UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
1ST WASHINGTON BANCORP, INC.
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
336909106
(CUSIP Number)
GREGORY K. THORESON
VICE PRESIDENT AND GENERAL COUNSEL
FIRST MARYLAND BANCORP
25 SOUTH CHARLES STREET, MS101-850
BALTIMORE, MARYLAND 21201
(410) 244-3800
(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications)
January 23, 1996
(Date of Event which Requires Filing of this Statement)
IF THE FILING PERSON HAS PREVIOUSLY FILED A STATEMENT ON SCHEDULE 13G TO REPORT
THE ACQUISITION WHICH IS THE SUBJECT OF THIS SCHEDULE 13D, AND IS FILING THIS
SCHEDULE BECAUSE OF RULE 13D-1(B)(3) OR (4), CHECK THE FOLLOWING BOX. |_|
CHECK THE FOLLOWING BOX IF A FEE IS BEING PAID WITH THE STATEMENT. |X|
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CUSIP NO. 336909106 SCHEDULE 13D
1. Name of Reporting Person/SS or IRS Identification Number
of Above Person
First Maryland Bancorp
2. Check the Appropriate Box if a Member of a Group
(a)
(b)
3. SEC Use Only
4. Source of Funds
WC
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Item 2(d) or 2(e)
Not applicable [ ]
6. Citizenship or Place of Organization
State of Maryland
Number of Shares 7. Sole Voting Power: 1,966,692
Beneficially Owned 8. Shared Voting Power:
by Each Reporting 9. Sole Dispositive Power: 1,966,692
Person With 10. Shared Dispositive Power
11. Aggregate Amount Owned by Each Reporting Person
1,966,692
12. Check Box if the Aggregate Amount in
Row 11 Excludes Certain Shares
[ ]
13. Percent of Class Represented by amount in Row 11:
19.9%
14. Type of Reporting Person:
CO
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ITEM 1. SECURITY AND ISSUER
The class of equity security to which this statement relates is the
Common Stock, $.01 par value (the "WF Common Stock"), of 1st Washington Bancorp,
Inc., a Delaware corporation. ("1st Washington"). The principal executive
offices of 1st Washington are located at 570 Herndon Parkway, Herndon, Virginia
22070.
ITEM 2. IDENTITY AND BACKGROUND
The person filing this statement is First Maryland Bancorp, a
corporation organized under the laws of the State of Maryland ("First
Maryland"). The address of First Maryland's principal business and its principal
office is 25 South Charles Street, Baltimore, Maryland 21201. First Maryland is
a bank holding company registered under the Bank Holding Company Act of 1956, as
amended, and through its various bank and non-bank subsidiaries, provides a
variety of financial services and products to individuals, businesses and
others. Schedule 1 to this statement sets forth certain information with respect
to the directors and executive officers of First Maryland.
All of the outstanding common stock of First Maryland is owned by
Allied Irish Banks, p.l.c., Bankcentre, Ballsbridge, Dublin 4 Ireland ("AIB").
AIB also controls 99% of the voting power of First Maryland's outstanding
capital stock. AIB is an Irish banking corporation and is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended. Shares
of AIB common and preferred stock are traded on the Dublin, London and New York
stock exchanges. AIB and its subsidiaries, including First Maryland, provide a
diverse range of banking, financial and related services principally in Ireland,
the United States and the United Kingdom. Schedule 2 to this statement sets
forth certain information with respect to the directors and executive officers
of AIB.
During the past five years, neither First Maryland or AIB, nor to the
knowledge of First Maryland, any director or executive officer of First Maryland
or AIB, (i) has been convicted in a criminal proceeding or (ii) has been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction where, as a result of such proceeding, was or is subject to a
judgement, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
a violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source of funds for any exercise of the Option (as defined in Item
4) would be provided from First Maryland's
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working capital. If First Maryland exercised the Option in full, the exercise
price would be approximately $13.8 million.
ITEM 4. PURPOSE OF THE TRANSACTION.
On January 23, 1996, First Maryland, 1st Washington and FMB Acquisition
Corp. ("Newco"), a wholly owned subsidiary of First Maryland formed for the
purpose of facilitating the transaction described below, entered into a
definitive Agreement and Plan of Merger (the "Merger Agreement"). Under the
Merger Agreement, Newco will merge with and into 1st Washington, shareholders of
1st Washington will receive $8.125 per share of WF Common Stock outstanding
(including stock options outstanding to 1st Washington employees), and 1st
Washington will become a wholly owned subsidiary of First Maryland (the
"Merger"). Contemporaneously with, or immediately following, the consummation of
the Merger, the business of 1st Washington and its principal subsidiary,
Washington Federal Savings Bank, will be integrated into the business of First
Maryland. Consummation of the transactions contemplated by the Merger Agreement
is subject to approval by the shareholders of 1st Washington and to receipt of
all required regulatory approvals. A copy of the Merger Agreement is filed as an
exhibit to this statement and is incorporated herein by reference.
In connection with the Merger Agreement, 1st Washington and First
Maryland entered into a Stock Option Agreement, dated January 23, 1996 (the
"Option Agreement"), pursuant to which 1st Washington granted to First Maryland
an option (the "Option") to acquire up to 1,966,692 shares of WF Common Stock at
an exercise price of $7.00 per share. The option is exercisable only upon the
occurrence of certain events, as set forth in Section 2 of the Option Agreement.
First Maryland may cause 1st Washington to repurchase the Option (and any shares
in respect of which it has been exercised) under certain circumstances, as
described in Section 7 of the Option Agreement. Reference is hereby made to the
Option Agreement filed as an exhibit to this statement for a complete
description of the terms and conditions of the Option.
The purpose of the Option Agreement is to increase the likelihood that
the Merger will be completed as contemplated by the Merger Agreement.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As a result of the Option Agreement, First Maryland (and AIB) may,
pursuant to Rule 13d-3(d)(i) under the Securities Exchange Act of 1934, be
deemed to own beneficially up to 1,966,692 shares of WF Common Stock, which is
19.9% of the outstanding WF Common Stock as of January 23, 1996, or 16.6% of the
outstanding WF Common Stock as of January 23, 1996, after giving effect to the
full exercise of the Option. If the Option were to be exercised, First Maryland
would have sole voting power and,
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subject to the Option Agreement, sole dispositive power, with respect to the
shares of WF Common Stock acquired upon exercise.
To the knowledge of First Maryland, Robert I. Schattner, DDS, a
director of First Maryland, may, pursuant to Rule 13d-3(d)(i) under the
Securities Exchange Act of 1934, be deemed to own beneficially 836,062 shares of
WF Common Stock (including the shares descibed in the immediately succeeding
paragraph), or 8.46% of the outstanding WF Common Stock. To the knowledge of
First Maryland, Dr. Schattner has sole voting and sole dispositive powers with
respect to such shares.
First Maryland has been informed that Dr. Shattner purchased a total of
66,300 shares of WF Common Stock during the period from January 24, 1996 through
February 2, 1996.
Except as set forth above, neither First Maryland or AIB, nor to the
knowledge of First Maryland, any of their respective directors and executive
officers, have effected transactions in shares of WF Common Stock during the
past 60 days.
ITEM 6. CONTRACTS, AGREEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
Except as set forth above, neither First Maryland or AIB, nor to the
knowledge of First Maryland, any of their respective directors and executive
officers, has any contracts, arrangements, understandings or relationships
(legal or otherwise) with any person with respect to any securities of 1st
Washington, including but not limited to, transfer or voting of any securities
of 1st Washington, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the giving
or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
7.1 Stock Option Agreement, dated January 23, 1996,
between 1st Washington Bancorp, Inc. and First Maryland
Bancorp.
7.2 Agreement and Plan of Merger, dated as of January 23,
1996, among First Maryland Bancorp, 1st Washington
Bancorp, Inc. and FMB Acquisition Corp.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: February 6, 1995 FIRST MARYLAND BANCORP
By: ROBERT W. SCHAEFER
Robert W. Schaefer, Executive
Vice President and Chief
Financial Officer
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SCHEDULE 1 TO SCHEDULE 13D
DIRECTORS AND EXECUTIVE OFFICERS OF FIRST MARYLAND BANCORP
The names, business addresses and present principal occupations or
employments of the directors and executive officers of First Maryland Bancorp
are set forth below. If no business address is given, the director's or
executive officer's address is First Maryland Bancorp, 25 South Charles Street,
Baltimore, Maryland 21201. Unless otherwise indicated, (i) each occupation set
forth opposite an individual's name refers to First Maryland Bancorp and (ii)
each individual is a citizen of the United States. Individuals marked with an
asterisk are citizens of Ireland.
Present Principal
Name Occupation or Employment
Frank P. Bramble President and Chief Executive
Officer
Benjamin L. Brown Former General Counsel and Ex-
ecutive Director of the Na-
tional Institute of Municipal
Law Officers (retired)
Jeremiah E. Casey Chairman of the Board
J. Owen Cole Former Chairman of the Board
of First Maryland Bancorp
(retired)
Edward A. Crooke President and Chief Operating
P.O. Box 1475 Officer of Baltimore Gas and
Baltimore, MD 21203 Electric Company
John F. Dealy Distinguished Professor of the
2300 N Street, NW Georgetown University School
Washington, DC 20037 of Business and Senior Counsel
to Shaw, Pittman, Potts and
Trowbridge
Mathias J. DeVito Chairman of the Board of The
10275 Little Patuxent Pkwy. Rouse Company
Columbia, MD 21044
Rhoda M. Dorsey President Emeritus of Goucher
College
Jerome W. Geckle Former Chairman of the Board
of PHH Corporation (retired)
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Frank A. Gunther Former Chairman of the Board
and President of Albert
Gunther Inc. (retired)
Curran W. Harvey, Jr. General Partner of Spectra
1119 St. Paul Street Enterprise Associates; Special
Baltimore, MD 21201 Partner of New Enterprise As-
sociates
Margaret M. Heckler Attorney
Kevin J. Kelly* Group Financial Director of
Bankcentre Allied Irish Banks, p.l.c.;
Ballsbridge, Dublin 4 Group General Manager of
AIB Bank
Henry J. Knott Chairman and Chief Executive
3904 Hickory Ave. Officer of Real Estate
Baltimore, MD 21211 Resource Management, Inc.
Thomas P. Mulcahy* Group Chief Executive of Al-
Bankcentre lied Irish Banks, p.l.c.
Ballsbridge, Dublin 4
William M. Passano, Jr. Chairman of the Board of
351 W. Camden Street Waverly, Inc.
Baltimore, MD 21230
Robert I. Schattner President of The R. Schattner
5901 Montrose Rd. Foundation for Medical
Rockville, MD 20852 Research; President and Chief
Executive Officer of
Sporicidin International
Executive Officers Who Are Not Directors
Name Position with First Maryland
Harry E. Berry Executive Vice President and Chief
Credit Officer
David M. Cronin* Executive Vice President and
Treasurer
Jerome W. Evans Executive Vice President and Chief
Administrative Officer
Walter R. Fatzinger, Jr. Executive Vice President
Susan M. Keating Executive Vice President
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Jeffrey D. Maddox Executive Vice President
Frederick W. Meier, Jr. Executive Vice President
Robert W. Schaefer Executive Vice President and Chief
Financial Officer
Richard H. White Executive Vice President
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SCHEDULE 2 TO SCHEDULE 13D
DIRECTORS AND EXECUTIVE OFFICERS OF ALLIED IRISH BANKS, P.L.C.
The names, business addresses and present principal occupations or
employments of the directors and executive officers of Allied Irish Banks,
p.l.c. ("AIB") are set forth below. If no business address is given, the
director's or executive officer's address is Allied Irish Banks, p.l.c.,
Bankcentre, Ballsbridge, Dublin 4 Ireland. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to AIB. Except for Mr.
Casey, who is a citizen of the United States, and for Mr. Carson, who is a
citizen of the United Kingdom, each individual is a citizen of Ireland.
Present Principal
Name Occupation or Employment
James P. Culliton Chairman
Thomas P. Mulcahy Group Chief Executive
Michael D. Buckley Group General Manager, Capital
Markets
William M. Carson Chairman, AIB Group Northern
Ireland plc.
Jeremiah E. Casey Chief Executive, USA Division
Tom Cavanagh Chairman, Earlsfort Centre
Hotel Proprietors Ltd.
Padraic M. Fallon Chairman, Euromoney Publica-
tions plc
Kevin J. Kelly Group Financial Executive;
Group General Manager of
AIB Bank
John B. McGuckian Chairman, Ulster Television
plc and the Industrial
Development Board
Raymond J. McLoughlin Managing Director, James Crean
plc.
Carol Moffett Managing Director, Moffett
Engineering Limited
Denis J. Murphy Chairman, St. Patrick's Wollen
Mills and The Swansea Cork Car
Ferries Ltd.
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Miriam H. O'Brien Chairman, Foundation for Fis-
cal Studies and the European
Cultural Foundation
Lochlann Quinn Director, Glen Dimplex
Seamus J. Sheehy Professor of Agricultural
Economics, University College,
Dublin
Peter Sutherland Chairman, Goldman Sachs
International
Executive Officers Who Are Not Directors
Brian Cregg Head of Group Human Resources
and Strategic Technology and
member of Group Executive
Committee
John Hickey Head of Direct Banking and
member of Group Executive
Committee
Pat Ryan Group Treasurer and member of
Group Executive Committee
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STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated January 23, 1996, between 1ST WASHINGTON
BANCORP, INC., a Delaware corporation ("Issuer"), and FIRST MARYLAND BANCORP, a
Maryland Corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated as of January 23, 1996 (the "Merger Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 1,966,692
fully paid and nonassessable shares of Issuer's Common Stock, par value $.01 per
share (the "Common Stock"), at a price of $$7.00 per share of Common Stock (the
"Option Price"); provided, however, that in no event shall the number of shares
of Common Stock for which this Option is exercisable exceed 19.9 percent of the
Issuer's issued and outstanding shares of Common Stock, without giving effect to
any shares subject or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, it equals 19.9 percent
of the number of shares of Common Stock then issued and outstanding, without
giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer to breach any provision of the Merger Agreement.
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2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or in part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within sixty (60) days following such Subsequent Triggering Event.
The term "Exercise Termination Event" shall mean and shall be deemed to have
occurred upon each and any of the following: (i) the Effective Time of the
Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event except a termination by Grantee pursuant to Section
7.1(d) of the Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional); (iii) the passage of 12 months after
termination of the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a termination by Grantee pursuant to
Section 7.1(d) of the Merger Agreement (unless the breach by Issuer giving rise
to such right of termination is nonvolitional) (provided that if an Initial
Triggering Event continues or occurs beyond such termination and prior to the
passage of such 12-month period, the Exercise Termination Event shall be 12
months from the occurrence of the Last Triggering Event (as hereinafter defined)
but in no event more than 18 months after such termination) or (iv) the second
anniversary of the date hereof. The "Last Triggering Event" shall mean the last
Initial Triggering Event to occur during the 12-month period described in clause
2(a)(iii). The term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent, shall
have entered into an agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder) other than Grantee or any of the Subsidiaries
of Grantee (each a "Grantee Subsidiary") or the Board of Directors of Issuer
shall have recommended that the stockholders of Issuer approve or accept any
such Acquisition Transaction. For purposes of this Agreement, the term
"Acquisition Transaction" shall mean (w) a merger or consolidation, or any
similar transaction, involving Issuer or any Significant
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Subsidiary (the term "Significant Subsidiary" for purposes of this Agreement
having the meaning assigned thereto in Rule 1-02 of Regulation S-X promulgated
by the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a
purchase, lease, or other acquisition of all or a substantial portion of the
assets of Issuer or any Significant Subsidiary of Issuer, (y) a purchase or
other acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10 percent or more of the voting power of
Issuer or any Significant Subsidiary of Issuer, or (z) any substantially similar
transaction;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended, proposed,
or publicly announced its intention to authorize, recommend, or propose, to
engage in an Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its interest to withdraw or modify,
in any manner adverse to Grantee, its recommendation that the stockholders of
Issuer approve the transactions contemplated by the Merger Agreement;
(iii) Any person other than Grantee, any Grantee Subsidiary,
or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course
of its business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 15 percent or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or
its stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger Agreement and (y) shall
not have been cured prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or
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notice has been accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial
ownership of 25 percent or more of the then outstanding Common
Stock; or
(ii) The occurrence of the Initial Triggering Event described
in clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) shall be 25 percent.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer 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 (3) business days nor later than sixty (60) business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided that
if prior notification to or approval of the Federal Reserve Board or any other
regulatory agency is required in connection with such purchase, the Holder 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 periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
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(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions to this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books
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of Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state, and local taxes
and other charges that may be payable in connection with the preparation, issue,
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee, or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities, and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution, or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations, or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting, and waiting
period requirements specified in 15 U.S.C. Section 18 and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), the Home Owners Loan Act, as amended, or the
Change in Bank Control Act of 1978, as amended, or any state banking law, prior
approval of or notice to any federal bank regulatory authority or any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to such federal or state regulatory authority as they
may require) in order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided for in Section 5 hereof to protect the
rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same condition as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Agreement, and (in the case of loss, theft, or
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destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed, or mutilated
shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within sixty (60) days of such Subsequent Triggering Event (whether on
its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file, and keep current a shelf registration statement under the
Securities Act covering this Option and any shares issued and issuable pursuant
to this Option and shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of this Option and any shares of Common Stock
issued upon total or partial exercise of this Option (the "Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of
one-hundred-eighty (180) days from the date such registration statement first
becomes effective or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Grantee shall have the right to demand two
such registrations. The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of the Option or Option
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Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25 percent of the total number of shares to be sold by
the Holder and Issuer in the aggregate; and provided further, however, that if
such reduction occurs, then the Issuer shall file a registration statement for
the balance as promptly as practical and no reduction shall thereafter occur.
Each such Holder shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder. If requested
by any such Holder in connection with such registration, Issuer shall 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 for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be obligated to
effect more than two registrations pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of any assignment or
division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the market/offer price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within ninety (90) days of such occurrence
(or such later period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price"
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shall mean the highest of the following amounts with respect to the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, (i) the price per share of Common Stock at
which a tender offer or exchange offer therefor has been made, (ii) the price
per share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock, or (iv)
in the event of a sale of all or a substantial portion of Issuer's assets, the
sum of the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
divided by the number of shares of Common Stock of Issuer outstanding at the
time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to Issuer. Notwithstanding the foregoing, if the same
person who has participated in a Triggering Event has entered, or after such
Triggering Event has occurred enters, into any agreement or understanding with
Grantee relating to Grantee's rights under this Option or with respect to the
Option Shares or directly or indirectly relating to Issuer, Grantee shall,
notwithstanding the terms of such agreement or understanding, at any time upon
the occurrence of a Subsequent Triggering Event of the type set forth in Section
3(d)(i) without Issuer's approval, recommendation or consent, promptly request
that Issuer repurchase the Option and any Option Shares held by Grantee as
provided in this Section 8 and Issuer shall do so.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the latter to occur of (x) five (5) business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
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(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/ or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five (5) business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to
use its best efforts to obtain all required regulatory and legal approvals and
file any required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, the term "Repurchase Event" shall
mean and shall be deemed to have occurred upon each and any of the following:
(i) the consummation of any merger, consolidation, or similar transaction
involving Issuer or any purchase, lease, or other acquisition of all or a
substantial portion of the assets of Issuer, or (ii) the acquisition by any
person of beneficial ownership of 50 percent or more of the then outstanding
shares of Common Stock, provided that no such event shall constitute a
Repurchase Event unless a Subsequent Triggering Event shall have occurred prior
to an Exercise Termination Event. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this Section 7 shall
not terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event.
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<PAGE>
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of the Subsidiaries of Grantee, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of the Grantee Subsidiaries, to
merge into Issuer and Issuer shall be the continuing or surviving corporation,
but, in connection with such merger, the then outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
person or cash or any other property or the then outstanding shares of Common
Stock shall after such merger represent less than 50 percent of the outstanding
voting shares and voting share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any person,
other than Grantee or one of the Grantee Subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially all of Issuer's assets.
(2) "Substitute Option Issuer" shall mean the issuer
of the Substitute Option.
(3) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute Option.
(4) "Assigned Value" shall mean the market/offer
price, as defined in Section 7.
(5) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger, or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the date preceding
such consolidation, merger or sale; provided that if Issuer is the Substitute
Option Issuer, the Average Price shall be computed with respect to a share of
common stock issued by the person merging into
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<PAGE>
Issuer or by any company which controls or is controlled by such person, as the
Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The Substitute Option Issuer shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9 percent of the shares of
Substitute Common Stock outstanding prior to the exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for more
than 19.9 percent of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the Substitute Option Issuer shall make a cash
payment to Holder equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over (ii) the value
of the Substitute Option after giving effect to the limitation in this clause
(e). This difference in value shall be determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
and reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
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<PAGE>
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five (5) business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five (5) business days after the date
on
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<PAGE>
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Option Shares it is then so prohibited
from repurchasing.
10. The 60-day period for exercise of certain rights under Sections 2,
6, 7, and 13 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the Exchange Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to
14
<PAGE>
consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances, and security interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
13. 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 Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within sixty
(60) days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date fifteen (15)
days following the date on which the Federal Reserve Board approves an
application by Grantee under the BHCA to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its 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 two (2) percent of the
voting shares of Issuer, (iii) an assignment to a
15
<PAGE>
single party (e.g., a broker or investment banker) for the purpose of conducting
a widely dispersed public distribution on Grantee's behalf, or (iv) any other
manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the NASDAQ National Market upon
official notice of issuance and applying to the Federal Reserve Board under the
BHCA for approval to acquire the shares issuable hereunder, but Grantee shall
not be obligated to apply to state banking authorities for approval to acquire
the shares of Common Stock issuable hereunder until such time, if ever, as it
deems appropriate to do so.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant, or restriction contained in this
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
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 Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section
1(b) or 5 hereof), it is the express intention of Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
17. All notices, requests, claims, demands, and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy, or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
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<PAGE>
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly 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.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, Grantee and Issuer have caused this Agreement to be
executed by their respective officers thereunto duly authorized, all as of the
date first above written.
1ST WASHINGTON BANCORP, INC., Issuer
By: CARROLL E. AMOS
Carroll E. Amos, Chief Executive
Officer
FIRST MARYLAND BANCORP, Grantee
By: JEREMIAH E. CASEY
Jeremiah E. Casey, Chairman of
the Board
18
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 23, 1996 (this
"Agreement"), between First Maryland Bancorp, a Maryland corporation ("First
Maryland"), FMB Acquisition Corporation, a Maryland corporation ("Newco"), and
1st Washington Bancorp, Inc., a Delaware corporation ("Falcon").
NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement, and of the representations, warranties, conditions and
promises herein contained, the parties hereto agree as follows:
ARTICLE I: THE MERGER
1.1 Merger. (a) At the Effective Time of the Merger (as defined in
Article VI hereof), Newco shall be merged with and into Falcon, the separate
corporate existence of Newco shall cease, and Falcon shall be the surviving
company and shall become a wholly owned subsidiary of First Maryland (the
"Merger").
(b) Falcon shall thereupon and thereafter: (i) possess all the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, of each of the merging corporations; and all property, real, personal
and mixed, and all debts due on whatever account, and all other choses in
action, and all and every other interest, of or belonging to or due to each of
the corporations so merged, shall be taken and deemed to be transferred to and
vested in Falcon without further act or deed, and the title to any real estate
or any interest therein, vested in any of such corporations, shall not revert or
be in any way impaired by reason of the Merger; and (ii) be responsible and
liable for all the liabilities and obligations of each of the corporations so
merged.
1.2 Charter; By-Laws; Directors and Officers. The Certificate of
Incorporation and By-Laws of the surviving company of the Merger shall be those
of Falcon, as in effect immediately prior to the Effective Time of the Merger.
The directors and officers of Newco immediately prior to the Effective Time of
the Merger shall be the directors and officers of the surviving company of the
Merger until their successors are elected and qualify.
1.3 Taking of Necessary Action. In case at any time after the Effective
Time of the Merger, First Maryland shall consider it necessary or desirable that
any further deeds, assignments or assurances in law or any other acts be
undertaken to (a) vest, perfect or conform, of record or otherwise, in First
Maryland its right, title or interest in, to or under any of the rights,
properties or assets of Falcon, or (b) otherwise carry out the purposes of this
Agreement, Falcon and its officers and directors shall be deemed to have granted
to First Maryland an irrevocable power of attorney to execute and deliver all
such deeds, assignments or assurances in law or any other acts as are necessary
or desirable to (i) vest, perfect or conform, of record or otherwise, in First
Maryland its right, title or interest in, to or under any of the rights,
properties or assets of Falcon, or
<PAGE>
(ii) otherwise carry out the purposes of this Agreement, Falcon and its officers
and directors shall be deemed to have granted to First Maryland an irrevocable
power of attorney to execute and deliver all such deeds, assignments or
assurances in law and to all acts necessary or proper to vest, perfect or
conform title to and possession of such rights, properties or assets in First
Maryland and otherwise to carry out the purposes of this Agreement, and the
officers and directors of First Maryland are authorized in the name of Falcon or
otherwise to take any and all such action.
ARTICLE II: TERMS OF THE MERGER.
2.1 Conversion of Stock and Stock Options. At the Effec-
tive Time of the Merger:
(a) Each share of Falcon Common Stock (as defined herein) which is
issued and outstanding at the Effective Time of the Merger (other than
Dissenting Shares (as defined in Section 2.4)) shall, and without any action by
the holder thereof, be converted into the right to receive $8.125 in cash (the
"Cash Price") from First Maryland.
(b) Each Falcon Option (as defined herein) which is issued and
outstanding at the Effective Time of the Merger (whether or not then
exercisable) shall, and without any action by the holder thereof, be converted
into the right to receive cash in an amount (the "Option Cash Price") equal to
the difference between the Cash Price and the per share exercise price of such
option as set forth on the Falcon Disclosure Schedule (as defined herein).
(c) Each share of Newco capital stock outstanding at the Effective Time
of the Merger shall, without any action by Falcon or by the holder thereof, be
converted into one share of Falcon Common Stock.
(d) All shares of Falcon Common Stock that are owned by Falcon as
treasury stock and all shares of Falcon Common Stock owned by First Maryland or
any of its subsidiaries immediately prior to the Effective Time of the Merger,
other than any such shares held directly or indirectly in trust accounts,
managed accounts and similar accounts or otherwise held in a fiduciary or
custodial capacity that are beneficially owned by third parties and other than
any shares of Falcon Common Stock held by First Maryland or its subsidiaries in
respect of debt previously contracted, shall be cancelled and retired and shall
cease to exist and no consideration shall be delivered in exchange therefor.
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2.2 Manner of Exchange.
(a) After the Effective Time of the Merger, each holder of a
certificate for theretofore outstanding shares of Falcon Common Stock, or each
optionee under a Falcon Option, upon surrender to The First National Bank of
Maryland, as exchange agent (the "Exchange Agent"), of such certificate or such
instrument or agreement representing a Falcon Option, as applicable, and a
letter of transmittal, which shall be mailed to each holder of a certificate for
theretofore outstanding shares of Falcon Common Stock or an agreement for an
Falcon Option, as applicable, by the Exchange Agent promptly following the
Effective Time of the Merger, shall be entitled to receive in exchange therefor
a cashier's check for the Cash Price or the Option Cash Price, as applicable.
Until so surrendered, each outstanding certificate or agreement, as applicable,
which, prior to the Effective Time of the Merger, represented Falcon Common
Stock or a Falcon Option will be deemed to evidence the right to receive the
Cash Price or the Option Cash Price, respectively. After the Effective Time of
the Merger, there shall be no further registration or transfer on the records of
Falcon of Falcon Common Stock and Falcon Options shall cease to be exercisable
or convertible into Falcon Common Stock. No interest shall accrue or be payable
on the Cash Price or the Option Cash Price, regardless of when any such amount
is actually received by a holder of Falcon Common Stock or a Falcon Option.
(b) At the Effective Time of the Merger, each Dissenting Share shall be
treated in accordance with Section 262 of the General Corporation Law of the
State of Delaware (the "Delaware Corporation Law").
2.3 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Falcon Common Stock which are issued and outstanding
immediately prior to the Effective Time of the Merger and which are held by a
stockholder who has the right (to the extent such right is available by law) to
demand and receive payment of the fair value of his shares of Falcon Common
Stock ("Dissenting Shares") pursuant to Section 262 of the Delaware Corporation
Law shall not be converted into or be exchangeable for the right to receive the
consideration provided in Section 2.1 of this Agreement, unless and until such
holder either shall fail to perfect such holder's right to dissent or shall have
effectively withdrawn or lost such right under the Delaware Corporation Law, as
the case may be. If such holder shall have so failed to perfect such holder's
right to dissent or shall have effectively withdrawn or lost such right, each of
such holder's Falcon Common Stock shall thereupon be deemed to have been
converted into, at the Effective Time of the Merger, the right to receive the
Cash Price as provided in Section 2.1(a).
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2.4 Withholding Rights. First Maryland shall be entitled to deduct and
withhold from any amounts otherwise payable pursuant to this Agreement to any
holder of shares of Falcon Common Stock or Falcon Options such amounts as First
Maryland is required under the Code or any provision of state, local or foreign
tax law to deduct and withhold with respect to the making of such payment. Any
amounts so withheld shall be treated for all purposes of this Agreement as
having been paid to the holder of Falcon Common Stock or Falcon Options in
respect of which such deduction and withholding was made by First Maryland.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF FALCON.
Falcon makes the following representations and warranties to First
Maryland on the date hereof and on the Effective Date of the Merger. As used in
this Article III, "Falcon" means Falcon and all of its Subsidiaries (as defined
herein) unless otherwise expressly stated
3.1 Organization, Standing and Power. (a) Falcon is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in each
jurisdiction in which its ownership or lease of property or the nature of
business conducted by it makes such qualification necessary, except for such
jurisdictions in which the failure to be so qualified would not have a material
adverse effect upon the financial condition, results of operations, business or
prospects of Falcon on a consolidated basis. Falcon is registered as a savings
and loan holding company under the Home Owners Loan Act, as amended ("HOLA").
Falcon has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Falcon has
delivered to First Maryland complete and correct copies of (i) its Certificate
of Incorporation and all amendments thereto to the date hereof and (ii) its
By-laws as amended to the date hereof.
(b) Washington Federal Savings Bank ("Falcon Bank") is a savings bank
duly organized, validly existing and in good standing under the laws of the
United States and has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted.
Falcon has delivered to First Maryland complete and correct copies of (i) the
charter of Falcon Bank and all amendments thereto to the date hereof and (ii)
the by-laws of Falcon Bank as amended to the date hereof.
3.2 Subsidiaries. The disclosure schedule delivered by Falcon to First
Maryland as of the date of this Agreement (the "Falcon Disclosure Schedule")
sets forth each corporation, partnership, limited liability company or other
entity (other than Falcon Bank, which is also a Subsidiary) with respect to
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which Falcon owns or controls more than 50% of the voting power or control
(each, a "Subsidiary"). Each Subsidiary has been duly organized, and is validly
existing and in good standing under the laws of the jurisdiction of its
formation and is qualified to do business in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such
qualification necessary, except for such jurisdictions in which the failure to
be so qualified would not have a material adverse effect on the business,
financial condition, results of operations or prospects of such Subsidiary. Each
Subsidiary has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Falcon has obtained all necessary regulatory approvals and authorizations to own
and operate each Subsidiary. Falcon has delivered to First Maryland complete and
correct copies of the organic organizational documents, as amended to the date
hereof, for each Subsidiary.
3.3 Capital Structure. (a) The authorized capital stock of Falcon
consists of 17,500,000 shares of common stock, $.01 par value ("Falcon Common
Stock") and 1,000,000 shares of preferred stock $.01 par value (the "Preferred
Stock"). On the date hereof, 9,882,877 shares of Falcon Common Stock were
outstanding, no shares of Preferred Stock were outstanding, 398,000 shares of
Falcon Common Stock were subject to Falcon Options and no shares of Falcon
Common Stock were held in treasury. All of the outstanding shares of Falcon
Common Stock are validly issued, fully paid and nonassessable. Except for the
Falcon Options, there are no outstanding subscriptions, contracts, conversion
privileges, options, warrants, calls or other rights obligating Falcon to issue,
sell or otherwise dispose of or to purchase, redeem or otherwise acquire, any
shares of Falcon Common Stock or Preferred Stock.
(b) The authorized capital stock of Falcon Bank consists of 22,500,000
shares of common stock. On the date hereof, 9,882,877 shares of Falcon Bank
common stock were outstanding and all of such outstanding shares are validly
issued, fully paid and non-assessable and owned by Falcon, free and clear of any
liens, claims, encumbrances, charges or rights of third parties of any kind
whatsoever. There are no outstanding subscriptions, contracts, conversion
privileges, options, warrants, calls or other rights obligating Falcon Bank or
Falcon to issue, sell or otherwise dispose of or to purchase, redeem or
otherwise acquire, any shares of common stock of Falcon Bank.
(c) The authorized capital stock and number of shares outstanding as of
the date hereof of each Subsidiary is set forth on the Falcon Disclosure
Schedule. All such outstanding Subsidiary capital stock is validly issued, fully
paid and non-assessable and owned by Falcon, free and clear of any liens,
claims, encumbrances, charges or rights of third parties of any kind whatsoever.
There are no outstanding subscriptions, con-
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tracts, conversion privileges, options, warrants, calls or other rights
obligating Falcon or any Subsidiary to issue, sell or otherwise dispose of or to
purchase, redeem or otherwise acquire, any shares of capital stock of any
Subsidiary.
(d) All outstanding shares of Falcon Common Stock have been issued in
compliance with the applicable requirements of the Securities Act of 1933 and
the rules and regulations promulgated pursuant thereto (the "1933 Act"). No
person has any right, contractual or otherwise, to require registration of
Falcon Common Stock under the 1933 Act. Except as set forth in the Falcon
Disclosure Schedule, Falcon knows of no person who beneficially owns, or has the
right to acquire, 5% or more of the outstanding common stock of Falcon as of the
date hereof.
3.4 Authority. (a) Subject to the approval of the Merger by the
stockholders of Falcon in accordance with Delaware Corporation Law and as
contemplated by Section 4.2 hereof, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary actions on the part of Falcon, and this
Agreement is a valid and binding obligation of Falcon, enforceable against
Falcon in accordance with its terms. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by Falcon with any of the provisions hereof will not (i) conflict
with or result in a breach of any provision of its Certificate of Incorporation
or By-laws or a default (or give rise to any right of termination, cancellation
or acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Falcon is a party, or by which it or
any of its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Falcon or any of
its properties or assets.
(b) Assuming (i) that the requirements of the Securities and Exchange
Act of 1934, as amended, and the rules and regulations promulgated pursuant
thereto (the "Exchange Act") are met, (ii) that any filings or approvals
required to be obtained from the Board of Governors of the Federal Reserve
System (the "FRB") under or pursuant to the BHCA, from the Office of Thrift
Supervision (the "OTS"), and from the Virginia State Corporation Commission
under or pursuant to applicable state law are obtained, (iii) that the filing of
any appropriate Certificate of Merger and Articles of Merger pertaining to the
Merger is made, (iv) that the approval of the Merger and this Agreement by the
holders of Falcon Common Stock is obtained, and (v) that such other consents as
have been disclosed in the Falcon Disclosure Schedule are obtained, then no
consent or approval by any governmental authority or other person is required in
connection with the execution and delivery of Falcon of this Agreement or
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the consummation by Falcon of the transactions contemplated
hereby.
3.5 Investments. (a) All securities owned by Falcon of record and
beneficially (i) are permissible investments for them under applicable federal
law, (ii) except as disclosed on the Falcon Disclosure Schedule, are free and
clear of all mortgages, liens, pledges, encumbrances or any other restriction,
whether contractual or statutory, which would materially impair the ability of
Falcon freely to dispose of any such security at any time and (iii) are properly
classified in accordance with generally accepted accounting principles on the
Falcon Financial Statements as of September 30, 1995. Falcon does not own
securities in an amount equal to 5% or more of the issued and outstanding voting
securities of any issuer thereof, other than those of a Falcon Subsidiary. There
are no voting trusts or other agreements or undertakings with respect to the
voting of any such securities. With respect to all repurchase agreements to
which Falcon is a party, Falcon, has a valid, perfected first lien security
interest in the securities or other collateral securing the repurchase
agreement, and the value of such securities or other collateral equals or
exceeds the amount of the debt secured thereby.
(b) Except as disclosed in the Falcon Disclosure Schedule, Falcon is
not a party to any interest rate or currency exchange swap transaction, interest
rate cap, collar or option, basis swap, forward rate contract, commodity swap,
commodity option, equity or equity-linked swap or option, structured note,
financial futures contract or any contract or agreement commonly known as a
derivative contract or product (collectively, "Derivatives"). The purchase or
acquisition of each Derivative by Falcon was in accordance with investment
policies approved by the Board of Directors of Falcon.
3.6 Reports and Financial Statements. Falcon has previously furnished
First Maryland with true and complete copies of Annual Reports on Form 10-K for
fiscal years 1990 through 1995 for Falcon or Falcon Bank, Falcon's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995, and each other
material report, schedule, registration statement and definitive proxy
statement, filed by Falcon with the SEC from and after December 31, 1993
(collectively, the "Falcon Reports"). As of their respective dates, the Falcon
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstance under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
financial statements of Falcon included in the Falcon Reports (collectively, the
"Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be
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indicated therein or in the notes thereto) and fairly present the consolidated
financial position of Falcon and its Subsidiaries (as hereinafter defined) as of
the dates thereof and the results of their operations and changes in cash flows
for the periods then ended subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein. Except as disclosed in the Falcon Reports, there
exist no material liabilities of Falcon or any of its Subsidiaries, contingent
or otherwise.
3.7 Absence of Undisclosed Liabilities. At September 30, 1995, Falcon
had no obligations or liabilities (contingent or otherwise) of any nature which
were not reflected in the unaudited interim financial statements contained in
the Falcon Reports as of such date or disclosed in the notes thereto, and from
September 30, 1995 through the date hereof Falcon has incurred no obligations or
liabilities (contingent or otherwise) of any nature, except for those which in
the aggregate are not material to the financial condition, results of
operations, business or prospects of Falcon on a consolidated basis.
3.8 Taxes. (a) Falcon has previously furnished to First Maryland true
and correct copies of the all federal, state and local income tax returns, and
state and local property and sales tax returns and any other tax returns filed
by Falcon or any Subsidiary for each of the fiscal years that remains open for
examination or assessment of tax. Falcon has prepared in good faith and duly and
timely filed, or caused to be duly and timely filed, all federal, state, local
and foreign income, estimated tax, withholding tax, franchise, sales and other
tax returns and such information and other reports required to be filed by
Falcon or any Subsidiary. Falcon has paid, or has made adequate provision or
reserve for the payment of, all taxes imposed by any taxing authority on Falcon
or any Subsidiary with respect to any Pre-Closing Tax Period (as hereinafter
defined), together with any interest, additions or penalties related to any such
taxes. Neither Falcon nor any Subsidiary (i) has consented to extend the statute
of limitations with respect to the assessment of any tax, (ii) is a party to any
action or proceeding by any governmental entity in connection with the
determination, assessment or collection of any taxes or penalties, and to the
best knowledge of Falcon no such action or proceeding is threatened, (iii) has
received any deficiency notices or reports in respect of any material
deficiencies for any tax, assessments, penalties or governmental charges or (iv)
has failed to timely file any information or other reports required under
applicable law.
(b) The term "Pre-Closing Tax Period" shall mean (i) each taxable
period that ends on or before the Effective Time of the Merger and (ii) any
taxable period that includes (but does not end on) the Effective Time of the
Merger (the period described in this clause (ii) being hereafter referred to as
a "Straddle
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Period"). In the case of any tax for a Straddle Period, the representation and
warranty in the third sentence of this Section 3.1(g) shall be limited to the
Pre-Closing Tax Amount determined as follows:
(1) in the case of a periodic tax that is not based on income
or receipts (e.g., an ad valorem property tax), the "Pre-Closing Tax Amount"
shall be an amount equal to the amount of such tax for the entire Straddle
Period multiplied by a fraction the numerator of which is the number of days
elapsed between the beginning of the Straddle Period and the Effective Time of
the Merger and the denominator of which is the total number of days in the
Straddle Period; and
(2) in the case of any other tax, the "Pre-Closing Tax Amount"
shall be the amount of such tax for which Falcon would have been liable if the
Straddle Period had ended as of the close of business on the day of the
Effective Time of the Merger.
3.9 Options, Warrants and Related Matters. There are no outstanding
unexercised subscriptions, contracts, conversion privileges, options, warrants,
calls, commitments or agreements of any character to which Falcon is a party or
by which it is bound, calling for the issuance of securities of Falcon or any
Subsidiary or any security representing the right to purchase or otherwise
receive any such security, except for the Falcon Options. The Falcon Disclosure
Schedule lists as of the date hereof (i) the name of each holder of Falcon
Options, (ii) the number of Falcon Options held by each such holder, and (iii)
the exercise price of each Falcon Option held by each such holder.
3.10 Property. (a) Falcon owns or leases all property reflected in the
consolidated statements of condition of Falcon contained in the Falcon Reports
as of September 30, 1995 (except property sold or otherwise disposed of in the
ordinary course of business). All property shown as being owned is owned free
and clear of all mortgages, liens, pledges, charges or encumbrances of any
nature whatsoever, except those referred to in the Financial Statements or the
notes thereto, liens for current taxes not yet due and payable, any unfiled
mechanics' liens and such encumbrances and imperfections of title, if any, as
are not substantial in character or amount or otherwise materially impair
Falcon's consolidated business operations. The leases relating to leased
property are in full force and effect and are fairly reflected in the Financial
Statements, and true and correct copies of all such leases have been delivered
by Falcon to First Maryland.
(b) The Falcon Disclosure Schedule describes, as of the date hereof,
all interests in real property owned, leased, subleased or otherwise claimed by
Falcon, including other real estate owned. Except as set forth in the Falcon
Disclosure
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Schedule, Falcon has "nondisturbance agreements" from all mortgagees of real
property leased or subleased by them and utilized in their respective
businesses.
(c) All property and assets material to the business or operations of
Falcon are in substantially good operating condition and repair and such
property and assets are adequate for the business and operations of Falcon as
currently conducted.
3.11 Employee Matters. (a) The Falcon Disclosure Schedule sets forth as
of the date hereof (i) the name, SSN, employment commencement date, original
hire date (for employee benefit plan purposes) and current base salary of all
present employees of Falcon, (ii) the entity by which each such employee is
employed or retained, (iii) the current position or capacity of each such
employee, (iv) all accrued vacation owed to each such employee, and (v) any
accrued salary or wages owed to each such employee. Each listed employee
receives a fixed salary and does not receive any commission or other cash
compensation other than as set forth on the Falcon Disclosure Schedule. Except
as set forth on the Falcon Disclosure Schedule, since September 30, 1995, Falcon
has not increased the compensation payable to or to be payable to any of its
employees, or instituted or changed any personnel policies, employee or fringe
benefits or other compensation arrangements other than in the ordinary course of
business or as provided for in this Agreement.
(b) The Falcon Disclosure Schedule sets forth all employment,
consulting, severance, bonus, retention or similar written agreements or
arrangements to which Falcon is a party and which cover any individual listed as
an employee on the Falcon Disclosure Schedule, or any former employee or
independent contractor of Falcon. Falcon has previously provided First Maryland
with true and complete copies of all such agreements and arrangements.
(c) Except as set forth on the Falcon Disclosure Schedule, there are no
investigations, claims or proceedings pending or, to the best knowledge of
Falcon, threatened relating to or arising out of the employment of any employee
or former employee, including without limitation equal employment, employment
practices or the terms and conditions of employment or termination of
employment. None of the employees listed on the Falcon Disclosure Schedule is
represented by a union or other collective bargaining organization, and there is
no organizational effort involving Falcon pending or, to the best knowledge of
Falcon, threatened which could reasonably be expected to result in such
representation. Falcon is not a party to any union or labor agreement.
3.12 Material Agreements. The Falcon Disclosure Schedule
sets forth all notes, bonds, mortgages, indentures, licenses,
real and personal property lease and sublease agreements, noncom-
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petition agreements and arrangements and other material instruments, agreements
and obligations to which Falcon is a party as of the date hereof, except for any
mortgages in which Falcon or any Subsidiary is mortgagee (the "Material
Contracts"). All Material Contracts are valid and in full force and effect, and
Falcon is not in breach of any material provision of, or are in default in any
material respect under the terms of, any such Material Contract, the effect of
which breach or default would have a material adverse effect upon the financial
condition, results of operations, business or prospects of Falcon on a
consolidated basis.
3.13 Legal Proceedings; Compliance with Laws. (a) Except as set forth
on the Falcon Disclosure Schedule, there is no legal, administrative,
arbitration or other proceeding or governmental investigation pending or, to the
best knowledge of Falcon's management, threatened or probable of assertion,
which if decided adversely would have a material adverse effect on the financial
condition, results of operations, business or prospects of Falcon on a
consolidated basis. Falcon is not aware of any pending or threatened
investigation of Falcon by any federal, state, local or foreign governmental or
regulatory authority or any formal assertion by any other person relating to or
arising out of: (i) the lending patterns, practices, procedures or policies of
Falcon (other than examinations of the OTS conducted in the normal course of
business) including any claim of disparate impact on, or disparate treatment of,
similarly situated applicants or other prospective customers of Falcon; (ii)
compliance by Falcon with federal and state regulations governing the conduct of
Falcon's banking business or (iii) compliance by Falcon with federal and state
securities laws.
(b) Falcon has complied in all material respects with all laws,
ordinances, requirements, regulations, rules or orders applicable to its
businesses (including, but not limited to environmental, capital adequacy, fair
lending and affiliate transactions laws, securities laws, ordinances,
requirements, regulations, rules or orders). Falcon does not permit, and for the
past three years has not permitted, the charging of overages by any originator
of any consumer loan (other than any residential first mortgage loan) or small
business loan. With respect to any loan originated pursuant to which an overage
was charged, the charging of such overage, in the opinion of Falcon, did not and
will not result in a disparate impact on, or in the disparate treatment of,
similarly situated applicants or customers of Falcon.
(c) Falcon has all licenses, permits, orders and approvals of any
federal, state, local or foreign governmental or regulatory body that are
necessary for the conduct of the respective businesses of Falcon and each of the
Subsidiaries (collectively, the "Falcon Permits"). The Falcon Permits are in
full
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force and effect, no material violations are or have been recorded in respect to
any Falcon Permits, and no proceeding is pending or, to the best knowledge of
Falcon, threatened to revoke or limit any Falcon Permit. Falcon is not subject
to any judgment, order, writ, injunction or decree which materially adversely
affects or might reasonably be expected materially adversely to affect, the
financial condition, results of operations, business or prospects of Falcon on a
consolidated basis.
3.14 Employee Benefit Plans. (a) The Falcon Disclosure Statement
includes a correct and complete list of, and First Maryland has been furnished a
true and correct copy of: (i) all retirement, pension, thrift and profit-sharing
plans, all deferred compensation, consulting, severance, stock-based
compensation and bonus plans, all group insurance contracts and all other
incentive, welfare and employee benefit plans, and any trust, annuity or other
funding agreements with respect to any of such plans, and all other agreements
(including oral agreements) that are presently in effect, or have been approved
prior to the date hereof, maintained for the benefit of employees or former
employees of Falcon or the dependents or beneficiaries of any employee or former
employee of Falcon (the "Employee Plans"), whether or not subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) the
most recent actuarial and financial reports prepared or required to be prepared
with respect to any Employee Plan; and (iii) the most recent annual reports
filed with any governmental agency, the most recent favorable determination
letter issued by the Internal Revenue Service, and any open requests for rulings
or determination letters, that pertain to any such qualified Employee Plan. The
Falcon Disclosure Schedule identifies each Employee Plan that is intended to be
qualified under Section 401(a) of the Code and each such plan is so qualified.
(b) Neither Falcon nor any employee pension benefit plan (as defined in
Section 3(2) of ERISA and herein, a "Pension Plan") maintained by it, has
incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC") or
to the Internal Revenue Service with respect to any such plan. There is not
currently pending with the PBGC any filing with respect to any reportable event
under Section 4043 of ERISA nor has any reportable event occurred as to which a
filing is required and has not been made.
(c) Except as described in the Falcon Disclosure Schedule, full payment
has been made (or proper accruals have been established) of all contributions
required to be made under the terms of each Employee Plan, ERISA, or a
collective bargaining agreement, no accumulated funding deficiency (as defined
in Section 302 of ERISA or Section 412 of the Code) whether or not waived,
exists with respect to any Pension Plan, and there is no
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"unfunded current liability" (as defined in Section 412 of the Code) with
respect to any Pension Plan.
(d) No Employee Plan is a "multiemployer plan" (as defined in Section
3(37) of ERISA). Falcon has not incurred any liability under Section 4201 of
ERISA for a complete or partial withdrawal from a multiemployer plan (as defined
in Section 3(37) of ERISA). Falcon has not participated in or agreed to
participate in, a multiemployer plan (as defined in Section 3(37) of ERISA).
(e) All Employee Plans that are "employee benefit plans," as defined in
Section 3(3) of ERISA, comply, and have been administered in compliance, in all
material respects with ERISA and all other applicable legal requirements,
including the terms of such plans, collective bargaining agreements and
securities laws. Falcon has no liability under any such plan that is not
reflected in the consolidated financial statements of Falcon contained in the
Falcon Reports as of September 30, 1995.
(f) No prohibited transaction has occurred with respect to any Employee
Plan that is an "employee benefit plan" (as defined in Section 3(3) of ERISA)
that would result, directly or indirectly, in liability under ERISA or in the
imposition of a excise tax under Section 4975 of the Code.
(g) The Falcon Disclosure Schedule identifies each Employee Plan that
is an "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) and
which is funded. The funding under each such plan does not exceed the
limitations under Section 419A(b) or 419A(c) of the Internal Revenue Code of
1986, as amended (the "Code"). Falcon is not subject to taxation on the income
of any such plan.
(h) The Falcon Disclosure Schedule identifies the method of
funding (including any individual accounting) for all post-
retirement medical or life insurance benefits for the employees
of Falcon. The Falcon Disclosure Schedule also discloses the
funded status of these Employee Plans.
3.15 Insurance. (a) All policies or binders of fire, liability, product
liability, workers' compensation, vehicular and other insurance currently
maintained by or on behalf of Falcon ("Insurance Policies") are listed in the
Falcon Disclosure Schedule, and copies of all Insurance Policies, as well as
copies of all insurance policies or binders of Falcon which were in force at any
time during the past five years have been maintained by Falcon and have been
made available to First Maryland. The Insurance Policies are valid and
enforceable in accordance with their terms, are in full force and effect, and
insure against risks and liabilities to the extent and in the manner customary
for the industry and are deemed appropriate and sufficient by
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Falcon. Falcon is not in default with respect to any provision contained in any
Insurance Policy and has not failed to give any notice or present any claim
under any Insurance Policy in due and timely fashion, in either case where such
default or failure to give notice or present any claim would have a material
adverse effect on the financial condition, results of operations, business or
prospects of Falcon on a consolidated basis. Falcon has not received notice of
cancellation or non-renewal of any Insurance Policy. Falcon has no knowledge of
any inaccuracy in any application for any Insurance Policy, any failure to pay
premiums when due or any similar state of facts that might form the basis for
termination of any Insurance Policy. Falcon has no knowledge of any state of
facts or of the occurrence of any event that is reasonably likely to form the
basis for any material claim against it not fully covered (except to the extent
of any applicable deductible) by the Insurance Policies. Falcon has not received
notice from any of its insurance carriers that any insurance premiums will be
increased in the future or that any such insurance coverage will not be
available in the future on substantially the same terms as now in effect.
(b) Since at least January 1, 1991, Falcon has continuously maintained
fidelity, surety, mortgage errors and omissions and savings and loan blanket
bond coverages in the amounts customary for a savings association of its size.
Since January 1, 1991, the aggregate amount of all claims under such bonds has
not exceeded [$100,000.00], and neither Falcon nor Falcon Bank is aware of any
facts which would form the basis of a claim under such bonds. Neither has a
reason to believe that its fidelity coverage will not be renewed by its carrier
on substantially the same terms as its existing coverage.
3.16 Loan Portfolio. Each loan outstanding on the books of Falcon is in
all respects what it purports to be, was made in the ordinary course of
business, was not known to be uncollectible at the time it was made, and was
made in accordance with Falcon's established loan policies. The records of
Falcon regarding all loans outstanding on its books are accurate in all material
respects. The allowance for loan losses (the "Allowance") shown in the Falcon
Reports as of September 30, 1995 was, and the Allowance shown on the
consolidated statements of condition for Falcon and its Subsidiaries as of dates
subsequent to this Agreement will, in the opinion of Falcon's management, be
adequate: (i) to provide for losses relating to or inherent in the loan and
lease portfolios (including accrued interest receivables) of Falcon and its
Subsidiaries and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by Falcon and its Subsidiaries, (ii)
within the meaning of generally accepted accounting principles and (iii) under
all applicable regulatory requirements. Except as set forth in the Falcon
Disclosure Schedule, no loan or other asset has been classified by Falcon Bank
or any regulatory examiner as
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"Other Assets Specially Mentioned", "Substandard", "Doubtful", "Classified",
"Criticized", "Credit Risk", "Loss", "Concerned Loans", "Watch List Loans" or
words of similar import (collectively "Nonperforming Assets"). Each loan
reflected as an asset on the Financial Statements contained in the Falcon
Reports, is, to the knowledge of Falcon, the legal, valid and binding obligation
of the obligor and any guarantor, and no defense, offset or counterclaim has
been asserted with respect to any such loan which if successful would have a
material adverse effect on the financial condition, results of operations,
business or prospects of Falcon on a consolidated basis. Except as set forth in
the Falcon Disclosure Schedule, Falcon does not know of any pending or
threatened action in connection with any material loan or commitment presently
or previously made by Falcon relating to claims based on theories of "lender
liability" or any other basis. The other real estate owned and in-substance
foreclosures included in any Nonperforming Assets are accrued net of reserves at
the lesser of cost or market value based on current independent appraisals or
current management appraisals.
3.17 Absence of Changes. Since September 30, 1995, there has not been
any material adverse change in the consolidated financial condition, results of
operations, business or prospects of Falcon, other than changes resulting from
or attributable to (i) changes since such date in laws or regulations (whether
enacted or proposed), generally accepted accounting principles or
interpretations of either thereof that affect the banking or savings and loan
industries generally, (ii) changes since such date in the general level of
interest rates, (iii) expenses since such date incurred in connection with the
transactions contemplated by this Agreement, (iv) accruals and reserves by
Falcon since such date pursuant to the terms of Section 4.5 hereof or (v) any
other accruals, reserves or expenses incurred by Falcon since such date with
First Maryland's prior written consent. Since September 30, 1995, the business
of Falcon has been conducted only in the ordinary course.
3.18 Brokers and Finders. Except for Legg Mason Wood Walker,
Incorporated, neither Falcon nor any of its officers, directors or employees has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
herein.
3.19 Environmental Matters. (a) For purposes of this
subsection, the following terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (i) the protection, preservation or restoration of the
environ-
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ment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
"Environmental Law" includes without limitation (A) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq.; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq.; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq.;
the Emergency Planning and Community Right To Know Act, 42 U.S.C. ss.11001, et
seq.; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq.; and all
comparable state and local laws, and (B) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a component.
Hazardous Substances include, without limitation, petroleum or any derivative or
byproduct thereof, asbestos, radioactive material, and polychlorinated
biphenyls.
"Real Property" means all real property serving as collateral
for any loans made by Falcon and any real property owned or operated by Falcon
or any other real estate owned (including property held as a trustee or in any
other fiduciary capacity).
(b) Except as set forth in the Falcon Disclosure Schedule,
(i) Falcon has not been and is not now in violation of
or liable under any Environmental Law;
(ii) none of the Real Property either (A) has been or is in
violation of or liable under any Environmental Law or (B) contains any Hazardous
Substance; and there are no underground storage tanks on, in or under, and no
underground storage tanks have been removed from, any Real Property;
(iii) except for any real property owned or operated by Falcon
or other real estate owned identified on the Falcon Disclosure Schedule, Falcon
has not, and does not now, exercise dominion, management or control over, or
participate in the management or control of, any Real Property; and
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(iv) there are no actions, suits, demands, notices, claims,
investigations or proceedings pending or threatened relating to the liability of
any of the Real Property under any Environmental Law, including without
limitation any notices, demand letters or requests for information from any
federal or state environmental agency relating to any such liabilities under or
violations of Environmental Law, except in the case of clauses (i), (ii) and
(iii) above for such violations and liabilities, and actions, suits, demands,
notices, claims, investigations or proceedings, which would not singly or in the
aggregate have a material adverse effect on the business, financial condition,
results of operations or prospects of Falcon on a consolidated basis.
3.20 Certain Regulatory Matters. (a) Except as set forth in the Falcon
Disclosure Schedule, Falcon is not, and since January 1, 1994 has not been, a
party to any written agreement or memorandum of understanding with, or a party
to any commitment letter, board resolution or similar undertaking to, or subject
to any order or directive by, or is a recipient of any extraordinary supervisory
letter from, any governmental entity which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its credit or
reserve policies or its management, nor has Falcon been advised by any
governmental entity that is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission. Falcon knows of no reason why
the regulatory approvals referred to in Section 5.1(c) hereof should not be
obtained.
(b) Except as set forth in the Falcon Disclosure Schedule: (i) Falcon
is in compliance in all material respects with the applicable rules and
regulations of the OTS, and Falcon has obtained the necessary exemptions or
exceptions from such rules and regulations as to the matters noted in the Falcon
Disclosure Schedule; (ii) Falcon Bank is in compliance in all material respects
with the rules and regulations of the FDIC to the extent such rules and
regulations are deemed applicable by regulatory determination (including the
rules and regulations issued by the FDIC in its administration of the SAIF); and
(iii) Falcon does not, either directly or through a Subsidiary, hold any
corporate debt security not of "investment grade," as defined in Section 222 of
the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), and Falcon is in compliance with the applicable divestiture
requirements established by the FDIC as to any such investments noted as
exceptions in the Falcon Disclosure Schedule.
(c) As of September 30 1995, (i) Falcon was in compliance with the
minimum capital requirements applicable to savings associations pursuant to 12
CFR ss.567 et seq., including as to
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leverage ratio requirements, tangible capital requirements and risk based
capital requirements and (ii) Falcon met the Qualified Thrift Lender test as set
out and defined in Section 303 of FIRREA.
(d) Since the enactment of FIRREA, Falcon Bank has not made loans on
the security of non-residential real property in an aggregate amount in excess
of 400% of its capital. Falcon has not been advised by appropriate regulatory
authorities that it is in "default" or "danger of default" (as those terms are
defined in FIRREA Sections 204(x)(1) and (2)). Since the enactment of FIRREA,
except as may be noted in the Falcon Disclosure Schedule, Falcon has been in
compliance in all material respects with Sections 23A and 22(h) of the Federal
Reserve Act. Except as set forth in the Falcon Disclosure Schedule, there are no
"covered transactions" (such term is defined in Section 23A of the Federal
Reserve Act) between Falcon Bank and any affiliate Falcon Bank. Falcon has
provided all required notices in connection with the addition of new members of
the Board of Directors or employment of senior executives as required by Section
914 of FIRREA. All payments, fees and charges assessed by appropriate federal
agencies against Falcon, including the Federal Home Loan Bank Board and the OTS,
including those assessed pursuant to 12 C.F.R.
ss.502, have been paid in full.
3.21 Regulation O. Except as set forth in the Falcon Disclosure
Schedule, Falcon Bank has no loans to any "principal shareholder," "director" or
"executive officer," or to any "related interest" of any such person, as such
terms are defined in Regulation O promulgated by the FRB.
3.22 State Takeover Laws. Falcon has taken all steps necessary to
irrevocably exempt the Merger from any applicable state takeover law and from
any applicable charter or contractual provision containing change of control or
anti-takeover provisions.
3.23 Falcon Action. The Board of Directors of Falcon (at a meeting duly
called and held) has by the requisite vote (i) determined that the Merger is
advisable and in the best interest of each of Falcon and its stockholders, and
(ii) approved this Agreement and the transactions contemplated by this Agreement
and (iii) directed that the Merger be submitted for consideration by Falcon's
stockholders at a special meeting of the stockholders duly called by the Falcon
Board of Directors.
3.24 Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of Falcon Common Stock entitled to vote thereon is the
only vote of the holders of any class or series of Falcon capital stock
necessary to approve this Agreement and the transactions contemplated hereunder.
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3.25 Material Interest of Certain Persons. Except as disclosed in the
Falcon Disclosure Schedule, no officer or director of Falcon nor any "associate"
(as such term is defined in Rule 14a-1 under the 1934 Act) of any such officer
or director, has any material interest in any Material Contract or property
(real or personal), tangible or intangible, used in or pertaining to the
business of Falcon.
3.26 Persons Authorized to Act. The Falcon Disclosure Schedule sets
forth (i) the current directors and officers of Falcon and (ii) each bank
account of Falcon and each person authorized to draw on such account; each safe
deposit box of Falcon and each person entitled to have access thereto; and each
person authorized to borrow money on behalf of Falcon.
3.27 Information in Disclosure Documents, Registration Statement, etc.
None of the information with respect to Falcon provided by Falcon for inclusion
in any proxy statement of Falcon (the "Proxy Statement") required to be mailed
to Falcon's stockholders in connection with the Merger will, in the case of the
Proxy Statement or any amendment or supplements thereto, at the time of the
mailing of the Proxy Statement and any such amendments and supplements, and at
the time of the Falcon stockholder meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they are made, not misleading. The Proxy Statement will comply as to form
in all material respects with the provisions of the 1934 Act and the rules and
regulations promulgated thereunder.
3.28 Disclosure. Except to the extent of any subsequent correction or
supplement with respect thereto furnished prior to the date hereof, no written
statement, certificate, schedule, list, document or other written information
furnished by or on behalf of Falcon at any time to First Maryland, in connection
with this Agreement, including, without limitation, the Falcon Disclosure
Schedule, when considered as a whole, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Each document
delivered or to be delivered by Falcon to First Maryland is or will be a true
and complete copy of such document, unmodified except by another document
delivered by Falcon.
IIIA. REPRESENTATIONS AND WARRANTIES OF FIRST MARYLAND.
First Maryland represents and warrants to Falcon on the date hereof and
on the Closing Date as follows:
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3A.1 Organization, Standing and Power. (a) First Maryland is a
corporation duly organized, validly existing and in good standing (where
applicable) under the laws of the State of Maryland and is duly qualified to do
business as a foreign corporation in each jurisdiction in which its ownership or
lease of property or the nature of business conducted by it makes such
qualification necessary, except for such jurisdictions in which the failure to
be so qualified would not have a material adverse effect upon its financial
condition, results of operations, business or prospects on a consolidated basis.
First Maryland is registered as a bank holding company under the BHCA. First
Maryland has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
(b) Newco is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland and is duly qualified to do
business as a foreign corporation in each jurisdiction in which its ownership or
lease of property or the nature of business conducted by it makes such
qualification necessary, except for such jurisdictions in which the failure to
be so qualified would not have a material adverse effect upon its financial
condition, results of operations, business or prospects on a consolidated basis.
Newco has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. All of the
outstanding capital stock of Newco is owned by First Maryland, free and clear of
any lien, claim or other encumbrance.
3A.2 Authority. (a) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of First Maryland, and
this Agreement is a valid and binding obligation of First Maryland, enforceable
in accordance with its terms. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by First
Maryland, respectively with any of the provisions hereof will not (i) conflict
with or result in a breach of any provision of its Charter or Articles of
Incorporation or By-laws or a default (or give rise to any right of termination
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which First Maryland is a party, or by which it or any of its
properties or assets may be bound or (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable or First Maryland, respectively
or any of their respective properties or assets.
(b) Assuming (i) that the requirements of the Exchange Act are met,
(ii) that any filings or approvals required to be obtained from the FRB under or
pursuant to the BHCA, from the OTS,
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from the Virginia State Corporation Commission under or pursuant to applicable
state law, from the Minister for Employment and Enterprise of Ireland and from
the Central Bank of Ireland are obtained, (iii) that the filing of any
appropriate Certificate of Merger and Articles of Merger pertaining to the
Merger is made, and (iv) that the approval of the Merger and this Agreement by
the holders of Falcon Common Stock is obtained, no consent or approval by any
governmental authority or other person is required in connection with the
execution and delivery by First Maryland of this Agreement or the consummation
by such entity of the transactions contemplated hereby.
3A.3 Reports and Financial Statements. Since January 1, 1994, First
Maryland has filed all reports, registrations and statements, together with any
required amendments thereto, that it was required to file with the SEC under the
1934 Act ("FMB Reports"). As of their respective dates, the FMB Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstance under which they were made, not misleading. The
audited consolidated financial statements of First Maryland included in the FMB
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present the financial position of First
Maryland its subsidiaries taken as a whole as at the dates thereof and the
consolidated results of their operations and changes in cash flows for the
periods then ended subject, in the case of the unaudited interim financial
statements, to normal year-end and audit adjustments and any other adjustments
described therein. There exist no material liabilities of First Maryland and its
consolidated subsidiaries, contingent or otherwise, except as disclosed in the
FMB Reports.
3A.4 Brokers and Finders. Neither First Maryland nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein.
3A.5 Agreements with Bank Regulators, etc. Neither First Maryland nor
any of its bank subsidiaries is a party to any written agreement or memorandum
of understanding with, or a party to any commitment letter, board resolution or
similar undertaking to, or subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any governmental entity
that is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, extraordinary supervisory letter, commitment letter
or similar submission. First Maryland does not know of any reason why the
regulatory
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approvals referred to in Section 5.1(c) hereof should not be
obtained.
3A.6 Proxy Statement. None of the information with respect to First
Maryland provided by it for inclusion in the Proxy Statement will in the case of
the Proxy Statement or any amendment or supplements thereto and at the time of
the mailing of the Proxy Statement and any amendments and supplements thereto,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances under which they are made, not misleading.
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ARTICLE IV: CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF
THE MERGER.
4.1 Access to Records and Properties of Falcon and its Subsidiaries.
Between the date of this Agreement and the Effective Time of the Merger, Falcon
agrees to give First Maryland reasonable access to all the premises and books
and records (including tax returns filed and those in preparation) of it and its
Subsidiaries and to cause its officers to furnish First Maryland with such
financial and operating data and other information with respect to the business
and properties as First Maryland shall from time to time request for the
purposes of verifying the warranties and representations set forth herein,
preparing applicable regulatory filings (as set forth in Section 4.9),
confirming the conditions to Closing and preparing consolidated financial
statements of Falcon as of a date prior to the Effective Time of the Merger in
order to assist First Maryland in performance of its post-Closing Date financial
reporting requirements; provided, however, that any such investigation shall be
conducted in such manner so as not to interfere unreasonably with the operation
of the business of Falcon or its Subsidiaries. In the event of termination of
this Agreement, First Maryland will return to Falcon all documents, work papers
and other material (including all copies made thereof) obtained pursuant hereto
in connection with the transactions contemplated hereby and will use all
reasonable efforts to keep confidential any information obtained pursuant to
this Agreement unless such information is readily ascertainable from public or
published information or trade sources.
4.2 Proxy Statement; Stockholder Approval. Falcon will duly call and
will hold a special meeting of its stockholders as soon as practicable for the
purpose of approving the Merger and will comply fully with the provisions of the
Delaware Corporation Law, the 1933 Act and the 1934 Act, and the Certificate of
Incorporation and By-laws of Falcon relating to the calling and holding of a
special meeting of stockholders for such purpose. Unless the Board of Directors
of Falcon have received the written opinion of Muldoon, Murphy & Faucette or
other independent counsel reasonably acceptable to First Maryland ("Falcon
Counsel") to the effect that making such a recommendation would cause the Board
of Directors to violate its fiduciary duty under Delaware Corporation Law, then
the Board of Directors of Falcon will recommend to stockholders of Falcon that
they vote in favor of and approve the Merger. Falcon will, with the cooperation
and assistance of First Maryland, prepare the Proxy Statement to be used in
connection with such meeting, and Falcon covenants and agrees that it will not
include information in the Proxy Statement or otherwise use proxy material in
connection with such meeting to which First Maryland reasonably objects. Falcon
covenants that none of the information supplied by Falcon, and First Maryland
covenants that none of the information supplied by
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First Maryland, in the Proxy Statement will, at the time of the mailing of the
Proxy Statement to Falcon stockholders, contain any untrue statement of a
material fact nor will any such information omit any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading; and at all times
subsequent to the time of the mailing of the Proxy Statement, up to and
including the date of the meeting of Falcon stockholders to which the Proxy
Statement relates, none of such information in the Proxy Statement as amended or
supplemented, will contain an untrue statement of a material fact or omit any
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
4.3 Operation of the Business of Falcon. Falcon agrees that from the
date hereof to the Effective Time of the Merger, it will operate and cause to be
operated its businesses substantially as presently operated and only in the
ordinary course and in general conformity with applicable laws and regulations,
and, consistent with such operation, it will use its best efforts to preserve
intact its present business organizations and its relationships with persons
having business dealings with it (including, without limitation, key officers
and employees). Without limiting the generality of the foregoing, Falcon agrees
that it will not, without the prior written consent of First Maryland, (i) make
any change in the compensation or title of any executive officer of Falcon; (ii)
make any change in the compensation or title of any other employee of Falcon,
other than those permitted by current employment policies in the ordinary course
of business, any of which changes shall be reported promptly to First Maryland;
(iii) enter into or make any payments or awards under any bonus, incentive
compensation, deferred compensation, profit sharing, thrift, retirement,
pension, group insurance or other benefit plan or any employment or consulting
agreement or increase benefits under existing plans; provided, (A) that Falcon
may pay cash bonuses to employees pursuant to the terms of the Falcon periodic
cash bonus plans described in the Falcon Disclosure Schedule and (B) that prior
to the Closing, in consultation with First Maryland, Falcon may by letter to
certain employees identified in the Falcon Disclosure Schedule confirm such
employees' terms of continued employment with Falcon, as the case may be; (iv)
create or otherwise become liable with respect to any indebtedness for money
borrowed or purchase money indebtedness except in the ordinary course of
business; (v) amend any Certificate of Incorporation, Charter, Articles of
Association or By-laws; (vi) declare or pay any dividend in cash, property or
securities of Falcon, other than the regular quarterly dividend of $.03 per
share on the Falcon Common Stock out of current earnings, or issue or contract
to issue any shares of Falcon capital stock or securities exchangeable for or
convertible into capital stock, except shares of
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Falcon Common Stock which may be issued pursuant to the exercise of Falcon
Options outstanding as of the date hereof; (vii) purchase any shares of Falcon
Common Stock; (viii) enter into or assume any material contract or obligation,
except in the ordinary course of business; (ix) waive any right of substantial
value; (x) propose or take any other action which would make any representation
or warranty in Article III hereof untrue at the Effective Time of the Merger;
(xi) materially modify any existing deposit instrument or materially amend its
policies and procedures relating the establishment of the rate of interest paid
on deposits; (xii) make any change in policies respecting applications for
credit, extensions of credit or loan charge-offs; (xiii) change its reserve
requirement policies; (xiv) change its liquidity, asset/liability management,
investment or Derivatives policies; (xv) modify, extend or renew any lease or
other Material Contract and will notify First Maryland in writing not less than
thirty (30) days prior to the expiration of any applicable notice period with
respect to any extension or renewal option or the expiration of the term of any
such agreement; or (xvi) propose or take any action with respect to the closing,
relocation or remodeling of any branches. Falcon further agrees that, between
the date of this Agreement and the Effective Time of the Merger, it will consult
and cooperate with First Maryland regarding: (w) loan portfolio management,
including management and work-out of nonperforming assets, and credit review and
approval procedures; (x) testing, review and implementation of fair lending
compliance procedures; (y) investment securities, Derivatives and funds
management, including management of interest rate risk; and (z) the termination
of any Falcon contract required by First Maryland to be terminated as of the
Effective Time of the Merger.
4.4 Commercial Credits. Between the date hereof and the Effective Time
of the Merger, Falcon will (a) advise First Maryland of any loan, letter of
credit or other credit facility of Falcon in excess of $500,000 (i) which it
proposes to extend to a new or existing borrower, (ii) which it proposes to
restructure with an existing borrower, (iii) under which it proposes to take
enforcement or collection action, or (iv) which it proposes to sell or transfer,
and (b) await First Maryland's advice (if any) with respect to any such credit
facilities prior to taking any action it is considering with regard to any such
credit facilities. If First Maryland advises Falcon that any such credit
facility or the action to be taken with respect to any such credit facility does
not meet with existing First Maryland credit standards or procedures, Falcon
shall use their respective best efforts to undertake such action with respect to
such facility as is recommended by First Maryland.
4.5 Operating Synergies; Conformance to Reserve Policies,
Etc. (a) Between the date hereof and the Effective Time of the
Merger, Falcon management will work with First Maryland to
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achieve appropriate operating efficiencies following the Closing Date. At the
request of First Maryland and upon receipt by Falcon of written confirmation
from First Maryland that there are no conditions to the obligations of First
Maryland under this Agreement set forth in Article V which it believes will not
be fulfilled so as to permit them to consummate the transactions contemplated
hereby, on the day prior to the Effective Time of the Merger, Falcon shall
establish such additional accruals, reserves and charge-offs, through
appropriate entries in its accounting books and records, as may be necessary to
conform Falcon's accounting and credit loss reserve practices and methods to
those of First Maryland (as such practices and methods are to be applied from
and after the Effective Time of the Merger) and to First Maryland's plans with
respect to the conduct of the business of Falcon following the Merger and the
costs and expenses relating to the consummation by Falcon of the transactions
contemplated hereby. Any such accrual, reserve or charge-off requested by First
Maryland under this Section 4.5 (and not otherwise specifically required by
another provision of this Agreement) shall not be deemed to cause any
representation and warranty of Falcon to not be true and accurate as of the
Effective Time of the Merger.
(b) Falcon may, with the concurrence of First Maryland, terminate the
employment of Carroll E. Amos ("Amos") and/or Wade Hotsenpiller ("Hotsenpiller")
prior to the Closing Date. If such a termination occurs, then First Maryland
agrees that the execution and delivery this Agreement constitutes a "change in
control" under the terms of the Employment Agreements, each dated November 1,
1995, between Falcon and Amos and Hotsenpiller, respectively (the "Amos
Agreement" and the "Hotsenpiller Agreement," respectively) and that Falcon may
make the payments and incur the obligations set forth under Section 5 of the
Amos Agreement and the Hotsenpiller Agreement. First Maryland further agrees
that in such event, Falcon may also make payments to Amos and Hotsenpiller pay
in respect of earned and unused vacation for calendar year 1996 and for any
earned and unused vacation carried over from calendar year 1995 in accordance
with Falcon's vacation policy as set forth in the Falcon Disclosure Schedule.
4.6 Consents and Estoppel Letters. Falcon shall use its best efforts to
obtain, within ninety (90) days of the date of this Agreement, (a) from all
lessors (direct and indirect) of real property leased or subleased by Falcon
("Lessors"), and to deliver copies of the same to First Maryland, (i) any Lessor
consents required to assign any leases of real property (the "Leases") to First
Maryland (such consents being subject only to the consummation of the Merger)
and (ii) estoppel letters in form and content reasonably satisfactory to First
Maryland, and (b) from any third party, any required third party consents
necessary to assign any Material Contract of Falcon to First Maryland. Falcon
further agrees to use its best efforts to obtain, or to
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cause its Subsidiaries to obtain, such consents, assignments and estoppel
letters with respect to leases or subleases of its Subsidiaries as may be
reasonably requested by First Maryland in order to effect a merger or a sale of
assets of any Subsidiary with or to one or more subsidiaries of First Maryland.
4.7 Public Announcements. The initial press release announcing this
Agreement shall be a joint press release and thereafter each party will consult
with the other before issuing any press release or otherwise making any public
statements or making any filings with governmental or regulatory entities with
respect to the Merger, and shall not issue any press release or make any such
public statement prior to such consultations except as may be required by law.
4.8 No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to its terms or First Maryland shall have otherwise
consented in writing, neither Falcon, any Subsidiary nor any of their executive
officers, directors, representatives, agents or affiliates shall, directly or
indirectly, encourage, solicit or initiate discussions or negotiations (with any
person other than First Maryland) concerning any merger, sale of substantial
assets, tender offer, sale of shares of stock or similar transaction involving
Falcon or disclose, directly or indirectly, any information not customarily
disclosed to the public concerning Falcon, afford to any other person access to
the properties, books or records of Falcon or otherwise assist any person
preparing to make or who has made such an offer, or enter into any agreement
with any third party providing for a business combination transaction, equity
investment or sale of significant amount of assets, except in a situation in
which a majority of the full Board of Directors of Falcon has determined in good
faith, upon the written opinion of Falcon Counsel, that such Board has a
fiduciary duty to shareholders under applicable law to consider and respond to a
bona fide proposal by a third party (which proposal was not directly or
indirectly solicited by Falcon or any of their respective officers, directors,
representatives, agents or affiliates) and provides written notice of its
intention to consider such proposal and the material terms thereof to First
Maryland at least five (5) days before responding to the proposal. Falcon will
promptly communicate to First Maryland the terms of any proposal which it may
receive in respect to any of the foregoing transactions, and any discussions or
negotiations or any similar activity with respect to any of the foregoing
transactions with any party other than First Maryland which may have heretofore
been conducted shall cease immediately.
4.9 Regulatory Filings; Best Efforts. First Maryland and Falcon shall
jointly prepare all regulatory filings required to consummate the transactions
contemplated by the Agreement and submit the filings for approval with the
Central Bank of Ireland,
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the Minister for Employment and Enterprise for Ireland, the FRB, the OTS and the
Virginia State Corporation Commission as soon as practicable after the date
hereof. First Maryland and Falcon shall use their best efforts to obtain
approvals for such filings. Each of First Maryland and Falcon shall use its best
efforts, in good faith, to take all such actions and to do or cause to be done
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the Merger and to consummate and make effective
a merger or sale of assets of any Subsidiary with or to one or more subsidiaries
of First Maryland.
4.10 Additional Pre-Closing Covenants of Falcon. (a) Within seventy
(70) days of the date of this Agreement, Falcon shall obtain from a consultant
reasonably satisfactory to First Maryland an environmental assessment as to such
matters as First Maryland shall reasonably request of any and all real property
owned or leased by Falcon or any Subsidiary (whether used in the operation of
the respective businesses of such entities or classified as other real property
owned) ("Environmental Assessments");
(b) On or before the Closing Date, Falcon shall take such remedial
action as may be necessary, in the reasonable judgment of First Maryland to
remove any Hazardous Substance or to otherwise ensure compliance with any and
all Environmental Laws ("Remedial Action");
(c) On or before the Closing Date, Falcon shall cooperate with First
Maryland in connection with First Maryland's efforts to arrange for the
post-Closing divestiture of certain assets of Falcon; and
(d) Promptly following receipt by Falcon, Falcon shall provide a copy
of the actuarial valuation of Falcon's pension plan assets as of June 30, 1995.
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ARTICLE V: CONDITIONS OF MERGER.
5.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to perform this Agreement are subject to
the satisfaction at or prior to the Effective Time of the Merger of the
following conditions:
(a) All action necessary to authorize the execution, delivery and
performance of this Agreement by Falcon and the consummation of the transactions
contemplated herein (including the stockholder actions referred to in Section
4.2) shall have been duly and validly taken by the Boards of Directors of Falcon
and by the stockholders of Falcon and Falcon shall have full power and right to
merge on the terms provided herein.
(b) All action necessary (i) to authorize the execution, delivery and
performance of this Agreement by First Maryland and the consummation of the
transactions contemplated herein shall have been duly and validly taken by the
Board of Directors of Allied Irish Banks, p.l.c., parent of First Maryland and
(ii) to authorize the execution, delivery and performance of this Agreement by
First Maryland and the consummation of the transactions contemplated herein
shall have been duly and validly taken by the Board of Directors of First
Maryland.
(c) All authorizations, consents, orders or approvals of, and all
expirations of waiting periods imposed by, any federal, state and foreign
regulatory authorities having jurisdiction over any of the parties
(collectively, "Consents") which are necessary for the consummation of the
Merger, (other than immaterial Consents, the failure to obtain which would not
be materially adverse to the combined businesses of First Maryland and Falcon
taken as a whole) shall have been obtained or shall have occurred and shall be
in full force and effect at the Effective Time of the Merger; provided, however,
that no such authorization, consent, order or approval shall be deemed to have
been received if it shall include any conditions or requirements which would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable, in the
reasonable opinion of the Board of Directors of First Maryland or of Falcon, the
consummation of the transactions contemplated hereby.
(d) No temporary restraining order, preliminary or permanent injunction
or other order by any federal or state court in the United States or any
comparable order issued by any court in Ireland which prevents the consummation
of the Merger shall have been issued and remain in effect.
5.2 Conditions to Obligations of First Maryland to Effect
the Merger. The obligations of First Maryland to perform this
Agreement are subject to the satisfaction at or prior to the
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Effective Time of the Merger of the following conditions unless waived by First
Maryland:
(a) The representations and warranties of Falcon set forth in Article
III hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Time of the Merger, as though made on and
as of such time (or on the date when made in the case of any representation and
warranty which specifically relates to an earlier date); Falcon shall have
performed and complied with in all material respects all obligations required to
be performed or complied with by it under this Agreement prior to the Effective
Time of the Merger; and First Maryland shall have received a certificate signed
by the President of Falcon to such effect and setting forth all changes to the
Falcon Disclosure Schedule from the date hereof to the Effective Time of the
Merger.
(b) Between the date hereof and the Closing Date, there shall have been
no material adverse change in the business, financial condition, results of
operations or prospects of Falcon, other than (i) changes during such time
period in laws or regulations (whether enacted or proposed), generally accepted
accounting principles or interpretations of either thereof that affect the
banking or savings and loan industries generally, (ii) changes since such date
in the general level of interest rates, (iii) expenses incurred in connection
with the transactions contemplated by, and which are permitted by, this
Agreement, (iv) accruals and reserves by Falcon since such date pursuant to the
terms of Section 4.5 hereof or (v) any other accruals, reserves or expenses
incurred by Falcon since such date with First Maryland's prior written consent.
(c) No litigation, arbitration, mediation, investigation, inquiry or
other proceeding is pending, threatened or, in the reasonable, good faith
judgement of First Maryland, likely to be commenced against Falcon, any
Subsidiary or any of its stockholders, directors, officers or employees, or
against First Maryland, any subsidiary of First Maryland or any of their
respective directors, officers or employees, relating to or arising out of (i)
trading in Falcon Common Stock prior to the date of this Agreement, (ii) the
alleged disparate treatment of similarly situated loan applicants or other
customers of Falcon or any Subsidiary or (iii) the alleged disparate impact of
any policies or procedures of Falcon or any Subsidiary on similarly situated
loan applicants.
(d) The form and substance of all legal matters contemplated hereby and
all papers delivered hereunder shall be reasonably acceptable to counsel for
First Maryland, and First Maryland shall have received from Falcon Counsel an
opinion addressed to First Maryland and dated the Closing Date, covering the
matters set forth on Exhibit A hereto.
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<PAGE>
5.3 Conditions to Obligations of Falcon. The obligation of Falcon to
perform this Agreement is subject to the satisfaction at or prior to the
Effective Time of the Merger of the following conditions:
(a) The representations and warranties set forth in Article IIIA hereof
shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time of the Merger as though made on and as of
the Effective Time of the Merger (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date);
First Maryland shall have performed or complied with in all material respects
all obligations required to be performed or complied with by them under this
Agreement prior to the Effective Time of the Merger; and Falcon shall have
received a certificate signed by an executive officer of First Maryland to such
effect.
(b) The Board of Directors of Falcon shall have received a letter, in
form and substance reasonably satisfactory to it, from Legg Mason Wood Walker,
Incorporated to the effect that the terms of the Merger are fair from a
financial point of view to the holders of Falcon Common Stock.
(c) The form and substance of all legal matters contemplated hereby and
of all papers delivered hereunder shall be reasonably acceptable to Falcon
Counsel.
ARTICLE VI: CLOSING DATE; EFFECTIVE TIME.
6.1 Closing Date. Unless another date or place is agreed to in writing
by the parties, the closing (the "Closing") of the transactions contemplated in
this Agreement shall take place at the offices of First Maryland, 25 South
Charles Street, Baltimore, Maryland 21201, at 10:00 o'clock A.M., local time,
on such date as First Maryland shall designate to Falcon at least 10 days prior
to the designated Closing Date and is reasonably acceptable to Falcon; provided,
that the date so designed shall not be earlier than 30 days or later than 60
days following date of the decision of the FRB, the OTS, the Virginia Bank
Commissioner, the Minister for Employment and Enterprise for Ireland or the
Central Bank of Ireland, whichever decision is later, approving the Merger (the
"Closing Date").
6.2 Filings at Closing. Subject to the provisions of Article V, at the
Closing Date, First Maryland shall cause a Certificate of Merger relating to the
Merger to be filed in accordance with the Delaware Corporation Law and Articles
of Merger in accordance with Maryland law and each of First Maryland and Falcon
shall take any and all lawful actions to cause the Merger to become effective.
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6.3 Effective Time. Subject to the terms and conditions set forth
herein, including receipt of all required regulatory approvals, the Merger shall
become effective at the time of the last to occur of the filing of: (a) the
Certificate of Merger with the Delaware Secretary of State or (b) Articles of
Merger with the Maryland State Department of Assessments and Taxation (the
"Effective Time of the Merger").
ARTICLE VII: TERMINATION; SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; WAIVER AND AMENDMENT.
7.1 Termination. This Agreement shall be terminated, and the Merger
abandoned, if the stockholders of Falcon shall not have given the approval
required by Section 4.2 on or before June 30, 1996. Notwithstanding such
approval by such stockholders, this Agreement may be terminated at any time
prior to the Effective Time of the Merger:
(a) by the mutual consent of First Maryland and Falcon, as expressed by
their respective Boards of Directors;
(b) by either First Maryland or Falcon, as expressed by their
respective Board of Directors, after June 30, 1997, or such later date as may be
established by First Maryland, in its sole discretion, to permit any Remedial
Action required by First Maryland to be completed;
(c) by First Maryland in writing authorized by its Board of Directors
if Falcon has, or by Falcon in writing authorized by its Board of Directors if
First Maryland has, in any material respect, breached (i) any covenant or
agreement contained herein, or (ii) any representation or warranty contained
herein, in any case if such breach has not been cured by the earlier of 30 days
after the date on which written notice of such breach is given to the party
committing such breach or the Closing Date; provided that it is understood and
agreed that either party may terminate this Agreement on the basis of any such
material breach of any representation or warranty contained herein
notwithstanding any qualification therein relating to the knowledge of the other
party;
(d) by either First Maryland or Falcon, as expressed by their
respective Boards of Directors, in the event that any of the conditions
precedent to the obligations of such parties to consummate the Merger have not
been satisfied or fulfilled or waived by the party entitled to so waive on or
before the Closing Date, provided that neither party shall be entitled to
terminate this Agreement pursuant to this subparagraph (d) if the condition
precedent or conditions precedent which provide the basis for termination can
reasonably be and are satisfied within a
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reasonable period of time, in which case, the Closing Date shall be
appropriately postponed;
(e) by First Maryland, if its Board of Directors shall have determined
in its sole discretion that the Merger has become inadvisable or impracticable
by reason of (i) the institution of any litigation, proceeding, inquiry or
investigation to restrain or prohibit the consummation of the transactions
contemplated by this Agreement or to obtain other relief in connection with this
Agreement or (ii) public commencement of a competing offer for Falcon Common
Stock which is better than First Maryland's offer, which is accepted or not
opposed by Falcon and which First Maryland certifies to Falcon, in writing, it
is unwilling to meet;
(f) by First Maryland if any Environmental Assessment has not been
completed or is for any reason not reasonably satisfactory to First Maryland or
if Falcon shall fail to undertake any Remedial Action in accordance with Section
4.10(b) hereof;
(g) by First Maryland or Falcon if the FRB, the OTS, the Virginia State
Corporation Commission, the Minister for Employment and Enterprise for Ireland
or the Central Bank of Ireland deny approval of the Merger and the time period
for all appeals or requests for reconsideration has run; or
(h) by First Maryland if dissents to the Merger shall have been filed
with Falcon by the holders of 15% or more of the outstanding shares of Falcon
Common Stock pursuant to the Delaware Corporation Law.
7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement, other
than the provisions of Sections 4.1 (last sentence), 7.2 and 9.1, shall become
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders. Nothing contained in this Section 7.2 shall
relieve any party from liability for any breach of this Agreement.
7.3 Survival of Representations, Warranties and Covenants. The
respective representations and warranties, obligations, covenants and agreements
(except for those contained in Sections 1.3, 2.1, 2.2, 2.3, 2.4, 2.5, 4.1 (last
sentence), 8.1 and 9.1, which shall survive the effectiveness of the Merger) of
First Maryland and Falcon contained herein shall expire with, and be terminated
and extinguished by, the effectiveness of such merger and shall not survive the
Effective Time of the Merger.
7.4 Waiver and Amendment. Any term or provision of this Agreement may
be waived in writing at any time by the party which is, or whose stockholders
are, entitled to the benefits thereof
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and this Agreement may be amended or supplemented by written instructions duly
executed by all parties hereto at any time, whether before or after the meeting
of Falcon stockholders referred to in Section 4.2 hereof, excepting statutory
requirements and requisite approvals of stockholders and regulatory authorities,
provided that any such amendment or waiver executed after stockholders of Falcon
have approved this Agreement shall not modify either the amount or form of the
consideration to be received by such stockholders for their shares of Falcon
Common Stock or otherwise materially adversely affect such stockholders without
their approval.
ARTICLE VIII: ADDITIONAL COVENANTS.
8.1 Indemnification of Falcon Officers and Directors. After the
Effective Time of the Merger, First Maryland shall indemnify and hold harmless
directors, officers and employees who have rights to indemnification from Falcon
under the Certificate of Incorporation and By-laws of Falcon immediately prior
to the Effective Time of the Merger (the "Indemnified Parties") from and against
any and all claims, suits, actions, investigations and other proceedings arising
out of or in connection with activities in such capacity prior to the Effective
Time of the Merger, or on behalf of, or at the request of Falcon ("Claims"), and
shall advance expenses incurred with respect to the foregoing, as they are
incurred, in each case to the fullest extent permitted under the Certificate of
Incorporation and By-laws of Falcon, as in effect on the date hereof, and to the
extent legally permitted to do so. The obligations of First Maryland under this
Section 8.1 shall survive the Merger and shall continue in full force and effect
following the Effective Time of the Merger for a period of not less than three
years; provided, that all rights to indemnification in respect of any Claim
asserted or made within such period shall continue until the final disposition
of such Claim; and further provided, that First Maryland shall have no
obligation to indemnify or to advance expenses to any person who is the subject
of a Claim relating to or arising out of his or her trading in Falcon Common
Stock prior to the date of this Agreement.
8.2 Employee Matters. (a) Nothing contained in this Agreement shall be
construed to obligate First Maryland to continue the employment of any employee
of Falcon or any Subsidiary after the Effective Time of the Merger.
(b) For purposes of this Section 8.2, (i) the term "Terminated
Employee" means an employee of Falcon as of the date of this Agreement and with
respect to whom First Maryland notifies Falcon in writing that such person's
employment will not be continued by First Maryland following the Closing Date
and (ii) the term "Continued Employee" means an employee of Falcon as of the
date of this Agreement and with respect to whom First
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Maryland notifies Falcon in writing that such person's employment will be
continued by First Maryland following the Closing Date. Neither term shall
include Carroll E. Amos or Wade Hotsenpiller.
(c) Each Terminated Employee will be entitled to a severance payment
from First Maryland, the amount of which will be calculated using such person's
base salary (exclusive of commissions and bonuses) as of the Closing Date as set
forth ont he falcon Disclosure Schedule and the formulas set forth on Schedule
8.2A, giving credit for all service with Falcon through the Closing Date;
provided, that if a Terminated Employee is listed on Schedule 8.2B, then the
number of weeks used to calculate the severance payment shall be as provided on
Schedule 8.2B. Any such severance payment (less applicable income and employment
tax withholding) will be paid in a lump sum within fifteen days after the
Closing Date. Each Terminated Employee will also be entitled to receive a
payment (i) in respect of earned and unused vacation for calendar year 1996 and
for any earned and unused vacation carried over from calendar year 1995 in
accordance with Falcon's vacation policy as set forth in the Falcon Disclosure
Schedule and (ii) for amounts, if any, payable to such person under the Falcon
cash bonus plans disclosed on the Falcon Disclosure Schedule, prorated (on a
monthly basis) as necessary if the Closing Date occurs prior to June 30, 1996.
(d) If within six months after the Closing Date, the employment with
First Maryland of any Continued Employee is terminated by First Maryland for any
reason other than "Cause" and the Employee is not offered a "comparable job"
with First Maryland, then such Employee will be entitled to a severance payment
from First Maryland, the amount of which will be calculated using such person's
base salary (exclusive of commissions and bonuses) as of the Closing Date as set
forth ont he falcon Disclosure Schedule and the formulas set forth on Schedule
8.2A, giving credit for all service with Falcon before, and with First Maryland
after, the Closing Date; provided, that if such Continued Employee is listed on
Schedule 8.2B, then the number of weeks used to calculate the severance payment
shall be as provided on Schedule 8.2B. Any such severance payment (less
applicable income and employment tax withholding) will be paid in a lump sum
within ten days after the Continued Employee's employment with First Maryland is
terminated.
(e) After the Closing Date, First Maryland shall determine in its
discretion whether the Falcon qualified pension plan will be terminated, will be
maintained as a separate plan and if so, for how long and under what conditions,
or will be merged into a qualified pension plan maintained by First Maryland or
one of its affiliates.
(f)(i) Subject to the following provisions of this paragraph (f),
commencing on January 1, 1997 or such earlier date
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as First Maryland may determine in its discretion (such date, the "Benefit
Commencement Date"), a Continued Employee shall be eligible to participate in
the employee benefit plans of First Maryland on the same basis as such plans and
benefits are offered to similarly situated employees of First Maryland, and such
Continued Employee shall receive credit for eligibility, vesting and, with
respect to First Maryland's qualified pension plan, benefit accrual purposes,
under each employee benefit plan provided by First Maryland to Employees for the
service credited for such purpose under the comparable employee benefit plan (if
any) provided to a Continued Employee immediately prior to the Effective Date of
the Merger. The Benefit Commencement Date may be different for different First
Maryland employee benefit plans and other fringe benefits. Until the Benefit
Commencement Date for a particular employee benefit plan, First Maryland will
maintain the analogous Falcon Employee Plan on the same terms and conditions as
in effect immediately prior to the Effective Time of the Merger.
(ii) For purposes of this paragraph (f) only, "employee
benefit plans" includes, without limitation, pension and profit sharing plans,
health and dental insurance, flexible spending accounts (health care and
dependent care), disability insurance, life and accident insurance, severance,
sickness and vacation benefits and employee loan and banking privileges;
provided, that during the six-month period following the Closing Date,
participation in any First Maryland severance plan shall be determined under
Section 8.2(d) hereof.
(iii) First Maryland agrees that for any Continued Employee
who becomes a participant as of the Benefit Commencement Date in a health, life
insurance or long-term disability plan maintained by First Maryland, any
preexisting condition limitation or exclusion, any proof of insurability
requirement or any waiting period in such plan shall not be applicable to such
Continued Employee or to such Continued Employee's eligible dependents who are
enrolled in any such plan of Falcon's as of the Closing Date.
(g) Notwithstanding anything in this Agreement to the contrary, a
Continued Employee's benefit under the First Maryland pension plan shall be
calculated using the benefit formula under the Falcon pension plan in effect at
the Effective Time of the Merger for the period of time from such employee's
original hire date at Falcon to the Closing Date, and using the benefit formula
under the First Maryland pension plan for the period of time from the Closing
Date to such employee's termination date.
(h) The home mortgage loan program maintained by Falcon for
its employees, which is described in the Falcon Disclosure
Schedule, will be terminated on the Closing Date. Each
Terminated Employee and Continued Employee participating in such
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program as of the Closing Date shall have six months from the Closing Date
within which to refinance his or her home mortgage loan obtained under the
program. After the end of such period, any such loan which has not been
refinanced will bear interest at the rate specified in the related loan
documents for a non-employee of Falcon.
(i) For purposes of this Section 8.2, the terms "Cause" and "comparable
job" shall have the meanings given them in Schedule 8.2C.
8.3 Certain Change of Control Matters. From and after the date hereof,
except as otherwise expressly provide for in this Agreement and except with
respect to the employment agreements, each dated November 1, 1995, between
Falcon and Carroll E. Amos and Wade Hotsenpiller, respectively, Falcon shall
take all action necessary so that he execution and delivery of this Agreement
will not (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
employees under any Falcon benefit plan or otherwise; (ii) increase any benefits
otherwise payable under any Falcon benefit plan or (iii) result in any
acceleration of the time of payment or vesting of any such benefits.
ARTICLE IX: MISCELLANEOUS.
9.1 Expenses. Each party hereto shall bear and pay the
costs and expenses incurred by it relating to the transactions
contemplated hereby.
9.2 Entire Agreement. This Agreement contains the entire agreement
First Maryland, Newco and Falcon with respect to the Merger and the related
transactions and supersedes all prior arrangements or understandings with
respect thereto.
9.3 Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or
construction of any provisions of this Agreement.
9.4 Notices. All communications and notices permitted or required under
this Agreement shall be in writing and shall be sent (i) by hand delivery, (ii)
by commercial overnight courier, (iii) by first class mail, postage prepaid, or
(iv) by facsimile transmission, to a party using the following information, or
such other information as a party has given to the other party in the manner
specified in this Section 9.4:
If to First Maryland:
First Maryland Bancorp
25 S. Charles Street, MS 101-870
Baltimore, Maryland 21201
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Attn: Jeffrey D. Maddox
Fax: (410) 244-4459
Copy to:
First Maryland Bancorp
25 S. Charles Street, MS101-850
Baltimore, Maryland 21201
Attn: General Counsel
Fax: (410) 244-3817
If to Falcon:
Falcon Bancorp, Inc.
570 Herndon Parkway
Herndon, Virginia 22070
Attn: Carroll E. Amos
Fax: (703) 478-0457
Copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Ave., NW
Washington, D.C. 20016
Attn: George W. Murphy, Jr.
Fax: (202) 363-5068
A notice hereunder shall be deemed given (a) upon receipt, in the case
of hand delivery, (b) one day after delivery to the courier, in the case of
commercial overnight courier, (c) three days after deposit in the U.S. mail, in
the case of first class mail or (d) when completely sent and received, as
evidenced by a transmission or activity report of the sender's facsimile
machine, in the case of facsimile transmission.
9.5 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
9.6 Governing Law. Except as may otherwise be required by
the laws of the United States, this Agreement shall be governed
by and construed in accordance with the laws of the State of
Maryland.
9.7 Assignment. None of the parties to this Agreement may assign or
delegate any of their respective rights, duties or obligations hereunder without
the prior written consent of the other parties hereto; provided, however, the
parties expressly agree that First Maryland and/or Newco shall be permitted to
assign and delegate all, but not less than all, of its rights, duties and
obligations hereunder to any person or entity con-
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<PAGE>
trolled by, in control of, or under common control with, First Maryland and that
upon any such assignment and delegation, such assignee shall be deemed for all
purposes to have made the covenants, representations and warranties of First
Maryland contained herein.
(rest of page left blank intentionally)
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by its officers thereunto duly authorized, all as of the
date set forth above.
WITNESS/ATTEST FIRST MARYLAND BANCORP
____________________ By: JEREMIAH E. CASEY
Jeremiah E. Casey, Chairman of
the Board
FMB ACQUISITION CORP.
____________________ By: JEREMIAH E. CASEY
Jeremiah E. Casey, Chairman of
the Board
1ST WASHINGTON BANCORP, INC.
____________________ By: CARROLL E. AMOS
Carroll E. Amos, Chief Execu-
tive Officer
40
