profit
sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
agreements, trusts, plans, funds, employee stock ownership, consulting,
severance or fringe benefit plan, or other arrangements for the benefit or
welfare of any employee or voluntarily accelerate the vesting of any stock
options or other stock-based compensation; (vii) modify in any material respect
the manner in which it and its subsidiaries have heretofore conducted or
accounted for their business; (viii) except as contemplated by the Agreement,
amend its Articles of Incorporation or its By-Laws; (ix) agree to, or make any
commitment to, take any of the actions prohibited by the provisions of the
Agreement governing the conduct of the business of Loyola pending the Merger;
(x) except if as a result of death, disability or other inability to serve,
elect or appoint any new director or officer of Loyola or any of its
subsidiaries, provided that the appointment of an officer to another office of
Loyola or any of its subsidiaries shall not be deemed to be the appointment of a
new officer; or (xi) acquire an insurance policy or enter into any new
agreement, amendment or endorsement or make any changes relating to insurance
coverage, including coverage for its directors and officers, which would result
in an additional premium payment obligation of $50,000 or more.
Loyola has further agreed that neither Loyola nor any of its subsidiaries,
nor any of their respective officers, directors and employees shall, and Loyola
shall direct and use its best efforts to cause its agents and representatives
not to, directly or indirectly, take any action to solicit or initiate any
inquiries or the making of any offer or proposal with respect to a merger,
consolidation, business combination, liquidation, reorganization, sale or other
disposition of any significant portion of assets, sale of shares of capital
stock, or similar transactions involving Loyola or any subsidiary of Loyola (an
"Acquisition Proposal") or, except as may be legally required for the discharge
by the Loyola Board of its fiduciary duties, engage in any negotiation
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal. Loyola will
promptly notify Crestar of any Acquisition Proposal or any inquiries with
respect thereto, and will give Crestar contemporaneous written notice upon
engaging in discussions or negotiations with, or providing any information
regarding Loyola to, any such person regarding an Acquisition Proposal.
Loyola has agreed that, prior to the consummation of the Merger, it will
conform its loan, accrual and reserve policies, and shall establish and take
such accruals, reserves and charges in order to implement such policies in
respect of excess facilities and equipment capacity, severance and other benefit
costs, litigation matters, write-off or write-down of various assets and other
appropriate accounting adjustments, and to recognize for financial accounting
purposes such expenses of the Merger and restructuring charges related to or to
be incurred in connection with the Merger, including the expense for any tax
liabilities with respect to the anticipated recapture of the bad debt reserves
established by Loyola or any of its subsidiaries for tax purposes to the extent
not otherwise recorded, so that such policies are applied consistently on a
mutually satisfactory basis with those of Crestar; provided that: (i) Loyola
will not be obligated to take any such action unless and until Crestar
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specifies its request in writing and acknowledges that all conditions to
Crestar's obligations to consummate the Merger set forth in the Agreement have
been satisfied or waived by Crestar; (ii) Loyola acknowledges that the
conditions to its obligation to consummate the Merger set forth in the Agreement
have been satisfied or waived by Loyola; (iii) Loyola shall not be required to
take any such action that impairs its regulatory capital below regulatory
guidelines, that is inconsistent with any formal or informal undertaking by
Loyola to any bank regulator that has been disclosed in writing to Crestar prior
to the date of the Agreement or is inconsistent with any bank regulatory
requirement applicable to Loyola; and (iv) Loyola shall not be required to take
any such action that is not consistent with generally accepted accounting
principles applicable to depository institutions.
Crestar has agreed that until the Effective Time of the Merger it will and
will cause each of its subsidiaries to conduct their respective operations only
in the ordinary course of business consistent with past practice and will use
its best efforts to preserve intact their respective business organizations,
keep available the services of their officers and employees and maintain
satisfactory relationships with licensors, suppliers, distributors, customers,
clients and others having business relationships with them. Crestar has also
agreed that it will not, and will not permit any of its subsidiaries to, take
any action, engage in any transactions or enter into any agreement which would
adversely affect or delay in any material respect the ability of Crestar or
Loyola to obtain any necessary approvals, consents or waivers of any
Governmental Entity required for the transactions contemplated hereby or to
perform its covenants and agreements on a timely basis under the Agreement.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is conditioned upon the approval of the holders
of a majority of the outstanding Loyola Common Stock entitled to vote at the
Loyola Stockholder Meeting. The Merger must be approved by the Federal Reserve
Board, the OTS, the MBC, and the SCC, applications for which have been filed and
approvals for which are expected to be received. The obligations of Loyola and
Crestar to consummate the Merger are further conditioned upon: (i) the accuracy
of the representations and warranties of Loyola and Crestar contained in the
Agreement; (ii) the performance of all covenants and agreements contained in the
Agreement; (iii) the receipt of an opinion of Piper & Marbury L.L.P., counsel to
Loyola, and an opinion of Hunton & Williams, counsel to Crestar, with respect to
certain of the tax consequences of the Merger described herein under
" -- Certain Federal Income Tax Consequences;" (iv) no preliminary or permanent
injunction or other order shall have been issued by any court or by any
Governmental Entity which prohibits the consummation of the Merger and no
litigation or proceeding shall be pending against Crestar or Loyola or any of
their subsidiaries brought by any government entity seeking to prevent
consummation of the Merger; (v) the approval for listing on the NYSE of the
shares of Crestar Common Stock at the Effective Time of the Merger, subject to
official notice of issuance; (vi) the receipt of opinions of counsel with
respect to certain legal matters; (vii) the registration statement registering
the shares of Crestar Common Stock to be issued in the Merger shall have become
effective and no stop order suspending the effectiveness of such registration
statement shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC; (viii) no statute, rule, regulation,
executive order, decree or order of any kind shall have been enacted, entered,
promulgated or enforced by any court or Governmental Entity which prohibits
consummation of the Merger; (ix) the receipt by Crestar of permits and other
authorizations necessary under all state securities or "Blue Sky" laws to
consummate the Merger; and (x) the receipt by Crestar of a letter from KPMG Peat
Marwick LLP to the effect that the Merger can be accounted for as a
pooling-of-interests.
Crestar and Loyola may waive any condition to their obligations to
consummate the Merger except requisite approvals of Loyola stockholders and
regulatory authorities.
STOCK OPTION AGREEMENT
Crestar and Loyola have entered into a Stock Option Agreement, dated as of
April 27, 1995 (the "Option Agreement"), pursuant to which Loyola issued to
Crestar an option (the "Option") to purchase up to 1,613,442 shares of Loyola
Common Stock at a purchase price of $25.00 per share.
Crestar may exercise the Option upon the occurrence of certain events (each
a "Purchase Event"). The Option Agreement provides that a Purchase Event shall
mean the occurrence of any of the following events after the date of execution
of the Option Agreement: (i) Loyola or Loyola F.S.B., without having received
Crestar's prior written consent, shall have entered into an agreement with any
person to: (x) merge, consolidate or enter into any similar transaction with
Loyola except as contemplated in the Agreement; (y) purchase, lease or otherwise
acquire all or substantially all of the assets of Loyola or Loyola F.S.B.; or
(z) purchase or otherwise acquire (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 10% or more
of the voting power of Loyola or Loyola F.S.B.; (ii) any person
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(other than Crestar and its subsidiary banks in a fiduciary capacity, or Loyola
and Loyola F.S.B. in a fiduciary capacity) shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 15% or more of the
outstanding shares of Loyola Common Stock; (iii) any person shall have made a
bona fide proposal to Loyola by public announcement or written communication
that is or becomes the subject of public disclosure to acquire Loyola or Loyola
F.S.B. by merger, consolidation, purchase of all or substantially all of its
assets or any other similar transaction, and following such bona fide proposal
the stockholders of Loyola vote not to adopt the Agreement; or (iv) Loyola shall
have willfully breached certain specified covenants contained in the Agreement
following a bona fide proposal to Loyola or Loyola F.S.B. to acquire Loyola or
Loyola F.S.B. by merger, consolidation, purchase of all or substantially all of
its assets or any other similar transaction, which breach would entitle Crestar
to terminate the Agreement (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the date on which
Crestar shall notify Loyola of its intent to exercise the Option.
The Option may be exercised in whole or in part, at one or more closings,
and may be exercised at any time if a Purchase Event shall have occurred and be
continuing and before the Option Agreement is terminated, unless Crestar shall
have breached in any material respect any material covenant or representation
contained in the Agreement and such breach has not been cured. The Option
Agreement provides that to the extent that it shall have not been exercised, the
Option shall terminate (i) on the Effective Date of the Merger; (ii) upon the
termination of the Agreement in accordance with the provisions thereof (other
than a termination resulting from a willful breach by Loyola of certain
specified covenants contained therein or, following the occurrence of a Purchase
Event, failure of Loyola's stockholders to approve the Merger by the vote
required under applicable law); or (iii) 12 months after termination of the
Agreement due to a willful breach by Loyola of certain specified covenants
contained therein or, following the occurrence of a Purchase Event, failure of
Loyola's stockholders to approve the Merger by the vote required under
applicable law.
WAIVER AND AMENDMENT; TERMINATION
WAIVER AND AMENDMENT. Prior to the Effective Time, any provision of the
Agreement may be: (i) waived by the party benefitted by the provision or by both
parties by a writing executed by an executive officer; or (ii) amended or
modified at any time by an agreement in writing between the parties approved by
their respective boards of directors, except that, after the vote by the
stockholders of Loyola, no such amendment or modification may be made which
reduces or changes the form and amount of consideration payable pursuant to the
Agreement without further stockholder approval. If at any time before the
Effective Time of the Merger a material term of the Agreement or Plan of Merger
is amended, the Loyola Board will postpone or reschedule the Loyola Stockholder
Meeting (or, if necessary, call additional stockholder meetings), to vote on the
Agreement and Plan of Merger, as amended, and resolicit proxies for use at such
meeting. For these purposes, each of the following will be deemed to constitute
an amendment to a material term of the Agreement or the Plan of Merger: (i) an
amendment to the Exchange Ratio adverse to Loyola stockholders; (ii) a change in
the income tax treatment of the Merger as a tax-free reorganization; or (iii)
any other change that would materially adversely affect the holders of Loyola
Common Stock.
TERMINATION. The Agreement may be terminated, and the Merger abandoned at
any time prior to the Effective Date of the Merger, by: (i) the mutual consent
of Crestar and Loyola, if its respective board of directors so determines by a
vote of a majority of the members of its entire board; (ii) either Crestar or
Loyola, if its respective board of directors so determines by a vote of a
majority of the members of its entire board, in the event of the failure of the
stockholders of Loyola to approve the Agreement at the Special Meeting; (iii) by
Crestar or Loyola, if its respective board of directors so determines by a vote
of a majority of the members of its entire board, in the event of a material
breach by the other party of any representation, warranty, covenant or agreement
contained in the Agreement which is not cured or not curable within 60 days
after written notice of such breach is given to the party committing such
breach; (iv) either Crestar or Loyola by written notice to the other party if
prior to December 31, 1995 either (A) any approval, consent or waiver of any
Governmental Entity required to permit consummation of the transactions
contemplated by the Agreement shall have been denied, or (B) any Governmental
Entity of competent jurisdiction shall have issued a final, unappealable order
or ruling enjoining or otherwise prohibiting consummation of the transactions
contemplated by the Agreement; (v) either Crestar or Loyola, if its respective
board of directors so determines by a vote of a majority of the members of its
entire board, if the Merger is not consummated by March 31, 1996, unless the
failure to so consummate by such time is due to a breach of any representation,
warranty, agreement or covenant by the party seeking to terminate the Agreement;
and (vi) Loyola, if the Loyola Board so determines by a majority vote of the
members of its entire board at any time during the five-day period prior to the
fifth day prior to the Closing Date, if the Average Closing Price is less than
$40.00; provided, however, that Crestar shall have the option of increasing the
consideration to be received by holders of Loyola Common Stock by adjusting the
Exchange Ratio to a number equal to the quotient,
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the numerator of which is the product of $40.00 times the Exchange Ratio then in
effect and the denominator of which is the Average Closing Price.
In the event of the termination of the Agreement pursuant to the above, the
Agreement, other than provisions relating to confidentiality of information
obtained by the parties and to the payment of expenses relating to the Merger,
shall become void and there shall be no liability on the part of any party or
its directors or officers, except that any such termination will be without
prejudice to the rights of any party arising out of the willful breach of the
other party of any covenant or willful misrepresentation contained in the
Agreement.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the receipt by Crestar of a
letter from KPMG Peat Marwick LLP to the effect that the Merger can be accounted
for as a pooling-of-interests. See " -- Conditions to Consummation of the
Merger." Under this accounting treatment, as of the Effective Time of the
Merger, the assets and liabilities of Loyola would be added to those of Crestar
at their recorded book values and the shareholders' equity accounts of Crestar
and Loyola would be combined on Crestar's consolidated balance sheet. On the
pooling-of-interests accounting basis, income and other financial statements of
Crestar issued after consummation of the Merger would be restated retroactively
to reflect the consolidated combined financial position and results of
operations of Crestar and Loyola as if the Merger had taken place prior to the
periods covered by such financial statements.
OPERATIONS AFTER THE MERGER
After the consummation of the Merger, Crestar will continue generally to
conduct the business presently conducted by Loyola, except that following the
Merger Crestar will be required to divest certain real estate development
activities of Loyola not permitted to be engaged in by bank holding companies.
The divestiture of impermissible business activities of Loyola will not have a
material effect on Crestar following the Merger. Crestar also intends to
establish a Baltimore Region for the administration of the Baltimore area
operations of Crestar Bank MD and Loyola F.S.B. following the Merger. The
Baltimore Region will have a separate management team and a local advisory board
of directors.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Loyola's management may be deemed to have interests in
the Merger in addition to their interests as stockholders of Loyola generally.
In each case, the Loyola Board was aware of their potential interests, and
considered them, among other matters, in approving the Agreement and the
transactions contemplated thereby.
EMPLOYMENT AGREEMENTS. Employment agreements are currently in effect for 12
executive and other senior officers of Loyola and its subsidiaries
(collectively, the "Officers"), including Messrs. Mosmiller and Johnson who are
members of the Loyola Board. The agreements will continue to be effective
(except with respect to an amendment to the agreements dated as of May 16, 1995)
whether or not the Merger is consummated. If the Merger is consummated, employer
obligations under the employment agreements with the Officers will become
obligations of Crestar and its subsidiaries by operation of law.
Loyola and Loyola F.S.B. have entered into employment agreements with
Joseph W. Mosmiller, Chairman of the Board and Chief Executive Officer, and
James C. Johnson, President and Chief Operating Officer. The original terms of
the agreements continue until April, 1998. However, upon each anniversary date
of the agreements, the Loyola Board may extend the term for an additional
one-year period. Each of these agreements provides for a minimum annual salary
of $393,000 and $299,000, respectively. The agreements further provide that
these individuals will serve as Chairman of the Board and Chief Executive
Officer, and as President and Chief Operating Officer of Loyola and Loyola
F.S.B., respectively, and that they will be entitled to participate in
discretionary bonuses, stock option plans, incentive compensation plans, other
customary fringe benefits, vacation and sick leave and disability payments
available to senior management employees. Under the agreements, Messrs.
Mosmiller and Johnson may relinquish their respective positions and accept
reduced responsibilities during the remaining portion of the terms of the
agreements. In such event, they would be entitled to receive an annual salary in
an amount at least equal to 50% of the annual salary they were being paid at the
time they relinquished their respective positions.
The agreements with Messrs. Mosmiller and Johnson provide for salary
reviews by the Loyola Board at least annually. The agreements also provide that
salary increases may be awarded in the sole discretion of the Loyola Board and
that discretionary bonuses may be awarded in an equitable manner with all other
senior management employees. Each agreement is terminated upon death and is
terminable by Loyola or Loyola F.S.B. for "just cause," as defined in the
agreements. If employment is terminated without "just cause," the employee is
entitled to a continuation of his salary for the remaining term
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(including any renewal term) (the "Expiration Date") of the agreement plus such
salary for an additional one-year period, continued payment of certain health,
life, disability and other insurance benefit costs through the Expiration Date,
as well as supplemental retirement benefits in an amount sufficient to provide
the employee with the benefits he would have received had he remained employed
through the Expiration Date. Messrs. Mosmiller and Johnson may terminate their
agreements upon 60 days' prior written notice to the Loyola Board, in which case
they are entitled only to compensation, vested rights, and employee benefits up
to the date of such termination.
Loyola F.S.B. has also entered into employment agreements with Thomas R.
Marvel, James V. McAveney, Charles C. Schmitt and William A. Wycoff. The terms
of the agreements continue until April, 1998. However, upon each anniversary
date of the agreements, the Loyola Board may extend the term for an additional
one-year period. The agreements each provide for a minimum annual salary of
$166,200. The agreements provide for salary review by the Loyola Board at least
annually. The agreements also provide that salary increases may be awarded in
the sole discretion of the Loyola Board and that discretionary bonuses may be
awarded in an equitable manner with all other senior management employees. The
named individuals are also entitled to participate in fringe benefits, vacation
and sick leave and disability payments available to senior management employees.
Each agreement is terminated upon death, and is terminable by Loyola F.S.B. for
"just cause," as defined in such agreements. If employment is terminated without
"just cause," the employee is entitled to a continuation of his salary for the
remaining term (including any renewal term) (the "Expiration Date") of the
agreement plus such salary for an additional one year period, continued payment
of certain health, life, disability and other insurance benefit costs through
the Expiration Date, as well as supplemental retirement benefits in an amount
sufficient to provide the employee with the benefits he would have received had
he remained employed through the Expiration Date. The employee may terminate his
agreement upon 60 days' prior written notice to the Loyola Board, in which case
he is entitled only to compensation, vested rights and employee benefits up to
the date of such termination.
Each of the employment agreements discussed above contains a provision
stating that in the event of termination of employment without the employee's
prior written consent and for a reason other than "just cause,"in connection
with, or within one year after, any "change in control" of Loyola or Loyola
F.S.B., as defined in the agreements, the employee will be paid within 10 days
of such termination in one lump sum payment or, at the employee's election, in
monthly payments over the five-year period following such termination, a sum
equal to the difference between the product of 2.99 times his "base amount" as
defined in Section 280G(b)(3) of the Code, which generally defines "base amount"
as the average taxable compensation he received during the five-year period
immediately prior to the year of the change in control and the sum of any other
"parachute payments" (as defined under the Code) he receives on account of the
change in control but excluding from the calculation of such base amount any
amount includible in the employee's gross income for his 1995 taxable year which
is attributable to (a) the employee's exercise of nonqualified stock options,
(b) any disqualifying disposition of stock acquired from the exercise of any
incentive stock options, and (c) cash received in exchange for any stock option
during such taxable year. The term "change in control" generally refers to the
ownership, holding or power to vote more than 25% of Loyola's or Loyola F.S.B.'s
voting stock, the control of the election of a majority of Loyola's or Loyola
F.S.B.'s directors, the exercise of a controlling influence over the management
or policies of Loyola or Loyola F.S.B. by any person or by persons acting as a
"group" (as defined under the Securities Exchange Act of 1934, as amended, and
the rules promulgated thereunder), or during any period of two consecutive
years, individuals who are continuing directors cease to constitute at least
two-thirds of the Loyola Board or the Board of Directors of Loyola F.S.B.
(provided that any individual whose election or nomination for election was
approved by a vote of at least two-thirds of the continuing directors then in
office shall be considered a continuing director). The agreements also provide
for payment of the amounts described above to the employee in the event of his
voluntary termination of employment following the occurrence of certain
specified events (such as a material reduction in compensation, duties or
responsibilities) in connection with, or within three years after, any change in
control of Loyola or Loyola F.S.B. The aggregate payments which would be made to
Messrs. Mosmiller, Johnson, Marvel, McAveney, Schmitt and Wycoff, assuming the
termination of employment under the foregoing circumstances at the date of this
Proxy Statement/Prospectus, would be approximately $1.6 million, $1.2 million,
$607,000, $612,000, $610,000 and $606,000, respectively.
The following additional senior officers of subsidiaries of Loyola have
employment agreements with the subsidiary identified: Linda A. Stadtler, Loyola
F.S.B.; John A. Nicodemus, Bay State Appraisal Corporation; David F. Noyes,
Loyola F.S.B.; John F. Carroll, III, Mid-Atlantic Financial Group, Inc.; Thomas
M. King, Mid-Atlantic Builders, Inc.; and George F. Adams, Loyola Financial and
Development Corporation. These agreements also provide for severance payments
generally using the formula for calculating the amount of the payment described
in the preceding paragraph.
Crestar will interview current senior management employees of Loyola and
its subsidiaries for available positions in a Baltimore region to be established
by Crestar with a separate management team and a local advisory board of
directors.
27
<PAGE>
Immediately following the Effective Time of the Merger, William A. Wycoff, who
is currently Executive Vice President of Loyola F.S.B., shall have the title of
Maryland Regional President. Mr. Wycoff will receive an increase in compensation
commensurate with the additional responsibilities he will be assuming as
Maryland Regional President.
Crestar will undertake to use its best efforts to continue employment of
all branch personnel of Loyola and its subsidiaries who meet Crestar's
employment qualification requirements, either at existing offices of Loyola and
its subsidiaries or at offices of Crestar or its subsidiaries, in each case,
within reasonable commuting distance. Non-branch personnel of Loyola and its
subsidiaries not offered employment will be interviewed prior to the Effective
Time of the Merger for open positions within offices of Crestar or its
subsidiaries. During the pendency of the Merger, but in no instance later than
two months prior to the Effective Date, Crestar and its subsidiaries will invoke
a hiring freeze in the Baltimore-Washington Metropolitan Area (excluding
employees of any financial institution in such areas acquired by Crestar prior
to the Effective Time) with a view towards filling vacant positions with
employees of Loyola and its subsidiaries not previously offered employment by
Crestar or its subsidiaries. Notwithstanding the hiring freeze, Crestar reserves
the right to fill jobs which it characterizes as "immediately must fill"with
persons other than employees of Loyola or its subsidiaries. Employees of Loyola
as of the Effective Time who are not offered comparable employment by Crestar or
its subsidiaries (the acceptance of a position with Crestar or one of its
banking subsidiaries shall establish that such position is comparable), other
than those who are covered by employment agreements or individual severance
arrangements (who are terminated and paid in accordance with such respective
employment agreements or individual severance arrangements), will be paid
severance pay equal to one week's base pay for each year of service with Loyola
up to a maximum of 20 years service and two weeks' base pay for each year of
service with Loyola in excess of 20 years service, with a minimum of four weeks'
severance pay. Employees of Loyola as of the Effective Time who are not offered
comparable employment by Crestar or its subsidiaries, will be offered
outplacement counseling.
INDEMNIFICATION; LIABILITY INSURANCE. After the Effective Time of the
Merger, Crestar agrees to indemnify and hold harmless each present and former
director and officer of Loyola or its subsidiaries (each an "Indemnified Party")
against any and all costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities incurred in connection
with any and all claims, actions, suits, proceedings or investigations, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters arising out of or in connection with such party's position as, or
actions taken as, a director or officer of Loyola or a subsidiary, at or prior
to the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent permitted by applicable law (and also
advance expenses incurred to the fullest extent permitted by Maryland law and
Loyola's Charter and Bylaws); provided, however, that Crestar's obligation to
provide such indemnification shall not apply to any material litigation,
proceeding or controversy required to be disclosed under the Agreement that is
not disclosed in the Agreement, nor to claims asserted or claimed more than six
years after the Effective Time. Crestar shall not have any obligation to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and nonappealable,
that the indemnification of the Indemnified Party in the manner contemplated
hereby is prohibited by applicable law. For a period of six years after the
Effective Time, Crestar will honor the duties and obligations contained in the
indemnification agreements identified in the Agreement which have been entered
into between Loyola and its directors, chief executive officer, president,
executive vice presidents and secretary.
ADVISORY BOARD OF DIRECTORS FOR BALTIMORE REGION. Crestar Bank MD will
offer all members of the Loyola Board a position on Crestar Bank MD's Baltimore
local advisory board for a term of at least one year commencing at the Effective
Time of the Merger. Members who agree to serve on the Baltimore local advisory
board will receive a retainer of $8,000 per year and a fee of $3,000 per meeting
attended (or a maximum of $20,000 per annum) plus non-local travel expenses. The
Baltimore local advisory board will meet four times during the year. Crestar
agreed to waive its age limitation for advisory directors for the one-year
period.
STOCK OPTIONS
At the Effective Time of the Merger, each outstanding option to purchase
Loyola Common Stock (the "Loyola Options"), other than the Option held by
Crestar, shall be converted into an Exchange Option to purchase such number of
shares of Crestar Common Stock at an exercise price determined as follows: (i)
the number of shares of Crestar Common Stock to be subject to the Exchange
Option shall be equal to the product of (A) the number of shares of Loyola
Common Stock subject to the Loyola Option multiplied by (B) the Exchange Ratio,
the product being rounded, if necessary, up or down, to the nearest whole share;
and (ii) the per share exercise price under the Exchange Option shall be equal
to (A) the per share exercise price under the Loyola Option divided by (B) the
Exchange Ratio, with any fractional cent rounded to the nearest whole cent. The
Exchange Option shall otherwise have the same duration and other terms as the
Loyola Option.
28
<PAGE>
Adjustments to any Loyola Options which are "incentive stock options" under
Section 422 of the Code shall be effected in a manner consistent with Section
424(a) of the Code.
EFFECT ON LOYOLA EMPLOYEE BENEFITS PLANS
As of the Effective Time, Crestar unconditionally agrees to, and agrees to
cause each of its subsidiaries, with respect to which such subsidiary is an
employer of a Contract Employee (as defined below) to honor, without
modification (except in accordance with the terms of such contract, agreement or
commitment), offset or counterclaim (except with the consent of the Contract
Employee), all contracts, agreements and commitments of Loyola or any of its
subsidiaries authorized by Loyola or any of its subsidiaries prior to the date
of the Agreement which apply to any current or former employee or current or
former director of Loyola or any of its subsidiaries, all of which contracts,
agreements and commitments to or with employees are listed in the Agreement,
which have been entered into or authorized prior to the date of the Agreement
(the "Contract Employees"), supplemental retirement benefits and the
Supplemental Executive Retirement Plan. In accordance with the terms of such
contracts, agreements and commitments, Crestar has assumed, subject to the
consummation of the Merger, all of Loyola's and its subsidiaries' obligations
under such contracts, agreements and commitments. With respect to each Contract
Employee, Crestar has expressly agreed that in the event of any dispute under
such employee's contract or under the terms of the Agreement, Crestar shall pay
all reasonable fees and disbursements of such employee's counsel in connection
with all matters as to which such employee is the prevailing party.
All employees of Loyola or its subsidiaries immediately prior to the
Effective Time of the Merger who are employed by Crestar or its subsidiaries
immediately following the Effective Time ("Transferred Employees") will be
covered by Crestar's employee benefit plans as to which they are eligible based
on their length of service with Loyola, compensation, job classification,
position and, where variations are required by local circumstances, location,
including, where applicable, any incentive compensation plan. Notwithstanding
the foregoing, Crestar may determine to continue any of the Loyola benefit plans
for Transferred Employees in lieu of offering participation in Crestar's benefit
plans providing similar benefits (e.g., medical and hospitalization benefits),
to terminate any such Loyola benefit plans, or to merge any such Loyola benefit
plans with Crestar's benefit plans. Except as prohibited by law, Transferred
Employees' service with Loyola and its subsidiaries which is recognized by the
applicable Loyola benefit plan at the Effective Time shall be recognized as
service with Crestar for purposes of eligibility to participate (including level
of participation but not for purposes of benefit accrual) and vesting, if
applicable, under the corresponding Crestar benefit plan, if any, subject to
applicable break-in-service rules, provided, however, that such service with
Loyola and its subsidiaries shall not be recognized for purposes of determining
a Transferred Employee's eligibility for retiree medical and life insurance
benefits under Crestar's benefit plans unless such Transferred Employee
completes twelve months of continuous service with Crestar or its subsidiaries
immediately following the Effective Time and provided further that retiree
medical shall be available only under Crestar's defined dollar retiree health
plan.
Crestar has agreed that any preexisting condition, limitation or exclusion
in its health plans shall not apply to Transferred Employees or their covered
dependents who are covered under a medical or hospitalization indemnity plan
maintained by Loyola or its subsidiaries at the Effective Time and who then
change that coverage to Crestar's medical or hospitalization indemnity health
plan at the time such Transferred Employees are first given the option to enroll
in Crestar's health plans.
Crestar has agreed that immediately following the Effective Time, all
participants who then have accounts in the 401(k) profit sharing plan maintained
by Loyola (the "401(k) Plan") shall be fully vested in their account balances.
Crestar, at its election, may continue the 401(k) Plan for the benefit of
Transferred Employees (as such plan may be amended as of the Effective Time to
provide current contributions and eligibility provisions identical to those
under Crestar's Employees' Thrift and Profit Sharing Plan (the "Thrift Plan")),
may merge the 401(k) Plan into the Thrift Plan or any other defined contribution
plan maintained by Crestar, may cease additional benefit accruals under and
contributions to the 401(k) Plan and continue to hold the assets of such Plan
until they are distributable in accordance with its terms or may terminate the
401(k) Plan as permitted under applicable provisions of the Code. In the event
of a merger of the 401(k) Plan into the Thrift Plan or other defined
contribution plan maintained by Crestar or other transfers of a Transferred
Employee to the Thrift Plan or other defined contribution plan, the Thrift Plan
or other defined contribution plan will recognize for purposes of eligibility to
participate, early retirement, and vesting, all Transferred Employees' service
which is recognized under the 401(k) Plan, subject to applicable
break-in-service rules. Loyola and its subsidiaries have agreed to cooperate
with Crestar in implementing any decision under the Agreement with respect to
the 401(k) Plan.
The Retirement Plan for Employees of Crestar Financial Corporation and
Affiliated Corporations (the "Crestar Retirement Plan") will recognize for
purposes of eligibility to participate, vesting, and eligibility for early
retirement (including early retirement under the "rule of 85"), but not for
benefit accrual purposes, all Transferred Employees' service which is
29
<PAGE>
recognized under the Pension Plan of Loyola Federal Savings Bank (the "Loyola
Pension Plan"), subject to applicable break-in-service rules. Crestar, at its
option, may continue the Loyola Pension Plan and pay out or annuitize benefits,
or may merge the Loyola Pension Plan into the Crestar Retirement Plan. If the
Loyola Pension Plan is terminated, or if accruals are suspended or the Loyola
Pension Plan is merged into the Crestar Retirement Plan, or in the event of
other transfers of a Transferred Employee to the Crestar Retirement Plan, each
Transferred Employee who becomes a participant in the Crestar Retirement Plan
shall begin to accrue benefits under the Crestar Retirement Plan on and after
the date of such merger, suspension, termination or transfer in accordance with
the terms of the Crestar Retirement Plan.
Loyola has agreed to amend the vacation plan or policy applicable to
employees of Loyola and its subsidiaries, effective no later than January 1,
1996, to provide identical benefits and accrual of vacation in accordance with
Crestar's vacation policy. Effective no later than January 1, 1996, Loyola has
agreed to amend the cafeteria plan covering employees of Loyola and its
subsidiaries to (i) eliminate the payment of cash or other compensation or
benefits to an employee who waives medical, dental or vision benefits and (ii)
eliminate any provision allowing the surrender or cancellation of vacation in
lieu of additional cash or other compensation or benefits. Loyola has agreed not
to adopt, or to amend the cafeteria plan covering employees of Loyola or its
subsidiaries to provide health care flexible spending accounts.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Crestar and Loyola have received opinions of Hunton & Williams, counsel to
Crestar, and Piper & Marbury L.L.P., counsel to Loyola, to the effect that for
federal income tax purposes: (i) the Merger and the Bank Merger each will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Code; (ii) neither Loyola nor Crestar will recognize any taxable gain or loss
upon consummation of the Merger; (iii) none of Loyola F.S.B., Crestar Bank MD or
Crestar will recognize any taxable gain or loss upon consummation of the Bank
Merger (but Loyola F.S.B. or Crestar Bank MD may be required to include in
income certain amounts as a result of the termination of any bad debt reserve
maintained by Loyola F.S.B. for federal income tax purposes and other possible
required changes in tax accounting methods); and (iv) the Merger will result in
the tax consequences summarized below for Loyola stockholders who receive
Crestar Common Stock in exchange for Loyola Common Stock pursuant to the Merger.
Such opinions have been filed as exhibits to the Registration Statement. Receipt
of substantially the same opinions as of the Effective Date is a condition to
consummation of the Merger. The opinions of Hunton & Williams and Piper &
Marbury L.L.P. are based on, and the opinions to be given as of the Effective
Date will be based on, certain customary assumptions and representations
regarding, among other things, the lack of previous dealings between Loyola and
Crestar, the existing and future ownership of Loyola capital stock and Crestar
capital stock and the future business plans for Crestar.
A Loyola stockholder who receives solely Crestar Common Stock (including
the associated Rights) in exchange for his shares of Loyola Common Stock will
not recognize any gain or loss on the exchange. If a stockholder receives
Crestar Common Stock and cash in lieu of a fractional share of Crestar Common
Stock, the stockholder will recognize taxable gain or loss solely with respect
to such cash as if the fractional share had been received and then redeemed for
the cash. A stockholder will have an aggregate tax basis in his shares of
Crestar Common Stock (including any fractional share interest) received in the
Merger equal to his tax basis in the shares of Loyola Common Stock exchanged
therefor. A stockholder's holding period for shares of Crestar Common Stock
(including any fractional share interest) received in the Merger will include
his holding period for the shares of Loyola Common Stock exchanged therefor if
they are held as a capital asset at the Effective Time of the Merger.
THE PRECEDING DISCUSSION SUMMARIZES FOR GENERAL INFORMATION THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO LOYOLA STOCKHOLDERS. IT DOES
NOT DISCUSS ALL POTENTIALLY RELEVANT FEDERAL INCOME TAX MATTERS OR CONSEQUENCES
TO ANY FOREIGN OR OTHER STOCKHOLDERS SUBJECT TO SPECIAL TAX TREATMENT, NOR DOES
IT DISCUSS, AND NO OPINION HAS BEEN REQUESTED REGARDING, ANY STATE OR LOCAL TAX
CONSEQUENCES OF THE MERGER. THE TAX CONSEQUENCES TO ANY PARTICULAR STOCKHOLDER
MAY DEPEND ON THE STOCKHOLDER'S INDIVIDUAL CIRCUMSTANCES. LOYOLA STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO FEDERAL, STATE, AND
LOCAL TAX CONSEQUENCES.
30
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
The following Pro Forma Condensed Financial Information and explanatory
notes are presented to show the impact of the Merger on Crestar's and Loyola's
historical financial position and results of operations. The Merger is reflected
in the Pro Forma Condensed Financial Information under the pooling-of-interests
method of accounting.
The Pro Forma Condensed Statement of Financial Condition presented assumes
that the Merger was consummated on June 30, 1995 and the Pro Forma Condensed
Statements of Operations assume that the Merger was consummated at the beginning
of each period presented.
The pro forma earnings are not necessarily indicative of the results of
operations had the Merger occurred at the beginning of each period presented,
nor are they necessarily indicative of the results of future operations.
PRO FORMA CONDENSED STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CRESTAR &
ADJUSTMENTS LOYOLA
INCREASE PRO FORMA
CRESTAR LOYOLA (DECREASE) COMBINED
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Cash and due from banks......................................... $ 792,741 $ 22,737 $ $ 815,478
Securities held to maturity..................................... 823,555 271,776 1,095,331
Securities available for sale................................... 1,482,677 37,109 1,519,786
Money market investments........................................ 518,275 59,279 577,554
Mortgage loans held for sale.................................... 351,982 65,426 417,408
Loans, net of unearned income................................... 9,796,143 2,067,928 11,864,071
Less: Allowance for loan losses.............................. (222,882) (14,835) (2,100)(1) (239,817)
Loans -- net............................................... 9,573,261 2,053,093 11,624,254
Premises and equipment, net..................................... 333,408 25,091 358,499
Intangible assets -- net........................................ 160,348 8,927 169,275
Foreclosed properties -- net.................................... 13,631 6,911 (878)(1) 19,664
Other assets.................................................... 581,981 29,343 611,324
Total Assets............................................... $14,631,859 $2,579,692 $ (2,978) $17,208,573
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits.......................... $ 2,218,499 $ 31,034 $ $ 2,249,533
Interest bearing deposits.................................... 8,898,167 1,487,242 10,385,409
Total deposits............................................. 11,116,666 1,518,276 12,634,942
Short-term borrowings............................................. 1,413,719 484,850 1,898,569
Other liabilities................................................. 487,893 79,710 23,554(1) 591,157
Long-term debt.................................................... 384,577 321,118 705,695
Total Liabilities.......................................... 13,402,855 2,403,954 23,554 15,830,363
Shareholders' Equity
Preferred stock, authorized 2,000,000 shares, none issued....... -- -- -- --
Common stock, $5 par value, authorized 100,000,000 shares;
outstanding 37,733,761 actual shares and 42,925,185 pro forma
combined shares.............................................. 188,669 -- 25,957(2) 214,626
Common stock, $.10 par value, authorized 50,000,000 shares;
outstanding 8,111,600 shares................................. -- 811 (811)(2) --
Capital surplus................................................... 342,597 44,258 (25,146)(2) 361,709
Retained earnings................................................. 701,029 130,669 (26,532)(1) 805,166
Net unrealized loss on securities available for sale.............. (3,291) -- -- (3,291)
Total Shareholders' Equity................................. 1,229,004 175,738 (26,532) 1,378,210
Total Liabilities and Shareholders' Equity................. $14,631,859 $2,579,692 $ (2,978) $17,208,573
</TABLE>
See Notes to Pro Forma Condensed Financial Information.
31
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CRESTAR &
LOYOLA
PRO FORMA
CRESTAR LOYOLA COMBINED (4)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Interest Income
Interest and fees on loans......................... $421,791 $81,527 $503,318
Interest and dividends on securities............... 74,341 6,844 81,185
Other interest income.............................. 19,836 4,401 24,237
Total interest income......................... 515,968 92,772 608,740
Interest Expense
Interest on deposits............................... 160,570 34,394 194,964
Interest on short-term borrowings.................. 34,578 13,658 48,236
Interest on long-term debt......................... 16,034 9,249 25,283
Total interest expense........................ 211,182 57,301 268,483
Net interest income
Net interest income................................ 304,786 35,471 340,257
Provision for loan losses.......................... 23,600 437 24,037
Net interest income after provision for loan losses.. 281,186 35,034 316,220
Noninterest income
Service charges on deposit accounts................ 43,356 713 44,069
Trust and investment advisory income............... 28,689 -- 28,689
Securities losses.................................. (3,460) -- (3,460)
Other noninterest income........................... 65,637 4,845 70,482
Total noninterest income...................... 134,222 5,558 139,780
Noninterest expense
Personnel expense.................................. 152,624 13,235 165,859
Occupancy expense, net............................. 21,576 2,413 23,989
Equipment expense.................................. 13,916 843 14,759
Other noninterest expense.......................... 87,357 9,957 97,314
Total noninterest expense..................... 275,473 26,448 301,921
Net income
Income before income taxes......................... 139,935 14,144 154,079
Income tax expense................................. 46,960 5,695 52,655
Net income......................................... $ 92,975 $ 8,449 $101,424
Per common share data (2)
Net income per share:
Primary......................................... $ 2.44 $ 0.97 $ 2.32
Fully diluted................................... $ 2.43 $ 0.97 $ 2.31
Weighted average shares outstanding:
Primary......................................... 38,134,000 8,714,000 43,711,000
Fully diluted................................... 38,198,000 8,745,000 43,795,000
</TABLE>
See Notes to Pro Forma Condensed Financial Information
32
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
CRESTAR &
LOYOLA
PRO FORMA
CRESTAR LOYOLA COMBINED (4)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Interest Income
Interest and fees on loans............................ $323,988 $65,092 $389,080
Interest and dividends on securities.................. 97,730 7,364 105,094
Other interest income................................. 23,684 5,207 28,891
Total interest income............................ 445,402 77,663 523,065
Interest Expense
Interest on deposits.................................. 130,899 27,772 158,671
Interest on short-term borrowings..................... 19,993 6,760 26,753
Interest on long-term debt............................ 8,915 10,003 18,918
Total interest expense........................... 159,807 44,535 204,342
Net interest income
Net interest income................................... 285,595 33,128 318,723
Provision for loan losses............................. 18,882 360 19,242
Net interest income after provision for loan losses... 266,713 32,768 299,481
Noninterest income
Service charges on deposit accounts................... 41,895 474 42,369
Trust and investment advisory income.................. 29,444 -- 29,444
Securities losses..................................... (1,767) -- (1,767)
Other noninterest income.............................. 58,542 5,910 64,452
Total noninterest income......................... 128,114 6,384 134,498
Noninterest expense
Personnel expense..................................... 150,789 13,279 164,068
Occupancy expense, net................................ 20,855 2,333 23,188
Equipment expense..................................... 11,997 876 12,873
Other noninterest expense............................. 87,618 10,854 98,472
Total noninterest expense........................ 271,259 27,342 298,601
Net income
Income before income taxes............................ 123,568 11,810 135,378
Income tax expense.................................... 40,478 4,679 45,157
Net income............................................ $ 83,090 $ 7,131 $ 90,221
Per common share data (2)
Net income per share:
Primary............................................ $ 2.19 $ 0.83 $ 2.08
Fully diluted...................................... $ 2.19 $ 0.82 $ 2.08
Weighted average shares outstanding:
Primary............................................ 37,901,000 8,626,000 43,421,000
Fully diluted...................................... 37,904,000 8,654,000 43,442,000
</TABLE>
See Notes to Pro Forma Condensed Financial Information
33
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
CRESTAR &
LOYOLA
PRO FORMA
CRESTAR LOYOLA COMBINED (4)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Interest Income
Interest and fees on loans............................. $692,710 $133,072 $ 825,782
Interest and dividends on securities................... 183,997 22,277 206,274
Other interest income.................................. 49,327 6,062 55,389
Total interest income............................. 926,034 161,411 1,087,445
Interest Expense
Interest on deposits................................... 276,542 57,915 334,457
Interest on short-term borrowings...................... 48,169 16,667 64,836
Interest on long-term debt............................. 19,507 19,485 38,992
Total interest expense............................ 344,218 94,067 438,285
Net interest income
Net interest income.................................... 581,816 67,344 649,160
Provision for loan losses.............................. 29,682 660 30,342
Net interest income after provision for loan losses.... 552,134 66,684 618,818
Noninterest income
Service charges on deposit accounts.................... 82,851 1,063 83,914
Trust and investment advisory income................... 55,609 -- 55,609
Securities losses...................................... (10,776) -- (10,776)
Other noninterest income............................... 126,586 11,610 138,196
Total noninterest income.......................... 254,270 12,673 266,943
Noninterest expense
Personnel expense...................................... 303,580 26,364 329,944
Occupancy expense, net................................. 42,231 4,901 47,132
Equipment expense...................................... 25,339 1,755 27,094
Other noninterest expense.............................. 180,558 21,272 201,830
Total noninterest expense......................... 551,708 54,292 606,000
Net income
Income before income taxes............................. 254,696 25,065 279,761
Income tax expense..................................... 85,617 10,026 95,643
Net income............................................. $169,079 $ 15,039 $ 184,118
Per common share data (2)
Net income per share:
Primary............................................. $ 4.47 $ 1.74 $ 4.24
Fully diluted....................................... $ 4.47 $ 1.73 $ 4.24
Weighted average shares outstanding:
Primary.............................................37,864,000 8,646,000 43,398,000
Fully diluted.......................................37,867,000 8,660,000 43,409,000
</TABLE>
See Notes to Pro Forma Condensed Financial Information
34
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
CRESTAR &
LOYOLA
PRO FORMA
CRESTAR LOYOLA COMBINED (4)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Interest Income
Interest and fees on loans............................... $575,085 $116,637 $691,722
Interest and dividends on securities..................... 208,827 14,937 223,764
Other interest income...................................... 48,717 9,016 57,733
Total interest income............................... 832,629 140,590 973,219
Interest Expense
Interest on deposits..................................... 244,341 58,322 302,663
Interest on short-term borrowings........................ 43,787 4,600 48,387
Interest on long-term debt............................... 17,489 15,764 33,253
Total interest expense.............................. 305,617 78,686 384,303
Net interest income
Net interest income...................................... 527,012 61,904 588,916
Provision for loan losses................................ 48,775 3,085 51,860
Net interest income after provision for loan losses...... 478,237 58,819 537,056
Noninterest income
Service charges on deposit accounts...................... 79,419 909 80,328
Trust and investment advisory income..................... 57,440 -- 57,440
Securities gains......................................... 2,237 -- 2,237
Other noninterest income................................. 109,169 10,614 119,783
Total noninterest income............................ 248,265 11,523 259,788
Noninterest expense
Personnel expense........................................ 262,626 23,260 285,886
Occupancy expense, net................................... 38,359 4,467 42,826
Equipment expense........................................ 24,122 1,684 25,806
Other noninterest expense................................ 197,915 20,506 218,421
Total noninterest expense........................... 523,022 49,917 572,939
Net income
Income before income taxes............................... 203,480 20,425 223,905
Income tax expense....................................... 62,989 8,160 71,149
Net income............................................... 140,491 12,265 152,756
Preferred dividend requirement........................... 2,221 -- 2,221
Net income applicable to common shares................... $138,270 $ 12,265 $150,535
Per common share data (2)
Net income per share:
Primary............................................... $ 3.68 $ 1.42 $ 3.49
Fully diluted......................................... $ 3.67 $ 1.42 $ 3.49
Weighted average shares outstanding:
Primary............................................... 37,587,000 8,620,000 43,103,000
Fully diluted......................................... 37,665,000 8,630,000 43,189,000
</TABLE>
See Notes to Pro Forma Condensed Financial Information
35
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1992
(UNAUDITED)
<TABLE>
<CAPTION>
CRESTAR &
LOYOLA
PRO FORMA
CRESTAR LOYOLA COMBINED (4)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Interest Income
Interest and fees on loans................................. $617,686 $131,100 $ 748,786
Interest and dividends on securities....................... 179,902 7,974 187,876
Other interest income...................................... 66,089 14,169 80,258
Total interest income................................. 863,677 153,243 1,016,920
Interest Expense
Interest on deposits....................................... 326,240 76,980 403,220
Interest on short-term borrowings.......................... 38,096 121 38,217
Interest on long-term debt................................. 17,197 10,066 27,263
Total interest expense................................ 381,533 87,167 468,700
Net interest income
Net interest income........................................ 482,144 66,076 548,220
Provision for loan losses.................................. 99,242 7,065 106,307
Net interest income after provision for loan losses........ 382,902 59,011 441,913
Noninterest income
Service charges on deposit accounts........................ 73,944 789 74,733
Trust and investment advisory income....................... 51,007 -- 51,007
Securities gains........................................... 3,563 2,900 6,463
Other noninterest income................................... 89,877 11,785 101,662
Total noninterest income.............................. 218,391 15,474 233,865
Noninterest expense
Personnel expense.......................................... 233,838 22,891 256,729
Occupancy expense, net..................................... 35,654 4,275 39,929
Equipment expense.......................................... 24,011 1,655 25,666
Other noninterest expense.................................. 208,300 26,799 235,099
Total noninterest expense............................. 501,803 55,620 557,423
Net income (3)
Income before income taxes................................. 99,490 18,865 118,355
Income tax expense......................................... 19,689 7,460 27,149
Net income................................................. 79,801 11,405 91,206
Preferred dividend requirement............................. 2,475 -- 2,475
Net income applicable to common shares..................... $ 77,326 $ 11,405 $ 88,731
Per common share data (2) (3)
Net income per common share:
Primary................................................. $ 2.32 $ 1.30 $ 2.28
Fully diluted........................................... $ 2.32 $ 1.29 $ 2.27
Weighted average shares outstanding:
Primary................................................. 33,286,000 8,776,000 38,903,000
Fully diluted........................................... 33,369,000 8,811,000 39,008,000
</TABLE>
See Notes to Pro Forma Condensed Financial Information
36
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
(1) Certain material, non-recurring adjustments of approximately $25
million, on an after-tax basis, will be recorded in conjunction with
the Merger. These adjustments include approximately $11 million for the
tax liability associated with the tax bad debt reserves of Loyola
(which becomes payable upon the merger of Loyola F.S.B. into a bank),
approximately $5 million for the settlement of obligations under
existing employment contracts, severance pay for involuntary
terminations, early retirement and related employee benefits;
approximately $3 million associated with branch closings; and
approximately $6 million of expenses related to effecting the Merger.
Additional non-recurring adjustments include an increase in the
allowance for loan losses of approximately $2 million and an increase
in the reserve for foreclosed properties of approximately $1 million
(resulting in an after-tax charge of approximately $2 million). Such
adjustments will be taken to recognize Crestar's accelerated
disposition strategy with respect to specific loans and foreclosed
properties. The impact of each of the adjustments has been reflected in
the Proforma Condensed Statement of Financial Condition as of June 30,
1995. The loan loss provision and write-down of foreclosed properties
ultimately recorded will be based on the facts, circumstances and
external events operative at the time, and may be more or less than the
amounts reflected in the pro forma condensed financial information.
(2) Based on an Exchange Ratio of 0.640 for conversion of Loyola Common
Stock into Crestar Common Stock. The Exchange Ratio is based on the
August 14, 1995 closing price of Crestar Common Stock of $51.75 per
share. On a pro forma basis, net income per share can vary depending on
the final calculation of the Exchange Ratio. See "Summary --
Comparative Per Share Data" for disclosure of the possible ranges of
pro forma net income per common share for the six months ended June 30,
1995 and 1994, and for the years ended December 31, 1994, 1993 and
1992. See "Summary -- The Exchange Ratio" and "The Merger --
Determination of Exchange Ratio and Exchange for Crestar Common Stock"
for additional discussion regarding calculation of the Exchange Ratio.
At June 30, 1995, Crestar and Loyola had 37,733,761 and 8,111,600
common shares outstanding, respectively.
(3) Net income and primary and fully diluted net income per share for the
year ended December 31, 1992 does not include the cumulative effect of
a change in accounting principle resulting from the adoption by Loyola
effective January 1, 1992 of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
cumulative effect of adopting SFAS 109 on Loyola's net income, primary
net income per share and fully diluted net income per share was an
increase of $2.8 million, $0.31 and $0.31, respectively, for the year
ended December 31, 1992.
(4) No pro forma adjustments are necessary in the Pro Forma Condensed
Statements of Operations.
37
<PAGE>
CAPITALIZATION
The following table sets forth (i) the unaudited historical capitalization
of Crestar as of June 30, 1995, (ii) the unaudited historical capitalization of
Loyola as of June 30, 1995 and (iii) the unaudited pro forma capitalization of
Crestar and Loyola assuming the merger had been consummated on June 30, 1995.
For additional information, reference is made to the historical consolidated
financial statements and notes thereto of Crestar, incorporated by reference
herein, the historical consolidated statements and notes thereto of Loyola, also
incorporated by reference herein, and the "Notes to Capitalization" which
follow.
CAPITALIZATION
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CRESTAR &
LOYOLA
PRO FORMA
CRESTAR LOYOLA ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Long-term debt and capital lease obligations:
Crestar:
8 3/4% Subordinated notes due 2004................................. $ 149,634 $ 149,634
8 1/4% Subordinated notes due 2002................................. 125,000 125,000
8 5/8% Subordinated notes due 1998................................. 49,971 49,971
7-8 1/4% Mortgage indebtedness maturing through 2009............... 9,742 9,742
8 5/8-14 3/8% Capital lease obligations maturing through 2006...... 1,215 1,215
4 3/8-8% Federal Home Loan Bank obligations payable through 2008... 18,841 18,841
6 1/4%-11 1/4% Collateralized mortgage obligation bonds maturing
through 2019..................................................... 30,174 30,174
Loyola:
4 -7 1/4% Federal Home Loan Bank obligations payable through
2014............................................................. 321,118 321,118
Total long-term debt and capital lease obligations............... 384,577 321,118 -- 705,695
Shareholders' Equity:
Crestar:
Preferred stock, authorized 2,000,000 shares, none issued.......... -- --
Common stock, $5 par value, authorized 100,000,000 shares;
outstanding 37,733,761 shares actual and 42,925,185 shares
pro forma combined............................................... 188,669 25,957(1) 214,626
Capital surplus.................................................... 342,597 19,112(1) 361,709
Retained earnings.................................................. 701,029 130,669(1) 803,413
(28,285)(2)
Net unrealized loss on securities available for sale............... (3,291) (3,291)
Loyola:
Common stock, $.10 par value, authorized 50,000,000 shares,
outstanding 8,111,600 shares..................................... 811 (811)(1)
Paid-in capital.................................................... 44,258 (44,258)(1)
Retained earnings.................................................. 130,669 (130,669)(1)
Net unrealized gain (loss) on securities available for sale........ -- --
Total stockholders' equity....................................... 1,229,004 175,738 (28,285) 1,376,457
Total long-term debt, capital lease obligations and shareholders'
equity........................................................ $1,613,581 $496,856 $ (28,285) $2,082,152
</TABLE>
38
<PAGE>
NOTES TO CAPITALIZATION
(UNAUDITED)
(1) Based on an Exchange Ratio of 0.640 for conversion of Loyola Common
Stock into Crestar Common Stock. See "Summary -- The Exchange Ratio"
and "The Merger -- Determination of Exchange Ratio and Exchange for
Crestar Common Stock" for additional discussion regarding calculation
of the Exchange Ratio. Loyola common shares outstanding are assumed to
be converted into 5,191,424 shares of Crestar Common Stock, having a
par value of $5 per share.
(2) Certain material, non-recurring adjustments of approximately $25
million, on an after-tax basis, will be recorded in conjunction with
the Merger. These adjustments include approximately $11 million for the
tax liability associated with the tax bad debt reserves of Loyola
(which becomes payable upon the merger of Loyola F.S.B. into a bank),
approximately $5 million for the settlement of obligations under
existing employment contracts, severance pay for involuntary
terminations, early retirement and related employee benefits;
approximately $3 million associated with branch closings; and
approximately $6 million of expenses related to effecting the Merger.
Additional non-recurring adjustments include an increase in the
allowance for loan losses of approximately $2 million and an increase
in the reserve for foreclosed properties of approximately $1 million
(resulting in an after-tax charge of approximately $2 million). Such
adjustments will be taken to recognize Crestar's accelerated
disposition strategy with respect to specific loans and foreclosed
properties. The impact of each of the adjustments described above has
been reflected in the Pro Forma Condensed Statement of Financial
Condition as of June 30, 1995, and the Crestar and Loyola pro forma
combined capitalization as of June 30, 1995. The loan loss provision
and write-down of foreclosed properties ultimately recorded will be
based on the facts, circumstances and external events operative at the
time, and may be more or less than the amounts detailed above.
39
<PAGE>
PRO FORMA CONDENSED FINANCIAL
INFORMATION -- CRESTAR, LOYOLA AND CHASE MD
The following Pro Forma Condensed Financial Information and explanatory
notes are presented to show the impact of the Merger on Crestar's and Loyola's
historical financial position, including the impact of Crestar's pending
purchase of selected assets and liabilities of Chase MD. The Merger of Crestar
and Loyola is presented under the pooling-of-interests method of accounting, and
the purchase of selected assets and liabilities of Chase MD is presented under
the purchase method of accounting.
The Pro Forma Condensed Statement of Financial Condition -- Crestar, Loyola
and Chase MD assumes that the Merger of Crestar and Loyola, and the purchase of
selected assets and assumption of specified liabilities of Chase MD by Crestar,
was consummated on June 30, 1995. The historical statements of operations for
Chase MD are not material in comparison to the historical statements of
operations for Crestar, or in comparison to the pro forma statements of
operations for Crestar and Loyola combined.
PRO FORMA CONDENSED STATEMENT OF FINANCIAL CONDITION --
CRESTAR, LOYOLA AND CHASE MD
JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION> CRESTAR,
CRESTAR & PURCHASE LOYOLA &
LOYOLA OF CHASE MD CHASE MD
ADJUSTMENTS PRO FORMA BY CRESTAR PRO FORMA
CRESTAR LOYOLA INCR(DECR) COMBINED (3) COMBINED
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Assets
Cash and due from banks....................... $ 792,741 $ 22,737 $ $ 815,478 $ 9,310 $ 824,788
Securities held to maturity................... 823,555 271,776 1,095,331 1,095,331
Securities available for sale................. 1,482,677 37,109 1,519,786 1,519,786
Money market investments...................... 518,275 59,279 577,554 148,210 725,764
Mortgage loans held for sale.................. 351,982 65,426 417,408 417,408
Loans, net of unearned income................. 9,796,143 2,067,928 11,864,071 261,102 12,125,173
Less: Allowance for loan losses............. (222,882) (14,835) (2,100)(1) (239,817) (3,000) (242,817)
Loans -- net................................ 9,573,261 2,053,093 11,624,254 258,102 11,882,356
Premises and equipment, net................... 333,408 25,091 358,499 445 358,944
Intangible assets -- net...................... 160,348 8,927 169,275 38,651 207,926
Foreclosed properties -- net.................. 13,631 7,328 (878)(1) 20,081 20,081
Other assets.................................. 581,981 28,926 610,907 610,907
Total Assets.............................. $14,631,859 $2,579,692 $ (2,978) $17,208,573 $ 454,718 $17,663,291
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand deposits......... $ 2,218,499 $ 31,034 $ $ 2,249,533 $ 19,693 $ 2,269,226
Interest bearing deposits................... 8,898,167 1,487,242 10,385,409 414,017 10,799,426
Total deposits............................ 11,116,666 1,518,276 12,634,942 433,710 13,068,652
Short-term borrowings......................... 1,413,719 484,850 1,898,569 21,008 1,919,577
Other liabilities............................. 487,893 79,710 23,554 (1) 591,157 591,157
Long-term debt................................ 384,577 321,118 705,695 705,695
Total Liabilities......................... 13,402,855 2,403,954 23,554 15,830,363 454,718 16,285,081
Shareholders' Equity
Preferred stock, authorized 2,000,000 shares,
none issued................................. -- -- -- -- -- --
Common stock, $5 par value, authorized
100,000,000 shares; outstanding 37,733,761
actual shares and 42,925,185 pro forma
combined shares............................. 188,669 -- 25,957 (2) 214,626 -- 214,626
Common stock, $.10 par value, authorized
50,000,000 shares; outstanding 8,111,600
shares...................................... -- 811 (811)(2) -- -- --
Capital surplus................................. 342,597 44,258 (25,146)(2) 361,709 -- 361,709
Retained earnings............................... 701,029 130,669 (26,532)(1) 805,166 -- 805,166
Net unrealized loss on securities available for
sale.......................................... (3,291) -- -- (3,291) -- (3,291)
Total Shareholders' Equity................ 1,229,004 175,738 (26,532) 1,378,210 -- 1,378,210
Total Liabilities and Shareholders' Equity...... $14,631,859 $2,579,692 $ (2,978) $17,208,573 $ 454,718 $17,663,291
</TABLE>
See Notes to Pro Forma Condensed Financial Information -- Crestar, Loyola and
Chase MD.
40
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION --
CRESTAR, LOYOLA AND CHASE MD
(UNAUDITED)
(1) Certain material, non-recurring adjustments of approximately $25
million, on an after-tax basis, will be recorded in conjunction with
the Merger of Crestar with Loyola. These adjustments include
approximately $11 million for the tax liability associated with the tax
bad debt reserves of Loyola (which becomes payable upon the merger of
Loyola F.S.B. into a bank), approximately $5 million for the settlement
of obligations under existing employment contracts, severance pay for
involuntary terminations, early retirement and related employee
benefits; approximately $3 million associated with branch closings; and
approximately $6 million of expenses related to effecting the Merger.
Additional non-recurring adjustments include an increase in the
allowance for loan losses of approximately $2 million and an increase
in the reserve for foreclosed properties of approximately $1 million
(resulting in an after-tax charge of approximately $2 million). Such
adjustments will be taken to recognize Crestar's accelerated
disposition strategy with respect to specific loans and foreclosed
properties. The impact of each of the adjustments has been reflected in
the Pro Forma Condensed Statement of Financial Condition -- Crestar,
Loyola and Chase MD as of June 30, 1995. The loan loss provision and
write-down of foreclosed properties ultimately recorded will be based
on the facts, circumstances and external events operative at the time,
and may be more or less than the amounts reflected in the pro forma
condensed financial information.
(2) Based on an Exchange Ratio of 0.640 for conversion of Loyola Common
Stock into Crestar Common Stock. The Exchange Ratio is based on the
August 14, 1995 closing price of Crestar Common Stock of $51.75 per
share. See "Summary -- The Exchange Ratio" and "The
Merger -- Determination of Exchange Ratio and Exchange for Crestar
Common Stock" for additional discussion regarding calculation of the
Exchange Ratio. At June 30, 1995, Crestar and Loyola had 37,733,761 and
8,111,600 common shares outstanding, respectively.
(3) Per the terms of the purchase agreement between Crestar MD and Chase
MD, Crestar MD will purchase selected assets and assume selected
liabilities of Chase MD in a transaction expected to be completed in
the fourth quarter of 1995. The assumption of net liabilities by
Crestar will result in receipt of approximately $148.2 million from
Chase MD (excluding cash balances on hand at Chase MD branches of
approximately $9.3 million), that is reflected as an increase to money
market investments in the Pro Forma Condensed Statement of Financial
Condition - Crestar, Loyola and Chase MD. The statement also reflects
the estimated purchase premium for the net liabilities to be assumed by
Crestar MD, recorded as an intangible asset, of $38.7 million.
41
<PAGE>
BUSINESS OF CRESTAR
Crestar is the holding company for Crestar Bank, Crestar Bank N.A. of
Washington, D.C. and Crestar Bank MD of Maryland (collectively, the "Bank
Subsidiaries"). At June 30, 1995, Crestar had approximately $14.6 billion in
total assets, $11.1 billion in total deposits and $1.2 billion in total
stockholders' equity.
In 1963, six Virginia banks combined to form United Virginia Bankshares
Incorporated ("UVB"), a bank holding company formed under the Bank Holding
Company Act of 1956 (the "BHCA"). UVB (parent company of United Virginia Bank)
extended its operations into the District of Columbia by acquiring NS&T Bank,
N.A. on December 27, 1985 and into Maryland by acquiring Bank of Bethesda on
April 1, 1986. On September 1, 1987, UVB became Crestar Financial Corporation
and its bank subsidiaries adopted their present names.
Crestar serves customers through a network of 338 banking offices and 289
automated teller machines (as of June 30, 1995). The Bank Subsidiaries offer a
broad range of banking services, including various types of deposit accounts and
instruments, commercial and consumer loans, trust and investment management
services, bank credit cards and international banking services. Crestar's
subsidiary, Crestar Insurance Agency, Inc., offers a variety of personal and
business insurance products. Securities brokerage and investment banking
services, including mutual funds and annuities, are offered by Crestar's
subsidiary, Crestar Securities Corporation. Mortgage loan origination, servicing
and wholesale lending are offered by Crestar Mortgage Corporation, and
investment advisory services are offered by Capitoline Investment Services
Incorporated, both of which are subsidiaries of Crestar Bank. These various
Crestar subsidiaries provide banking and non-banking services throughout
Virginia, Maryland and Washington, D.C., as well as certain non-banking services
to customers in other states.
The executive offices of Crestar are located in Richmond, Virginia at
Crestar Center, 919 East Main Street. Crestar's Operations Center is located in
Richmond. Regional headquarters are located in Norfolk and Roanoke, Virginia and
in Washington, D.C.
RECENT DEVELOPMENTS
RECENT ACQUISITIONS. On March 24, 1995, Crestar acquired TideMark Bancorp,
Inc., headquartered in Newport News, Virginia. Approximately $400 million in
total assets, $170 million in loans, $240 million in total deposits and three
branches were initially added to Crestar's existing branch network. Crestar
issued 648 thousand shares of Crestar Common Stock and made cash payments of
approximately $13 million in the transaction.
On January 20, 1995, Crestar acquired Jefferson Savings & Loan Association,
F.A., headquartered in Warrenton, Virginia. Approximately $300 million in total
assets, $200 million in loans, $250 million in deposits, and five branches were
initially added to Crestar's existing branch network. Crestar issued 471
thousand shares of Crestar Common Stock and made cash payments of approximately
$5 million in the transaction.
On January 20, 1995, Crestar acquired Independent Bank, headquartered in
Manassas, Virginia. Approximately $85 million in total assets, $50 million in
loans, $70 million in total deposits and four banking offices were initially
added to Crestar's existing branch network. Crestar issued 198 thousand shares
of Crestar Common Stock and made cash payments of approximately $5 million in
the transaction.
PENDING ACQUISITIONS. On June 22, 1995 Crestar and Crestar Bank MD entered
into an agreement with Chase MD to purchase certain of the assets and assume
specified liabilities relating to Chase MD. Crestar's purchase of certain assets
and assumption of specified liabilities of Chase MD will bring to Crestar
approximately $440 million in deposits and approximately $260 million in loans.
The purchase of certain assets and assumption of specified liabilities of Chase
MD, which is subject to the receipt of regulatory approvals, is expected to be
completed in the fourth quarter of 1995.
Crestar continually seeks acquisition opportunities with other financial
institutions in which it may pay cash or issue common stock or other equity or
debt securities. As of the date of this Proxy Statement/Prospectus, Crestar has
no present agreements or understandings to acquire or merge with any other
businesses other than as described in " -- Recent Acquisitions."
BUSINESS OF LOYOLA
Loyola is a unitary savings and loan holding company for Loyola F.S.B. At
June 30, 1995, Loyola had approximately $2.6 billion in total assets, $1.5
billion in total deposits, and $175.7 million in total stockholders' equity.
Loyola was incorporated under the laws of Maryland on May 8, 1989 and is a
successor to a Delaware corporation incorporated on August 8,
42
<PAGE>
1986. On December 12, 1986, the predecessor acquired all of the Common Stock of
Loyola F.S.B. following Loyola F.S.B.'s conversion from a federally chartered
mutual to a federally chartered stock savings and loan association. Loyola
F.S.B. converted from a federal savings and loan to a federal savings bank in
1992. Loyola is subject primarily to regulation by the Office of Thrift
Supervision.
Loyola is a financial intermediary which accepts deposits from the general
public and invests such deposits, together with other borrowings, primarily in
real estate loans secured by liens on residential and other real property and in
consumer and other loans. Currently, the principal asset of Loyola is the Common
Stock of Loyola F.S.B. Loyola F.S.B. is a federally chartered stock savings bank
serving more than 160,000 customers through a network of 34 banking centers in
Maryland and one in Washington, D.C. Loyola F.S.B. also operates 17 automated
teller machines and has three loan offices (with one located in each of south
central Pennsylvania, central Delaware and eastern South Carolina). Loyola
F.S.B. commenced operations in 1879 and is now the second largest thrift
institution headquartered in Maryland. Primarily through its other subsidiaries,
Loyola engages in additional mortgage banking and origination activities in
Virginia, Florida and Alabama, develops real estate and provides securities
brokerage and investment counseling services, real estate appraisal and
insurance brokerage services.
Loyola's executive offices are located at 1300 North Charles Street,
Baltimore, Maryland 21201-5705.
PRICE RANGE OF LOYOLA COMMON STOCK
AND DIVIDEND POLICY
Loyola Common Stock is traded on The Nasdaq National Market under the
symbol "LOYC." The following table sets forth the calendar periods indicated,
the high and low closing prices of the Loyola Common Stock as reported on The
Nasdaq National Market for the following calendar quarters:
<TABLE>
<CAPTION>
1995 HIGH LOW
<S> <C> <C>
Third Quarter (through August 25, 1995)............... $33.50 $30.50
Second Quarter........................................ 32.25 23.125
First Quarter......................................... 23.50 17.625
1994
Fourth Quarter........................................ $22.25 $15.875
Third Quarter......................................... 24.50 21.75
Second Quarter........................................ 22.875 18.75
First Quarter......................................... 19.50 15.375
1993
Fourth Quarter........................................ $19.50 $14.50
Third Quarter......................................... 16.50 13.25
Second Quarter........................................ 15.875 12.875
First Quarter......................................... 16.875 13.50
</TABLE>
On August 3, 1995, the Record Date, the outstanding shares of Loyola Common
Stock were held by approximately 3,722 record holders. The closing price per
share of Loyola Common Stock on August 25, 1995 on The Nasdaq National Market
was $33.25.
Loyola has agreed that it will not make, declare or pay any dividend on
Loyola Common Stock other than the regular quarterly cash dividend not exceeding
$0.12 per share of Loyola Common Stock; provided that for dividends paid after
September 30, 1995, the record date for each Loyola dividend shall be the same
as Crestar's record date for its dividend for the same quarter in which the
Loyola dividend is paid with the result that with respect to their shares of
Loyola Common Stock the stockholders of Loyola will be entitled to receive
either a Loyola or Crestar regular dividend for each fiscal quarter prior to the
Effective Time. The payment and amounts of dividends in the future will be
determined by the Loyola Board, based upon the results of operations and
financial condition of Loyola, economic conditions at the time of declaration
and OTS and other regulatory restrictions.
Loyola is a legal entity separate and distinct from Loyola F.S.B., its
wholly-owned subsidiary. A large portion of Loyola's revenues results from
dividends paid to Loyola by Loyola F.S.B. Loyola F.S.B. is subject to various
statutory restrictions on its ability to pay dividends to Loyola. Under federal
regulations, Loyola F.S.B. may not declare or pay a cash dividend on any of its
stock if the effect thereof would cause Loyola F.S.B.'s capital to be reduced
below the amount required
43
<PAGE>
for the liquidation account or the capital requirements imposed by Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and the
OTS. Since Loyola F.S.B. currently meets the fully phased-in capital
requirements under FIRREA, it may pay a cash dividend on its capital stock up to
the higher of (i) 100% of its net income to date during the calendar year plus
an amount not to exceed 50% of its surplus capital ratio at the beginning of the
calendar year or (ii) 75% of its net income over the most recent four-quarter
period. Based upon this calculation, the amount available for payment of a
dividend was $20.6 million on March 31, 1995.
See "Comparative Rights of Stockholders -- Dividends and Other
Distributions."
44
<PAGE>
LOYOLA SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Loyola Common Stock as of August 15, 1995 by each of Loyola's
directors and by all directors and executive officers of Loyola as a group.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
<TABLE>
<CAPTION>
HELD IN THE
DIRECT PROFIT PLUS
OWNERSHIP AND DEFERRED
OF COMMON STOCK COMPENSATION PERCENT OF
NAME STOCK (2) OPTIONS (3) PLANS (4) TOTAL CLASS
<S> <C> <C> <C> <C> <C>
Directors:
Joseph W. Mosmiller....................... 53,572(5) 171,300 58,502 283,374 3.5%
John T. Stinson........................... 17,224 5,000 -- 22,224 0.3
James C. Johnson.......................... 36,147(5) 144,375 51,771 232,293 2.9
William G. Scaggs......................... 133,202 11,000 -- 144,202 1.8
Harry K. Wells............................ 37,536(5) 11,000 -- 48,536 0.6
C. Gordon Haines.......................... 10,224 9,000 -- 19,224 0.2
Morton J. Macks........................... 216,000 -- -- 216,000 2.7
H. Mebane Turner.......................... 11,608(6) 10,120 -- 21,728 0.3
Executive Officers:
Thomas R. Marvel.......................... 32,556 89,576 36,267 158,399 2.0
James V. McAveney......................... 24,600(5) 81,802 22,869 129,271 1.6
Charles C. Schmitt........................ 5,200 90,800 20,417 116,417 1.4
William A. Wycoff......................... 1,920 96,000 15,941 113,861 1.4
All Directors and Executive
Officers as a group
(12 persons)............................ 579,789(5)(6) 719,973 205,767 1,505,529(5)(6)(7) 18.6%
</TABLE>
(1) For the purposes of this table, pursuant to rules promulgated under the
Exchange Act, an individual is considered to "beneficially own" any shares
of Loyola Common Stock over which he or she has or shares, (a) voting power,
which includes the power to vote or direct the voting of the shares; or (b)
investment power, which includes the power to dispose or direct the
disposition of the shares. A person also is deemed to have beneficial
ownership of any shares of Loyola Common Stock which may be acquired within
60 days pursuant to the exercise of stock options. Unless otherwise
indicated, the individuals listed in the table have sole voting power and
sole investment power with respect to the indicated shares. Shares of Common
Stock which may be acquired within 60 days of the Record Date are deemed to
be outstanding shares of Loyola Common Stock beneficially owned by such
person(s) but are not deemed to be outstanding for the purposes of computing
the percentage of Loyola Common Stock owned by any other person.
(2) Except as otherwise noted, the named individuals effectively exercise sole
voting power and sole dispositive power over these shares.
(3) Includes shares which the named individuals have the right to acquire
pursuant to stock options which are exercisable within 60 days of August 15,
1995.
(4) Includes shares held in a defined contribution profit sharing plan (the
"Profit Plus Plan") and a nonqualified deferred compensation plan (the
"Deferred Compensation Plan") as of July 31, 1995 for the benefit of the
executive officers named in the summary compensation table. Shares held in
the Profit Plus Plan and the Deferred Compensation Plan are voted by the
individual employees based upon their shares owned.
(5) Includes 12,400 shares, 11,748 shares, 6,000 shares and 18,768 shares owned
solely by the spouses of Messrs. Mosmiller, Johnson, McAveney and Wells,
respectively.
(6) Includes 2,802 shares owned by The University of Baltimore Educational
Foundation, as to which Mr. Turner exercised shared voting and dispositive
power.
(7) Includes executive officers of Loyola F.S.B. Includes 719,973 shares with
respect to which certain officers and directors have the right to acquire
beneficial ownership through the exercise of stock options, which stock
options are exercisable within 60 days of August 15, 1995. Such shares are
deemed to be outstanding for the purpose of computing the percentage
outstanding shares of Loyola's Common Stock beneficially owned by directors
and executive officers as a group.
To Loyola's knowledge, no persons or groups own in excess of 5% of the
outstanding Loyola Common Stock as of August 15, 1995.
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SUPERVISION AND REGULATION OF CRESTAR
Bank holding companies and banks operate in a highly regulated environment
and are regularly examined by federal and state regulators. The following
description briefly discusses certain provisions of federal and state laws and
certain regulations and the potential impact of such provisions on Crestar and
its Bank Subsidiaries. To the extent that the following information describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory or regulatory provisions.
BANK HOLDING COMPANIES
As a bank holding company registered under the BHCA, Crestar is subject to
regulation by the Federal Reserve Board. The Federal Reserve Board has
jurisdiction under the BHCA to approve any bank or nonbank acquisition, merger
or consolidation proposed by a bank holding company. The BHCA generally limits
the activities of a bank holding company and its subsidiaries to that of
banking, managing or controlling banks, or any other activity which is so
closely related to banking or to managing or controlling banks as to be a proper
incident thereto.
The BHCA currently prohibits the Federal Reserve Board from approving an
application from a bank holding company to acquire shares of a bank located
outside the state in which the operations of the holding company's banking
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by statute of the state in which the bank whose shares
are to be acquired is located. Under recently enacted federal legislation, the
restriction on interstate acquisitions will be abolished effective September 29,
1995 and thereafter. Bank holding companies from any state will then be able to
acquire banks and bank holding companies located in any other state. Effective
June 1, 1997, the law will allow interstate bank mergers, subject to earlier
"opt-in" or "opt-out" action by individual states. The law also allows
interstate branch acquisitions and de novo branching if permitted by the host
state. Virginia and Maryland have recently adopted early "opt-in" legislation
that will allow interstate bank mergers, effective July 1, 1995 and September
29, 1995, respectively. These laws also permit interstate branch acquisitions
and de novo branching in Virginia and Maryland by out-of-state banks if
reciprocal treatment is accorded Virginia and Maryland banks (as the case may
be) in the state of the acquiror.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance fund in the
event the depository institution becomes in danger of default or in default. For
example, under a policy of the Federal Reserve Board with respect to bank
holding company operations, a bank holding company is required to serve as a
source of financial strength to its subsidiary depository institutions and to
commit resources to support such institutions in circumstances where it might
not do so otherwise. In addition, the "cross-guarantee" provisions of federal
law require insured depository institutions under common control to reimburse
the FDIC for any loss suffered or reasonably anticipated by either the Savings
Association Insurance Fund ("SAIF") or the Bank Insurance Fund ("BIF") as a
result of the default of a commonly controlled insured depository institution or
for any assistance provided by the FDIC to a commonly controlled insured
depository institution in danger of default. The FDIC may decline to enforce the
cross-guarantee provisions if it determines that a waiver is in the best
interest of the SAIF or the BIF or both. The FDIC's claim for reimbursement is
superior to claims of stockholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institution.
The Federal Deposit Insurance Act ("FDIA") also provides that amounts
received from the liquidation or other resolution of any insured depository
institution by any receiver must be distributed (after payment of secured
claims) to pay the deposit liabilities of the institution prior to payment of
any other general or unsecured senior liability, subordinated liability, general
creditor or stockholder. This provision would give depositors a preference over
general and subordinated creditors and stockholders in the event a receiver is
appointed to distribute the assets of any of the Bank Subsidiaries.
Crestar also is registered under the bank holding company laws of Virginia.
Accordingly, Crestar and its Bank Subsidiaries are subject to further regulation
and supervision by the State Corporation Commission of Virginia.
CAPITAL REQUIREMENTS
The Federal Reserve Board, the Office of the Comptroller of the Currency
(the "OCC") and the FDIC have issued substantially similar risk-based and
leverage capital guidelines applicable to United States banking organizations.
In addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels because of its
financial condition or actual or anticipated growth. Under the risk-based
capital requirements of these
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federal bank regulatory agencies, Crestar and its Bank Subsidiaries are required
to maintain a minimum ratio of total capital to risk-weighted assets of at least
8%. At least half of the total capital is required to be "Tier 1 capital", which
consists principally of common and certain qualifying preferred stockholders'
equity, less certain intangibles and other adjustments. The remainder "Tier 2
capital" consists of a limited amount of subordinated and other qualifying debt
(including certain hybrid capital instruments) and a limited amount of the
general loan loss allowance. The Tier 1 and total capital to risk-weighted asset
ratios of Crestar Financial Corporation as of June 30, 1995 were 8.9% and 12.6%
respectively, exceeding the minimums required.
In addition, each of the federal regulatory agencies has established a
minimum leverage capital ratio (Tier 1 capital to average tangible assets).
These guidelines provide for a minimum ratio of 3% for banks and bank holding
companies that meet certain specified criteria, including that they have the
highest regulatory examination rating and are not contemplating significant
growth or expansion. All other institutions are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the minimum. The Tier 1 capital
leverage ratio of Crestar as of June 30, 1995, was 7.8% The guidelines also
provide that banking organizations experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels, without significant reliance on intangible
assets.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires each federal banking agency to revise its risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk, concentration of credit risk and the risks of nontraditional activities,
as well as reflect the actual performance and expected risk of loss on
multi-family mortgages. Rules have been promulgated with respect to
concentration of credit risk and the risks of non-traditional activities, and
also as to the risk of loss on multi-family mortgages. A proposed rule with
respect to interest rate risk is still under consideration. The proposal would
allow institutions to use internal risk models to measure interest rate risk (if
the models are acceptable to examiners) and would require additional capital of
institutions identified as having excess interest rate risk. Crestar does not
expect any of these rules, either individually or in the aggregate, to have a
material impact on its capital requirements.
LIMITS ON DIVIDENDS AND OTHER PAYMENTS
Crestar is a legal entity separate and distinct from its subsidiary
institutions. Most of the revenues of Crestar result from dividends paid to
Crestar by its Bank Subsidiaries. There are various limitations applicable to
the payment of dividends to Crestar as well as the payment of dividends by
Crestar to its respective stockholders. Under federal law applicable to the Bank
Subsidiaries, prior approval from the bank regulatory agencies is required if
cash dividends declared in any given year exceed net income for that year plus
retained earnings of the two preceding years. Under these supervisory practices,
at June 30, 1995, the Bank Subsidiaries could have paid additional dividends to
Crestar of approximately $191.2 million, without obtaining prior regulatory
approval. The payment of dividends by the Bank Subsidiaries or Crestar may also
be limited by other factors, such as requirements to maintain capital above
regulatory guidelines. Bank regulatory agencies have authority to prohibit any
Bank Subsidiary or Crestar from engaging in an unsafe or unsound practice in
conducting their business. The payment of dividends, depending upon the
financial condition of the Bank Subsidiary in question, or Crestar, could be
deemed to constitute such an unsafe or unsound practice. The Federal Reserve
Board has stated that, as a matter of prudent banking, a bank or bank holding
company should not maintain its existing rate of cash dividends on common stock
unless (1) the organization's net income available to common stockholders over
the past year has been sufficient to fund fully the dividends and (2) the
prospective rate of earnings retention appears consistent with the
organization's capital needs, asset quality, and overall financial condition.
Under the FDIA, insured depository institutions such as the Bank
Subsidiaries are prohibited from making capital distributions, including the
payment of dividends, if, after making such distribution, the institution would
become "undercapitalized," (as such term is used in the statute). Based on the
Bank Subsidiaries' current financial condition, Crestar does not expect that
this provision will have any impact on its ability to obtain dividends from its
Bank Subsidiaries.
In addition to limitations on dividends, the Bank Subsidiaries are limited
in the amount of loans and other extensions of credit that may be extended to
Crestar, and any such loans or extensions of credit are subject to collateral
security requirements. Generally, up to 10% of the Bank Subsidiaries' regulatory
capital, surplus, undivided profits, allowance for loan losses and contingency
reserves may be loaned to Crestar. As of June 30, 1995, approximately $140
million of credit was available to Crestar under this limitation, although no
extensions of credit were outstanding.
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BANKS
The Bank Subsidiaries are supervised and regularly examined by the Federal
Reserve Board, the SCC, the MBC and the OCC, as the case may be. The Bank
Subsidiaries are also subject to various requirements and restrictions under
federal and state law such as limitations on the types of services that they may
offer, the nature of investments that they make, and the amounts of loans that
may be granted. Various consumer and compliance laws and regulations also affect
the operations of the Bank Subsidiaries. In addition to the impact of
regulation, the Bank Subsidiaries are affected significantly by actions of the
Federal Reserve Board in attempting to control the money supply and the
availability of credit.
The Bank Subsidiaries also are subject to the requirements of the Community
Reinvestment Act (the "CRA"). The CRA imposes on financial institutions an
affirmative and ongoing obligation to meet the credit needs of their local
communities, including low- and moderate-income neighborhoods, consistent with
the safe and sound operation of those institutions. Each financial institution's
efforts in meeting community credit needs currently are evaluated as part of the
examination process pursuant to twelve assessment factors. These factors also
are considered in evaluating mergers, acquisitions and applications to open
branches. The Bank Subsidiaries have attained either an "outstanding" or
"satisfactory"rating on their most recent CRA performance evaluations.
As a result of a 1993 Presidential initiative, each of the federal banking
agencies, recently approved a final rule establishing a new framework for the
implementation of CRA. The new rule, which will become fully effective on July
1, 1997, will emphasize an institution's performance in meeting community credit
needs. Institutions will be evaluated on the basis of a three pronged lending,
investment and service test, with lending being of primary importance. CRA
ratings will continue to be a matter of public record, and CRA performance will
continue to be evaluated in connection with mergers, acquisitions and branch
applications. Although the new rule is likely to have some impact on Crestar's
business practices, it is not anticipated that any changes will be material.
As institutions with deposits insured by BIF and SAIF, the Bank
Subsidiaries also are subject to insurance assessments imposed by the FDIC.
Currently, a risk-based assessment schedule imposes assessments on both BIF and
SAIF deposits, ranging from 0.23% to 0.31% of an institution's average
assessment base. The actual assessment paid is based on the institution's
assessment risk classification, which is determined based on whether the
institution is considered "well capitalized," "adequately capitalized" or
"undercapitalized," as such terms have been defined in applicable federal
regulations, and whether such institution is considered by its supervisory
agency to be financially sound or to have supervisory concerns. The Bank
Subsidiaries currently pay at a rate of 0.23% of assessable deposits.
On August 8, 1995, the FDIC's Board of Directors voted to revise the range
of assessment premiums applicable to BIF-insured deposits, while leaving
unchanged the range of premiums applicable to SAIF-insured deposits. Under the
revised risk-based assessment rate schedule for BIF-insured deposits, the
best-rated banks will pay 0.04% of deposits while the weakest ones will continue
to pay 0.31% of deposits. The new rate schedule is expected to be applied in
September, 1995, when the FDIC will be able to confirm that BIF has reached a
high enough reserve ratio to justify a rate reduction. The premium reduction,
however, will be retroactive to July 1, 1995, and institutions will receive a
refund for excess payments made during the interim period. The Bank Subsidiaries
are expected to receive an after-tax refund in excess of $2.4 million, and the
premium reduction on BIF-insured deposits is expected to annually save the Bank
Subsidiaries approximately $8.0 million (after-tax), based on their current
level of BIF-insured deposits. The premium reduction will not benefit Loyola
F.S.B., whose deposits are SAIF-insured, or the portion of the Bank Subsidiaries
deposits which are SAIF-insured.
In a separate development, on July 28, 1995, the Clinton Administration put
forth a legislative proposal, supported by the FDIC and OTS, to recapitalize
SAIF with the imposition of a one-time assessment on SAIF-insured deposits of
between 85 and 90 basis points (0.85% -- 0.90%). The assessment would be due on
January 1, 1996, based on SAIF-insured deposits held as of March 31, 1995. The
proposal also calls for a merger of BIF and SAIF and for BIF members to share in
the cost of interest payments on bonds issued to recapitalize the insurance
funds ("FICO Bonds"). After the one-time assessment, the risk-based assessment
schedule for the newly capitalized SAIF would be similar to the schedule for BIF
(that is, rates ranging from 4 to 31 basis points.) House and Senate hearings
have been held on the proposal but the prospects for passage are uncertain at
this time.
Any one-time assessment on SAIF-insured deposits will impact both the Bank
Subsidiaries and Loyola F.S.B. As of June 30, 1995, the Bank Subsidiaries and
Loyola F.S.B. had $4.3 billion and $1.5 billion, respectively, of SAIF-insured
deposits. An 85 basis point assessment would, on an after-tax basis, negatively
affect Crestar's earnings by $23.4 million, and Loyola's earnings by $7.8
million. By the same token, future earnings of Crestar and Loyola would be
augmented by a lower SAIF assessment rate. Absent a one-time SAIF assessment,
the Bank Subsidiaries and Loyola F.S.B. will pay indefinitely or
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for a number of years a higher premium rate on SAIF-insured deposits. Under
existing law, Loyola F.S.B. deposits acquired by Crestar as part of the proposed
transaction will remain SAIF-insured subject to the SAIF-assessment rate,
regardless of whether or when Loyola F.S.B. is merged into one of the Bank
Subsidiaries.
OTHER SAFETY AND SOUNDNESS REGULATIONS
The federal banking agencies have broad powers under current federal law to
take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized," as such terms are defined under uniform regulations defining
such capital levels issued by each of the federal banking agencies.
In addition, FDIC regulations now require that management report on its
institution's responsibility for preparing financial statements, and
establishing and maintaining an internal control structure and procedures for
financial reporting and compliance with designated laws and regulations
concerning safety and soundness; and that independent auditors attest to and
report separately on assertions in management's reports concerning compliance
with such laws and regulations, using FDIC-approved audit procedures.
The 1991 FDICIA law, as amended by the Riegle Community Development Act of
1994, requires the Federal bank regulators to develop standards for a wide
variety of internal bank operating procedures and grants regulators discretion
to develop standards on asset quality, earnings and stock valuation. Final rules
on the subject have not yet been published but a 1993 proposed rule contained
broad principle-based standards that leave the method for meeting such standards
largely in the province of management. Based on its review of the proposed rule,
Crestar does not believe that the standards will have any significant impact on
its operations.
DESCRIPTION OF CRESTAR CAPITAL STOCK
The capital stock of Crestar consists of 100,000,000 authorized shares of
Common Stock and 2,000,000 authorized shares of Preferred Stock. The shares of
Preferred Stock are issuable in series, with relative rights, preferences and
limitations of each series fixed by Crestar's Board of Directors. The following
summary does not purport to be complete and is subject in all respects to
applicable Virginia law, Crestar's Restated Articles of Incorporation (the
"Crestar Articles") and Bylaws, and the Rights Agreement dated June 23, 1989
(described below) (the "Rights Agreement").
COMMON STOCK
Crestar had 37,733,761 shares of Common Stock outstanding at June 30, 1995.
Each share of Common Stock is entitled to one vote on all matters submitted to a
vote of stockholders. Holders of Common Stock are entitled to receive dividends
when and as declared by Crestar's Board of Directors out of funds legally
available therefor. Dividends may be paid on the Common Stock only if all
dividends on any outstanding Preferred Stock have been paid or provided for.
The issued and outstanding shares of Common Stock are fully paid and
non-assessable. Holders of Common Stock have no preemptive or conversion rights
and are not subject to further calls or assessments by Crestar.
In the event of the voluntary or involuntary dissolution, liquidation or
winding up of Crestar, holders of Common Stock are entitled to receive, pro
rata, after satisfaction in full of the prior rights of creditors and holders of
Preferred Stock, if any, all the remaining assets of Crestar available for
distribution.
Directors are elected by a vote of the holders of Common Stock. Holders of
Common Stock are not entitled to cumulative voting rights. Mellon Bank, N.A.
acts as the transfer agent and registrar for the Common Stock.
PREFERRED STOCK
Crestar's Board of Directors is authorized to designate with respect to
each new series of Preferred Stock the number of shares in each series, the
dividend rates and dates of payment, voluntary and involuntary liquidation
preferences, redemption prices, whether or not dividends shall be cumulative
and, if cumulative, the date or dates from which the same shall be cumulative,
the sinking fund provisions, if any, for redemption or purchase of shares, the
rights, if any, and the terms and conditions on which shares can be converted
into or exchanged for, or the rights to purchase, shares of any other class or
series, and the voting rights, if any. Any Preferred Stock issued will rank
prior to the Common Stock as to dividends and as to distributions in the event
of liquidation, dissolution or winding up of Crestar. The ability of Crestar's
Board of Directors to
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issue Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting powers of holders of Common Stock and, under certain
circumstances, may discourage an attempt by others to gain control of Crestar.
Pursuant to the Crestar Articles, the Board of Directors has designated a
series of 100,000 shares of Participating Cumulative Preferred Stock, Series C
(the "Series C Preferred Stock"), none of the shares of which are currently
outstanding. The Series C Preferred Stock was created in connection with
Crestar's stockholder rights plan which is described below.
RIGHTS
In 1989, pursuant to the Rights Agreement, Crestar distributed as a
dividend one Right for each outstanding share of Common Stock. Each Right
entitles the holder to buy one one-thousandth of a share of Junior Preferred
Stock at an exercise price of $115, subject to adjustment. The Rights will
become exercisable only if a person or group acquires or announces a tender
offer for 10% or more of the outstanding Common Stock. When exercisable, Crestar
may issue a share of Common Stock in exchange for each Right other than those
held by such person or group. If a person or group acquires 30% or more of the
outstanding Common Stock, each Right will entitle the holder, other than the
acquiring person, upon payment of the exercise price, to acquire Series C
Preferred Stock or, at the option of Crestar, Common Stock, having a value equal
to twice the Right's exercise price. If Crestar is acquired in a merger or other
business combination or if 50% of its earnings power is sold, each Right will
entitle the holder, other than the acquiring person, to purchase securities of
the surviving company having a market value equal to twice the exercise price of
the Right. The Rights will expire on June 23, 1999, and may be redeemed by
Crestar at any time prior to the tenth day after an announcement that a 10%
position has been acquired, unless such time period has been extended by the
Board of Directors.
Until such time as a person or group acquires or announces a tender offer
for 10% or more of the Common Stock, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such Common
Stock certificates, and (ii) the surrender for transfer of any certificate for
Common Stock will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. Rights may not be transferred,
directly or indirectly (i) to any person or group that has acquired, or obtained
the right to acquire, beneficial ownership of 10% or more of the Rights (an
"Acquiring Person"), (ii) to any person in connection with a transaction in
which such person becomes an Acquiring Person or (iii) to any affiliate or
associate of any such person. Any Right that is the subject of a purported
transfer to any such person will be null and void.
The Rights can be expected to have certain anti-takeover effects if an
acquisition transaction not approved by the Board of Directors is proposed by a
person or group. In such event, the Rights will cause substantial dilution to
any person or group that acquires more than 10% of the outstanding shares of
Common Stock of Crestar if certain events thereafter occur without the Rights
having been redeemed. For example, if thereafter such acquiring person acquires
30% of Crestar's outstanding Common Stock, or effects a business combination
with Crestar, the Rights permits stockholders to acquire securities having a
value equal to twice the amount of the purchase price specified in the Rights,
but rights held by such "acquiring person" are void to the extent permitted by
law and may not be exercised. Further, other stockholders may not transfer
rights to such "acquiring person" above his 10% ownership threshold. Because of
these provisions, it is unlikely that any person or group will propose an
acquisition transaction that is not approved by Crestar's Board of Directors.
Thus, the Rights could have the effect of discouraging acquisition transactions
not approved by Crestar's Board of Directors. The Rights do not interfere with
any merger or other business combination approved by Crestar's Board of
Directors and stockholders because the rights are redeemable with the
concurrence of a majority of the "Continuing Directors," defined as directors in
office when the Rights Agreement was adopted or any person added thereafter to
the Board with the approval of the Continuing Directors.
VIRGINIA STOCK CORPORATION ACT
The VSCA contains provisions governing "Affiliated Transactions." These
provisions, with several exceptions discussed below, require approval of
material acquisition transactions between a Virginia corporation and any holder
of more than 10% of any class of its outstanding voting shares (an "Interested
Stockholder") by the holders of at least two-thirds of the remaining voting
shares. Affiliated Transactions subject to this approval requirement include
mergers, share exchanges, material dispositions of corporate assets not in the
ordinary course of business, any dissolution of the corporation proposed by or
on behalf of an Interested Stockholder, or any reclassification, including
reverse stock splits, recapitalization or merger of the corporation with its
subsidiaries which increases the percentage of voting shares owned beneficially
by an Interested Stockholder by more than 5%.
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For three years following the time that an Interested Stockholder becomes
an owner of 10% of the outstanding voting shares, a Virginia corporation cannot
engage in an Affiliated Transaction with such Interested Stockholder without
approval of two-thirds of the voting shares other than those shares beneficially
owned by the Interested Stockholder, and majority approval of the "Disinterested
Directors." A Disinterested Director means, with respect to a particular
Interested Stockholder, a member of Crestar's Board of Directors who was (1) a
member on the date on which an Interested Stockholder became an Interested
Stockholder and (2) recommended for election by, or was elected to fill a
vacancy and received the affirmative vote of, a majority of the Disinterested
Directors then on the Board. At the expiration of the three year period, the
statute requires approval of Affiliated Transactions by two-thirds of the voting
shares other than those beneficially owned by the Interested Stockholder.
The principal exceptions to the special voting requirement apply to
transactions proposed after the three year period has expired and require either
that the transaction be approved by a majority of the corporation's
Disinterested Directors or that the transaction satisfy the fair-price
requirements of the statute. In general, the fair-price requirement provides
that in a two-step acquisition transaction, the Interested Stockholder must pay
the stockholders in the second step either the same amount of cash or the same
amount and type of consideration paid to acquire the Virginia corporation's
shares in the first step.
None of the foregoing limitations and special voting requirements applies
to a transaction with an Interested Stockholder whose acquisition of shares
making such person an Interested Stockholder was approved by a majority of the
Virginia corporation's Disinterested Directors.
These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Interested
Stockholder, a corporation can adopt an amendment to its articles of
incorporation or bylaws providing that the Affiliated Transactions provisions
shall not apply to the corporation. Crestar has not "opted out" of the
Affiliated Transactions provisions.
Virginia law also provides that shares acquired in a transaction that would
cause the acquiring person's voting strength to meet or exceed any of three
thresholds (20%, 33 1/3% or 50%) have no voting rights unless granted by a
majority vote of shares not owned by the acquiring person or any officer or
employee-director of the Virginia corporation. This provision empowers an
acquiring person to require the Virginia corporation to hold a special meeting
of stockholders to consider the matter within 50 days of its request.
COMPARATIVE RIGHTS OF STOCKHOLDERS
At the Effective Time of the Merger, stockholders of Loyola automatically
will become stockholders of Crestar, and their rights as stockholders will be
determined by the Crestar Articles and Crestar's Bylaws. The following is a
summary of the material differences in the rights of stockholders of Crestar and
Loyola. This summary does not purport to be a complete discussion of, and is
qualified in its entirety by reference to, the governing law and the Articles of
Incorporation or Charter and Bylaws of each entity.
CAPITALIZATION
LOYOLA. The Loyola Charter authorizes the issuance of up to 50,000,000
shares of capital stock, par value $0.10 per share. All of such shares are
classified as Loyola Common Stock of which 8,112,300 shares were issued and
outstanding as of the Record Date. The Loyola Charter permits the Loyola Board
to issue preferred stock from time to time and in one or more series, to specify
the number of shares of such series and to determine the applicable preferences,
conversion and other rights, voting powers, restrictions, limitations as to
distributions and dividends, qualifications or terms or conditions of redemption
of such shares within the limits established by law from time to time.
CRESTAR. Crestar's authorized capital is set forth under "Description of
Crestar Capital Stock."
AMENDMENT OF ARTICLES OR BYLAWS
LOYOLA. The By-Laws of Loyola may be amended only by the affirmative vote
of the holders of not less than 80% of all of the votes entitled to vote
generally in the election of directors or by a vote of two-thirds of the Loyola
Board. The Loyola Charter may be amended only by the affirmative vote of the
holders of not less than a majority of all of the votes entitled to be cast on
the matter, except a vote by not less than 80% of all votes entitled to be cast
is required to amend the Loyola Charter (a) to make certain changes relating to
the Loyola Board, (b) to limit stockholder proposals and nominations, (c) to
modify provisions governing business combinations or other transactions
involving a change in control, and (d) to make
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changes to provisions relating to limitations of liability and indemnification.
The Loyola Charter provisions relating to limitations of liability and
indemnification may only be amended prospectively.
CRESTAR. As permitted by the VSCA, the Crestar Articles provide that,
unless a greater vote is required by law, by the Crestar Articles or by a
resolution of the Board of Directors, the Crestar Articles may be amended if the
amendment is adopted by the Board of Directors and approved by a vote of the
holders of a majority of the votes entitled to be cast on the amendment by each
voting group entitled to vote thereon. The Article providing for a classified
Board of Directors and establishing criteria for removing Directors requires the
approving vote of a majority of "Disinterested Directors" and the holders of at
least two-thirds of the votes entitled to be cast on the amendment.
Crestar's Bylaws generally provide that the Board of Directors may, by a
majority vote, amend its Bylaws.
REQUIRED STOCKHOLDER VOTE FOR CERTAIN ACTIONS
LOYOLA. Except as otherwise provided by the MGCL, the approval of
stockholders holding a majority of all votes entitled to be cast is required for
a merger, consolidation or sale of substantially all of the assets of Loyola.
CRESTAR. The VSCA generally requires the approval of a majority of a
corporation's Board of Directors and the holders of more than two-thirds of all
the votes entitled to be cast thereon by each voting group entitled to vote on
any plan of merger or consolidation, plan of share exchange or sale of
substantially all of the assets of a corporation not in the ordinary course of
business. The VSCA also specifies additional voting requirements for Affiliated
Transactions and transactions that would cause an acquiring person's voting
power to meet or exceed specified thresholds, as discussed under "Description of
Crestar Capital Stock -- Virginia Stock Corporation Act."
None of the additional voting requirements contained in the VSCA are
applicable to the Merger since it is not an "Affiliated Transaction."
DIRECTOR NOMINATIONS
LOYOLA. The Loyola Charter provides that any stockholder desiring to make a
nomination for the election of directors at a meeting of stockholders must
submit written notice to Loyola not less than 30 or more than 60 days in advance
of the meeting.
CRESTAR. The Bylaws of Crestar provide that any nomination for director
made by a stockholder must be made in writing to the Secretary of Crestar not
less than 15 days prior to the meeting of stockholders at which directors are to
be elected. If mailed, such notice shall be sent by certified mail, return
receipt requested, and shall be deemed to have been given when received by the
Secretary of Crestar. A stockholder's nomination for director shall set forth
(a) the name and business address of the stockholder's nominee, (b) the fact
that the nominee has consented to his name being placed in nomination, (c) the
name and address, as they appear on Crestar's books, of the stockholder making
the nomination, (d) the class and number of shares of Crestar's stock
beneficially owned by the stockholder, and (e) any material interest of the
stockholder in the proposed nomination.
DIRECTORS AND CLASSES OF DIRECTORS; VACANCIES AND REMOVAL OF DIRECTORS
LOYOLA. The Loyola Charter and By-Laws provide that the number of directors
(exclusive of directors, if any, to be elected by the holders of preferred
stock) shall not be less than six nor more than 15 as shall be provided from
time to time in accordance with the By-laws. The power to determine the number
of directors within these numerical limitations is vested in the Loyola Board.
The Loyola Board currently consists of eight members. Moreover, the Loyola
Charter divides the Loyola Board into three classes which shall be as nearly
equal in number as possible. Each class currently contains two or three
directors. The members of each class serve for three years with terms staggered
so that only one class is elected each year.
The Loyola Charter provides that vacancies on the Loyola Board and newly
created directorships shall be filled by a majority vote of the stockholders or
directors then in office and any director so chosen by the remaining directors
shall hold office until the next annual meeting of stockholders, at which time
the stockholders shall elect a director to hold office for the balance of the
term then remaining.
Subject to the rights of the holders of any class separately entitled to
elect directors, the Loyola Charter provides that any director may be removed
from office at any time, but only for cause and then only by the affirmative
vote of the holders of at least 80% of the combined voting power of all classes
of shares of capital stock entitled to vote in the election for directors.
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CRESTAR. The Crestar Articles provide that the number of Directors shall be
set forth in the Bylaws, but the number of directors set forth in the Bylaws may
not be increased by more than four during any 12-month period except by the
affirmative vote of more than two-thirds of the votes entitled to be cast. The
Bylaws provide for a Board of Directors consisting of not less than five nor
more than 26 members, with the number to be fixed by the Board. The Board
currently has fixed the number of directors at 17. Crestar's Board of Directors
is divided into three classes, each as nearly equal in number as possible, with
one class being elected annually.
The Crestar Articles provide that any vacancy occurring on the Board of
Directors, including a vacancy resulting from an increase in the number of
Directors, may be filled by the affirmative vote of a majority of the remaining
directors, though less than a quorum of the Board of Directors. If at the time
any such vacancy is filled, any person, or any associate or affiliate of such
person (as those terms are defined in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, or any successor rule or regulation) is
directly or indirectly the beneficial owner of 10% (or more) of outstanding
voting shares, the vacancy shall be filled by the affirmative vote of a majority
of the remaining directors in the class of directors in which the vacancy has
occurred. Directors so chosen shall hold office for a term expiring at the next
following annual meeting of stockholders at which directors are elected. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Subject to the rights of the holders of preferred stock then outstanding,
any director may be removed, with cause, only by the affirmative vote of the
holders of at least two-thirds of outstanding voting shares.
ANTI-TAKEOVER PROVISIONS
LOYOLA. The Loyola Charter directs the Loyola Board in connection with the
exercise of its business judgment when evaluating a transaction which may
involve a change in control of Loyola, to give consideration to all relevant
factors, including the long-term economic effects on Loyola and its
stockholders; the social and economic effects on employees, depositors and other
constituents of Loyola; the historical and current operating results or
financial condition of Loyola; whether a more favorable price could be obtained
in the future; the reputation and business practices of the other party; and
estimate of values of future sales of securities by Loyola; and any antitrust or
other legal or regulatory issues raised by the transaction. The Loyola Charter
authorizes the Loyola Board to employ a broad range of defensive measures to
defeat an offer they believe should be opposed.
The MGCL prohibits certain "business combinations" (including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and an "Interested Stockholder." Interested Stockholders are all
persons (a) who beneficially own 10% or more of the voting power of the
corporation's shares or (b) an affiliate or associate of the corporation who, at
any time within the two-year period prior to the date in question, was an
Interested Stockholder or an affiliate or an associate thereof. Such business
combinations are prohibited for five years after the most recent date on which
the Interested Stockholder became an Interested Stockholder. Thereafter, any
such business combination must be recommended by the board of directors of such
corporation and approved by the affirmative vote of at least (a) 80% of the
votes entitled to be case by all holders of voting shares of the corporation,
and (b) 66 2/3% of the votes entitled to be cast by all holders of voting shares
of the corporation other than voting shares held by the Interested Stockholder
or an affiliate or associate of the Interested Stockholder, with whom the
business combination is to be effected, unless, among other things, the
corporation's stockholders receive a minimum price (as defined in the MGCL) for
their shares and the consideration is received in cash or in the same form as
previously paid by the Interested Stockholder for its shares. These provisions
of Maryland law do not apply, however, to business combinations that are
approved or exempted by the Board of Directors of the corporation prior to the
time that the Interested Stockholder becomes an Interested Stockholder. Crestar
and its affiliates and associates were exempted from these provisions of
Maryland law by the Loyola Board. A Maryland corporation may adopt an amendment
to its charter electing not to be subject to the special voting requirements of
the foregoing legislation. Any such amendment would have to be approved by the
affirmative vote of at least 80% of the votes entitled to be cast by all holders
of outstanding shares of voting stock and 66 2/3% of the votes entitled to be
cast by holders of outstanding shares of voting stock who are not Interested
Stockholders. Loyola has not adopted such an amendment to the Loyola Charter.
The MGCL provides the "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror or by officers or directors who
are employees of the corporation. Control shares are voting shares of stock
which, if aggregated with all other shares of stock previously acquired by such
a person, would entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power: (a) 20% or
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more but less than 33 1/3%; (b) 33 1/3% or more but less than a majority; or (c)
a majority of all voting power. Control Shares do not include shares of stock an
acquiring person is entitled to vote as a result of having previously obtained
stockholder approval. A control share acquisition means, subject to certain
exceptions, the acquisition of, ownership of or the power to direct the exercise
of voting power with respect to, control shares.
A person who has made or proposed to make a "control share acquisition,"
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the board of directors to call a special meeting of
stockholders to be held within 50 days of demand therefore to consider the
voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders' meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as permitted by the statute, then
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to voting rights, as of
the date of the last control share acquisition or of any meeting of stockholders
at which the voting rights of such shares are considered and not approved. If
voting rights for "control shares" are approved at a stockholders' meeting and
the acquiror becomes entitled to vote a majority of the shares entitled to vote,
all other stockholders may exercise appraisal rights. The fair value of the
stock as determined for purposes of such appraisal rights may not be less than
the highest price per share paid in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a "control share acquisition."
The control share acquisition statute does not apply to stock acquired in a
merger, consolidation or stock exchange if the corporation is a party to the
transaction, or to acquisitions previously approved or exempted by a provision
in the charter or by-laws of the corporation. The Loyola By-Laws exempt the
acquisition of Loyola Common Stock by Crestar or its affiliates and associates
or any other related transaction from the provisions of the Maryland control
share acquisition statute.
CRESTAR. For a description of certain provisions of VSCA which may be
deemed to have an anti-takeover effect, see "Description of Crestar Capital
Stock Virginia Stock Corporation Act."
PREEMPTIVE RIGHTS
Neither the stockholders of Crestar nor the stockholders of Loyola have
preemptive rights. Thus, if additional shares of Crestar Common Stock, Crestar
preferred stock or Loyola Common Stock or Loyola Preferred Stock are issued,
holders of such stock, to the extent they do not participate in such additional
issuance of shares, would own proportionately smaller interests in a larger
amount of outstanding capital stock.
ASSESSMENT
All outstanding shares of Loyola Common Stock are fully paid and
nonassessable.
All shares of Crestar Common Stock presently issued are, and those to be
issued pursuant to the Agreement will be, fully paid and nonassessable.
CONVERSION; REDEMPTION; SINKING FUND
Neither Crestar Common Stock nor Loyola Common Stock is convertible,
redeemable or entitled to any sinking fund.
LIQUIDATION RIGHTS
LOYOLA. Maryland law generally provides that a corporation's board of
directors may propose dissolution for submission to stockholders and that to be
authorized, the dissolution must be approved by the holders of more than
two-thirds of all votes entitled to be cast on the proposal, unless the charter
of the corporation requires a greater or lesser vote. The Loyola Charter, which
would require the affirmative vote of the holders of a majority of the total
number of shares entitled to vote on the proposal, modifies the statutory
requirements for dissolution under the MGCL.
CRESTAR. The VSCA generally provides that a corporation's board of
directors may propose dissolution for submission to stockholders and that to be
authorized, the dissolution must be approved by the holders of more than
two-thirds of all votes entitled to be cast on the proposal, unless the articles
of incorporation of the corporation require a greater or lesser vote. There are
no provisions in the Crestar Articles which would modify the statutory
requirements for dissolution under the VSCA.
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DIVIDENDS AND OTHER DISTRIBUTIONS
LOYOLA. Maryland law permits the payment of dividends unless the
corporation would not be able to pay its debts as they become due in the usual
course of business or the corporation's total assets would be less than the sum
of the corporation's total liabilities plus, unless the charter permits
otherwise (which the Loyola Charter does not), the amount that would be needed,
if the corporation were to be dissolved at the time of such dividends, to
satisfy the preferential rights upon dissolution of stockholders whose
preferential rights on dissolution are superior to those receiving the
dividends.
CRESTAR. The VSCA generally provides that a corporation may make
distributions to its stockholders unless, after giving effect to the
distribution, (i) the corporation would not be able to pay its debts as they
become due in the usual course of business or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise, which the Crestar Articles do not)
the amount that would be needed, if the corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution. These requirements are applicable to Crestar as a Virginia
corporation.
In addition to the limitations set forth in the VSCA, there are various
regulatory requirements which are applicable to distributions by bank holding
companies such as Crestar and by savings and loan holding companies such as
Loyola. For a description of the regulatory limitations on distributions by
Crestar, see "Supervision and Regulation Limits on Dividends and Other
Payments." For a description of the regulatory limitations on capital
distributions by Loyola, see "Price Range of Loyola Common Stock and Dividend
Policy."
SPECIAL MEETINGS OF STOCKHOLDERS
LOYOLA. A special meeting of the stockholders of Loyola may be called by
the Chairman of the Loyola Board or the President, by a majority of the Loyola
Board or by stockholders entitled to cast at least 25% of the votes at such
meeting. However, Maryland law provides that a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of stockholders held during the preceding 12 months
unless the meeting is requested by stockholders entitled to cast a majority of
all the votes entitled to be cast at the meeting.
CRESTAR. The Bylaws of Crestar provide that special meetings of the
stockholders for any purpose or purposes may be called at any time by the
Chairman of the Board of Directors, by the President, or by a majority of the
Board of Directors.
INDEMNIFICATION
LOYOLA. As permitted by the MGCL, provisions in the Loyola Charter limit
the personal liability of directors and officers for money damages to the
fullest extent permitted by Maryland law except that such Loyola Charter
provisions do not limit liability (a) for, and to the extent of, actual receipt
of an improper benefit in money, property or services or (b) in respect of any
adjudication based upon a finding of active and deliberate dishonesty which was
material or the cause of action adjudicated. The Loyola Charter provisions do
not affect potential liability of directors and officers to third parties, such
as creditors of Loyola.
As permitted by the MGCL, the Loyola Charter obligates Loyola to indemnify
its directors and officers and to pay or reimburse expenses for such individuals
in advance of the final disposition of a proceeding to the maximum extent
permitted by Maryland law. Loyola's By-Laws contain indemnification procedures
which implement those of the Loyola Charter. The MGCL permits a corporation to
indemnify its directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities, unless it is established that (a)
the act or omission of the director or officer was material to the matter giving
rise to such proceeding and (i) was committed in bad faith or (ii) was the
result of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services, or (c) in
the case of any criminal proceeding, the director or officer had reasonably
cause to believe that the action or omission was unlawful.
CRESTAR. The Crestar Articles provide that to the full extent permitted by
the VSCA and any other applicable law, Crestar shall indemnify a director or
officer of Crestar who is or was a party to any proceeding by reason of the fact
that he is or was such a director or officer or is or was serving at the request
of the corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise. The Board of Directors is empowered, by majority vote of a
quorum of disinterested directors, to contract in advance to indemnify any
director or officer.
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STOCKHOLDER PROPOSALS
LOYOLA. The Loyola Charter provides that any stockholder desiring to make a
nomination for the election of directors or a proposal for new business at a
meeting of stockholders must submit written notice to the corporation not less
than 30 or more than 60 days in advance of the meeting, delivered or mailed by
first class United States mail, postage prepaid, to the Secretary of Loyola.
Such notice given by a stockholder to the Secretary shall set forth in writing
as to each matter: (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(ii) the name and address, as they appear in Loyola's books, of the stockholder
proposing such business, (iii) the class and number of shares of Loyola which
are beneficially owned by the stockholder and (iv) any material interest of the
stockholder in such business. No business shall be conducted at a meeting of
stockholders except in accordance with the procedures set forth in Loyola's
By-laws.
CRESTAR. The Bylaws of Crestar provide that at any meeting of stockholders
of Crestar, only that business that is properly brought before the meeting may
be presented to and acted upon by the stockholders. To be properly brought
before the meeting, business must be brought (a) by or at the direction of the
Board of Directors or (b) by a stockholder who has given written notice of
business he expects to bring before the meeting to the Secretary of Crestar not
less than 15 days prior to the meeting. If mailed, such notice shall be sent by
certified mail, return receipt requested, and shall be deemed to have been given
when received by the Secretary of Crestar. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the meeting (a) a brief description of the business to be brought before
the meeting and the reasons for conducting such business at the meeting, (b) the
name and address, as they appear on Crestar's books, of the stockholder
proposing such business, (c) the class and number of shares of Crestar's stock
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. No business shall be conducted at a meeting of
stockholders except in accordance with the procedures set forth in Crestar's
Bylaws.
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
LOYOLA. Under Maryland law, any stockholder has the right to inspect and
copy the by-laws, minutes of the proceedings of stockholders, annual statement
of affairs, and voting trust agreements on file at the corporation's principal
office. Maryland law also provides that one or more persons who together have
been stockholders of record for at least six months and who together hold at
least 5% of the outstanding stock of any class may inspect and copy the
corporation's books of account, stock ledger and stockholders' list and may
require the corporation to produce a verified statement of affairs.
CRESTAR. Under the VSCA, the stockholder of a Virginia corporation is
entitled to inspect and copy certain books and records, including the articles
of incorporation and bylaws of the corporation if he gives the corporation
written notice of his demand at least five business days before the date on
which he wishes to inspect and copy. The stockholder of a Virginia corporation
is entitled to inspect and copy certain other books and records, including a
list of stockholders, minutes of any meeting of the board of directors and
accounting records of the corporation, if (i) the stockholder has been a
stockholder of record for at least six months immediately preceding his or her
written demand or is the holder of at least 5% of the corporation's outstanding
shares, (ii) the stockholder's demand is made in good faith and for a proper
purpose, (iii) the stockholder describes with reasonable particularity the
purpose of the request and the records desired to be inspected and (iv) the
records are directly connected with the stated purpose, and if he gives the
corporation written notice of his demand at least five business days before the
date on which he wishes to inspect and copy. The VSCA also provides that a
corporation shall make available for inspection by any stockholder during usual
business hours, at least 10 days before each meeting of stockholders, a complete
list of the stockholders entitled to vote at such meeting.
STOCKHOLDER RIGHTS PLAN
LOYOLA. Loyola has not implemented a stockholder rights plan. Crestar. For
a description of a stockholder rights plan which has been adopted by Crestar,
see "Description of Crestar Capital Stock -- Rights."
DISSENTERS' RIGHTS
LOYOLA. The provisions of Title 3 of the MGCL, which provide stockholders
of a Maryland corporation the right to demand and receive payment of the fair
value of their shares in the event of mergers, consolidations and certain other
corporate transactions, are applicable to Loyola as a Maryland corporation.
However, because Loyola Common Stock is designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc., stockholders of Loyola generally do not have rights to
demand and receive payment of the fair value of their shares in the event of
mergers, consolidations and certain other corporate transactions to which Loyola
is a party.
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CRESTAR. The provisions of Article 15 of the VSCA which provide
stockholders of a Virginia corporation the right to dissent from, and obtain
payment of the fair value of their shares in the event of, mergers,
consolidations and certain other corporate transactions are applicable to
Crestar as a Virginia corporation. However, because Crestar has more than 2,000
record stockholders, stockholders of Crestar generally do not have rights to
dissent from mergers, consolidations and certain other corporate transactions to
which Crestar is a party because Article 15 of the VSCA provides that holders of
shares of a Virginia corporation which has shares listed on a national
securities exchange or which has at least 2,000 record stockholders are not
entitled to dissenters' rights unless certain requirements are met.
RESALE OF CRESTAR COMMON STOCK
Crestar Common Stock has been registered under the 1933 Act, thereby
allowing such shares to be traded freely and without restriction by those
holders of Loyola Common Stock who receive such shares following consummation of
the Merger and who are not deemed to be "affiliates" (as defined under the 1933
Act, but generally including directors, certain executive officers and 10% or
more stockholders) of Loyola or Crestar. Each holder of Loyola Common Stock who
is deemed by Loyola to be an affiliate of it has entered into an agreement with
Crestar prior to the Effective Date of the Merger providing, among other things,
that (A) such affiliate acknowledges and agrees to support and vote such shares
of Loyola Common Stock beneficially owned by them to ratify and confirm the
Agreement and the Merger, (B) such affiliate acknowledges and agrees beginning
30 days prior to the Effective Date, that he will not sell, pledge, transfer or
otherwise dispose of shares of Loyola Common Stock or Crestar capital stock
except in compliance with the applicable provisions of the 1933 Act and rules
and regulations thereunder and until such time as financial results covering at
least 30 days of combined operations of Crestar and Loyola have been published
within the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies, and (C) the certificates representing said shares may bear a
legend referring to the foregoing restrictions. This Proxy Statement/Prospectus
does not cover any resales of Crestar Common Stock received by affiliates of
Loyola.
EXPERTS
The consolidated financial statements of Crestar Financial Corporation and
Subsidiaries incorporated in this Proxy Statement/Prospectus by reference to
Crestar's Annual Report on Form 10-K for the year ended December 31, 1994 have
been so incorporated in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, incorporated herein by reference, and upon the authority
of said firm as experts in accounting and auditing. The report of KPMG Peat
Marwick LLP refers to a change in accounting for certain investments in debt and
equity securities.
The consolidated financial statements of Loyola Capital Corporation and
Subsidiaries incorporated in this Proxy Statement/Prospectus by reference to
Loyola's Annual Report on Form 10-K for the year ended December 31, 1994 have
been so incorporated in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, incorporated herein by reference, and upon the authority
of said firm as experts in accounting and auditing. The report of KPMG Peat
Marwick LLP refers to a change in accounting for income taxes.
LEGAL OPINION
The legality of the Crestar Common Stock to be issued in the Merger will be
passed on for Crestar by Hunton & Williams, Richmond, Virginia. Gordon F.
Rainey, Jr., a partner in Hunton & Williams, is a director of Crestar.
Certain legal matters will be passed on for Loyola by Piper & Marbury
L.L.P., Baltimore, Maryland.
A condition to consummation of the Merger is the delivery by each of Piper
& Marbury L.L.P., counsel to Loyola, and Hunton & Williams, counsel to Crestar,
of an opinion concerning certain federal income tax consequences of the Merger.
See "The Merger -- Certain Federal Income Tax Consequences."
OTHER MATTERS
As of the date of this Prospectus/Proxy Statement, the Loyola Board does
not know of any other matters to be presented for action at the Loyola
Stockholder Meeting other than procedural matters incident to the conduct of the
meeting. In addition, stockholders may make proposals for consideration at the
Loyola Stockholder Meeting in accordance with the procedures specified in
Loyola's Bylaws. If such stockholder proposals are made or any other matters not
now known are properly brought before the Loyola Stockholder Meeting, the
persons named in the accompanying proxy will vote such proxy in accordance with
the determination of a majority of the Loyola Board.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
CRESTAR FINANCIAL CORPORATION
("CRESTAR")
AND
LOYOLA CAPITAL CORPORATION
("LOYOLA")
MAY 16, 1995
I-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 THE MERGER
1.1. Structure of the Merger........................................... I-5
1.2. Conversion of Stock; Exchange Ratio............................... I-5
1.3. Exchange Procedures............................................... I-6
1.4. Stock Options..................................................... I-6
1.5. Articles of Incorporation of the Successor Corporation............ I-7
1.6. By-Laws of the Successor Corporation.............................. I-7
1.7. Directors and Officers of the Successor Corporation............... I-7
1.8. Closing........................................................... I-7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
2.1. Organization and Capitalization of Crestar........................ I-7
2.2. Organization and Capitalization of Loyola......................... I-7
2.3. Rights, etc....................................................... I-7
2.4. Capital Stock..................................................... I-7
2.5. Authority......................................................... I-8
2.6. Subsidiaries...................................................... I-8
2.7. Authorization and Validity of Agreement........................... I-8
2.8. No Violations..................................................... I-8
2.9. Securities Exchange Act Reports................................... I-8
2.10. Absence of Certain Changes or Events.............................. I-9
2.11. Taxes............................................................. I-9
2.12. Absence of Claims................................................. I-9
2.13. Absence of Regulatory Actions..................................... I-10
2.14. Labor Matters..................................................... I-10
2.15. Employee Benefit Plans............................................ I-10
2.16. Title to Assets................................................... I-11
2.17. Knowledge as to Conditions........................................ I-11
2.18. Compliance With Laws.............................................. I-11
2.19. Crestar Common Stock.............................................. I-11
2.20. Fees.............................................................. I-11
2.21. Registration Statement; Proxy Statement........................... I-11
2.22. Environmental Matters............................................. I-11
2.23. Material Contracts................................................ I-12
2.24. Insurance......................................................... I-13
2.25. Loans; Allowance for Credit Losses................................ I-13
2.26. Business Combination Statute, etc................................. I-13
2.27. No Dissenters' Rights............................................. I-13
2.28. Loan Servicing Rights............................................. I-14
ARTICLE 3 CONDITIONS TO EFFECTIVENESS
3.1. Stock Option Agreement............................................ I-14
3.2. Affiliate Agreements.............................................. I-14
ARTICLE 4 COVENANTS PRIOR TO CLOSING
4.1. Access to Information; Notice of Changes; Confidentiality......... I-14
4.2. Conduct of the Business of Loyola Pending the Closing Date........ I-15
4.3. Conduct of the Business of Crestar Pending the Closing Date....... I-16
4.4. No Solicitation of Other Offers................................... I-16
4.5. Certain Filings, Consents and Arrangements........................ I-17
4.6. Best Efforts...................................................... I-17
4.7. Publicity......................................................... I-17
4.8. Proxy; Registration Statement..................................... I-17
4.9. Stockholders' Meeting............................................. I-17
4.10. Crestar........................................................... I-17
4.11. Additional Agreements............................................. I-18
4.12. Listing........................................................... I-18
4.13. Merger............................................................ I-18
4.14. Branch Closing Law................................................ I-19
ARTICLE 5 CONDITIONS PRECEDENT TO MERGER
5.1. Conditions Precedent to Obligations of All Parties................ I-19
5.2. Conditions Precedent to Obligations of Crestar.................... I-20
5.3. Conditions Precedent to Obligations of Loyola..................... I-20
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 6 COVENANTS
6.1. Tax-Free Reorganization Treatment................................. I-21
6.2. Employee Matters.................................................. I-21
6.3. Employee Benefits................................................. I-21
6.4. Indemnification; Directors' and Officers' Insurance............... I-23
6.5. Crestar Baltimore, Maryland Local Advisory Board of Directors..... I-23
ARTICLE 7 TERMINATION
7.1. Termination....................................................... I-23
7.2. Effect of Termination............................................. I-24
ARTICLE 8 MISCELLANEOUS
8.1. Certain Definitions; Interpretation............................... I-24
8.2. Fees and Expenses................................................. I-25
8.3. Survival.......................................................... I-25
8.4. Notices........................................................... I-25
8.5. Entire Agreement.................................................. I-26
8.6. Binding Effect; Benefit; Assignment............................... I-26
8.7. Waiver............................................................ I-26
8.8. Further Actions................................................... I-27
8.9. Counterparts...................................................... I-27
8.10. Applicable Law.................................................... I-27
8.11. Severability...................................................... I-27
</TABLE>
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<PAGE>
INDEX TO DEFINITIONS
<TABLE>
<CAPTION>
TERM LOCATION OF DEFINITION
<S> <C>
Acquisition Proposal.............. 4.4
Affiliates........................ 3.2(a)
Agreement......................... Preamble
Average Closing Price............. 1.2(b)
Bank Regulators................... 2.13
Benefit Plans..................... 2.15
Branch Property................... 2.22(a)
Change of Control................. 8.1
Claims............................ 6.4(a)
Closing Date...................... 1.8
Code.............................. 1.4(b)
Contract Employees................ 6.3(a)
Control........................... 8.1
Crestar........................... Preamble
Crestar Bank MD................... 5.1(f)
Crestar Retirement Plan........... 6.3(e)
Crestar Common Stock.............. 1.2(a)
Effective Date.................... 1.8
Effective Time.................... 1.8
Environmental Law................. 2.22(a)
ERISA............................. 2.15
Exchange Option................... 1.4(a)
Exchange Ratio.................... 1.2(b)
Federal Reserve Board............. 4.14
401(k) Plan....................... 6.3(d)
GAAP.............................. 2.9(a)
Governmental Entity............... 2.22(a)
Hazardous Substance............... 2.22(a)
Indemnified Parties............... 6.3(a)
IRS............................... 2.15
Loan Servicing File............... 8.1
Loan Servicing Rights............. 8.1
Loyola............................ Preamble
Loyola Common Stock............... 1.2(a)
Loyola FSB........................ 5.1(h)
Loyola Meeting.................... 4.9
Loyola Pension Plan............... 6.3(e)
Material.......................... 8.1
Material Adverse Effect........... 8.1
Merger............................ 1.1
MGCL.............................. 1.1
OREO.............................. 2.25(a)
Outstanding Option................ 1.4(a)
Pension Plan...................... 2.15
Person............................ 8.1
Proxy Statement................... 2.21
Proxy Statement/Prospectus........ 2.21
Registration Statement............ 2.21
Reports........................... 2.9
Rights............................ 2.3
SEC............................... 2.9
Securities Exchange Act........... 2.9
Securities Act.................... 2.21
Serviced Mortgage Loan............ 8.1
Significant Subsidiary............ 2.4
Subsidiary........................ 8.1
Successor Corporation............. 1.1
Thrift Plan....................... 6.3(d)
To the knowledge of Crestar....... 8.1
To the knowledge of Loyola........ 8.1
Transferred Employees............. 6.3(b)
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of the 16th day
of May, 1995, by and between CRESTAR FINANCIAL CORPORATION, a Virginia
corporation ("Crestar"), and LOYOLA CAPITAL CORPORATION, a Maryland corporation
("Loyola").
WHEREAS, the respective Boards of Directors of Crestar and Loyola have
approved the acquisition of Loyola by Crestar, subject to the terms and
conditions of this Agreement;
WHEREAS, to complete such acquisition, the respective Boards of Directors
of Crestar and Loyola have approved the merger of Loyola into Crestar pursuant
to and subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties, intending to be legally bound hereby, agree as follows:
ARTICLE 1
THE MERGER
1.1. STRUCTURE OF THE MERGER.
Subject to the terms and conditions of this Agreement and the Plan of
Merger attached hereto as Schedule 1.1, at the Effective Time (as defined in
Section 1.8), Loyola will merge (the "Merger") with and into Crestar, with
Crestar being the successor corporation (the "Successor Corporation"). At the
Effective Time, the separate corporate existence of Loyola shall cease, and
Crestar shall continue as the Successor Corporation. From and after the
Effective Time, the Merger shall have the effects set forth in Section 3-114 of
the Maryland General Corporation Law ("MGCL") and in Section 13.1-721 of the
Virginia Stock Corporation Act.
1.2. CONVERSION OF STOCK; EXCHANGE RATIO.
(A) CONVERSION OF STOCK. At the Effective Time, each share of common stock
of Loyola, par value $0.10 per share (the "Loyola Common Stock") then issued and
outstanding (other than shares held directly by Crestar, excluding shares held
in a fiduciary capacity or in satisfaction of a debt previously contracted)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and represent the right to receive the number of
shares of stock of Crestar determined in accordance with subparagraph (b). As of
the Effective Time, each share of Loyola Common Stock held directly by Crestar,
excluding shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted, shall be canceled, retired and cease to exist, and no
exchange or payment shall be made with respect thereto. Each issued and
outstanding share of common stock of Crestar, par value $5.00 per share
("Crestar Common Stock") shall continue to be an issued and outstanding share of
common stock of the Successor Corporation.
(B) EXCHANGE RATIO. Each share of Loyola Common Stock (other than shares
held directly by Crestar, excluding shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted) shall be converted into a fraction
of a share of Crestar Common Stock, determined in accordance with the Exchange
Ratio. The "Exchange Ratio" shall be calculated as follows:
(i) if the Average Closing Price (as defined below) is between $43.478
and $46.375, the Exchange Ratio shall be 0.690 (the quotient of (A) $32.00
divided by (B) $46.375);
(ii) if the Average Closing Price is greater than $46.375, the
Exchange Ratio shall be the quotient of (A) $32.00 divided by (B) the
Average Closing Price, rounded to the nearest one-one thousandth of a
share, provided that the Exchange Ratio shall not be less than 0.640; and
(iii) if the Average Closing Price is less than $43.478, the Exchange
Ratio shall be the quotient of (A) $30.00 divided by (B) the Average
Closing Price, rounded to the nearest one-one thousandth of a share,
provided that the Exchange Ratio shall not be greater than 0.750, subject
to adjustment as provided in Section 7.1(f).
As used herein, "Average Closing Price" shall mean the average closing
price of Crestar Common Stock as reported on the New York Stock Exchange for
each of the 10 trading days ending on the tenth day prior to the Closing Date
(as defined in Section 1.8).
The Exchange Ratio at the Effective Time of the Merger shall be adjusted to
reflect any consolidation, split-up, other subdivisions or combinations of
Crestar Common Stock, any dividend payable in Crestar Common Stock, or any
capital
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<PAGE>
reorganization involving the reclassification of Crestar Common Stock subsequent
to the date of this Agreement. The Exchange Ratio may be adjusted as provided in
Section 7.1(f).
(C) FRACTIONAL SHARES. No fractional shares of Crestar Common Stock will be
issued pursuant hereto, and Crestar shall pay cash in lieu of any fractional
shares of Crestar Common Stock which otherwise would be issuable. Any such cash
payments shall be made on the basis of the Average Closing Price.
1.3. EXCHANGE PROCEDURES.
(a) After the Effective Time of the Merger, each holder of a certificate
for theretofore outstanding shares of Loyola Common Stock, upon surrender of
such certificate and a letter of transmittal to Crestar Bank (which shall act as
exchange agent), shall be entitled to receive in exchange therefor a certificate
or certificates representing the number of full shares of Crestar Common Stock
for which shares of Loyola Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been exchanged as provided
in this Article I. Until so surrendered, each outstanding certificate which,
prior to the Effective Time of the Merger, represented Loyola Common Stock will
be deemed to evidence the right to receive the number of full shares of Crestar
Common Stock into which the shares of Loyola Common Stock represented thereby
may be converted in accordance with the Exchange Ratio; and, after the Effective
Time of the Merger will be deemed for all corporate purposes of Crestar to
evidence ownership of the number of full shares of Crestar Common Stock into
which the shares of Loyola Common Stock represented thereby were converted.
(b) Until such outstanding certificates formerly representing Loyola Common
Stock are surrendered, no dividend payable to holders of record of Crestar
Common Stock for any period as of any date subsequent to the Effective Time of
the Merger shall be paid to the holder of such outstanding certificates in
respect thereof. After the Effective Time of the Merger, there shall be no
further registry of transfer on the records of Loyola or shares of Loyola Common
Stock. If a certificate representing such shares is presented to Crestar, it
shall be canceled and exchanged for a certificate representing shares of Crestar
Common Stock as herein provided. Upon surrender of certificates of Loyola Common
Stock in exchange for Crestar Common Stock, there shall be paid to the record
holder of the certificates of Crestar Common Stock issued in exchange therefor
(i) the amount of dividends theretofore paid with respect to such full shares of
Crestar Common Stock as of any date subsequent to the Effective Time of the
Merger which have not yet been paid to a public official pursuant to abandoned
property laws and (ii) at the appropriate payment date the amount of dividends
with a record date after the Effective Time of the Merger but prior to surrender
and a payment date subsequent to surrender. No interest shall be payable with
respect to such dividends upon surrender of outstanding certificates.
(c) At the Effective Time of the Merger, each share of Loyola Common Stock
held directly by Crestar (excluding shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted) shall be canceled, retired and
cease to exist.
1.4. STOCK OPTIONS.
(a) At the Effective Time, options granted by Loyola under Loyola's 1986
Stock Option Plan, as amended, to purchase shares of Loyola Common Stock, which
are outstanding and unexercised immediately prior thereto (each, an "Outstanding
Option"), shall be converted as to each whole share subject to such Outstanding
Option into an option (each, an "Exchange Option") to purchase such number of
shares of Crestar Common Stock at such exercise price as is determined as
provided below:
(i) the number of shares of Crestar Common Stock to be subject to the
Exchange Option shall be equal to the product of (A) the number of shares
of Loyola Common Stock subject to the Outstanding Option multiplied by (B)
the Exchange Ratio (as may be adjusted pursuant to Section 1.2(b)), the
product being rounded, if necessary, up or down, to the nearest whole
share;
(ii) the per share exercise price under the Exchange Option shall be
equal to (A) the per share exercise price under the Outstanding Option
divided by (B) the Exchange Ratio (as may be adjusted pursuant to Section
1.2(b)), with any fractional cent rounded to the next whole cent; and
(iii) the Exchange Option shall otherwise have the same duration and
other terms as the Outstanding Option.
(b) The adjustments provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be effected in a manner consistent
with Section 424(a) of the Code.
(c) No options for Loyola capital stock have been granted since May 1, 1995
except under the Stock Option Agreement contemplated by Section 3.1.
I-6
<PAGE>
1.5. ARTICLES OF INCORPORATION OF THE SUCCESSOR CORPORATION.
The Articles of Incorporation of Crestar, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation of the Successor
Corporation until thereafter amended as provided by law.
1.6. BY-LAWS OF THE SUCCESSOR CORPORATION.
The By-Laws of Crestar, as in effect immediately prior to the Effective
Time, shall be the By-Laws of the Successor Corporation until thereafter amended
as provided by law.
1.7. DIRECTORS AND OFFICERS OF THE SUCCESSOR CORPORATION.
The directors and officers of Crestar, as in office immediately prior to
the Effective Time, shall be the directors and officers of the Successor
Corporation.
1.8. CLOSING.
On such date as Crestar shall designate which shall be a date promptly
following the expiration of all applicable waiting periods in connection with
approvals of Bank Regulators (as defined in Section 2.13) occurs (but not
earlier than December 28, 1995) and all conditions to the consummation of this
Agreement are satisfied or waived, or on such earlier or later date as may be
agreed by the parties (the "Closing Date"), articles of merger shall be executed
in accordance with all appropriate legal requirements and shall be filed as
required by law, and the Merger provided for herein shall become effective upon
such filing or on such date as may be specified in such articles of merger by
agreement of the parties hereto. The date of such filing or such later effective
date is herein called the "Effective Date." The "Effective Time" of the Merger
shall be such time on the Effective Date as may be agreed by the parties.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Crestar represents and warrants to Loyola, and Loyola represents and
warrants to Crestar, to the extent applicable as indicated below, that:
2.1. ORGANIZATION AND CAPITALIZATION OF CRESTAR.
In the case of Crestar, it is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia, it
is a bank holding company registered under the Bank Holding Company Act of 1956,
as amended; and its authorized capital stock as of the date hereof consists of
100,000,000 authorized shares of common stock, par value $5.00 per share, of
which 38,397,409 shares were issued and outstanding as of March 31, 1995, and
2,000,000 authorized shares of preferred stock, no par value per share, of which
no shares are issued and outstanding as of the date hereof.
2.2. ORGANIZATION AND CAPITALIZATION OF LOYOLA.
In the case of Loyola, it is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland and it is a savings
and loan holding company registered under the Savings and Loan Holding Company
Act, as amended; and its authorized capital stock as of the date hereof consists
of 35,000,000 authorized shares of Loyola Common Stock, of which 8,107,750
shares were issued and outstanding as of March 31, 1995, and 15,000,000
authorized shares of preferred stock, par value $0.10 per share, of which no
shares are issued and outstanding as of the date hereof.
2.3. RIGHTS, ETC.
In the case of Loyola, except as set forth on Schedule 2.3 or as
contemplated by Section 3.1, there are not any shares of its capital stock
reserved for issuance, or any outstanding or authorized options, warrants,
rights, subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments, contingent or
otherwise, relating to its capital stock, pursuant to which it is or may become
obligated to issue shares of capital stock or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of its
capital stock (collectively, "Rights").
2.4. CAPITAL STOCK.
In the case of Crestar and Loyola, respectively, all outstanding shares of
capital stock of it and its Significant Subsidiaries (as defined in Rule 1-02 of
Regulation S-X, provided that any Subsidiary (as defined in Section 8.1) that is
a bank,
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<PAGE>
savings bank or trust company shall be deemed a Significant Subsidiary) are duly
authorized, validly issued and outstanding, fully paid and (subject to 12 U.S.C.
(section mark) 55 in the case of a national bank) nonassessable, and subject to
no preemptive rights.
2.5. AUTHORITY.
In the case of Crestar and Loyola, respectively, each of it and its
Significant Subsidiaries has the power and authority, and is duly qualified in
all jurisdictions where such qualification is required, to carry on its business
as it is now being conducted and to own all its Material (as defined in Section
8.1) properties and assets (except for such qualifications the absence of which,
individually or in the aggregate, would not have a Material Adverse Effect (as
defined in Section 8.1)), and it has all federal, state, local, and foreign
Governmental Entity (as defined in Section 2.22(a)) authorizations necessary for
it to own or lease its properties and assets and to carry on its business as it
is now being conducted, except for such powers and authorizations the absence of
which, either individually or in the aggregate, would not have a Material
Adverse Effect.
2.6. SUBSIDIARIES.
In the case of Loyola, a list of its Subsidiaries is contained on Schedule
2.6. In the case of Loyola, all of the issued and outstanding shares of capital
stock of each of its Subsidiaries are owned by it free and clear of all liens,
claims, encumbrances and restrictions on transfer and there are no Rights with
respect to such capital stock, except as set forth on Schedule 2.6.
2.7. AUTHORIZATION AND VALIDITY OF AGREEMENT.
In the case of Crestar and Loyola, respectively, it has full power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. In the case of
Crestar, and subject, in the case of Loyola, to the receipt of the required
stockholder approval for Loyola referred to in Section 5.1(a), this Agreement
has been authorized by all necessary corporate action of it. In the case of
Crestar and Loyola, respectively, this Agreement is a valid and binding
agreement of it enforceable against it in accordance with its terms, subject as
to enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. In the case of Crestar and
Loyola, respectively, neither the execution and delivery of this Agreement nor
the carrying out of the transactions contemplated hereunder will result in any
violation, termination or modification of, or be in conflict with, any terms of
any contract or other instrument to which Crestar or Loyola is a party, or of
any judgment, decree or order applicable to Crestar or Loyola, or result in the
creation of any lien, charge or encumbrance upon any of its properties or
assets.
2.8. NO VIOLATIONS.
In the case of Crestar and Loyola, respectively, the execution, delivery
and performance of this Agreement by it does not, and the consummation of the
transactions contemplated hereby by it will not, constitute (i) a breach or
violation of, or a default under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or Material agreement, indenture
or instrument of it or its Subsidiaries or to which it or its Subsidiaries (or
any of their respective properties) is subject, which breach, violation or
default would have a Material Adverse Effect (all of such breaches, violations,
or defaults being identified on Schedule 2.8) or enable any person to enjoin the
Merger or (ii) a breach or violation of, or a default under, the charter or
by-laws of it or any of its Subsidiaries; and the consummation of the
transactions contemplated hereby will not require any approval, consent or
waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than (i) the
required approvals, consents and waivers of governmental authorities referred to
in Section 5.1(c), (ii) the approval of the stockholders of Loyola referred to
in Section 5.1(a), (iii) such approvals, consents or waivers as are required
under the federal and state securities or "Blue Sky" laws in connection with the
transactions contemplated by this Agreement, and (iv) any other approvals,
consents or waivers the absence of which, individually or in the aggregate,
would not result in a Material Adverse Effect or enable any person to enjoin the
Merger.
2.9. SECURITIES EXCHANGE ACT REPORTS.
In the case of Crestar and Loyola, respectively, it has filed with the
Securities and Exchange Commission ("SEC") all required forms, reports and
documents required under the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"). In the case of Crestar and Loyola, respectively, as
of their respective dates, neither its Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, nor any other document filed subsequent to
December 31, 1994 under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act, each in the form (including exhibits) filed with the SEC
(collectively, its "Reports") contained, as of the date thereof, any untrue
statement of a Material fact or omitted to state a Material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. In the case of Crestar
and Loyola, respectively, each of the balance sheets or
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<PAGE>
statements of condition contained or incorporated by reference in its Reports
(including any related notes and schedules) fairly present the financial
position of the entity or entities to which it relates as of its date and each
of the statements of operations and retained earnings and of cash flows and
changes in financial position or equivalent statements contained or incorporated
by reference in its Reports (including any related notes and schedules) fairly
present the results of operations, retained earnings and cash flows of the
entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not Material in amount or effect), in each case in
accordance with generally accepted accounting principles applicable to
depository institutions ("GAAP") consistently applied during the periods
involved, except as may be noted in the Reports. In the case of Crestar and
Loyola, respectively, as of the date of such Reports, there existed no Material
liabilities of Crestar or Loyola, respectively, contingent or otherwise, that
are required to be disclosed under GAAP or would be required to be disclosed in
the financial statements contained in the Annual Report on Form 10-K for the
year ended December 31, 1994 but are not so disclosed in such Reports.
2.10. ABSENCE OF CERTAIN CHANGES OR EVENTS.
In the case of Crestar and Loyola, respectively, since December 31, 1994,
except as disclosed in its Reports, it has not incurred any Material liability
except in the ordinary course of its business consistent with past practice, and
since December 31, 1994 there has not been any change in the financial condition
or results of operations of it or any of its Subsidiaries which, individually or
in the aggregate, has had a Material Adverse Effect (other than as a result of
changes in banking laws or regulations of general applicability or
interpretations thereof).
2.11. TAXES.
In the case of Crestar and Loyola, respectively, except as otherwise would
not have a Material Adverse Effect, all federal, state, local and foreign tax
returns required to be filed on or before the Effective Date by or on behalf of
it or any of its Subsidiaries have been timely filed or requests for extensions
have been timely filed and any such extensions have been granted and not
expired. In the case of Crestar and Loyola, respectively, except as otherwise
would not have a Material Adverse Effect, all taxes imposed on it or any of its
Subsidiaries (or for which it or any of its Subsidiaries is liable) for any
period (or portion of a period) ending on or before the Effective Date have been
paid in full or adequate provision has been made for any such taxes on its
balance sheet (in accordance with GAAP). Except as disclosed on Schedule 2.11A,
in the case of Crestar, and on Schedule 2.11B, in the case of Loyola,
respectively, as of the date of this Agreement, there are no assessments or
notices of deficiency or proposed assessments with respect to any taxes of it or
any of its Subsidiaries (or for which it or any of its Subsidiaries is liable)
that, if resolved in a manner adverse to it, would have a Material Adverse
Effect. In the case of Crestar and Loyola, respectively, except as otherwise
would not have a Material Adverse Effect, neither it nor any of its Subsidiaries
has executed an extension or waiver of any statute of limitations on the
assessment or collection of any tax due that is currently in effect. In the case
of Loyola, except as disclosed on Schedule 2.11B, (i) neither Loyola nor any
Subsidiary of Loyola has filed (or been included in) a consolidated, combined,
or unitary income tax return with a corporation other than Loyola and its
Subsidiaries, (ii) each of Loyola and its Subsidiaries is in Material compliance
with, and its records contain all information and documents necessary to comply
in all Material respects with, all applicable tax information reporting and
withholding requirements, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the Code, (iii) for
periods ending after the date of the most recent balance sheet contained in the
latest Report of Loyola, the books and records of Loyola and its Subsidiaries
fully and properly reflect their liabilities for all accrued taxes in accordance
with GAAP, (iv) neither Loyola nor any of its Subsidiaries has made or entered
into, or holds any assets subject to, a consent filed pursuant to Section 341(f)
of the Code and the regulations thereunder or a "safe harbor lease" subject to
former Section 168(f)(8) of the Code and the regulations thereunder, (v) no
Material amount is required to be included in the income of Loyola or any of its
Subsidiaries pursuant to Section 481 of the Code and the regulations thereunder
by reason of any event that occurred prior to the Effective Time, and (vi)
Schedule 2.11B describes all Material tax elections, consents, and agreements
affecting Loyola or any of its Subsidiaries. For purposes of this Section 2.11,
"tax" and "taxes" include any interest, penalty, and addition to tax payable
with respect to any tax.
2.12. ABSENCE OF CLAIMS.
Except as disclosed on Schedule 2.12A, in the case of Crestar, and on
Schedule 2.12B, in the case of Loyola, respectively, no Material litigation,
proceeding or controversy before any court or Governmental Entity is pending,
and there is no pending claim, action or proceeding against it or any of its
Subsidiaries, which is reasonably likely, individually or in the aggregate to
have a Material Adverse Effect or to Materially hinder or delay consummation of
the transactions contemplated hereby.
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2.13. ABSENCE OF REGULATORY ACTIONS.
In the case of Crestar and Loyola, respectively, neither it nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of, federal or state governmental authorities charged with the
supervision or regulation of banks or bank holding companies or savings and
loans or savings and loan holding companies or engaged in the insurance of bank
deposits ("Bank Regulators"), nor has it been advised by any Bank Regulator that
it is contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such order, directive, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar undertaking.
2.14. LABOR MATTERS.
In the case of Crestar and Loyola, respectively, neither it 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 it or any of its Subsidiaries the subject of any proceeding
asserting that it or any such Subsidiary has committed an unfair labor practice
or seeking to compel it or such Subsidiary to bargain with any labor
organization as to wages and conditions of employment, nor to the knowledge of
Loyola and Crestar (as defined in Section 8.1), respectively, is there any
strike or other labor dispute involving it or any of its Subsidiaries pending or
threatened.
2.15. EMPLOYEE BENEFIT PLANS.
Except as disclosed on Schedule 2.15, to the knowledge of Loyola, all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that cover any of its or its
Subsidiaries' employees, comply and have been administered in all Material
respects with all applicable requirements of ERISA, the Code and other
applicable laws; to the knowledge of Loyola, neither it nor any of its
Subsidiaries has engaged in a "prohibited transaction" (as defined in Section
406 of ERISA or Section 4975 of the Code) with respect to any such employee
benefit plan which is likely to result in any Material penalties or taxes under
Section 502(i) of ERISA or Section 4975 of the Code; no Material liability to
the Pension Benefit Guaranty Corporation has been or is expected by it or them
to be incurred with respect to any such employee benefit plan which is subject
to Title IV of ERISA ("Pension Plan"), or with respect to any "single-employer
plan" (as defined in Section 4001(a)(15) of ERISA) currently or formerly
maintained by it, them or any entity which is considered one employer with it
under Section 4001 of ERISA or Section 414 of the Code; no Pension Plan had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA (whether or
not waived) as of the last day of the end of the most recent plan year ending
prior to the date hereof; the fair market value of the assets of each Pension
Plan exceeds the present value of the "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA) under such Pension Plan as of the end of the most
recent plan year with respect to such Pension Plan ending prior to the date
hereof, calculated on the basis of the actuarial assumptions used in the most
recent actuarial valuation for such Pension Plan as of the date hereof; no
notice of a "reportable event" (as defined in Section 4043 of ERISA) for which
the 30-day reporting requirement has not been waived has been required to be
filed for any Pension Plan within the 12-month period ending on the date hereof;
neither it nor any of its Subsidiaries has provided, or is required to provide,
security to any Pension Plan pursuant to Section 401(a)(29) of the Code; neither
it nor any of its Subsidiaries have not contributed to any "multiemployer plan,"
as defined in Section 3(37) of ERISA on or after September 26, 1980. Schedule
2.15 identifies each "employee welfare benefit plan" (as defined in Section 3(1)
of ERISA) maintained by Loyola and its Subsidiaries which is funded; the funding
under each such plan does not exceed the limitations under Section 419A(b) or
419A(c) of the Code and neither Loyola nor any of its Subsidiaries is subject to
taxation on the income of any such plan. Schedule 2.15 identifies the method of
funding (including any individual accounting) for all post-retirement medical or
life insurance benefits for the employees of Loyola and its Subsidiaries and
discloses the funded status of such plans. In the case of Loyola, with respect
to each benefit plan, program, arrangement or policy for employees that is
maintained or contributed to by Loyola or any of its Subsidiaries, including,
but not limited to, "employee benefit plans" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(collectively, the "Benefit Plans"), it has made available to Crestar a true and
correct copy of (i) the most recent annual report on Form 5500 filed with the
Internal Revenue Service (the "IRS"), (ii) such Benefit Plan, (iii) each trust
agreement and insurance contract relating to such Benefit Plan, (iv) the most
recent summary plan description for such Benefit Plan, (v) the most recent
actuarial report or valuation if such Benefit Plan is subject to Title IV of
ERISA, (vi) the most recent determination letter issued by the IRS if such
Benefit Plan is intended to be qualified under Section 401(a) of the Code, (vii)
any open requests for rulings or determination letters that pertain to any
Benefit Plan, and (viii) all outstanding employment agreements, as amended
through the date hereof with employees, former employees, directors, former
directors and independent contractors of Loyola and each of its Subsidiaries.
Other than has been identified on Schedule
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2.15, full payment has been made (or proper accruals have been established to
the extent required by GAAP) for all contributions which are required or for
which benefits have accrued prior to Closing under the terms of each Benefit
Plan, employment agreement, benefit commitment and for all liabilities which
have accrued prior to the Effective Time under each Benefit Plan, employment
agreement, benefit commitment or collective bargaining agreement, including any
such Benefit Plan, employment agreement, benefit commitment or collective
bargaining agreement to be assumed by Crestar pursuant to Section 6.3(a). There
are no trades or businesses, and there never have been any trades or businesses,
which are or were treated as a single employer under ERISA and the Code with
respect to Loyola other than its Subsidiaries.
2.16. TITLE TO ASSETS.
In the case of Crestar and Loyola, respectively, each of it and each of its
Subsidiaries has good and marketable title to its properties and assets (other
than property as to which it is lessee) except for such defects in title which
would not, individually or in the aggregate, have a Material Adverse Effect.
2.17. KNOWLEDGE AS TO CONDITIONS.
To the knowledge of Crestar and Loyola, respectively, there is no reason
why the approvals, consents and waivers of the Governmental Entities referred to
in Section 5.1(c) should not be obtained without the imposition of any condition
of the type referred to in the provisos thereto.
2.18. COMPLIANCE WITH LAWS.
In the case of Crestar and Loyola, respectively, it and each of its
Subsidiaries has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with,
federal, state, local and foreign governmental or regulatory bodies that are
required in order to permit it to carry on its business as it is presently
conducted and the absence of which could, individually or in the aggregate, have
a Material Adverse Effect.
2.19. CRESTAR COMMON STOCK.
In the case of Crestar, the shares of Crestar Common Stock to be issued
pursuant to this Agreement, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and subject to no preemptive rights.
2.20. FEES.
In the case of Crestar and Loyola, respectively, other than financial
advisory services performed for Loyola by Alex. Brown & Sons Incorporated (on
terms disclosed to Crestar) and financial advisory services performed for
Crestar by Morgan Stanley & Co., Incorporated, neither it nor any of its
Subsidiaries, nor any of their respective officers, directors, employees or
agents has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for it or any of its
Subsidiaries, in connection with this Agreement or the transactions contemplated
hereby.
2.21. REGISTRATION STATEMENT; PROXY STATEMENT.
In the case of Crestar and Loyola, respectively, the information to be
supplied by it for inclusion in (i) the Registration Statement on Form S-4
and/or such other form(s) as may be appropriate to be filed under the Securities
Act of 1933, as amended (the "Securities Act") with the SEC by Crestar for the
purpose of, among other things, registering Crestar Common Stock to be issued to
the stockholders of Loyola in the Merger (the "Registration Statement") will
not, at the time such Registration Statement becomes effective, contain any
untrue statement of a Material fact or omit to state any Material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, or (ii) the proxy statement to be filed with the SEC by Loyola under
the Securities Exchange Act and distributed in connection with Loyola's meeting
of its stockholders to vote upon this Agreement (as amended or supplemented from
time to time, the "Proxy Statement", and together with the prospectus included
in the Registration Statement, as amended or supplemented from time to time, the
"Proxy Statement/Prospectus") will not, at the time the Proxy
Statement/Prospectus is mailed and at the time of the Loyola Meeting (as defined
in Section 4.9), contain any untrue statement of a Material fact or omit to
state any Material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
2.22. ENVIRONMENTAL MATTERS.
(a) For purposes of this Section 2.22, the following terms shall have the
indicated meaning:
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"Branch Property" means all real property presently owned or operated by
Loyola and each of its Subsidiaries on which branches or facilities are located.
"Environmental Law" means (i) any applicable federal, state or local
statute, law, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, directive, requirement or agreement
with any court, governmental authority or other regulatory or administrative
agency or commission, domestic or foreign ("Governmental Entity") now existing,
relating to the use, storage, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous Substances,
each as amended, or (ii) any common law that may impose liability or obligations
for injuries or damages due to the presence of or exposure to any Hazardous
Substance.
"Hazardous Substance" means any substance, whether liquid, solid or gas,
listed, defined, designated or classified as hazardous, toxic, radioactive or
dangerous, under any applicable Environmental Law, whether by type or by
quantity. Hazardous Substance includes, without limitation, (i) any "hazardous
substance" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, and (ii) any "hazardous waste" as defined in the
Resource Conservation and Recovery Act, as amended.
(b) To the knowledge of Loyola, except as disclosed on Schedule 2.22 or as
would not individually or in the aggregate have a Material Adverse Effect on
Loyola;
(i) each of Loyola and its Subsidiaries is and has been in substantial
compliance with all applicable Environmental Law;
(ii) neither Loyola nor any of its Subsidiaries has received any
written notices, demand letters or written requests for information from
any Governmental Entity or any third party indicating that Loyola or any
Subsidiary may be in violation of, or liable under, any Environmental Law;
(iii) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigation or proceedings pending or
threatened against Loyola or any Subsidiary alleging that they may be in
violation of, or liable under, any Environmental Law;
(iv) no reports have been filed, or are required to be filed with any
Governmental Entity, by Loyola or any of its Subsidiaries concerning the
release of any Hazardous Substance or the violation or any Environmental
Law on or at the Branch Property; and
(v) there are no underground storage tanks on, in or under any of the
Branch Property and no underground storage tanks have been closed or
removed from any Branch Property while such Branch Property was owned or
operated by Loyola or any of its Subsidiaries.
(c) There are no permits or licenses required under any Environmental Law
in respect of the Branch Property presently operated by Loyola or any of its
Subsidiaries that the absence of which could, individually or in the aggregate,
have a Material Adverse Effect.
(d) Schedule 2.22 contains copies of all documentation representing
Loyola's environmental policies and procedures (including environmental policies
and procedures applicable to land loans, land acquisition and development loans,
commercial construction loans and commercial permanent mortgage loans). Land
loans and land acquisition and development loans made to real estate joint
ventures of Loyola and its Subsidiaries are among the land loans and land
acquisition and development loans covered by such policies and procedures.
Loyola has operated and conducted its business and operations (including
specifically the making of land loans, land acquisition and development loans,
commercial construction loans and commercial permanent mortgage loans) in
substantial compliance with all such policies and procedures since their
adoption on March 16, 1993 except where the failure to so operate or conduct
such business would not, individually or in the aggregate, have a Material
Adverse Effect.
2.23. MATERIAL CONTRACTS.
In the case of Crestar and Loyola, respectively, neither it nor any of its
Subsidiaries is in default under any Material contract, which default is
reasonably likely to have, either individually or in the aggregate, a Material
Adverse Effect on it, 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. In the
case of Crestar and Loyola, respectively, neither it nor any of its Subsidiaries
is a party to or is bound by any agreement or subject to or bound by any
judgment, decree, order, writ or injunction that places any Material restriction
on the ability of it or any of its Subsidiaries to engage in their respective
businesses in accordance with present practices.
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2.24. INSURANCE.
In the case of Crestar and Loyola, respectively, the assets, properties and
operations of it and its Subsidiaries are insured under various policies of
general liability and other forms of insurance, including surety and bonding
arrangements. Such policies are in amounts and types of coverage which are
reasonable in relation to the business and assets of each of them and all
premiums due have been paid in full. All such forms of insurance are in full
force and effect in accordance with their terms, no notice of cancellation has
been received, and there is no existing default or event which, with the giving
of notice or lapse of time or both, would constitute a default thereunder, in
each such case, except which would not have a Material Adverse Effect. To the
knowledge of Crestar and Loyola, respectively, there has been no failure to give
any notice or to present any Material claim under any insurance arrangement in
due and timely fashion.
2.25. LOANS; ALLOWANCE FOR CREDIT LOSSES.
(a) Each loan outstanding on the books of Loyola is reflected correctly in
all Material respects by the loan documentation, was made in the ordinary course
of business, was to the knowledge of Loyola not uncollectible at the time it was
made, and in all Material respects was made in accordance with Loyola's standard
loan policies. The records of Loyola regarding all loans outstanding on its
books are accurate in all Material respects. Except as identified on Schedule
2.25, no loan in excess of $1,000,000 has been classified as of the date hereof
by Loyola or regulatory examiners as "Other Loans Specially Mentioned,"
"Substandard," "Doubtful" or "Loss." Except as identified on Schedule 2.25, each
loan reflected as an asset on Loyola's balance sheets is, to the knowledge of
Loyola, the legal, valid and binding obligation of the obligor and any
guarantor, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditor's rights and to
general equity principles, and no defense, offset or counterclaim has been
asserted with respect to any such loan which if successful could have a Material
Adverse Effect. The allowance for credit losses included in the consolidated
financial statements of Loyola included in Loyola's December 31, 1994 Form 10-K
was determined in accordance with GAAP to be adequate to provide for losses
relating to or inherent in the loan and lease portfolios of, and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by, Loyola and its Subsidiaries. Loyola has disclosed to
Crestar in writing prior to the date hereof the aggregate amounts as of a recent
date of all loans, losses, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of Loyola and its Subsidiaries
that have been classified by any bank examiner (whether regulatory or internal)
as "Other Loans Specially Mentioned," "Special Mention," "Substandard,"
"Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans" or words of similar import, and Loyola shall promptly on a periodic basis
inform Crestar of any such classification arrived at any time after the date
hereof. The real property classified by Loyola and each of its Subsidiaries as
other real estate owned ("OREO") included in non-performing assets is carried
net of reserves at the lower of cost or market value based on independent
appraisals.
(b) The allowance for credit losses included in the consolidated financial
statements of Crestar included in Crestar's December 31, 1994 Form 10-K was
determined in accordance with GAAP to be adequate to provide for losses relating
to or inherent in the loan and lease portfolios of, and other extensions of
credit (including letters of credit and commitments to make loans or extend
credit) by, Crestar and its Subsidiaries. The OREO included in nonperforming
assets is carried net of reserves at the lower of cost or market value based on
independent appraisals.
2.26. BUSINESS COMBINATION STATUTE, ETC.
Loyola has taken all action necessary to exempt transactions with Crestar
and its affiliates from the operation of the Maryland "business combination"
statute at Sections 3-601 ET SEQ. of the MGCL and the Maryland "control share"
statute at Sections 3-701 ET SEQ. of the MGCL.
2.27. NO. DISSENTERS' RIGHTS.
Stockholders of Loyola who vote against the Merger will not have
dissenters' rights to receive cash for their shares under Sections 3-201 ET SEQ.
of the MGCL.
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2.28. LOAN SERVICING RIGHTS.
The Loan Servicing Rights (as defined in Section 8.1) relating to the
Serviced Mortgaged Loans (as defined in Section 8.1) described on Schedule 2.28
are valid and binding rights and obligations of Loyola or its Subsidiaries, as
the case may be and, to the knowledge of Loyola, all of the other parties
thereto, are in full force and effect and are enforceable in accordance with
their terms, except as may be limited by matters relating to bankruptcy and
insolvency. Except as set forth on Schedule 2.28, to the knowledge of Loyola,
there is no default or claim of default by any party under, or any third party
having an interest in, any such servicing agreement, and there is no pending or,
to the knowledge of Loyola, threatened cancellation of any servicing agreement
relating to any Serviced Mortgage Loan referred to on Schedule 2.28.
ARTICLE 3
CONDITIONS TO EFFECTIVENESS
This Agreement shall be effective upon execution by each of the parties
hereto and satisfaction of the following conditions:
3.1. STOCK OPTION AGREEMENT.
Crestar and Loyola shall each have executed and delivered the Stock Option
Agreement in the form of Schedule 3.1.
3.2. AFFILIATE AGREEMENTS.
(a) Loyola has identified to Crestar on Schedule 3.2 hereof all persons who
were, as of the date hereof, directors or executive officers of Loyola or any
Subsidiary representing 25% or more of the consolidated assets of Loyola (the
"Affiliates").
(b) Loyola has delivered a written letter agreement of Affiliates in form
and substance satisfactory to each of Loyola and Crestar from each person who is
identified as a possible Affiliate pursuant to clause (a) above. The written
letter agreements provide that each signatory thereto acknowledges and agrees to
support and vote the shares of Loyola Common Stock beneficially owned by them to
ratify and confirm this Agreement and the Merger. Such letter agreements also
provide that each signatory thereto acknowledges and agrees, beginning 30 days
prior to the Effective Date, that he will not sell, pledge, transfer or
otherwise dispose of shares of Loyola Common Stock or Crestar capital stock
except in compliance with applicable provisions of the Securities Act and the
rules and regulations thereunder and until such time as financial results
covering at least 30 days of combined operations of Crestar and Loyola have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies. If the Merger will qualify for
pooling-of-interests accounting treatment, shares of Crestar Common Stock issued
to Affiliates in exchange for shares of Loyola Common Stock shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of Crestar and Loyola have been published within the meaning
of Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such Affiliate has provided the written letter
agreement referred to in this Section 3.2(b) (and Crestar shall be entitled to
place restrictive legends upon certificates for shares of Crestar Common Stock
issued to Affiliates pursuant to this Agreement to enforce the provisions of
this Section 3.2(b)).
ARTICLE 4
COVENANTS PRIOR TO CLOSING
4.1. ACCESS TO INFORMATION; NOTICE OF CHANGES; CONFIDENTIALITY.
(a) During the period commencing on the date hereof and ending on the
Closing Date, each of the parties shall (and shall cause each of its
Subsidiaries to) upon reasonable notice, afford the other parties, and their
respective counsel, accountants, officers and employees and other authorized
representatives, reasonable access during normal business hours to the
properties, books, personnel, records, tax returns, work papers of independent
auditors of such party and its Subsidiaries in order that they may have the
opportunity to make such investigations as they shall desire of the affairs of
such party and its Subsidiaries; such investigation shall not, however, affect
or be deemed to modify the representations and warranties made by such party in
this Agreement.
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(b) During the period commencing on the date hereof and ending on the
Closing Date, each party shall promptly notify the other parties hereto in
writing of any and all occurrences which, if they had occurred prior to
execution of this Agreement, would have caused the representations and
warranties of such party contained in Article 2 and the Schedules delivered in
conjunction therewith to be incorrect in any Material respect.
(c) Crestar acknowledges that information received by it concerning Loyola
and its Subsidiaries and their operations is subject to the Confidentiality
Agreement dated February 22, 1995 between Crestar and Loyola. Without limiting
the foregoing, each party will not, and will cause its representatives not to,
use any information obtained pursuant to this Section 4.1 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of law, each party will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Section 4.1 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 Agreement is terminated or the transactions contemplated by this Agreement
shall otherwise fail to be consummated, each party 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.
4.2. CONDUCT OF THE BUSINESS OF LOYOLA PENDING THE CLOSING DATE.
Loyola agrees that, except as expressly permitted by this Agreement or
otherwise consented to or approved in writing by Crestar, during the period from
the date hereof to the Effective Time:
(a) Loyola will and will cause each of its Subsidiaries to conduct their
respective operations only in the ordinary course of business consistent with
past practice (subject, in any event, to the provisions of paragraph (c) below)
and will use its best efforts to preserve intact their respective business
organizations, keep available the services of their officers and employees and
maintain satisfactory relationships with licensors, suppliers, distributors,
customers, clients and others having business relationships with them.
(b) Loyola shall not, and shall not permit any of its Subsidiaries to, take
any action, engage in any transactions or enter into any agreement which would
adversely affect or delay in any Material respect the ability of Crestar or
Loyola to obtain any necessary approvals, consents or waivers of any
Governmental Entity or third party required for the transactions contemplated
hereby or to perform its covenants and agreements on a timely basis under this
Agreement.
(c) Loyola will not and will not permit any of its Subsidiaries to:
(i) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other Person, or make any loan or advance;
(ii) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend on Loyola Common Stock other than the regular
quarterly cash dividend not exceeding $0.12 per share of Loyola Common
Stock; provided that for dividends paid after September 30, 1995, the
record date for each Loyola dividend shall be the same as Crestar's record
date for its dividend for the same quarter in which the Loyola dividend is
paid with the result that with respect to their shares of Loyola Common
Stock the stockholders of Loyola will be entitled to receive either a
Loyola or Crestar regular dividend for each fiscal quarter prior to the
Effective Time; 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, or grant any stock appreciation rights, or
convert any options into stock appreciation rights, or grant any Person any
right to acquire any shares of its capital stock, except for dividends paid
by any of the wholly-owned Subsidiaries of Loyola to Loyola or any of its
wholly-owned Subsidiaries; or issue any additional shares of capital stock
except pursuant to the exercise of stock options outstanding as of the date
hereof which were granted under Loyola's 1986 Stock Option Plan, as
amended;
(iii) sell, transfer, mortgage, encumber or otherwise dispose of any
of its Material properties or assets to any Person other than a direct or
indirect wholly-owned Subsidiary of Loyola, or cancel, release or assign
any Material indebtedness of any Person or any claims held by any Person,
except pursuant to contracts or agreements in force at the date of this
Agreement;
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(iv) other than portfolio investments in the ordinary course of
business consistent with past practice, make any Material investment either
by purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other Person other
than a wholly-owned Subsidiary of Loyola;
(v) enter into or terminate any Material contract or agreement, or
make any change in any of its Material leases or contracts, other than
renewals of contracts and leases without Material adverse changes of terms;
(vi) except as permitted under the current year's budget, increase in
any manner the compensation or fringe benefits of its "employees" (which
term for purposes of this paragraph (vi) includes employees, former
employees, directors and former directors) or pay any pension or retirement
allowance not required by any existing plan or agreement to any such
employees, or become a party to, amend, modify 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 employee (except it may
continue supplemental retirement benefits to former employees listed on
Schedule 4.2), or (except as required by law, by Bank Regulators or by
Section 6.3) adopt, amend or modify any bonus (except that it may compute
1995 benefits under its incentive bonus program without regard to expenses
incurred in connection with the transactions contemplated under this
Agreement or to actions taken at the request of Crestar under Section 4.13
and that it may pay its 1995 incentive bonus if the Merger occurs in 1995
and the other conditions to payment are met), profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or other employee benefit agreements, trusts,
plans, funds, employee stock ownership, consulting, severance or fringe
benefit plan, formal, informal, written or oral, or other arrangements for
the benefit or welfare of any employee or voluntarily accelerate the
vesting of any stock options or other stock-based compensation, provided
that extensions of employment agreements in existence on the date hereof
and listed on Schedule 6.3 pursuant to the terms thereof shall be deemed to
be made in the ordinary course of business consistent with past practice
except that it may take any such action as provided in Section 6.3;
(vii) modify in any Material respect the manner in which it and its
Subsidiaries have heretofore conducted or accounted for their business;
(viii) except as contemplated by this Agreement, amend its Articles of
Incorporation or its By-Laws;
(ix) agree to, or make any commitment to, take any of the actions
prohibited by this Section 4.2;
(x) except if as a result of death, disability or other inability to
serve, elect or appoint any new director or officer of Loyola or any of its
Subsidiaries, provided that the appointment of an officer to another office
of Loyola or any of its Subsidiaries shall not be deemed to be the
appointment of a new officer; or
(xi) acquire an insurance policy or enter into any new agreement,
amendment or endorsement or make any changes relating to insurance
coverage, including coverage for its directors and officers, which would
result in an additional premium payment obligation of $50,000 or more.
4.3. CONDUCT OF THE BUSINESS OF CRESTAR PENDING THE CLOSING DATE.
Crestar agrees that, except as expressly permitted by this Agreement or
otherwise consented to or approved in writing by Loyola, during the period from
the date hereof to the Effective Time:
(a) Crestar will and will cause each of its Subsidiaries to conduct their
respective operations only in the ordinary course of business consistent with
past practice and will use its best efforts to preserve intact their respective
business organizations, keep available the services of their officers and
employees and maintain satisfactory relationships with licensors, suppliers,
distributors, customers, clients and others having business relationships with
them.
(b) Crestar shall not, and shall not permit any of its Subsidiaries to,
take any action, engage in any transactions or enter into any agreement which
would adversely affect or delay in any Material respect the ability of Crestar
or Loyola to obtain any necessary approvals, consents or waivers of any
Governmental Entity required for the transactions contemplated hereby or to
perform its covenants and agreements on a timely basis under this Agreement.
4.4. NO SOLICITAION OF OTHER OFFERS.
Loyola agrees that neither it nor any of its Subsidiaries nor any of their
respective officers, directors and employees shall, and Loyola shall direct and
use its best efforts to cause its agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) not to, directly or indirectly, take any action to solicit
or initiate any inquiries or the making of any offer or proposal (including
without limitation any proposal to
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stockholders of Loyola) with respect to a merger, consolidation, business
combination, liquidation, reorganization, sale or other disposition of any
significant portion of assets, sale of shares of capital stock, or similar
transactions involving Loyola or any Subsidiary of Loyola (any such inquiry,
offer or proposal, an "Acquisition Proposal"), or, except as may be legally
required for the discharge by the board of directors of its fiduciary duties,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal. As of the time hereof, Loyola is not engaged in any negotiations or
discussions relating to an Acquisition Proposal. Loyola shall promptly notify
Crestar orally and in writing of any Acquisition Proposal or any inquiries with
respect thereto, such written notification to include the identity of the Person
making such inquiry or Acquisition Proposal and such other information with
respect thereto as is reasonably necessary to apprise Crestar of the Material
terms of such Acquisition Proposal. Loyola shall give Crestar contemporaneous
written notice upon engaging in discussions or negotiations with, or providing
any information regarding Loyola to, any such person regarding an Acquisition
Proposal.
4.5. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS.
Crestar and Loyola shall (a) as soon as practicable make any filings and
applications required to be filed in order to obtain all approvals, consents and
waivers of Governmental Entities necessary or appropriate for the consummation
of the transactions contemplated hereby (including without limitation all
applications for required approvals as set forth in Section 5.1(c)), (b)
cooperate with one another (i) in promptly determining what filings are required
to be made and what approvals, consents or waivers are required to be obtained
under any relevant federal, state or foreign law or regulation, and (ii) in
promptly making any such filings, furnishing information required in connection
therewith and seeking timely to obtain any such approvals, consents or waivers,
and (c) deliver to the other copies of the publicly available portions of all
such filings and applications promptly after they are filed.
4.6. BEST EFFORTS.
Crestar and Loyola each will (i) use its best efforts to take all action
necessary to render accurate as of the Closing Date the representations and
warranties of it contained herein, and (ii) use its best efforts to perform or
cause to be satisfied each covenant or condition to be performed or satisfied by
it as contemplated by this Agreement.
4.7. PUBLICITY.
The initial press release announcing this Agreement shall be a joint press
release and thereafter Loyola and Crestar shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and in making any filings with any
Governmental Entity or with any national securities exchange with respect
thereto.
4.8. PROXY; REGISTRATION STATEMENT.
As soon as practicable after the date hereof, Crestar and Loyola shall
cooperate with each other to prepare the Proxy Statement, file it with the SEC,
respond to comments of the Staff of the SEC, clear the Proxy Statement with the
Staff of the SEC and thereafter and after the effectiveness of the Registration
Statement mail the Proxy Statement to all holders of record (as of the
applicable record date) of shares of Loyola Common Stock. Crestar shall promptly
prepare the Registration Statement and file it with the SEC and shall use all
reasonable efforts to have the Registration Statement declared effective by the
SEC as promptly as practicable and to maintain the effectiveness of such
Registration Statement. Crestar shall also take any action required to be taken
under state securities or "Blue Sky" laws in connection with the issuance of
Crestar Common Stock pursuant to the Merger and Loyola shall furnish Crestar all
information concerning Loyola and the holders of its capital stock and shall
take any action as Crestar may reasonably request in connection with any such
action.
4.9. STOCKHOLDERS' MEETING.
Loyola shall take all action necessary, in accordance with applicable law
and its Charter and By-Laws, to convene a meeting of the holders of Loyola
Common Stock (the "Loyola Meeting") as promptly as practicable for the purpose
of considering and taking action required by this Agreement. Except to the
extent legally required for the discharge by the board of directors of its
fiduciary duties, the board of directors of Loyola shall recommend that the
holders of Loyola Common Stock vote in favor of and approve the Merger at the
Loyola Meeting.
4.10. CRESTAR.
Crestar shall take all steps necessary such that Crestar shall exist at the
Closing Date as a Virginia corporation, into which Loyola may merge under
applicable law; and prior to the Closing Date take all corporate action to
approve of and authorize the consummation of the Merger and the other
transactions contemplated by this Agreement.
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4.11. ADDITIONAL AGREEMENTS.
Subject to the terms and conditions herein provided, each of the parties
hereto agrees to use all reasonable efforts to take promptly, or cause to be
taken promptly, all actions and to do promptly, or cause to be done promptly,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this Agreement
as promptly as practicable, including using efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and approvals from all
applicable Governmental Entities and third parties, effecting all necessary
registrations, applications and filings (including, without limitation, filings
under any applicable state securities or "Blue Sky" laws) and obtaining any
required contractual consents and regulatory approvals.
4.12. LISTING.
Crestar shall use its best efforts to list on the New York Stock Exchange
upon official notice of issuance Crestar Common Stock to be issued in the
Merger.
4.13. MERGER.
(a) Loyola shall, and shall cause its officers, directors and employees to,
cooperate with and assist Crestar in the formulation of a plan or plans of
integration for the Merger of Loyola into Crestar. Customer notification and
direct contact by Crestar with customers of Loyola will commence 30 days prior
to the Closing Date.
(b) Notwithstanding that to the knowledge of Loyola it has established all
reserves and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, Loyola recognizes that Crestar has
adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). To formulate
the plan or plans of integration for the Merger, Loyola and Crestar shall
consult and cooperate with each other with respect to (i) conforming, as
specified in a written notice from Crestar to Loyola, based upon such
consultation, Loyola's loan, accrual and reserve policies to those policies of
Crestar to the extent appropriate, (ii) new extensions of credit or Material
revisions to existing terms of credits by Loyola in each case where the
aggregate exposure exceeds $1 million, and (iii) conforming, as specified in a
written notice from Crestar to Loyola, based upon such consultation, the
composition of the investment portfolio and overall asset/liability management
position of Loyola to the extent appropriate and reasonable.
(c) To formulate the plan or plans of integration for the Merger, Loyola
and Crestar shall consult and cooperate with each other with respect to
determining, as specified in a written notice from Crestar to Loyola, based upon
such consultation, appropriate accruals, reserves and charges to establish and
take in respect of excess facilities and equipment capacity, severance and other
benefit costs, litigation matters, write-off or write-down of various assets and
other appropriate accounting adjustments taking into account Crestar's plan or
plans of integration and the Merger.
(d) Loyola and Crestar shall consult and cooperate with each other with
respect to determining, as specified in a written notice from Crestar to Loyola,
based upon such consultation, the amount and the timing for recognizing for
financial accounting purposes the expense of the Merger and the restructuring
charges related to or to be incurred in connection with the Merger.
(e) At the request of Crestar, Loyola shall, prior to the Effective Time,
use its best efforts to establish and take such reserves and accruals as Crestar
shall request to conform, on a mutually satisfactory basis, Loyola's loan,
accrual and reserve policies to Crestar's policies, shall establish and take
such accruals, reserves and charges in order to implement such policies in
respect of excess facilities and equipment capacity, severance and other benefit
costs, litigation matters, write-off or write-down of various assets and other
appropriate accounting adjustments, and to recognize for financial accounting
purposes such expenses of the Merger and restructuring charges related to or to
be incurred in connection with the Merger, including the expense for any tax
liabilities with respect to the anticipated recapture of the bad debt reserves
established by Loyola or any of its Subsidiaries for federal income tax purposes
(and state income tax purposes, if applicable) to the extent not otherwise
recorded; provided, however, that (i) Loyola shall not be obligated to take any
such action pursuant to this paragraph (e) unless and until Crestar specifies
its request in a writing delivered by Crestar to Loyola, and acknowledges that
all conditions to its obligations to consummate the Merger set forth in Sections
5.1 and 5.2 have been satisfied or waived (if waivable) by Crestar, (ii) Loyola
acknowledges that the conditions to its obligation to consummate the Merger set
forth in Sections 5.1 and 5.3 have been satisfied or waived (if waivable) by
Loyola, (iii) Loyola shall not be required to take any such action that impairs
its regulatory capital below regulatory guidelines, that is inconsistent with
any formal or informal undertaking by Loyola to any Bank Regulator that has been
disclosed in writing to Crestar prior to the date hereof or is inconsistent with
any bank regulatory requirement applicable to Loyola, and (iv) Loyola shall not
be required to take any such action that is not consistent with GAAP. Loyola's
representations, warranties and covenants contained in this Agreement shall not
be deemed
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to be untrue or breached in any respect for any purpose as a consequence of any
action undertaken on account of this Section 4.13.
(f) Loyola shall give notice of an intent to terminate the data processing
agreement of Loyola on the date hereof, and Loyola and Crestar shall consult and
cooperate with each other with respect to termination of the data processing
agreement of Loyola, the renewals of Material contracts and leases of Loyola and
employee benefit matters.
4.14. BRANCH CLOSING LAW.
Crestar expects to close and relocate the business of certain Loyola
branches in connection with the Merger. If any of these closings/relocations do
not constitute "relocations" as that term is defined in the Joint Policy
Statement of September 2, 1993 Concerning Branch Closings issued by the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), the
Office of the Comptroller of the Currency and the Federal Deposit Insurance
Corporation, and instead are considered branch closings for purposes of Section
42 of the Federal Deposit Insurance Act and after receipt of all required
approvals of the Merger from Bank Regulators, Loyola will take all necessary
action under Section 42 and the regulations promulgated thereunder by notifying
customers and otherwise complying with the branch closing law and regulations.
ARTICLE 5
CONDITIONS PRECEDENT TO MERGER
5.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF ALL PARTIES.
The respective obligations of Crestar and Loyola to effect the Merger are
subject to the satisfaction or waiver (subject to applicable law) at or prior to
the Effective Time of each of the following conditions:
(a) LOYOLA STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved by the requisite vote of the
stockholders of Loyola in accordance with applicable law.
(b) CRESTAR EXISTENCE. Crestar shall validly exist as a Virginia
corporation in good standing under the laws of the Commonwealth of Virginia.
(c) REGULATORY APPROVAL. Crestar shall have procured the required approval,
consent, waiver or other administrative action with respect to this Agreement
and the transactions contemplated hereby (i) by the Office of Thrift Supervision
under the Savings and Loan Holding Company Act, (ii) by the State Corporation
Commission of Virginia, and (iii) by the Federal Reserve Board and under the
Bank Holding Company Act of 1956, and all applicable statutory waiting periods
shall have expired; and the parties shall have procured all other regulatory
approvals, consents, waiver or administrative actions of Governmental Entities
or other Person that are necessary or appropriate to the consummation of the
transactions contemplated by this Agreement; provided, however, that no
approval, consent, waiver or administrative action referred to in this Section
5.1(c) shall be deemed to have been received if it shall include any condition
or requirement that would (i) result in a Material Adverse Effect on Crestar or
Loyola or (ii) so Materially and adversely affect the economic or business
benefits of the Merger that Crestar, in the sole judgment of Crestar, would not
have entered into this Agreement had such conditions or requirements been known
at the date hereof;
(d) OTHER LEGAL REQUIREMENTS. All other requirements prescribed by law
which are necessary to the consummation of the transactions contemplated by this
Agreement shall have been satisfied.
(e) INJUNCTION; LEGAL PROCEEDINGS. No preliminary or permanent injunction
or other order shall have been issued by any court or by any Governmental Entity
which prohibits the consummation of the Merger and the transactions contemplated
by this Agreement and which is in effect at the Effective Time; and no
litigation or proceeding shall be pending against Crestar or Loyola or any of
their Subsidiaries brought by any Governmental Entity seeking to prevent
consummation of the transactions contemplated hereby.
(f) STATUTES. No statute, rule, regulation, executive order, decree or
order of any kind shall have been enacted, entered, promulgated or enforced by
any court or Governmental Entity which prohibits the consummation of the Merger.
(g) REGISTRATION STATEMENT. The Registration Statement shall have become
effective and no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC.
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(h) TAX OPINION. Crestar and Loyola each shall have received the opinion of
Piper & Marbury L.L.P., counsel to Loyola, and the opinion of Hunton & Williams,
counsel to Crestar, each dated as of the Effective Date, substantially to the
effect that, on the basis of facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code and that, accordingly, for federal
income tax purposes: (i) no gain or loss will be recognized by Crestar or Loyola
as a result of the Merger; (ii) no gain or loss will be recognized by the
stockholders of Loyola on the exchange of their shares of Loyola Common Stock
for shares of Crestar Common Stock (including any fractional share interest)
pursuant to the Merger; (iii) the tax basis of the shares of Crestar Common
Stock (including any fractional share interest) received in the Merger will be
the same as the tax basis of the shares of Loyola Common Stock surrendered in
exchange therefor ; (iv) the holding period of the shares of Crestar Common
Stock (including any fractional share interest) received in the Merger will
include the period during which the shares of Loyola Common Stock surrendered in
exchange therefor were held, provided such shares of Loyola Common Stock were
held as capital assets at the Effective Time; and (v) the receipt of cash in
lieu of a fractional share of Crestar Common Stock will be treated as full
payment in exchange for such fractional share pursuant to Section 302(a) of the
Code, as if such fractional share had been issued and then redeemed for the
cash. In addition, if requested by Crestar, such opinions shall further opine
substantially to the effect that, if Loyola Federal Savings Bank ("Loyola FSB")
is to be merged into Crestar Bank MD or its successor after the Merger, such
subsequent merger will be treated as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code and that, accordingly, for federal income tax
purposes no gain or loss will be recognized by Crestar, Crestar Bank MD, or
Loyola FSB as a result of such subsequent merger (but amounts may be required to
be included in income as a result of the termination of any bad-debt reserve
maintained by Loyola FSB for federal income tax purposes and other possible
required changes in tax accounting methods). In rendering their opinions, such
counsel may rely upon representations contained in certificates of officers of
Crestar, Loyola and others. Crestar and Loyola shall cooperate with each other
and with such counsel, and shall provide such certificates as may be reasonably
requested by such counsel, to obtain such opinions.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF CRESTAR.
The obligations of Crestar to effect the Merger are also subject to the
satisfaction or waiver, at or prior to the Effective Time, of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Loyola contained herein shall be true and correct in all Material
respects as of the date hereof and at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date.
(b) LOYOLA'S PERFORMANCE. Loyola shall have performed in all Material
respects all obligations and agreements, and complied in all Material respects
with all covenants and conditions, contained in this Agreement to be performed
or complied with by it prior to the Closing Date, as set forth in Article 4 and
elsewhere herein.
(c) OFFICERS' CERTIFICATE. Crestar shall have received a certificate signed
by the Chief Executive Officer and the Chief Financial Officer of Loyola, dated
the Closing Date, certifying as to the matters set forth in subparagraphs 5.2(a)
and (b).
(d) OPINION OF COUNSEL. Crestar shall have received an opinion in form and
substance satisfactory to Crestar dated the Closing Date, of Piper & Marbury
L.L.P. covering the matters set forth in Sections 2.2, 2.5, 2.7 and 2.8, subject
to reasonable and customary exceptions and qualifications.
(e) STATE SECURITIES OR "BLUE SKY" LAWS. Crestar shall have received
permits and other authorizations necessary under all state securities or "Blue
Sky" laws to consummate the transactions contemplated hereby.
(f) ACCOUNTING TREATMENT. Crestar shall have received a letter in form and
substance satisfactory to Crestar dated the Effective Date from KPMG Peat
Marwick LLP to the effect that the Merger can be accounted for as a
pooling-of-interests.
5.3. CONDITIONS PRECEDENT TO OBLIGATIONS OF LOYOLA. The obligations of
Loyola to effect the Merger are also subject to the satisfaction or waiver, at
or prior to the Effective Time, of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Crestar contained herein shall be true and correct in all Material
respects as of the date hereof and at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date.
(b) CRESTAR'S PERFORMANCE. Crestar shall have performed in all Material
respects all obligations and agreements, and complied in all Material respects
with all covenants and conditions, contained in this Agreement to be performed
or complied with by it prior to the Closing Date, as set forth in Article 4 and
elsewhere herein.
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(c) OFFICER'S CERTIFICATE. Loyola shall have received a certificate signed
by the Chief Executive Officer and the Chief Financial Officer of Crestar, dated
the Closing Date, certifying as to the matters set forth in subparagraphs 5.3(a)
and (b).
(d) OPINION OF COUNSEL. Loyola shall have received an opinion in form and
substance satisfactory to Loyola, dated the Closing Date, of Hunton & Williams
covering the matters set forth in Section 2.1, 2.5, 2.7 and 2.8, subject to
reasonable and customary exceptions and qualifications.
(e) STOCK LISTING. Crestar Common Stock to be issued in the Merger has been
approved for listing on the New York Stock Exchange, subject to official notice
of issuance.
ARTICLE 6
COVENANTS
6.1. TAX-FREE REORGANIZATION TREATMENT.
Neither Crestar nor Loyola shall take or cause to be taken any action,
whether before or after the Effective Time, which would disqualify the Merger as
a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code.
6.2. EMPLOYEE MATTERS.
(a) Crestar intends to establish a Baltimore region with a separate
management team and an advisory board of directors.
(b) Crestar will interview current senior management employees of Loyola
and its Subsidiaries for available positions in the Baltimore region. Crestar
will undertake to use its best efforts to continue employment of all branch
personnel of Loyola and its Subsidiaries who meet Crestar's employment
qualification requirements, either at existing offices of Loyola and its
Subsidiaries or at offices of Crestar or its Subsidiaries, in each case, within
reasonable commuting distance. Non-branch personnel of Loyola and its
Subsidiaries not offered employment will be interviewed prior to the Effective
Time of the Merger for open positions within offices of Crestar or its
Subsidiaries. During the pendency of the Merger, but in no instance later than
two months prior to the Effective Date, Crestar and its Subsidiaries will invoke
a hiring freeze in the Baltimore-Washington Metropolitan Area (excluding
employees of any financial institution in such areas acquired by Crestar prior
to the Effective Time) with a view towards filling vacant positions with
employees of Loyola and its Subsidiaries not previously offered employment by
Crestar or its Subsidiaries. Notwithstanding the hiring freeze, Crestar reserves
the right to fill jobs which it characterizes as "immediately must fill" with
persons other than employees of Loyola or its Subsidiaries.
(c) Employees of Loyola as of the Effective Time who are not offered
comparable employment by Crestar or its Subsidiaries (the acceptance of a
position with Crestar or one of its banking Subsidiaries shall establish that
such position is comparable), other than those who are covered by employment
agreements or individual severance arrangements (who are terminated and paid in
accordance with such respective employment agreements or individual severance
arrangements), will be paid severance pay equal to one week's base pay for each
year of service with Loyola up to a maximum of 20 years service and two weeks'
base pay for each year of service with Loyola in excess of 20 years service.
Employees of Loyola as of the Effective Time who are not offered comparable
employment by Crestar or its Subsidiaries, will be offered outplacement
counseling.
6.3. EMPLOYEE BENEFITS.
(a) As of the Effective Time, Crestar hereby unconditionally agrees to, and
agrees to cause each of its Subsidiaries with respect to which such Subsidiary
is an employer of a Contract Employee (as defined below) to, honor, without
modification (except in accordance with the terms of such contract, agreement or
commitment), offset or counterclaim (except with the consent of the Contract
Employee), all contracts, agreements and commitments of Loyola or any of its
Subsidiaries authorized by Loyola or any of its Subsidiaries prior to the date
of this Agreement which apply to any current or former employee or current or
former director of Loyola or any of its Subsidiaries, all of which contracts,
agreements and commitments to or with employees are listed on Schedule 6.3,
which have been entered into or authorized prior to the date hereof (the
"Contract Employees"), supplemental retirement benefits listed on Schedule
6.3(c), and the Supplemental Executive Retirement Plan. In accordance with the
terms of such contracts, agreements and commitments, Crestar hereby assumes,
subject to the consummation of the Merger, all of Loyola's and its Subsidiaries'
obligations under such contracts, agreements and commitments. With respect to
each Contract Employee, Crestar expressly agrees that in the event of any
dispute under such employee's contract or under the terms of this Section 6.3,
Crestar shall pay all reasonable fees and disbursements of such employee's
counsel in connection with all matters as to which such employee is the
prevailing party.
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(b) All employees of Loyola or its Subsidiaries immediately prior to the
Effective Time of the Merger who are employed by Crestar or its Subsidiaries
immediately following the Effective Time ("Transferred Employees") will be
covered by Crestar's employee benefit plans as to which they are eligible based
on their length of service with Loyola, compensation, job classification,
position and, where variations are required by local circumstances, location,
including, where applicable, any incentive compensation plan. Notwithstanding
the foregoing, Crestar may determine to continue any of the Benefit Plans for
Transferred Employees in lieu of offering participation in Crestar's benefit
plans providing similar benefits (e.g., medical and hospitalization benefits),
to terminate any such Benefit Plans, or to merge any such Benefit Plans with
Crestar's benefit plans. Except as prohibited by law, Transferred Employees'
service with Loyola and its Subsidiaries which is recognized by the applicable
Benefit Plan at the Effective Time shall be recognized as service with Crestar
for purposes of eligibility to participate (including level of participation but
not for purposes of benefit accrual) and vesting, if applicable, under the
corresponding Crestar benefit plan, if any, subject to applicable
break-in-service rules, provided, however, that such service with Loyola and its
Subsidiaries shall not be recognized for purposes of determining a Transferred
Employee's eligibility for retiree medical and life insurance benefits under
Crestar's benefit plans unless such Transferred Employee completes twelve months
of continuous service with Crestar or its Subsidiaries immediately following the
Effective Time and provided further that retiree medical shall be available only
under Crestar's defined dollar retiree health plan.
(c) Crestar agrees that any preexisting condition, limitation or exclusion
in its health plans shall not apply to Transferred Employees or their covered
dependents who are covered under a medical or hospitalization indemnity plan
maintained by Loyola or its Subsidiaries at the Effective Time and who then
change that coverage to Crestar's medical or hospitalization indemnity health
plan at the time such Transferred Employees are first given the option to enroll
in Crestar's health plans.
(d) Crestar agrees that immediately following the Effective Time, all
participants who then have accounts in the 401(k) profit sharing plan maintained
by Loyola (the "401(k) Plan") shall be fully vested in their account balances.
Crestar, at its election, may continue the 401(k) Plan for the benefit of
Transferred Employees (as such plan may be amended as of the Effective Time to
provide current contributions and eligibility provisions identical to those
under Crestar's Employees' Thrift and Profit Sharing Plan (the "Thrift Plan")),
may merge the 401(k) Plan into the Thrift Plan or any other defined contribution
plan maintained by Crestar, may cease additional benefit accruals under and
contributions to the 401(k) Plan and continue to hold the assets of such Plan
until they are distributable in accordance with its terms or may terminate the
401(k) Plan as permitted under applicable provisions of the Code. In the event
of a merger of the 401(k) Plan into the Thrift Plan or other defined
contribution plan maintained by Crestar or other transfers of a Transferred
Employee to the Thrift Plan or other defined contribution plan, the Thrift Plan
or other defined contribution plan will recognize for purposes of eligibility to
participate, early retirement, and vesting, all Transferred Employees' service
which is recognized under the 401(k) Plan, subject to applicable
break-in-service rules. Loyola and its Subsidiaries agree to cooperate with
Crestar in implementing any decision under this subsection (d) with respect to
the 401(k) Plan.
(e) The Retirement Plan for Employees of Crestar Financial Corporation and
Affiliated Corporations (the "Crestar Retirement Plan") will recognize for
purposes of eligibility to participate, vesting, and eligibility for early
retirement (including early retirement under the "rule of 85"), but not for
benefit accrual purposes, all Transferred Employees' service which is recognized
under the Pension Plan of Loyola Federal Savings Bank (the "Loyola Pension
Plan"), subject to applicable break-in-service rules. Crestar, at its option,
may continue the Loyola Pension Plan and pay out or annuitize benefits, or may
merge the Loyola Pension Plan into the Crestar Retirement Plan. If the Loyola
Pension Plan is terminated, or if accruals are suspended or the Loyola Pension
Plan is merged into the Crestar Retirement Plan, or in the event of other
transfers of a Transferred Employee to the Crestar Retirement Plan, each
Transferred Employee who becomes a participant in the Crestar Retirement Plan
shall begin to accrue benefits under the Crestar Retirement Plan on and after
the date of such merger, suspension, termination or transfer in accordance with
the terms of the Crestar Retirement Plan.
(f) Loyola shall amend the vacation plan or policy applicable to employees
of Loyola and its Subsidiaries, effective no later than January 1, 1996, to
provide identical benefits and accrual of vacation in accordance with Crestar's
vacation policy. Effective no later than January 1, 1996, Loyola shall amend the
cafeteria plan covering employees of Loyola and its Subsidiaries to (i)
eliminate the payment of cash or other compensation or benefits to an employee
who waives medical, dental or vision benefits and (ii) eliminate any provision
allowing the surrender or cancellation of vacation in lieu of additional cash or
other compensation or benefits. Loyola shall not adopt, or amend the cafeteria
plan covering employees of Loyola or its Subsidiaries to provide, health care
flexible spending accounts.
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6.4. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, Crestar agrees to indemnify and hold
harmless each present and former director and officer of Loyola or its
Subsidiaries (the "Indemnified Parties"), against any and all costs or expenses
(including reasonable attorneys' fees), judgments, fines, penalties,
settlements, losses, claims, damages or liabilities incurred in connection with
any and all claims, actions, suits, proceedings or investigations, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters arising out of or in connection with such party's position as, or
actions taken as, a director or officer of Loyola or a Subsidiary (collectively,
"Claims"), at or prior to the Effective Time, whether asserted or claimed prior
to, at or after the Effective Time, to the fullest extent permitted by
applicable law (and also advance expenses incurred to the fullest extent
permitted by Maryland law and Loyola's Charter and By-Laws); provided, however,
that Crestar's obligation to provide such indemnification shall not apply to any
Material litigation, proceeding or controversy required to be disclosed on
Schedule 2.12B that is not disclosed on Schedule 2.12B, nor to Claims asserted
or claimed more than six years after the Effective Time. Crestar shall not have
any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(b) Any Indemnified Party wishing to claim indemnification under Section
6.4(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall within 30 days thereof notify Crestar thereof, but the
failure to so notify shall not relieve Crestar of any liability it may have to
such Indemnified Party if such failure does not Materially prejudice Crestar. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time): (i) Crestar shall have the right to
assume the defense thereof and Crestar shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if Crestar elects not to assume such defense, or counsel
for the Indemnified Parties advises that there are issues which raise conflicts
of interest between Crestar and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and Crestar shall pay the reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; (ii) the Indemnified Parties will cooperate in
the defense of any such matter; and (iii) Crestar shall not be liable for any
settlement effected without its prior written consent which shall not be
unreasonably withheld.
(c) Subject to Section 6.4(a), for a period of six years after the
Effective Time, Crestar shall honor the duties and obligations contained in the
Indemnification Agreements identified on Schedule 6.4 hereof which have been
entered into between Loyola and its directors, Chief Executive Officer,
President, Executive Vice Presidents and Secretary.
6.5. CRESTAR BALTIMORE, MARYLAND LOCAL ADVISORY BOARD OF DIRECTORS.
Crestar will offer all members of the board of directors of Loyola a
position on Crestar's Baltimore, Maryland local advisory board of directors for
a term of at least one year commencing at the Effective Time of the Merger.
There will be four meetings during the year. Such persons who agree to serve on
the local advisory board will receive a retainer of $8,000 per year and a fee of
$3,000 per meeting attended plus non-local travel expenses (or a maximum of
$20,000 per annum). Crestar agrees to waive the age limitation for the one-year
period.
ARTICLE 7
TERMINATION
7.1. TERMINATION. This Agreement may be terminated, and the Merger
abandoned, prior to the Effective Date, either before or after its approval by
the stockholders of Loyola:
(a) by the mutual consent of Crestar and Loyola, if the board of directors
of each so determines by vote of a majority of the members of its entire board;
(b) by Crestar or Loyola, if its board of directors so determines by vote
of a majority of the members of its entire board, in the event of the failure of
the stockholders of Loyola to approve this Agreement at the Loyola Meeting
called to consider such approval;
(c) by Crestar or Loyola, if its board of directors so determines by vote
of a majority of the members of its entire board, in the event of a Material
breach by the other party hereto of any representation, warranty, covenant or
agreement contained herein which is not cured or not curable within 60 days
after written notice of such breach is given to the party committing such breach
by the other party;
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(d) by Crestar or Loyola by written notice to the other party if prior to
December 31, 1995 either (i) any approval, consent or waiver of any Governmental
Entity required to permit consummation of the transactions contemplated hereby
shall have been denied or (ii) any Governmental Entity of competent jurisdiction
shall have issued a final, unappealable order or ruling enjoining or otherwise
prohibiting consummation of the transactions contemplated by this Agreement;
(e) by Crestar or Loyola, if its board of directors so determines by vote
of a majority of the members of its entire board, in the event that the Merger
is not consummated by March 31, 1996, unless the failure to so consummate by
such time is due to the breach of any representation, warranty, agreement or
covenant contained in this Agreement by the party seeking to terminate; or
(f) by Loyola if its board of directors so determines by a majority vote of
the members of its entire board at any time during the five-day period prior to
the fifth day prior to the Closing Date, if the Average Closing Price is less
than $40.00, provided, however, that Crestar shall have the option of increasing
the consideration to be received by holders of Loyola Common Stock hereunder by
adjusting the Exchange Ratio to a number equal to a quotient, the numerator of
which is the product of $40.00 times the Exchange Ratio then in effect and the
denominator of which is the Average Closing Price. In such case, Crestar shall
give prompt written notice to Loyola of such election and of the revised
Exchange Ratio, and in such event no termination shall be deemed to have
occurred pursuant to this Section 7.1(f), and this Agreement shall remain in
full force and effect in accordance with its terms (except as the Exchange Ratio
shall have been so modified) and any references herein to "Exchange Ratio" shall
thereafter be deemed to refer to the Exchange Ratio as adjusted pursuant to this
Section 7.1(f).
7.2. EFFECT OF TERMINATION.
In the event of the termination of this Agreement by either Crestar or
Loyola, as provided above, except as otherwise provided in Section 8.3, this
Agreement shall thereafter become void and there shall be no liability on the
part of any party hereto or their respective officers or directors, except that
any such termination shall be without prejudice to the rights of any party
hereto arising out of the willful breach of any other party of any covenant or
willful misrepresentation contained in this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1. CERTAIN DEFINITIONS; INTERPRETATION.
As used in this Agreement, the following terms shall have the meanings
indicated:
"Change of Control" means any of the following events:
(i) the acquisition by any Person (including a group within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act),
other than Crestar or any Subsidiary of Crestar, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange
Act) of 40% or more of the combined voting power of Crestar's then
outstanding voting securities;
(ii) the first purchase of shares of outstanding voting securities of
Crestar under a tender offer or exchange offer, other than an offer by
Crestar or any Subsidiary of Crestar;
(iii) individuals who as of the date hereof constitute the Board of
Directors of Crestar cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for the election by the
stockholders of Crestar of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors
as of the date hereof; or
(iv) approval by the stockholders of Crestar of any plan for the
liquidation or dissolution of Crestar or for a consolidation or merger of
Crestar (A) in which Crestar would not be the continuing or surviving
corporation, and pursuant to which shares of the outstanding voting
securities of Crestar would be converted into cash, securities or other
property, other than a merger of Crestar in which the stockholders of
Crestar immediately prior to the merger have the same proportionate
ownership of the surviving corporation immediately after the merger, or (B)
in which Crestar is the surviving corporation but the stockholders prior to
the merger or consolidation will not own 60% or more of the outstanding
voting stock of the surviving corporation immediately after such merger or
consolidation.
"Control" shall have the meaning ascribed thereto in the Bank Holding
Company Act of 1956, as amended.
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"Loan Servicing File" means the documents, files and other items which
pertain to a particular Serviced Mortgage Loan (as defined below) including, but
not limited to, the electronic data files, books, records, notes and all
additional documents generated as a result of or utilized in originating and or
servicing each Serviced Mortgage Loan.
"Loan Servicing Rights" means, with respect to each Serviced Mortgage Loan,
any and all of the following: (i) all rights to service the Serviced Mortgage
Loans; (ii) any payments or monies payable for servicing the Serviced Mortgage
Loans; (iii) any late fees, assumption fees, penalties or similar payments due
and payable with respect to the Serviced Mortgage Loans; (iv) all agreements or
documents creating, defining or evidencing any such servicing rights to the
extent they are related to such servicing rights and all rights of Loyola or any
Subsidiary of Loyola thereunder; (v) escrow payments or other similar payments
with respect to the Serviced Mortgage Loans and any amounts actually collected
with respect thereto; (vi) all accounts and other rights to payment related to
any of the property described in this paragraph; and (vii) possession and use of
any and all Loan Servicing Files pertaining to the Serviced Mortgage Loans or
pertaining to the past, present or prospective servicing of the Serviced
Mortgage Loans.
"Material" means material to Crestar or Loyola (as the case may be) and its
respective Subsidiaries, taken as a whole.
"Material Adverse Effect," with respect to a Person, means any condition,
event, change or occurrence that individually, or in the aggregate with any
other condition, event, change or occurrence, is reasonably likely to have a
material adverse effect upon (i) the financial condition, business or results of
operations of such Person and its Subsidiaries, taken as a whole, or (ii) the
ability of such Person to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement; provided, that reduction in
Loyola's net income attributable to movements in interest rates shall not by
itself constitute a Material Adverse Effect as to Loyola so long as Loyola
manages its portfolio gap position in a manner consistent with past practices.
"Person" includes an individual, corporation, partnership, association,
trust or unincorporated organization.
"Serviced Mortgage Loan" means an individual Serviced Mortgage Loan, the
Loan Servicing Rights associated therewith being an asset of Loyola or a
Subsidiary of Loyola. Each Serviced Mortgage Loan includes without limitation
the Serviced Mortgage Loan file, the monthly payments, principal prepayments,
liquidation proceeds, condemnation proceeds, insurance proceeds, OREO
disposition proceeds, and all other benefits, rights, proceeds and obligations
arising from or in connection with such Serviced Mortgage Loans after the
Effective Time.
"Subsidiary," with respect to a Person, means any other Person controlled
by such Person.
"To the knowledge of Loyola" or "to the knowledge of Crestar" means to the
knowledge of each person with the title of Executive Vice President or higher of
Crestar or Loyola, respectively, after inquiry of subordinate officers as
reasonable in the circumstances.
When a reference is made in this Agreement to Articles, Sections, or
Schedules, such reference shall be to a Section or Article of, or Schedule to,
this Agreement unless otherwise indicated. The table of contents, tie sheet and
headings contained in this Agreement are for ease of reference only and shall
not affect the meaning or interpretation of this Agreement. Whenever the words
"include," "includes," or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."Any singular term in this
Agreement shall be deemed to include the plural, and any plural term the
singular.
8.2. FEES AND EXPENSES.
All costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall, if incurred by
Crestar, be paid by Crestar and shall, if incurred by Loyola, be paid by Loyola.
8.3. SURVIVAL.
Only those agreements and covenants of the parties that are applicable in
whole or in part after the Effective Time shall survive the Effective Time. All
other representations, warranties, agreements and covenants shall be deemed to
be conditions of this Agreement and shall not survive the Effective Time. If
this Agreement shall be terminated, the agreements of the parties in Sections
4.1(c) and 8.2 shall survive such termination.
8.4. NOTICES.
All notices, requests, demands, waivers and other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered in person or mailed, certified or
registered mail with postage prepaid, or sent by telex, telegram or telecopier,
as follows:
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<PAGE>
(a) if to Loyola, to it at:
LOYOLA CAPITAL CORPORATION
1300 North Charles Street
Baltimore, Maryland 21201
Attention: Joseph W. Mosmiller,
Chairman of the Board and Chief
Executive Officer
Telecopier: (410) 332-7067
with a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201
Attention: James J. Winn, Jr., Esquire
Telecopier: (410) 576-5051
(b) if to Crestar, to it at:
CRESTAR FINANCIAL CORPORATION
919 East Main Street
Richmond, Virginia 23219
Attention: John C. Clark, III, Senior Vice
President and
General Counsel
Telecopier: (804) 782-7244
with a copy to:
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219
Attention: Lathan M. Ewers, Jr.
Telecopier: (804) 788-8218
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
8.5. ENTIRE AGREEMENT.
This Agreement and the Schedules and other documents referred to herein or
delivered pursuant hereto collectively contain the entire understanding of the
parties hereto with respect to the subject matter contained herein and supersede
all prior and contemporaneous agreements and understandings, oral and written,
with respect thereto.
8.6. BINDING EFFECT; BENEFIT; ASSIGNMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors, heirs and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties. Nothing in this Agreement, expressed or implied, is
intended to confer on any Person, other than the parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
8.7 WAIVER.
Prior to the Effective Time, any provision of this Agreement may be (i)
waived by the party benefited by the provision or by both parties by a writing
executed by an executive officer, or (ii) amended or modified at any time
(including the structure of the transaction) by an agreement in writing between
the parties hereto approved by their respective boards of directors, except
that, after the vote by the stockholders of Loyola, no such amendment or
modification may be made which
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<PAGE>
reduces or changes the form and amount of consideration payable pursuant to this
Agreement without further stockholder approval.
8.8. FURTHER ACTIONS.
Each of the parties hereto agrees that, subject to its legal obligations,
it will use its best efforts to fulfill all conditions precedent specified
herein, to the extent that such conditions are within its control, and to do all
things reasonably necessary to consummate the transactions contemplated hereby.
8.9. COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original, and all of which together shall he deemed to be one
and the same instrument.
8.10. APPLICABLE LAW.
This Agreement and the legal relations between the parties hereto shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia, without regard to the conflict of laws rules thereof, or to the extent
applicable, the federal laws of the United States of America.
8.11. SEVERABILITY.
If any term, provision, covenant or restriction contained in this Agreement
is held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, the remainder of the
terms, provisions, covenants and restrictions contained in this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
IN WITNESS WHEREOF, each of Crestar and Loyola have executed this Agreement
as of the date first above written.
CRESTAR FINANCIAL CORPORATION
By: /s/ Richard G. Tilghman
Name: Richard G. Tilghman
Title: Chairman of the Board and Chief
Executive Officer
LOYOLA CAPITAL CORPORATION
By: /s/ Joseph W. Mosmiller
Name: Joseph W. Mosmiller
Title: Chairman of the Board and
Chief Executive Officer
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<PAGE>
SCHEDULE 1.1
PLAN OF MERGER
OF
LOYOLA CAPITAL CORPORATION
INTO
CRESTAR FINANCIAL CORPORATION
SECTION 1. MERGER. Loyola Capital Corporation, a Maryland corporation
("Loyola") shall, upon the later of the time that Articles of Merger are made
effective by the Maryland State Department of Assessments and Taxation and the
State Corporation Commission of Virginia (the "Effective Time"), be merged (the
"Merger") into Crestar Financial Corporation, a Virginia corporation
("Crestar"), which shall be the "Successor Corporation."
SECTION 2. CONVERSION OF STOCK; EXCHANGE RATIO. At the Effective Time:
(a) Conversion of Stock. Each share of Crestar Common Stock issued and
outstanding immediately prior to the Effective Time shall continue
unchanged as an outstanding share of Common Stock of the Successor
Corporation.
Each share of Loyola Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares held directly by Crestar,
excluding shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent
the right to receive the number of shares of Crestar Common Stock
determined in accordance with subparagraph (b). As of the Effective Time,
each share of Loyola Common Stock held directly by Crestar (excluding
shares held in a fiduciary capacity or in satisfaction of a debt previously
contracted) shall be canceled, retired and cease to exist, and no exchange
or payment shall be made with respect thereto.
(b) Exchange Ratio. Each share of Loyola Common Stock (other than
shares held directly by Crestar, excluding shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted) shall be
converted into a fraction of a share of Crestar Common Stock, determined in
accordance with the Exchange Ratio. The "Exchange Ratio" shall be
calculated as follows:
(i) if the Average Closing Price (as defined below) is between
$43.478 and $46.375, the Exchange Ratio shall be 0.690 (the quotient of
(A) $32.00 divided by (B) $46.375);
(ii) if the Average Closing Price is greater than $46.375, the
Exchange Ratio shall be the quotient of (A) $32.00 divided by (B) the
Average Closing Price, rounded to the nearest one-one thousandth of a
share, provided that the Exchange Ratio shall not be less than 0.640;
and
(iii) if the Average Closing Price is less than $43.478, the
Exchange Ratio shall be the quotient of (A) $30.00 divided by (B) the
Average Closing Price rounded to the nearest one-one thousandth of a
share, provided that the Exchange Ratio shall not be greater than 0.750,
subject to adjustment as provided in Section 3.
As used herein, "Average Closing Price" shall mean the average closing
price of Crestar Common Stock as reported on the New York Stock Exchange for
each of the 10 trading days ending on the tenth day prior to the Closing Date
(as defined in the Agreement).
The Exchange Ratio at the Effective Time of the Merger shall be adjusted to
reflect any consolidation, split-up, other subdivisions or combinations of
Crestar Common Stock, any dividend payable in Crestar Common Stock, or any
capital reorganization involving the reclassification of Crestar Common Stock.
SECTION 3. POSSIBLE ADJUSTMENT OF EXCHANGE RATIO. The Agreement (as defined
in Section 6 of this Plan of Merger) may be terminated by Loyola if its Board of
Directors so determines by a majority vote of the members of its entire Board at
any time during the five-day period prior to the fifth day prior to the Closing
Date, if the Average Closing Price is less than $40.00; provided, however, that
Crestar shall have the option of increasing the consideration to be received by
holders of Loyola Common Stock by adjusting the Exchange Ratio to a number equal
to a quotient, the numerator of which is the product of $40.00 times the
Exchange Ratio then in effect and the denominator of which is the Average
Closing Price. In such case, Crestar shall give prompt notice to Loyola of such
election and of the revised Exchange Ratio, and in such event no termination
shall be deemed to have occurred pursuant to the Agreement and the Agreement and
this Plan of Merger shall remain in full force and effect in accordance with
their respective terms (except as the Exchange Ratio shall have been so
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<PAGE>
modified) and any references in the Agreement and this Plan of Merger to
"Exchange Ratio" shall thereafter be deemed to refer to the Exchange Ratio as
adjusted pursuant to this Section 3.
SECTION 4. CONVERSION OF OPTIONS.
(a) At the Effective Time, options granted by Loyola under Loyola's
1986 Stock Option Plan, as amended, to purchase shares of Loyola Common
Stock, which are outstanding and unexercised immediately prior thereto
(each, an "Outstanding Option"), shall be converted as to each whole share
subject to such Outstanding Option into an option (each, an "Exchange
Option") to purchase such number of shares of Crestar Common Stock at such
exercise price as is determined as provided below:
(i) the number of shares of Crestar Common Stock to be subject to
the Exchange Option shall be equal to the product of (A) the number of
shares of Loyola Common Stock subject to the Outstanding Option
multiplied by (B) the Exchange Ratio (as it may be adjusted pursuant to
Sections 2 and 3), the product being rounded, if necessary, up or down,
to the nearest whole share;
(ii) the per share exercise price under the Exchange Option shall
be equal to (A) the per share exercise price under the Outstanding
Option divided by (B) the Exchange Ratio (as it may be adjusted pursuant
to Sections 2 and 3), with any fractional cent rounded up to the next
whole cent; and
(iii) the Exchange Option shall otherwise have the same duration
and other terms as the Outstanding Option.
(b) The adjustments with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) shall be effected in a manner consistent
with Section 424(a) of the Code.
SECTION 5. ARTICLES OF INCORPORATION, BY-LAWS AND DIRECTORS OF THE
SUCCESSOR CORPORATION. At the Effective Time of the Merger, there shall be no
change caused by the Merger in the Articles of Incorporation (except any change
caused by the filing of Articles of Merger relating to the Merger), By-laws, or
Board of Directors of the Successor Corporation.
SECTION 6. CONDITIONS TO MERGER. Consummation of the Merger is subject to
the following conditions:
(i) Approval of the Agreement and the Transactions contemplated
thereby by the requisite vote of the holders of the requisite majority of
the outstanding shares of Loyola Common Stock entitled to vote;
(ii) Approval of the Merger by the Board of Governors of the Federal
Reserve System, the Office of Thrift Supervision, and the State Corporation
Commission of Virginia; and
(iii) The satisfaction of the conditions or the waiver of such
conditions by the party for whose benefit they were imposed, as contained
in the Agreement and Plan of Merger (the "Agreement") dated as of May 16,
1995 between Crestar and Loyola.
SECTION 7. EFFECT OF THE MERGER. The Merger shall have the effects provided
by Section 13.1-721 of Virginia Stock Corporation Act and Section 3-114 of the
Maryland General Corporation Law.
SECTION 8. AMENDMENT. Pursuant to Section 13.1-718(I) of the Virginia Stock
Corporation Act, the Board of Directors of Crestar (with Loyola's consent)
reserves the right to amend this Plan of Merger at any time prior to issuance of
the Certificate of Merger by the State Corporation Commission of Virginia;
provided, however, that any such amendment made subsequent to the submission of
this Plan of Merger to the stockholders of Loyola may not: (i) alter or change
the amount or kind of shares, securities, cash, property or rights to be
received in exchange for or in conversion of all or any of the shares of Loyola
Common Stock; (ii) alter or change any of the terms and conditions of this Plan
of Merger if such alteration or change would adversely affect the shares of
Loyola Common Stock; or (iii) alter or change any term of Loyola's Charter
(except as provided herein).
[REMAINING SCHEDULES OMITTED]
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ANNEX II
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Option Agreement") dated as of April 27,
1995, between LOYOLA CAPITAL CORPORATION ("Loyola"), a Maryland corporation, and
CRESTAR FINANCIAL CORPORATION ("Crestar"), a Virginia corporation, recites and
provides:
A. The Boards of Directors of Loyola and Crestar have approved a binding
letter of agreement dated April 27, 1995 (the "Letter Agreement") (to be merged
into a definitive agreement (the "Merger Agreement")) providing for the merger
(the "Merger") of Loyola with and into Crestar.
B. As a condition to and as consideration for Crestar's entry into the
Letter Agreement and the Merger Agreement and to induce such entry, Loyola has
agreed to grant to Crestar the option set forth herein to purchase authorized
but unissued shares of Loyola Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS.
Capitalized terms defined in the Letter Agreement or the Merger Agreement
and used herein shall have the same meanings as in the Letter Agreement or the
Merger Agreement, as the case may be.
2. GRANT OF OPTION.
Subject to the terms and conditions set forth herein, Loyola hereby grants
to Crestar an option (the "Option") to purchase up to 1,613,442 shares of Loyola
Common Stock at an exercise price of $25.00 per share payable in cash as
provided in Section 4; provided, however, that in the event Loyola issues or
agrees to issue any shares of Loyola Common Stock (other than as permitted under
the Letter Agreement and the Merger Agreement) at a price less than $25.00 per
share (as adjusted pursuant to Section 6), the exercise price shall be such
lesser price.
3. EXERCISE OF OPTION.
(a) Unless Crestar shall have breached in any material respect any material
covenant or representation contained in the Letter Agreement or the Merger
Agreement and such breach has not been cured, Crestar may exercise the Option,
in whole or part, at any time or from time to time if a Purchase Event (as
defined below) shall have occurred and be continuing; provided that to the
extent the Option shall not have been exercised, it shall terminate and be of no
further force and effect (i) on the Effective Date of the Merger, or (ii) upon
termination of the Letter Agreement or the Merger Agreement in accordance with
the provisions thereof (other than a termination resulting from a willful breach
by Loyola of any Specified Covenant or, following the occurrence of a Purchase
Event, failure of Loyola's stockholders to approve the Merger Agreement by the
vote required under applicable law or under Loyola's Charter), or (iii) 12
months after termination of the Letter Agreement or the Merger Agreement due to
a willful breach by Loyola of any Specified Covenant or, following the
occurrence of a Purchase Event, failure of Loyola's stockholders to approve the
Merger Agreement by the vote required under applicable law or under Loyola's
Charter. Any exercise of the Option shall be subject to compliance with
applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Loyola or Loyola Federal Savings Bank (the "Savings Bank"),
without having received Crestar's prior written consent, shall have entered
into an agreement with any person (x) to merge or consolidate, or enter
into any similar transaction, except as contemplated in the Letter
Agreement or the Merger Agreement, (y) to purchase, lease or otherwise
acquire all or substantially all of the assets of Loyola or the Savings
Bank, or (z) to purchase or otherwise acquire (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 10% or more of the voting power of Loyola or the Savings Bank;
(ii) any person (other than Loyola or the Savings Bank in a fiduciary
capacity, or Crestar, Crestar Bank, Crestar Bank N.A. or Crestar Bank MD in
a fiduciary capacity) shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 15% or more of the outstanding shares of
Loyola Common Stock after the date hereof (the term "beneficial ownership"
for purposes of this Option Agreement having the meaning assigned thereto
in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") and the regulations promulgated thereunder);
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<PAGE>
(iii) any person shall have made a bona fide proposal to Loyola by
public announcement or written communication that is or becomes the subject
of public disclosure to acquire Loyola or Savings Bank by merger,
consolidation, purchase of all or substantially all of its assets or any
other similar transaction, and following such bona fide proposal the
stockholders of Loyola vote not to adopt the Merger Agreement; or
(iv) Loyola shall have willfully breached any Specified Covenant
following a bona fide proposal to Loyola or the Savings Bank to acquire
Loyola or the Savings Bank by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, which
breach would entitle Crestar to terminate the Letter Agreement or the
Merger Agreement (without regard to the cure periods provided for therein)
and such breach shall not have been cured prior to the Notice Date (as
defined below).
If more than one of the transactions giving rise to a Purchase Event
under this Section 3(b) is undertaken or effected, then all such
transactions shall give rise only to one Purchase Event, which Purchase
Event shall be deemed continuing for all purposes hereunder until all such
transactions are abandoned. As used in this Option Agreement, "person"
shall have the meanings specified in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act.
(c) In the event Crestar wishes to exercise the Option, it shall send to
Loyola a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier than three
business days nor later than 60 business days after the Notice Date for the
closing of such purchase ("Closing Date"); provided that if prior notification
to or approval of any federal or state regulatory agency is required in
connection with such purchase, Crestar shall promptly file the required notice
or application for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification period has expired or
been terminated or such approval has been obtained and any requisite waiting
period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant contained in
Section 6 of the Letter Agreement and Sections 1.8, 4.1, 4.2, 4.4, 4.5, 4.6,
4.8, 4.9, 4.11, or 4.13 of the draft Merger Agreement, the table of contents of
which is attached hereto, and, after its execution, comparable provisions in the
Merger Agreement.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) At the closing referred to in Section 3, Crestar shall pay to Loyola
the aggregate purchase price for the shares of Loyola Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Loyola.
(b) At such closing, simultaneously with the delivery of funds as provided
in subsection (a), Loyola shall deliver to Crestar a certificate or certificates
representing the number of shares of Loyola Common Stock purchased by Crestar,
and Crestar shall deliver to Loyola a letter agreeing that Crestar will not
offer to sell or otherwise dispose of such shares in violation of applicable law
or the provisions of this Option Agreement.
(c) Certificates for Loyola Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend which shall read substantially as
follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of a Stock Option Agreement between the registered holder
hereof and Loyola Capital Corporation and to resale restrictions arising under
the Securities Act of 1933, as amended, a copy of which agreement is on file at
the principal office of Loyola Capital Corporation. A copy of such agreement
will be provided to the holder hereof without charge upon receipt by Loyola
Capital Corporation of a written request."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Crestar shall have
delivered to Loyola a copy of a letter from the staff of the Commission, or an
opinion of counsel, in form and substance satisfactory to Loyola, to the effect
that such legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS.
Loyola represents, warrants and covenants to Crestar as follows:
(a) Loyola shall at all times maintain sufficient authorized but unissued
shares of Loyola Common Stock so that the Option may be exercised without
authorization of additional shares of Loyola Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of the
Option, when paid for as provided herein, will be duly authorized, validly
issued, fully paid and nonassessable.
II-2
<PAGE>
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
In the event of any change in Loyola Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the type and number of shares subject to the Option, and the
purchase price per share, as the case may be, shall be adjusted appropriately.
In the event that any additional shares of Loyola Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement (other than
pursuant to this Option Agreement), the number of shares of Loyola Common Stock
subject to the Option shall be adjusted so that, after such issuance, it equals
19.9% of the number of shares of Loyola Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 6 shall be deemed to authorize Loyola to
breach any provision of the Letter Agreement or the Merger Agreement.
7. REGISTRATION RIGHTS.
If requested by Crestar, Loyola shall as expeditiously as possible file a
registration statement on a form of general use under the Securities Act if
necessary in order to permit the sale or other disposition of the shares of
Loyola Common Stock that have been acquired upon exercise of the Option in
accordance with the intended method of sale or other disposition requested by
Crestar. Crestar shall provide all information reasonably requested by Loyola
for inclusion in any registration statement to be filed hereunder. Loyola will
use its best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 270 days
from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sales or other dispositions. The first
registration effected under this Section 7 shall be at Loyola's expense except
for underwriting commissions and the fees and disbursements of Crestar's counsel
attributable to the registration of such Loyola Common Stock. A second
registration may be requested hereunder at Crestar's expense. In no event shall
Loyola be required to effect more than two registrations hereunder. The filing
of any registration statement hereunder may be delayed for such period of time
as may reasonably be required to facilitate any public distribution by Loyola of
Loyola Common Stock. If requested by Crestar, in connection with any such
registration, Loyola will become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements. Upon receiving any request
from Crestar or assignee thereof under this Section 7, Loyola agrees to send a
copy thereof to Crestar and to any assignee thereof known to Loyola, in each
case by promptly mailing the same, postage prepaid, to the address of record of
the persons entitled to receive such copies.
8. SEVERABILITY.
If any term, provision, covenant or restriction contained in this Option
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire the full
number of shares of Loyola Common Stock provided in Section 2 (as adjusted
pursuant to Section 6), it is the express intention of Loyola to allow the
holder to acquire such lesser number of shares as may be permissible, without
any amendment or modification hereof.
9. MISCELLANEOUS.
(A) EXPENSES. Except as otherwise provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(b) ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Option Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. The terms and
conditions of this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. Nothing in
this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Option Agreement, except as expressly provided herein.
(c) ASSIGNMENT. Neither of the parties hereto may assign any of its rights
or obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that in the event a Purchase Event shall have occurred and be continuing Crestar
may assign in whole or in part its rights and obligations hereunder; provided,
however, that to the extent required by applicable regulatory authorities,
Crestar may not assign its
II-3
<PAGE>
rights under the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Loyola, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Crestar's behalf, or (iv) any other
manner approved by applicable regulatory authorities.
(d) NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the addresses provided for in or pursuant to Section 8.4 of the
draft Merger Agreement and, after its execution, the Merger Agreement.
(e) COUNTERPARTS. This Option Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) SPECIFIC PERFORMANCE. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) GOVERNING LAW. This Option Agreement shall be governed by and construed
in accordance with the laws of Virginia applicable to agreements made and
entirely to be performed within such state and such federal laws as may be
applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
LOYOLA CAPITAL CORPORATION
By: /s/ Joseph W. Mosmiller
Joseph W. Mosmiller
Chairman of the Board and
Chief Executive Officer
CRESTAR FINANCIAL CORPORATION
By: /s/ Richard G. Tilghman
Richard G. Tilghman
Chairman of the Board and
Chief Executive Officer
II-4
<PAGE>
ANNEX III
[Alex, Brown & Sons letterhead]
August , 1995
The Board of Directors of
Loyola Capital Corporation
1300 North Charles Street
Baltimore, Maryland 21201
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, $0.10 par value
per share (the "Shares") of Loyola Capital Corporation (the "Company") of the
exchange ratio to be received by the Company's shareholders pursuant to the
Agreement and Plan of Merger By and Between Crestar Financial Corporation
("Crestar") and the Company dated May 16, 1995 (the "Agreement"). Pursuant to
the Agreement, each of the Shares will receive:
(a) 0.690 shares of Crestar Common Stock, par value $5.00 per share
("Crestar Common Stock"), if the Average Crestar Closing Price (as
defined in the Agreement) is between $43.478 and $46.375;
(b) the number of shares of Crestar Common Stock equal to $32.00
divided by the Average Crestar Closing Price (with a minimum of
0.640 shares of Crestar Common Stock), if the Average Crestar
Closing Price is greater than $46.375; or
(c) the number of shares of Crestar Common Stock equal to $30.00
divided by the Average Crestar Closing Price (with a maximum of
0.750 shares of Crestar Common Stock), if the Average Crestar
Closing Price is less than $43.478 (collectively, the "Exchange
Ratio").
Alex. Brown & Sons Incorporated, as a customary part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings, private
placements and valuations for estate, corporate and other purposes. We have
acted as financial advisor to the Board of Directors of the Company in
connection with the transactions described above and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the transaction contemplated by the Agreement. Alex. Brown & Sons Incorporated
regularly publishes research reports regarding the financial services industry
and the businesses and securities of publicly owned companies in that industry.
In connection with this opinion, we have reviewed certain publicly
available financial information concerning the Company and Crestar and certain
internal financial analyses and other information furnished to us by the Company
and Crestar. We have also held discussions with members of the senior management
of the Company and Crestar regarding the business and prospects of the Company
and Crestar, respectively. In addition, we have (i) reviewed the reported price
and trading activity for the Shares and Crestar Common Stock, (ii) compared
certain financial and stock market information for the Company and Crestar,
respectively, with similar information for certain comparable companies whose
securities are publicly traded (iii) reviewed the Agreement and compared the
financial terms of the Agreement with those of certain recent business
combinations of other savings banks and commercial banks which we deemed
comparable in whole or in part and (iv) performed such other studies and
analyses and considered such other factors as we deemed appropriate.
III-1
<PAGE>
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to information relating to the prospects of the Company
and Crestar, we have assumed that such information reflects the best currently
available estimates and judgments of the managements of the Company and Crestar,
respectively, as to the likely future financial performance of the Company and
Crestar. In addition, we have not made an independent evaluation or appraisal of
the assets or liabilities of the Company or Crestar, nor have we been furnished
with any such evaluation or appraisal. Our opinion is based on market, economic
and other conditions as they exist and can be evaluated as of the date of this
letter.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio is fair, from a financial point of view,
to the holders of Shares.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
III-2
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Crestar Articles implement the provisions of the VSCA, which provide
for the indemnification of Crestar's directors and officers in a variety of
circumstances, which may include indemnification for liabilities under the
Securities Act of 1933. Under sections 13.1-697 and 13.1-702 of the VSCA, a
Virginia corporation generally is authorized to indemnify its directors and
officers in civil or criminal actions if they acted in good faith and believed
their conduct to be in the best interests of the corporation and, in the case of
criminal actions, had no reasonable cause to believe that the conduct was
unlawful. The Crestar Articles require indemnification of directors and officers
with respect to certain liabilities, expenses and other amounts imposed upon
them by reason of having been a director or officer, except in the case of
willful misconduct or a knowing violation of criminal law. Crestar also carries
insurance on behalf of directors, officers, employees or agents that may cover
liabilities under the Securities Act of 1933. In addition, the VSCA and the
Crestar Articles eliminate the liability of a director or officer of Crestar in
a stockholder or derivative proceeding. This elimination of liability will not
apply in the event of willful misconduct or a knowing violation of the criminal
law or any federal or state securities law. Sections 13.1-692.1 and 13.1-696 to
- -704 of the VSCA are hereby incorporated herein by reference.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
2(a) Agreement and Plan of Merger, dated as of May 16, 1995, by and
between Crestar and Loyola (attached to the Proxy
Statement/Prospectus as ANNEX I)
2(b) Stock Option Agreement dated as of April 27, 1995, by and
between Crestar and Loyola (attached to the Proxy
Statement/Prospectus as ANNEX II)
5 Opinion of Hunton & Williams with respect to legality*
8(a) Opinion of Hunton & Williams with respect to tax consequences of
the Merger*
8(b) Opinion of Piper & Marbury L.L.P. with respect to tax
consequences of the Merger*
24(a) Consent of KPMG Peat Marwick LLP (Crestar Financial Corporation)
24(b) Consent of KPMG Peat Marwick LLP (Loyola Capital Corporation)
24(c) Consent of Alex. Brown & Sons Incorporated*
24(d) Consent of Hunton & Williams (included in Exhibit 5 and Exhibit
8(a))*
24(e) Consent of Piper & Marbury L.L.P. (included in Exhibit 8(b))*
25 Power of Attorney (included in the Registration Statement)*
28 Form of Proxy
(b) Financial Statement Schedules -- None
(c) Report, Opinion or Appraisal -- (attached to the Proxy
Statement/Prospectus as ANNEX III)
*Previously filed
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes as follows:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement.
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement.
II-1
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the registration statement is on Form S-3 or
Form S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration
statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
4. That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the Registrant
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the
applicable form.
5. That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to
Rule 415, will be filed as part of an amendment to the registration
statement and will not be used until such amendment is effective,
and that, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
6. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Richmond,
Commonwealth of Virginia, on September 5, 1995.
CRESTAR FINANCIAL CORPORATION
(Registrant)
By: /s/ JOHN C. CLARK, III
John C. Clark, III
Corporate Senior Vice President,
General Counsel and Secretary
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities indicated on September 5, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <S>
/s/ RICHARD G. TILGHMAN* Chairman of the Board and Chief
Richard G. Tilghman Executive Officer and Director
(Principal Executive Officer)
/s/ JAMES M. WELLS, III* President and Director
James M. Wells, III
/s/ RICHARD F. KATCHUK Corporate Executive Vice President
Richard F. Katchuk and Chief Financial Officer
(Principal Financial Officer)
/s/ JAMES D. BARR* Executive Vice President, Controller
James D. Barr and Treasurer (Principal
Accounting Officer)
______________________ Director
Richard M. Bagley
/s/ J. CARTER FOX* Director
J. Carter Fox
_______________________ Director
Bonnie Guiton Hill
/s/ GENE A. JAMES* Director
Gene A. James
_______________________ Director
H. Gordon Leggett, Jr.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
/s/ CHARLES R. LONGSWORTH* Director
Charles R. Longsworth
/s/ PATRICK J. MAHER* Director
Patrick J. Maher
/s/ FRANK E. MCCARTHY* Director
Frank E. McCarthy
________________________ Director
Paul D. Miller
________________________ Director
G. Gilmer Minor, III
/s/ GORDON F. RAINEY, JR.* Director
Gordon F. Rainey, Jr.
/s/ FRANK S. ROYAL, M.D.* Director
Frank S. Royal, M.D.
________________________ Director
Eugene P. Trani
________________________ Director
L. Dudley Walker
________________________ Director
Karen Hastie Williams
</TABLE>
*By /s/ DAVID M. CARTER
David M. Carter
Attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
2(a) Agreement and Plan of Merger, dated as of May 16, 1995, by and
between Crestar and Loyola (attached to the Proxy
Statement/Prospectus as ANNEX I)
2(b) Stock Option Agreement dated as of April 27, 1995, by and between
Crestar and Loyola (attached to the Proxy Statement/Prospectus as
ANNEX II)
*5 Opinion of Hunton & Williams with respect to legality
*8(a) Opinion of Hunton & Williams with respect to tax consequences of
the Merger
*8(b) Opinion of Piper & Marbury L.L.P. with respect to tax consequences
of the Merger
24(a) Consent of KPMG Peat Marwick LLP (Crestar Financial Corporation)
24(b) Consent of KPMG Peat Marwick LLP (Loyola Capital Corporation)
*24(c) Consent of Alex. Brown & Sons Incorporated
*24(d) Consent of Hunton & Williams (included in Exhibit 5 and Exhibit 8(a))
*24(e) Consent of Piper & Marbury L.L.P. (included in Exhibit 8(b))
*25 Power of Attorney (included in the Registration Statement)
28 Form of Proxy
</TABLE>
*Previously filed.
EXHIBIT 24(A)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Crestar Financial Corporation:
We consent to the use of our report included in Crestar Financial
Corporation's Annual Report on Form 10-K for the year ended December 31, 1994
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the Proxy Statement/Prospectus. Our report refers to a
change in accounting for certain investments in debt and equity securities.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
August 31, 1995
EXHIBIT 24(B)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Loyola Capital Corporation:
We consent to the use of our report included in Loyola Capital
Corporation's Annual Report on Form 10-K for the year ended December 31, 1994
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the Proxy Statement/Prospectus. Our report refers to a
change in accounting for income taxes.
/s/ KPMG Peat Marwick LLP
Baltimore, Maryland
August 31, 1995
LOYOLA CAPITAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Loyola Capital Corporation ("Loyola") hereby
appoints Harry K. Wells, John T. Stinson and H. Mebane Turner, and any of them,
as lawful attorneys and proxies of the undersigned, with several powers of
substitution, to vote all shares of Common Stock of Loyola which the undersigned
is entitled to vote at the Special Meeting of the Stockholders of Loyola to be
held on October 17, 1995, or at any adjourments or postponements thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED ON THE
REVERSE SIDE. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS LISTED. IF ANY OTHER BUSINESS IS PROPERLY PRESENTED AT THE SPECIAL
MEETING, THIS PROXY WILL BE VOTED BY THE PROXIES IN THEIR DISCRETION.
(Continued, and to be marked, signed and dated, on the reverse side)
<PAGE>
(Proxy Card, reverse side)
1. The approval and adoption of the Agreement and Plan of Merger and
related Plan of Merger dated as of May 16, 1995 (the "Merger
Agreement"), by and between Loyola and Crestar Financial Corporation
("Crestar"), providing for the merger of Loyola with and into Crestar
(the "Merger") as more fully described in the accompanying Proxy
Statement/Prospectus pursuant to which each share of common stock of
Loyola outstanding as of the effective date of the Merger will be
converted into and become a right to receive the number of shares of
common stock of Crestar (and associated stock rights) as determined in
the manner specified in the accompanying Proxy Statement/Prospectus and
the Merger Agreement.
( ) FOR ( ) AGAINST ( ) ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments or
postponements thereof.
The undersigned acknowledges receipt prior to the execution of this
proxy of a Notice of Special Meeting of Stockholders and of a Proxy
Statement/Prospectus dated , 1995.
Please sign exactly as your name appears
on this card. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title,
if shares are held jointly, each holder
may sign, but only one signature is
required.
Dated _________________________, 1995
_____________________________________
Signature
_____________________________________
Signature
