<PAGE>
As filed with the Securities and Exchange Commission on April 4, 1995
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
_______________
FORM S-4 REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________
F&M Bancorp
(Exact name of registrant as specified in its charter)
Maryland 6711 52-1316473
(State or other jurisdiction of (Primary SIC Code Number) (I.R.S. Employer
incorporation or organization) Identification No.)
110 Thomas Johnson Drive
Frederick, Maryland 21702
(301) 694-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
Charles W. Hoff, III James J. Winn, Jr., Esquire
F&M Bancorp Piper & Marbury
110 Thomas Johnson Drive 36 South Charles Street
Frederick, Maryland 21702 Baltimore, Maryland 21201-3010
(301) 694-4000 (410)539-2530
(Name, address, including zip code, and telephone number, including area
code, of agents for service)
_______________
Copy to:
Alan D. Yarbro, Esquire
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201-2978
(410) 244-7400
_______________
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement is declared effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
If any of the securities being registered on this form are being offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [ ]
______________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered Per Share(1) Offering Price(1) Registration Fee(1)
<S> <C> <C> <C> <C>
Common Stock,
par value $5.00 per share 350,000 shares (2) $7.52 $2,632,806 $907.86
</TABLE>
(1) Pursuant to Rules 457(f)(2), the proposed maximum offering price
per share, proposed maximum aggregate offering price and amount of
registration fee are based upon the book value of the issued and
outstanding capital stock of The Bank of Brunswick computed as of
December 31, 1994.
(2) Maximum number of shares which may be offered.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until this
Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
F&M BANCORP
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form S-4 Location in
Item Number and Heading Proxy Statement/Prospectus
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page; Outside
of Prospectus Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges, Outside Front Cover Page;
and Other Information Summary of the Transaction;
Investment Considerations;
Proposed Merger of Brunswick
Bank and F&M Bank;
Voting Information;
Description of F&M
Bancorp; Description of
Brunswick Bank
4. Terms of Transaction Summary of the Transaction;
Proposed Merger of Brunswick
Bank and F&M Bank
5. Pro Forma Financial Information Unaudited Pro Forma Combined
Financial Information
6. Material Contacts With the Company Being Acquired Proposed Merger of Brunswick
Bank and F&M Bank --
Background of the Merger
7. Additional Information Required For Reoffering by
Persons and Parties Deemed to be Underwriters Not Applicable
8. Interests of Named Experts and Counsel Experts; Legal Matters
9. Disclosure of Commission Position on Indemnification
For Securities Act Liabilities Description of F&M Bancorp
10. Information With Respect to S-3 Registrants Description of F&M Bancorp
11. Incorporation of Certain Information by Reference Incorporation of Certain
Documents by Reference
12. Information With Respect to S-2 or S-3 Registrants Not Applicable
13. Incorporation of Certain Information by Reference Not Applicable
<PAGE>
14. Information With Respect to Registrants Not Applicable
Other Than S-2 or S-3 Registrants
15. Information With Respect to S-3 Companies Not Applicable
16. Information With Respect to S-2 or S-3 Companies Not Applicable
17. Information With Respect to Companies Description of Brunswick Bank
Other Than S-2 or S-3 Companies
18. Information if Proxies, Consents or Authorizations Voting Information
Are to be Solicited
19. Information if Proxies, Consents or Authorizations Not Applicable
Are Not to be Solicited, or in an Exchange Offer
</TABLE>
<PAGE>
THE BANK OF BRUNSWICK
P.O. BOX 157, BRUNSWICK, MD 21716-0157
MAIN OFFICE JEFFERSON OFFICE
TEL. 301-834-7111 TEL. 301-473-5000
_______________________, 1995
To Our Stockholders:
You are cordially invited to attend the Special Meeting of Stockholders
of The Bank of Brunswick ("Brunswick Bank") to be held at the offices of
Brunswick Bank, 1 West Potomac Street, Brunswick, Maryland 21716-0157 on
_______________, 1995 at ___ p.m. local time.
At the Special Meeting, you will be asked to consider and vote on the
Plan and Agreement to Merge (the "Plan"), dated as of January 10, 1995,
by and among Brunswick Bank, F&M Bancorp, and Farmers and Mechanics
National Bank, a wholly-owned subsidiary of F&M Bancorp ("F&M Bank"),
pursuant to which Brunswick Bank will merge with and into F&M Bank, and
stockholders of Brunswick Bank will receive Common Stock of F&M Bancorp
(the "Merger"), all as more fully described in the enclosed Proxy
Statement/Prospectus. Based in Frederick, Maryland, F&M Bancorp is a
Maryland bank holding company which had approximately $675 million in
total assets at December 31, 1994. Its operations are currently
conducted through 19 offices and 24 ATM locations in three counties in
central Maryland.
Under the terms of the Plan, each share of the Common Stock of Brunswick
Bank outstanding immediately prior to the Merger will automatically
become and be converted into a number of shares of Common Stock of F&M
Bancorp whose aggregate value is equal to the greater of (a) 2.5 times
the net tangible book value per share of the Common Stock of Brunswick
Bank on the effective date of the Merger, rounded to the nearest one
hundredth of a share, or (b) nine shares of the Common Stock of F&M
Bancorp. Cash will be paid in lieu of fractional shares. Based on the
minimum exchange ratio, and the current dividend rate of the Common
Stock of F&M Bancorp, your annual dividend payments would increase to at
least $7.20 per share of Common Stock of Brunswick Bank now held by you.
The historical net income per share and the book value per share of
Common Stock of F&M Bancorp to be received by you would represent a
substantial increase over the historical net income per share and book
value per share of the Common Stock of Brunswick Bank. The shares of the
Common Stock of F&M Bancorp you would receive will also be more readily
marketable than the shares of Common Stock of Brunswick Bank you
presently hold. Following the consummation of the Merger, the
operations of Brunswick Bank will be continued by F&M Bank, and the
separate corporate existence of Brunswick Bank will cease.
Your Board of Directors has retained the investment banking firm of
Scott & Stringfellow, Inc. to act as its financial advisor in connection
with the Merger. As discussed in the accompanying Proxy
Statement/Prospectus, Scott & Stringfellow, Inc. has delivered to the
Board of Directors its written opinion that, as of this date, the terms
of the Plan are fair from a financial point of view to our stockholders.
The exchange of Common Stock of F&M Bancorp for Common Stock of
Brunswick Bank will be a tax- free transaction for federal income tax
purposes. However, any exchange of cash in lieu of fractional shares
will not be a tax-free transaction. Details of the proposed transaction
are set forth in the accompanying Proxy Statement/Prospectus. You are
urged to read it carefully in its entirety. Approval of the transaction
requires the affirmative vote of at least two-thirds of the outstanding
shares of the Common Stock of Brunswick Bank.
<PAGE>
Your Board of Directors unanimously approved the Merger and believes
that it is in the best interest of Brunswick Bank and our stockholders.
Accordingly, the Board of Directors unanimously recommends that you vote
TO APPROVE, RATIFY AND CONFIRM the Plan and the Merger provided for
therein.
We hope you can attend the Special Meeting. Whether or not you plan to
attend, please complete, sign and date the enclosed proxy card and
return it promptly in the enclosed envelope. Your vote is important
regardless of the number of shares you own.
We look forward to seeing you at the Special Meeting.
Sincerely,
David E. Brock Robert K. Moler
President and Chief Executive Officer Chairman of the Board
<PAGE>
THE BANK OF BRUNSWICK
Brunswick, Maryland
___________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be held on ______________, 1995
The Special Meeting of Stockholders of The Bank of Brunswick ("Brunswick
Bank") will be held on _____________, 1995 at ____ p.m. local time at
the offices of Brunswick Bank, 1 West Potomac Street, Brunswick,
Maryland 21716-0157, to consider and vote upon a proposal to approve,
ratify and confirm the Plan and Agreement to Merge, dated as of January
10, 1995 (the "Plan") by and among F&M Bancorp, a Maryland corporation
registered under the Bank Holding Company Act of 1956, Farmers and
Mechanics National Bank ("F&M Bank"), the wholly-owned subsidiary of F&M
Bancorp, and Brunswick Bank, and the merger provided for therein (the
"Merger"). A copy of the Plan is included as Annex A to the
accompanying Proxy Statement/Prospectus. Pursuant to the Plan, (a)
Brunswick Bank shall merge with and into F&M Bank; and (b) each share of
the outstanding Common Stock of Brunswick Bank, par value $12.50 per
share (other than shares of dissenting stockholders of Brunswick Bank
redeemed under applicable Federal law), shall be automatically converted
into and become a number of shares of the Common Stock of F&M Bancorp
whose aggregate value is equal to 2.5 times the net tangible book value
per share of Brunswick Bank on the effective date of the Merger, rounded
to the nearest one hundredth of a share. In no event will less than
nine shares of the Common Stock of F&M Bancorp be issued for each share
of the Common Stock of Brunswick Bank. Cash will be paid in lieu of
fractional shares.
If the Plan and the Merger are approved and consummated, each
stockholder of Brunswick Bank will have the right to dissent and demand
payment of the fair value of his shares. This right is contingent upon
strict compliance with the procedures set forth in the applicable
Federal statute. The full text of this statute is included as Annex B
to the accompanying Proxy Statement/Prospectus.
The Board of Directors has fixed ______________, 1995 as the record date
for the Special Meeting. Only holders of record of Common Stock of
Brunswick Bank at the close of business on that date are entitled to
receive notice of and to vote at the Special Meeting or any adjournments
or postponements thereof.
By Order of the Board of Directors
Jeffery S. Walker
Secretary
___________________, 1995
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
THE BOARD OF DIRECTORS OF BRUNSWICK BANK RECOMMENDS THAT ITS
STOCKHOLDERS VOTE TO APPROVE, RATIFY AND CONFIRM THE PLAN AND THE MERGER
PROVIDED FOR THEREIN.
<PAGE>
PROXY STATEMENT/PROSPECTUS Subject to Completion
April ____, 1995
350,000 Shares
F&M BANCORP
Common Stock
This Proxy Statement/Prospectus relates to up to 350,000 (but not less
than 216,000) shares of the Common Stock of F&M Bancorp, par value $5.00
per share, to be issued to holders (the "Brunswick Bank Stockholders")
of the common stock, par value $12.50 per share ("Common Stock") of The
Bank of Brunswick ("Brunswick Bank") in connection with the proposed
merger (the "Merger") of Brunswick Bank into Farmers and Mechanics
National Bank ("F&M Bank"). Upon consummation of the Merger, each
issued and outstanding share of the Common Stock of Brunswick Bank will
be automatically converted into a number of shares of the Common Stock
of F&M Bancorp whose aggregate value is equal to 2.5 times the net
tangible book value per share of Brunswick Bank on the effective date of
the Merger, rounded to the nearest one hundredth of a share. In no
event will less than nine shares of the Common Stock of F&M Bancorp be
issued for each share of the Common Stock of Brunswick Bank. Cash will
be paid in lieu of fractional shares.
F&M Bancorp's principal executive office is located at 110 Thomas
Johnson Drive, Frederick, Maryland 21702, telephone number (301)
694-4000. Brunswick Bank's principal banking office is located at 1
West Potomac Street, Brunswick, Maryland 21716, telephone number (301)
834-7111. The information presented in this Proxy Statement/Prospectus
concerning F&M Bancorp has been provided by F&M Bancorp, and the
information concerning Brunswick Bank has been provided by Brunswick
Bank.
No person has been authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if
given or made, such information or representation must not be relied
upon as having been authorized. This Proxy Statement/Prospectus does
not constitute an offer to any person to exchange or sell, or a
solicitation from any person of an offer to exchange or purchase, the
securities offered by this Proxy Statement/Prospectus, or the
solicitation of a proxy from any person, in any jurisdiction in which it
is unlawful to make such an offer or solicitation. Neither the delivery
of this Proxy Statement/Prospectus nor any distribution of the
securities to which this Proxy Statement/Prospectus relates shall under
any circumstances create any implication that the information contained
herein is correct at any time subsequent to the date hereof.
___________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________________
See "Investment Considerations" for certain information that should be
considered by Brunswick Bank Stockholders.
The date of this Proxy Statement/Prospectus, and the approximate date on
which it is being furnished to Brunswick Bank Stockholders, is ________,
1995.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be
sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
<PAGE>
AVAILABLE INFORMATION
F&M Bancorp is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such periodic reports, proxy statements and other
information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at 75 Park Place, 14th Floor, New York, New York 10007, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such materials may be obtained,
at prescribed rates, by delivering a request to the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Common Stock of F&M Bancorp is listed on the Nasdaq Stock
Market (National System). Reports, proxy statements and other
information concerning F&M Bancorp may be inspected at the Nasdaq
Department of the National Association of Securities Dealers, Inc., 1735
K Street, N.W., Washington, D.C. 20006.
F&M Bancorp has filed with the Commission a Registration Statement on
Form S-4 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act") with respect to the securities
to which this Proxy Statement/Prospectus relates. This Proxy
Statement/Prospectus does not contain all the information set forth in
the Registration Statement. For further information, reference is made
to the Registration Statement. Statements contained herein concerning
any document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is made to the copy
of such document filed as an exhibit to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. These documents
are available upon request, without charge, from Gordon M. Cooley,
Esquire, Secretary and Legal Officer, F&M Bancorp, 110 Thomas Johnson
Drive, Frederick, Maryland 21702, telephone number (301) 694-4000. In
order to ensure timely delivery of the documents, any request should be
made by at least six business days before the date of the Special
Meeting.
F&M Bancorp will provide a copy of any information that has been
incorporated by reference in this Proxy Statement/Prospectus, without
charge, to each person who makes a written or oral request. The
following documents and information are hereby incorporated by reference
into this Proxy Statement/Prospectus:
1. F&M Bancorp's Annual Report on Form 10-K and Annual Report to
Stockholders for the year ended December 31, 1994.
2. The description of F&M Bancorp's capital stock which is
contained in the Registration Statement on Form 8-B (File No. 0-12638)
filed with the Commission pursuant to the Exchange Act, including all
amendments or reports filed for the purpose of updating such
description.
All documents filed by F&M Bancorp pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the Special Meeting of the
stockholders of Brunswick Bank are hereby incorporated by reference into
this Proxy Statement/Prospectus and shall be deemed a part hereof from
the date of filing of each such document. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein or in any other subsequently
filed document which is also incorporated by reference herein modifies
or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute
a part of this Proxy Statement/Prospectus.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF THE TRANSACTION 1
F&M Bancorp and Subsidiary 1
Brunswick Bank 1
Proposed Merger 1
Required Regulatory Approval 1
Required Vote 2
Recommendation of Board of Directors of Brunswick Bank 2
Opinion of Financial Advisor 2
Dissenters' Rights 3
Certain Federal Tax Consequences of the Merger 3
Market Value of Common Stock 3
Selected Consolidated Financial and Other Data 4
INVESTMENT CONSIDERATIONS 10
Financial Performance of F&M Bancorp; No Assurance
of Continued Profitability 10
Government Regulation; Required Regulatory Approval;
Other Conditions 10
Competition 10
Economic Conditions 11
Limitations on Payment of Dividends 11
Adequacy of Allowance for Credit Losses 11
Additional Classes and Series of Stock 11
PROPOSED MERGER OF BRUNSWICK BANK AND F&M BANK 12
General Description of the Transaction 12
Effective Date of the Merger; Termination 14
Background of the Merger 14
Reasons for the Merger 16
Recommendation of the Board of Directors of
Brunswick Bank 17
Opinion of Financial Advisor 17
Interests of Certain Persons in the Merger 19
Conditions of the Merger 19
Support Agreements and Undertakings 20
Federal Income Tax Status 21
Accounting Treatment 22
Certain Differences in Rights of Stockholders of
Brunswick Bank and F&M Bancorp 22
VOTING INFORMATION 23
Proxy Solicitation 23
Vote Required 23
Rights of Dissenting Stockholders 24
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION 25
DESCRIPTION OF F&M BANCORP 31
General Description of F&M Bancorp's Common Stock,
Charter, and By-Laws 31
Business Combinations 32
Control Share Acquisitions 32
Dividends and Liquidation Preferences 33
Indemnification and Limitation of Liability 33
DESCRIPTION OF BRUNSWICK BANK 34
Lending Activities 34
Investment Activities 37
<PAGE>
Sources of Funds 37
Community Reinvestment Act 37
Properties 38
Market for Company Common Stock; Dividends 38
MANAGEMENT OF BRUNSWICK BANK 39
Directors and Executive Officers of Brunswick Bank 39
Remuneration of Directors and Officers 39
Stock Ownership of Directors and Officers of
Brunswick Bank 39
Interest of Management and Others in Certain
Transactions 40
EXPERTS 41
LEGAL MATTERS 41
OTHER MATTERS 41
ADDITIONAL INFORMATION ABOUT F&M BANCORP 41
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
Balance Sheets F-2
Income Statements F-3
Statements of Cash Flows F-4
Statements of Stockholders' Equity F-5
Notes to Financial Statements F-6
ANNEX A A-1
Plan and Agreement to Merge, dated as of
January 10, 1995, by and among F&M Bancorp, F&M
Bank, and Brunswick Bank A-1
ANNEX B B-1
TITLE 12, UNITED STATES CODE, SECTION 215a B-1
ANNEX C C-1
Opinion of Scott & Stringfellow, Inc. C-1
<PAGE>
SUMMARY OF THE TRANSACTION
The following summary is intended to supply certain facts and highlights
from the more detailed information contained herein or incorporated
herein by reference. This summary is qualified in its entirety by the
financial statements and other material included herein or incorporated
herein by reference. Brunswick Bank Stockholders should carefully read
this Proxy Statement/Prospectus in its entirety.
F&M Bancorp and Subsidiary
F&M Bancorp is a Maryland corporation registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended. At
December 31, 1994 F&M Bancorp had assets of approximately $675 million,
deposits of $576 million, and loans, net of unearned income, of $459
million. F&M Bancorp's sole direct subsidiary is F&M Bank, a
full-service commercial bank. F&M Bank currently conducts business
through 19 offices and 24 ATM locations in three counties in central
Maryland.
Brunswick Bank
Brunswick Bank is a full-service commercial bank organized under the
laws of the State of Maryland. It conducts a commercial and retail
banking business from two offices in southwestern Frederick County,
Maryland. At December 31, 1994 Brunswick Bank had assets of
approximately $28.6 million, deposits of $25.9 million and loans (net)
of $20.8 million.
Proposed Merger
The stockholders of Brunswick Bank ("Brunswick Bank Stockholders") will
vote on a proposed merger (the "Merger") of Brunswick Bank with and into
F&M Bank pursuant to the Plan and Agreement to Merge dated as of January
10, 1995, by and among F&M Bancorp, F&M Bank, and Brunswick Bank (the
"Plan"). As a result of the Merger, Brunswick Bank Stockholders are to
become stockholders of F&M Bancorp. On the effective date of the Merger
(the "Effective Date"), each issued and outstanding share of the Common
Stock of Brunswick Bank will be automatically converted into a number of
shares of the Common Stock of F&M Bancorp whose aggregate value is equal
to 2.5 times the net tangible book value per share of Brunswick Bank on
the Effective Date, rounded to the nearest one hundredth of a share.
Cash will be paid in lieu of fractional shares. In no event will less
than nine shares of the Common Stock of F&M Bancorp be issued for each
share of the Common Stock of Brunswick Bank. See "Proposed Merger of
Brunswick Bank and F&M Bank" for a more detailed description of the
terms of the Plan.
F&M Bancorp shall request the Office of the Comptroller of the Currency
of the United States (the "Comptroller") to provide that the Effective
Date shall be either the last day of the month, or the first day of the
month following the month, in which all events preceding the Effective
Date as provided by the Plan and all conditions to the consummation of
the Plan have been fulfilled or waived. It is anticipated that the
Effective Date will be no later than the third quarter of 1995. After
the Effective Date, the banking operations of Brunswick Bank will be
continued by F&M Bank, and the separate corporate existence of Brunswick
Bank will cease.
Required Regulatory Approval
The Comptroller must approve the Merger. With the assistance of
Brunswick Bank, F&M Bank has prepared and filed an application
requesting the approval of the Comptroller. The approval of the
Comptroller is still pending. Upon approval of the Merger, the
Comptroller will issue a certificate of merger, which will set forth the
Effective Date.
A copy of the application filed with the Comptroller will also be
forwarded to the United States Department of Justice. The Department of
Justice will review the application to determine whether Federal
antitrust laws affect the Merger. The Merger may not be consummated
until after a waiting period to permit the United States Department of
Justice to review the competitive effects of the Merger.
-1-
<PAGE>
Required Vote
Under applicable Federal law, the affirmative vote of Brunswick Bank
Stockholders owning at least two- thirds of the outstanding capital
stock of Brunswick Bank is required to approve, ratify and confirm the
Plan and the Merger. This vote will be taken at the Special Meeting of
Brunswick Bank Stockholders to be held on _______________, 1995
(together with any adjournments or postponements, the "Special
Meeting"). Notice of the Special Meeting is being delivered together
with this Proxy Statement/Prospectus. As of the record date, directors,
executive officers, and affiliates of Brunswick Bank held an aggregate
of 7,531 shares, or 31.38%, of the outstanding capital stock of
Brunswick Bank. See "Voting Information." The Directors and certain
related Brunswick Bank Stockholders have signed an agreement to support
and vote their shares to approve, ratify and confirm the Plan and the
Merger.
At the Special Meeting, each share of the Common Stock of Brunswick Bank
will entitle its holder to one vote. Because the required vote of
Brunswick Bank Stockholders on the Plan and the Merger is based upon the
total number of outstanding shares of the Common Stock of Brunswick
Bank, the failure to submit a proxy card (or the failure to vote in
person at the Special Meeting), the abstention from voting and any
broker non- vote will have the same effect as a vote against the Plan
and the Merger.
The Board of Directors of F&M Bancorp has passed a resolution to vote
all of the shares of the Common Stock of F&M Bank to approve, ratify and
confirm the Plan and the Merger. No vote of the stockholders of F&M
Bancorp is required to approve, ratify and confirm the Plan or the
Merger.
Recommendation of Board of Directors of Brunswick Bank
The Brunswick Bank Board of Directors (the "Brunswick Board") believes
that the terms of the Plan and the Merger are fair to, and in the best
interests of, Brunswick Bank and the Brunswick Bank Stockholders and has
unanimously approved the Merger. In approving the Merger, the Brunswick
Board considered, among other things, the financial terms of the Merger,
the benefits to Brunswick Bank's customers, employees and communities,
matters regarding board representation, the fact that the Merger would
be a tax-free reorganization under the Internal Revenue Code of 1986, as
amended (the "Code"), certain information as to F&M Bancorp and the
viability of other strategic alternatives. The Brunswick Board also
considered the opinion of its financial advisor that the terms of the
Plan are fair from a financial point of view to the Brunswick Bank
Stockholders.
On January 10, 1995, the Board of Directors of Brunswick Bank adopted a
resolution in which it unanimously authorized and approved the Merger
and recommended the Merger to its stockholders. The Board of Directors
of Brunswick Bank therefore unanimously recommends that the Brunswick
Bank Stockholders vote TO APPROVE, RATIFY AND CONFIRM the Plan and the
Merger provided for therein. See "Proposed Merger of Brunswick Bank and
F&M Bank -- Recommendation of the Board of Directors of Brunswick Bank."
Opinion of Financial Advisor
Brunswick Bank has engaged Scott & Stringfellow, Inc. ("Scott &
Stringfellow") as its financial advisor in evaluating the financial
terms of the Merger. Scott & Stringfellow has delivered to the Board of
Directors of Brunswick Bank its written opinion, dated the date of this
Proxy Statement/Prospectus, that the terms of the Plan are fair to the
Brunswick Bank Stockholders from a financial point of view.
A copy of the opinion of Scott & Stringfellow, which sets forth the
assumptions made, matters considered and limits on review undertaken, is
attached as Annex C to this Proxy Statement/Prospectus. Brunswick Bank
Stockholders are urged to read the opinion in its entirety. For a
description of the analysis underlying this opinion, see "Proposed
Merger of Brunswick Bank and F&M Bank -- Opinion of Financial Advisor."
-2-
<PAGE>
Dissenters' Rights
Brunswick Bank Stockholders have the right to dissent from the Merger
and receive from F&M Bank in cash the value of the shares held by them
as of the Effective Date. To exercise these dissenters' rights, the
following conditions must be satisfied: (a) such stockholder must vote
against the Merger at the Special Meeting or give written notice of his
opposition to the Merger to Brunswick Bank at or prior to the Special
Meeting; (b) such stockholder must, before 30 days after the Effective
Date, make a written demand for payment to F&M Bank; and (c) the written
demand must be accompanied by surrender of the stock certificates
representing such shares. See also "Voting Information -- Rights of
Dissenting Stockholders."
Failure to comply with any of the foregoing conditions will result in
the loss of the dissenters' rights described above. Since the
preservation and exercise of appraisal rights are conditioned on strict
observance of the applicable Federal statute, each Brunswick Bank
Stockholder who might exercise appraisal rights should consult and
strictly observe the statute. A copy of the statute is included as
Annex B to this Proxy Statement/Prospectus.
Certain Federal Tax Consequences of the Merger
It is intended that the Merger will qualify as a tax-free reorganization
under the Code. The parties to the Merger will obtain an opinion of
counsel to F&M Bancorp as to the tax consequences of the Merger. Among
other consequences, no gain or loss will be recognized to a Brunswick
Bank Stockholder on the conversion of Common Stock of Brunswick Bank
solely into shares of the Common Stock of F&M Bancorp. The basis of the
shares of the Common Stock of F&M Bancorp received by a Brunswick Bank
Stockholder will be the same as the basis of the shares of the Common
Stock of Brunswick Bank which were converted into F&M Bancorp shares
pursuant to the Merger. The holding period of shares of the Common
Stock of F&M Bancorp received by a Brunswick Bank Stockholder will
include the period during which he held the shares of the Common Stock
of Brunswick Bank which were converted into F&M Bancorp shares pursuant
to the Merger, provided that the Common Stock of Brunswick Bank is held
by such stockholder as a capital asset on the Effective Date. Brunswick
Bank Stockholders are urged to consult their own tax advisors as to the
specific tax consequences to them of the Merger.
For a more complete description of the tax consequences of the Merger,
see "Proposed Merger of Brunswick Bank and F&M Bank -- Federal Income
Tax Status."
Market Value of Common Stock
The information provided below with respect to the Common Stock of F&M
Bancorp reflects the closing price as reported by the Nasdaq Stock
Market (National Market) on the day prior to the announcement of the
proposed Merger. The information provided below with respect to the
Common Stock of Brunswick Bank reflects the price of the last trade
known to Brunswick Bank prior to the announcement of the proposed
Merger. Since there is no organized public trading market for shares of
the Common Stock of Brunswick Bank, the price reflected for this stock
does not necessarily reflect the intrinsic or market value of its Common
Stock.
F&M Bancorp Brunswick Bank Equivalent Per Share Basis(1)
$28.75 $110.00 $274.28
(1) Amount derived by multiplying the price of the Common Stock of
F&M Bancorp as stated above by an assumed conversion ratio of 9.54
shares of the Common Stock of F&M Bancorp per share of the Common Stock
of Brunswick Bank, which reflects the price of the last trade of the
Common Stock of F&M Bancorp prior to the announcement of the Merger.
Because the market price of the Common Stock of F&M Bancorp is subject
to fluctuation, the per share market value of the Common Stock of F&M
Bancorp that Brunswick Bank Stockholders will receive pursuant to the
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<PAGE>
Merger may increase or decrease prior to the Effective Date. Brunswick
Bank Stockholders are urged to obtain current market quotations for the
Common Stock of F&M Bancorp.
Selected Consolidated Financial and Other Data
The following tables set forth selected financial data for F&M Bancorp
for the five fiscal years ended December 31, 1994, selected financial
data for Brunswick Bank for the five fiscal years ended December 31,
1994 and pro forma consolidated information reflecting the consolidation
of F&M Bancorp and Brunswick Bank.
The selected financial and other data of F&M Bancorp and Brunswick Bank
set forth on the accompanying pages does not purport to be complete. It
should be read in conjunction with, and is qualified in its entirety by,
the more detailed information appearing elsewhere or incorporated by
reference herein, including the financial statements and related notes.
-4-
<PAGE>
F&M BANCORP
SELECTED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
Year ended December 31,
(Dollars in thousands, except per share amounts) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Operating Data
Interest income $ 45,004 $ 43,687 $ 45,790 $ 48,243 $ 48,289
Interest expense 17,144 16,623 19,524 25,952 26,944
Net interest income 27,860 27,064 26,266 22,291 21,345
Provision for credit losses 900 1,500 2,615 1,800 1,100
Net interest income after provision for credit
losses 26,960 25,564 23,651 20,491 20,245
Net gains (losses) on sales of securities -- 2 619 -- (19)
Other noninterest income 6,691 5,920 5,030 4,350 3,507
Noninterest expenses 22,794 20,755 19,425 16,896 15,750
Provision for income taxes 2,901 3,128 2,758 2,063 2,344
Income before cumulative effect of change in
accounting principle 7,956 7,603 7,117 5,882 5,639
Cumulative effect of accounting change -- -- -- 1,023 --
Net income 7,956 7,603 7,117 4,859 5,639
Per Share Data
Income before cumulative effect of change in
accounting principle $ 2.02 $ 1.94 $ 1.82 $ 1.50 $ 1.42
Cumulative effect of change in accounting
principle -- -- -- 0.26 --
Net income 2.02 1.94 1.82 1.24 1.42
Cash dividends paid 0.78 0.75 0.70 0.69 0.69
Year end book value 15.01 14.91 13.35 12.25 11.73
Other Data
Loans, net of unearned income $459,272 $396,337 $398,819 $386,973 $366,208
Total assets 675,256 617,668 583,729 551,324 518,832
Total deposits 576,296 522,154 498,377 476,402 448,005
Total shareholders' equity 59,249 58,639 52,345 47,972 46,267
Dividend payout ratio 38.61% 38.66% 38.46% 55.65% 48.59%
Average Ratios
Return on assets 1.26% 1.27% 1.25% 0.92% 1.10%
Return on equity 13.57% 13.90% 14.23% 10.28% 12.42%
Shareholders' equity to total assets 9.26% 9.16% 8.79% 8.91% 8.88%
Other information
Total average assets $633,453 $597,189 $568,898 $530,417 $511,399
Total average equity 58,633 54,688 50,006 47,251 45,398
Weighted average shares outstanding 3,938,805 3,924,310 3,917,997 3,928,132 3,971,066
</TABLE>
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<PAGE>
THE BANK OF BRUNSWICK
SELECTED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
Year ended December 31,
(Dollars in thousands, except per share amounts) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Operating Data
Interest income $ 2,102 $ 2,170 $ 2,212 $ 2,593 $ 2,556
Interest expense 714 768 1,027 1,379 1,472
Net interest income 1,388 1,402 1,185 1,214 1,084
Provision for credit losses 10 30 47 95 104
Net interest income after provision for credit
losses 1,378 1,372 1,138 1,119 980
Net gains (losses) on sales of securities -- -- (1) -- --
Other noninterest income 109 70 178 144 139
Noninterest expenses 1,202 1,207 1,104 1,047 941
Provision for income taxes 90 75 59 54 40
Net income 195 160 152 162 138
Per Share Data
Net income $ 8.11 $ 6.68 $ 6.31 $ 6.74 $ 5.76
Cash dividends paid 2.20 2.20 1.65 2.20 2.20
Year end book value 109.71 103.79 99.31 94.65 90.11
Other Data
Loans, net of unearned income $21,122 $19,289 $16,616 $17,112 $18,641
Total assets 28,607 28,946 29,866 27,923 27,559
Total deposits 25,878 26,388 27,391 25,522 25,253
Total shareholders' equity 2,633 2,491 2,383 2,272 2,163
Dividend payout ratio 27.13% 32.93% 26.15% 32.64% 38.19%
Average Ratios
Return on assets 0.68% 0.56% 0.53% 0.58% 0.51%
Return on equity 7.58% 6.46% 6.53% 7.31% 6.51%
Shareholders' equity to total assets 8.95% 8.69% 8.16% 7.90% 7.83%
Other information
Total average assets $28,753 $28,520 $28,528 $28,071 $27,074
Total average equity 2,573 2,478 2,327 2,217 2,120
Weighted average shares outstanding 24,000 24,000 24,000 24,000 24,000
</TABLE>
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<PAGE>
F&M BANCORP
THE BANK OF BRUNSWICK
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
Year ended December 31,
(Dollars in thousands, except per share amounts) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Operating Data
Interest income $ 47,106 $ 45,857 $ 48,002 $ 50,836 $ 50,845
Interest expense 17,858 17,391 20,551 27,331 28,416
Net interest income 29,248 28,466 27,451 23,505 22,429
Provision for credit losses 910 1,530 2,662 1,895 1,204
Net interest income after provision for
credit losses 28,338 26,936 24,789 21,610 21,225
Net gains (losses) on sales of securities -- 2 618 -- (19)
Other noninterest income 6,800 5,990 5,208 4,494 3,646
Noninterest expenses 23,996 21,962 20,529 17,943 16,691
Provision for income taxes 2,991 3,203 2,817 2,117 2,384
Income before cumulative effect of change in
accounting principle 8,151 7,763 7,269 6,044 5,777
Cumulative effect of accounting change -- -- -- 1,023 --
Net income 8,151 7,763 7,269 5,021 5,777
Per Share Data(1)
Income before cumulative effect of change in
accounting principle $ 1.96 $ 1.87 $ 1.76 $ 1.46 $ 1.38
Cumulative effect of change in accounting
principle -- -- -- 0.25 --
Net income 1.96 1.87 1.76 1.21 1.38
Cash dividends paid 0.75 0.73 0.68 0.66 0.66
Year end book value 14.86 14.73 13.23 12.16 11.64
Other Data
Loans, net of unearned income $480,394 $415,626 $415,435 $404,085 $384,849
Total assets 703,863 646,614 613,595 579,247 546,391
Total deposits 602,174 548,542 525,768 501,924 473,258
Total shareholders' equity 61,882 61,130 54,728 50,244 48,430
Dividend payout ratio 38.27% 39.04% 38.64% 54.55% 47.83%
Average Ratios
Return on assets 1.23% 1.24% 1.22% 0.90% 1.07%
Return on equity 13.32% 13.58% 13.89% 10.15% 12.16%
Shareholders' equity to total assets 9.24% 9.14% 8.76% 8.86% 8.82%
Other information
Total average assets $662,206 $625,709 $597,426 $558,488 $538,473
Total average equity 61,206 57,166 52,333 49,468 47,518
Weighted average shares outstanding(1) 4,154,805 4,140,310 4,133,997 4,144,132 4,187,066
</TABLE>
(1) Reflects the conversion of the Common Stock of Brunswick Bank at the
minimum exchange ratio of 9.0 shares of the Common Stock of F&M Bancorp
per share of the Common Stock of Brunswick Bank.
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<PAGE>
F&M BANCORP
THE BANK OF BRUNSWICK
COMPARATIVE HISTORICAL AND PRO FORMA DATA
<TABLE>
<CAPTION>
Year ended December 31,
(Dollars in thousands, except per share amounts) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
F&M Bancorp Common Stock:
Earnings per Common Share:
Historical:
Income before cumulative effect of change in
accounting principle $ 2.02 $ 1.94 $ 1.82 $ 1.50 $ 1.42
Cumulative effect of change in accounting
principle -- -- -- 0.26 --
Net Income 2.02 1.94 1.82 1.24 1.42
Pro forma combined - Minimum Conversion Ratio:
Income before cumulative effect of change in
accounting principle 1.96 1.87 1.76 1.46 1.38
Cumulative effect of change in accounting
principle -- -- -- 0.25 --
Net Income 1.96 1.87 1.76 1.21 1.38
Pro forma combined - Assumed Conversion Ratio:
Income before cumulative effect of change in
accounting principle 1.96 1.87 1.75 1.45 1.38
Cumulative effect of change in accounting principle -- -- -- 0.24 --
Net Income 1.96 1.87 1.75 1.21 1.38
Dividends per Common Share:
Historical 0.78 0.75 0.70 0.69 0.69
Pro forma combined - Minimum Conversion Ratio 0.75 0.73 0.68 0.66 0.66
Pro forma combined - Assumed Conversion Ratio 0.75 0.72 0.68 0.66 0.66
Book Value per Common Share (period end):
Historical 15.01 14.91 13.35 12.25 11.73
Pro forma combined - Minimum Conversion Ratio 14.86 14.73 13.23 12.16 11.64
Pro forma combined - Assumed Conversion Ratio 14.82 14.69 13.19 12.12 11.61
Brunswick Bank Common Stock(1):
Earnings per Common Share:
Historical:
Net Income $ 8.11 $ 6.68 $ 6.31 $ 6.74 $ 5.76
Pro forma equivalent - Minimum Conversion Ratio:
Income before cumulative effect of change in
accounting principle 17.64 16.83 15.84 3.14 12.42
Cumulative effect of change in accounting
principle -- -- -- 2.25 --
Net Income 17.64 16.83 15.84 10.89 12.42
Pro forma equivalent - Assumed Conversion Ratio:
Income before cumulative effect of change in
accounting principle 18.70 17.84 16.69 13.83 13.17
Cumulative effect of change in accounting
principle -- -- -- 2.29 --
Net Income 18.70 17.84 16.69 11.54 13.17
Dividends per Common Share:
Historical 2.20 2.20 1.65 2.20 2.20
Pro forma equivalent - Minimum Conversion Ratio 6.75 6.57 6.12 5.94 5.94
Pro forma equivalent - Assumed Conversion Ratio 7.16 6.87 6.49 6.30 6.30
Book Value per Common Share (period end):
Historical 109.71 103.79 99.31 94.65 90.11
Pro forma equivalent - Minimum Conversion Ratio 133.74 132.57 119.07 109.44 104.76
Pro forma equivalent - Assumed Conversion Ratio 141.38 140.14 125.83 115.62 110.76
</TABLE>
-8-
<PAGE>
(1) The amounts provided with respect to pro forma equivalent - Minimum
Conversion Ratio for Brunswick Bank are derived by multiplying the pro
forma combined - Minimum Conversion Ratio amounts for F&M Bancorp by the
minimum exchange ratio of 9.0 shares of the Common Stock of F&M Bancorp
per share of the Common Stock of Brunswick Bank. The amounts provided
with respect to pro forma equivalent - Assumed Conversion Ratio for
Brunswick Bank are derived by multiplying the pro forma combined -
Assumed Conversion Ratio amounts for F&M Bancorp by an assumed
conversion ratio of 9.54 shares of the Common Stock of F&M Bancorp per
share of the Common Stock of Brunswick Bank, which reflects the price of
the last trade of the Common Stock of F&M Bancorp prior to the
announcement of the Merger.
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<PAGE>
INVESTMENT CONSIDERATIONS
Financial Performance of F&M Bancorp; No Assurance of Continued Profitability
Brunswick Bank negotiated the amount of the consideration which
Brunswick Bank Stockholders are to receive in the Merger partly on the
basis of F&M Bancorp's past financial performance. Specifically,
Brunswick Bank and its financial advisor considered the historical
trading range of the Common Stock of F&M Bancorp and its historical
dividends per share, net income per share and book value per share. See
"Proposed Merger of Brunswick Bank and F&M Bank -- Reasons for the
Merger." The recommendation of the Brunswick Board to approve, ratify
and confirm the Plan and the Merger is also based in part upon F&M
Bancorp's past financial performance.
Although F&M Bancorp's operations have been profitable in recent
years, no assurance can be given that they will be as profitable in the
future. A decline in F&M Bancorp's financial performance could adversely
affect the value of the consideration which Brunswick Bank Stockholders
will receive. Among many factors which could adversely affect F&M
Bancorp's financial performance are government regulation, increased
competition, and unfavorable economic conditions. See "-- Government
Regulation; Required Regulatory Approval; Other Conditions;" "--
Competition;" and "-- Economic Conditions." These are discussed below.
Government Regulation; Required Regulatory Approval; Other Conditions
F&M Bancorp and F&M Bank are subject to extensive governmental
supervision, regulation and control. Future legislation and government
policy could adversely affect the banking industry and the operations of
F&M Bancorp and F&M Bank. There can be no assurance that the
profitability of F&M Bancorp and F&M Bank will not be adversely affected
by changes in the applicable laws, regulations, and policies. For
example, recent changes in Federal banking laws will result in increased
competition in the banking industry. See "-- Competition."
Like other depository institutions, F&M Bancorp is affected by the
monetary policies of the Federal Reserve Board and other federal
instrumentalities. A primary instrument of the Federal Reserve Board's
monetary policy is the restriction on expansion of the money supply.
This is accomplished through open market operations, including the
purchase and sale of government securities and the adjustment of reserve
requirements. These actions may at times result in significant
fluctuations in interest rates, which could have adverse effects on the
operations of F&M Bank. In particular, F&M Bank's ability to make loans
and attract deposits, as well as public demand for loans, could be
adversely affected.
The Merger itself is also subject to regulatory oversight. The Plan
must be approved by the Comptroller. The Department of Justice will
review the application filed with the Comptroller and may object to the
Merger on the basis of Federal antitrust laws. See "Summary of the
Transaction -- Required Regulatory Approval." The Merger is also
subject to various conditions. See "Proposed Merger of Brunswick Bank
and F&M Bank -- Conditions of the Merger." There can be no assurance
that regulatory approvals will be received or that the other conditions
to consummation of the Merger set forth in the Plan will be satisfied or
waived.
Competition
F&M Bancorp operates in a competitive environment, competing for
deposits and loans with commercial banks, thrift institutions and other
financial institutions. Numerous mergers and consolidations involving
Maryland banks have recently occurred, resulting in an intensification
of competition in the banking industry. Many of F&M Bancorp's
competitors possess greater financial resources or have substantially
higher lending limits than does F&M Bancorp. F&M Bancorp also competes
with money market mutual funds for funds from depositors.
Recent changes in Federal banking laws will facilitate interstate
branching and merger activity among banks. For example, on September 29,
1995, certain bank holding companies will be permitted to acquire banks
located outside the state in which they were organized. In addition, on
June 1, 1997, certain banks will be permitted to merge
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<PAGE>
with banks organized under the laws of different states. In February
1995, a bill allowing out-of-state banks to establish branches in
Maryland and to merge with Maryland banks was introduced in the Maryland
legislature. Such changes may result in an even greater degree of
competition in the banking industry. F&M Bancorp may be brought into
competition with institutions with which it does not presently compete.
There can be no assurance that the profitability of F&M Bancorp will not
be adversely affected by the increased competition which may
characterize the banking industry in the future.
Economic Conditions
An adverse change in general economic conditions could adversely
affect F&M Bancorp's financial performance. F&M Bancorp's operating
results depend upon the rate differentials which result from the
difference between the income it receives from its loans, securities and
other earning assets and the interest expense it pays on its deposits
and other interest-bearing liabilities. These rate differentials are
highly sensitive to many factors beyond the control of F&M Bancorp.
Also, an adverse change in general economic conditions could impair
borrowers' ability to repay loans as they mature, thus reducing the
income F&M Bancorp receives from its loans and reducing the amount of
the rate differentials.
Limitations on Payment of Dividends
F&M Bank is the wholly-owned subsidiary of F&M Bancorp and is its
principal income-producing operation. Accordingly, dividends payable by
F&M Bancorp are subject to the financial conditions of both F&M Bank and
F&M Bancorp and to other business considerations. Even if F&M Bank is
able to generate sufficient earnings to pay dividends, there can be no
assurance that the Board of Directors might not decide or be required to
retain a greater portion of F&M Bank's earnings in order to maintain
existing capital or achieve additional capital.
In addition, F&M Bank's ability to pay dividends may be restricted by
applicable provisions of national banking laws and regulations of the
Comptroller, the FDIC, and the Federal Reserve Board. Any one or a
combination of these could have the effect of reducing the amount of
dividends payable by F&M Bancorp.
Adequacy of Allowance for Credit Losses
To address the risk of credit losses, management of F&M Bank maintains
an allowance for credit losses based upon a percentage of the
outstanding balances of all loans. Management also maintains an
allowance for specific loans when their ultimate collectability becomes
questionable. The amount of the allowance for credit losses is
established on the basis of, among other things, historical experience,
an evaluation of economic conditions and regular reviews of
delinquencies and loan portfolio quality. If management's assumptions
and judgments prove to be incorrect and the allowance for credit losses
is inadequate to absorb future losses, or if regulatory authorities
require F&M Bank to increase the allowance for credit losses, F&M Bank's
earnings could be significantly and adversely affected.
Additional Classes and Series of Stock
The Board of Directors of F&M Bancorp is authorized to establish one
or more classes and series of stock, including series of preferred
stock, from time to time and to establish the number of shares in each
class or series and to fix the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of such class or series, without
any further vote or action by its stockholders, unless such action is
required by applicable law or the rules of any stock exchange or
automated quotation system on which F&M Bancorp's securities may be
listed or traded. The issuance of additional classes or series of
capital stock with voting and conversion rights may adversely affect the
voting power of the holders of capital stock of F&M Bancorp, including
the loss of voting control to others. The ability of the Board of
Directors of F&M Bancorp to issue additional classes or series of
capital stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to
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<PAGE>
acquire, or of discouraging a third party from acquiring, a majority of
the outstanding voting stock of F&M Bancorp. However, the Board of
Directors of F&M Bancorp is not aware of any present attempt or efforts
by any person to accumulate Common Stock of F&M Bancorp or obtain
control of F&M Bancorp.
PROPOSED MERGER OF BRUNSWICK BANK AND F&M BANK
The Brunswick Bank Stockholders are being asked to approve, ratify and
confirm the Plan and Agreement to Merge dated as of January 10, 1995, by
and among F&M Bancorp, F&M Bank, and Brunswick Bank, and the Merger
provided for therein. The following description of the Plan is a
summary only and is qualified by reference to the full text thereof. A
copy of the Plan is included as Annex A to this Proxy
Statement/Prospectus. Brunswick Bank Stockholders are urged to read the
Plan in its entirety.
General Description of the Transaction
Under the Plan, Brunswick Bank will merge into F&M Bank, and F&M Bank
will be the resulting national banking association. The banking
businesses of Brunswick Bank and F&M Bank will be continued by the
resulting national banking association in the same manner and through
the offices now operated by F&M Bank and Brunswick Bank. The separate
corporate existence of Brunswick Bank will cease.
Brunswick Bank Stockholders will become stockholders of F&M Bancorp.
On the Effective Date, each issued and outstanding share of the Common
Stock of Brunswick Bank shall, without further act, be automatically
converted into and become a number of shares of the Common Stock of F&M
Bancorp whose aggregate value (determined using the average closing
price of the Common Stock of F&M Bancorp on the Nasdaq Stock Market for
the 20 business days immediately preceding the Effective Date) is equal
to 2.5 times the net tangible book value per share of Brunswick Bank on
the Effective Date, rounded to the nearest one hundredth of a share. In
any event, Brunswick Bank Stockholders will receive not less than nine
shares of the Common Stock of F&M Bancorp for each share of the Common
Stock of Brunswick Bank which they own. Cash will be paid in lieu of
fractional shares.
Determination of Number of Shares of the Common Stock of F&M Bancorp
to be Issued. The determination of net tangible book value shall be
made within 15 business days of the Effective Date by Keller, Bruner &
Company, L.L.C. (or such other independent accounting firm chosen
jointly by F&M Bancorp and Brunswick Bank). As of the date of this
Proxy Statement/Prospectus, it is not possible to determine the precise
number of shares of the Common Stock of F&M Bancorp that will be issued
for each share of the Common Stock of Brunswick Bank. For purposes of
illustration, if the Effective Date would have occurred on December 31,
1994, the net tangible book value per share of the Common Stock of
Brunswick Bank would have been $109.71, and the value per share of the
Common Stock of F&M Bancorp would have been $29.25. As a result, 9.38
shares of the Common Stock of F&M Bancorp would have been issued for
each share of the Common Stock of Brunswick Bank. There can be no
assurance that more than nine shares of the Common Stock of F&M Bancorp
will be issued for each share of the Common Stock of Brunswick Bank.
Under the Plan, net tangible book value shall mean the total tangible
assets of Brunswick Bank as of the close of business on the Effective
Date minus the total liabilities of Brunswick Bank as of the close of
business on the Effective Date calculated in conformity with generally
accepted accounting principles applied on a basis consistent with past
practice of Brunswick Bank. For purposes of determining net tangible
book value, only normal and recurring items of income and expense
(including any additional premiums to obtain extended directors' and
officers' liability coverage) shall be considered as an expense.
However, transactional expenses (other than such additional premiums)
shall not be deducted as an expense. Expenses arising under the
agreements with Messrs. Brock and Porter (other than expenses arising
from normal accruals in accordance with current practice of Brunswick
Bank) also shall not be deducted as an expense.
Procedures for Exchange of Certificates. After the Effective Date,
certificates for shares of the Common Stock of Brunswick Bank shall
represent the right to receive certificates representing the number of
shares of the
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<PAGE>
Common Stock of F&M Bancorp described above. Such certificates may be
exchanged by their holders for new certificates for shares of the Common
Stock of F&M Bancorp at any time after the determination of the net
tangible book value of Brunswick Bank as described above. F&M Bancorp
may withhold payment of cash in lieu of fractional shares, dividends,
and other distributions from any stockholder until such stockholder's
certificates are surrendered for exchange to F&M Bancorp or to an
exchange agent designated by F&M Bancorp. When the new certificates are
issued, the holders thereof shall be entitled to be paid the amount
(without any interest thereon) of all such withheld cash in lieu of
fractions, dividends, or other distributions which have become payable.
Brunswick Bank Stockholders will receive further instructions as to the
time and method of surrendering their certificates for exchange.
Shortly after the Effective Date, Brunswick Bank Stockholders will
receive transmittal forms and instructions as to the time and method of
surrendering their certificates. Until so surrendered, certificates
formerly representing shares of the Common Stock of Brunswick Bank
(other than shares of dissenting stockholders as described herein under
the heading "Rights of Dissenting Stockholders") will be deemed for all
corporate purposes to evidence the number of whole shares of the Common
Stock of F&M Bancorp that a holder would be entitled to receive upon
surrender and the cash to be paid in lieu of fractional shares.
BRUNSWICK BANK STOCKHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES
UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS AND INSTRUCTIONS. BRUNSWICK
BANK STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
Certain Restrictions on Resale by Controlling Persons. Directors and
certain Brunswick Bank Stockholders will have certain restrictions on
the transfer of shares of F&M Bancorp received by them in the Merger.
These restrictions are imposed as a result of Rule 145 under the
Securities Act and because the Merger is being accounted for as a
pooling-of-interests. All such persons have been contacted by F&M
Bancorp and have consented in writing to the restrictions. There will
be no restrictions imposed on resale of Common Stock of F&M Bancorp
received in the Merger by other Brunswick Bank Stockholders.
Board Representation. If the Merger becomes effective, the Nominating
Committee of the Board of Directors of F&M Bancorp will designate one of
the directors of Brunswick Bank to be elected to the Boards of Directors
of both F&M Bancorp and F&M Bank. Such director will serve until the
next annual meeting of stockholders and until his successor is elected
and has qualified.
Certain Employment Matters. The officers and employees of Brunswick
Bank will continue in their employment with F&M Bank as temporary,
at-will employees at the same compensation level they received with
Brunswick Bank before the Merger. The full time officers and employees
of Brunswick Bank will also receive all benefits provided to full-time
officers and employees of F&M Bank, and the part-time officers and
employees of Brunswick Bank will receive all benefits provided to
part-time officers and employees of F&M Bank. After the Merger, F&M
Bank will interview the former officers and employees of Brunswick Bank
for consideration for continued employment at-will with F&M Bank.
Offers of continued employment at-will at F&M Bank, at compensation
levels then offered to officers and employees of equivalent status at
F&M Bank, and with the same benefits as are available to other employees
of equivalent status at F&M Bank, will be made to former officers and
employees of Brunswick Bank as are necessary to fill available
positions. Cash payments will be made to each of those officers,
full-time employees, or part-time employees of Brunswick Bank who become
employed by F&M Bank on the Effective Date and either remain employed by
F&M Bank for six months continuously thereafter or leave such employment
at the request of F&M Bank within six months after the Effective Date.
In addition, a severance payment of two weeks' salary for each year that
such employee has been employed by Brunswick Bank will be made to those
employees of Brunswick Bank who become employed by F&M Bank on the
Effective Date but are not offered a position of continued employment by
F&M Bank.
In addition, the profit sharing plan of Brunswick Bank in the
discretion of F&M Bancorp will be continued, frozen, terminated, or
merged with the 401(k) Plan of F&M Bank. After the Effective Date, all
full-time officers and employees of Brunswick Bank may participate in
the 401(k) Plan of F&M Bank and shall participate in the other employee
benefit programs available to employees of F&M Bank to the extent they
are eligible to do so under the terms of such plans or programs as are
in force on the Effective Date, with credit given for their prior
service with Brunswick Bank for purposes of allocation, eligibility and
vesting. F&M Bancorp and F&M Bank will discontinue
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health and life insurance benefits to retired officers and employees of
Brunswick Bank except to the extent that coverage may continue after,
and Brunswick Bank may have paid for the coverage prior to, the
Effective Date.
F&M Bancorp will cause F&M Bank to assume the obligations of Brunswick
Bank under certain agreements which it has entered into with David E.
Brock, its President, and C. Bruce Porter, a longtime employee. See "--
Interests of Certain Persons in the Merger."
Effective Date of the Merger; Termination
Subject to the satisfaction of all conditions contained in the Plan
which have not been waived by F&M Bancorp and F&M Bank, or by Brunswick
Bank, as the case may be, the Merger will become effective on the date
designated by the Comptroller. It is expected that the Merger will
become effective not later than the third quarter of 1995. F&M Bancorp
will request the Comptroller to make such certificate of merger
effective on either the last day of the month, or the first day of the
month following the month, in which all necessary corporate and
regulatory actions shall have occurred and all conditions to the Merger
have been fulfilled or waived.
The Merger may not be consummated until after a waiting period to
permit the United States Department of Justice to review the competitive
effects of the Merger. The failure of the United States Department of
Justice to challenge the Merger does not limit the rights of private
parties or confer immunity on future transactions.
The Plan may be terminated and abandoned (a) by mutual consent of the
Boards of Directors of Brunswick Bank and F&M Bancorp; (b) by action of
the Board of Directors of Brunswick Bank or F&M Bancorp if the Merger
has not become effective by September 30, 1995; (c) unilaterally by the
Board of Directors of F&M Bancorp in their sole discretion if F&M
Bancorp receives information from any governmental regulatory authority,
which by law is required to approve the Merger or any other aspect of
the transactions provided for in the Plan or which has the authority to
challenge the validity of the Merger or the transactions in judicial
proceedings or otherwise, that provides a substantial basis for
concluding that the required regulatory approval will not be granted or
that the Merger or such transactions will be so challenged; or (d) if
Brunswick Bank accepts or recommends to the Brunswick Bank Stockholders
an acquisition proposal other than the Merger, provided that Brunswick
Bank would then be required to pay to F&M Bancorp a termination fee of
$94,000.
Brunswick Bank has agreed not to solicit or entertain offers from,
negotiate with, or in any manner encourage, discuss, accept or consider
any proposal of any person or group relating to an acquisition proposal
other than the Merger. In the event that Brunswick Bank accepts or
recommends to the Brunswick Bank Stockholders an acquisition proposal
other than the Merger, it is to pay to F&M Bancorp the termination fee
as described in the preceding paragraph.
Background of the Merger
Brunswick Bank has made significant advances toward improving its
financial condition and increasing stockholder value since its release
from an FDIC Memorandum of Understanding in September of 1993. Brunswick
Bank's net income per share increased from $6.68 for the year ended
December 31, 1993 to $8.11 for the year ended December 31, 1994. Book
value per share increased from $103.79 at December 31, 1993 to $109.71
at December 31, 1994. During this time both the Brunswick Board and its
management continued to consider and analyze various strategic
alternatives. Brunswick Bank received several unsolicited acquisition
proposals in August and September of 1994. At its meeting on September
13, 1994, the Brunswick Board appointed a Mergers and Acquisitions
Committee (the "Committee") consisting of Messrs. Robert Moler, Sauser,
Hemp, Croghan, Draper, Brock and Hooper. The Committee was formed to
analyze the offers that had been made and, more broadly, to consider the
strategic alternatives and ways in which stockholder value could be
further enhanced.
For the next several weeks, the Committee met with prospective
acquirors, including five institutions which had previously submitted
offers or indications of interest and four other institutions which had
been contacted as potential acquirors. F&M Bancorp was one of the four
institutions so contacted. During this process, such institutions were
provided with materials regarding Brunswick Bank and its financial
condition to assist in determining whether
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they might be interested in acquiring Brunswick Bank. As part of this
process, the Committee also gathered and analyzed information as to each
potential acquiror. In its analysis the Committee evaluated such
matters as the level of interest of each prospective acquiror and such
acquiror's ability to consummate a transaction, as well as each
prospective acquiror's results of operations, market share, stock
performance, product range, corporate goals and mission, quality of
management and strategic and expansion planning. Following these
discussions, four of the nine institutions informed the Committee that
they would not be in a position to submit a bid. During this period the
Committee also met with representatives of the investment banking firm
of Scott & Stringfellow. On October 25, 1994 Brunswick Bank retained
Scott & Stringfellow to serve as its financial advisor and to assist
with its strategic planning, including its possible acquisition by
another financial institution.
On November 7, 1994, Scott & Stringfellow presented to the Committee
an analysis of strategic alternatives, including an in-depth study of
the five offers made by that date. The Committee discussed each offer
at length with Scott & Stringfellow, along with the relative merits of
continued independence. Having reviewed Scott & Stringfellow's
analysis, the Committee concluded that because of increasing competition
and costs, and the illiquidity of the Common Stock of Brunswick Bank, it
would be comparatively more difficult to increase stockholder value
through a strategy of internal growth. The Committee therefore concluded
that it was advisable to continue to explore a merger with a larger
institution. The Committee believed it preferable that the merger be
structured as a tax-free exchange of the Common Stock of Brunswick Bank
for stock of an acquiror listed on a national securities exchange. The
Committee considered which potential acquirors it believed were most
likely to provide a fair financial return to Brunswick Bank
Stockholders, and also concluded that it would be desirable to have a
representative of Brunswick Bank on the acquiror's Board of Directors.
Based upon the financial analysis and recommendation of Scott &
Stringfellow and the proposals which had been received, the Committee
authorized Scott & Stringfellow, subject to the approval of the
Brunswick Board, to contact the two institutions who appeared to best
meet its criteria, and allow them to perform further due diligence
review and to present their final offers. One of these two institutions
was F&M Bancorp.
At its regular meeting on November 8, 1994, the Brunswick Board was
briefed by the Committee as to its analysis and as to recent
developments, and discussed in detail with the Committee its conclusions
and the status of its discussions. The Brunswick Board reviewed Scott &
Stringfellow's report, which outlined such factors as balance sheet
data, earnings and dividend levels, return on equity, dilution and
exchange ratio. The Brunswick Board also considered information
regarding comparable recent bank acquisitions. After a lengthy
discussion of Scott & Stringfellow's analysis and the Committee's
deliberations, the Brunswick Board voted unanimously to authorize the
Committee to continue to explore the two offers. The Committee set a
deadline of November 30, 1994 for the submission of final acquisition
offers.
On December 6 and December 7, 1994 the Committee met to discuss the
final offers of both potential acquirors, at which time Scott &
Stringfellow made a presentation regarding certain financial aspects of
the offers. The Committee discussed Scott & Stringfellow's presentation
at length. Scott & Stringfellow reported that it would be able to
render an opinion that the terms of a merger with F&M Bancorp pursuant
to the terms offered by F&M Bancorp were fair to Brunswick Bank
Stockholders from a financial point of view. Both institutions offered
to issue shares of their Common Stock worth 2.5 times Brunswick Bank's
book value per share in exchange for each issued and outstanding share
of the Common Stock of Brunswick Bank. However, F&M Bancorp also
offered a minimum of nine shares of its Common Stock for each share of
the Common Stock of Brunswick Bank. The other offeror did not offer
such a minimum exchange ratio. F&M Bancorp also offered to allow a
representative of Brunswick Bank to sit on the boards of directors of
both F&M Bancorp and F&M Bank, while the other offeror only allowed a
representative at the bank level. Scott & Stringfellow reported that
the dividend enhancement would likely be greater under a merger with F&M
Bancorp than with the other offeror, and that the transaction appeared
to be less dilutive for F&M Bancorp than for the other offeror. The
Committee authorized Scott & Stringfellow to discuss with the other
offeror whether it could also offer a minimum exchange ratio and whether
such offeror could provide for a representative of Brunswick Bank to sit
on the Board of Directors at the holding company level. When the
Committee was informed that the other offeror could not provide for a
minimum exchange ratio, it resolved to recommend to the Brunswick Board
that it be authorized to pursue negotiations for a definitive agreement
with F&M Bancorp. At a meeting held on December 8, 1994, the Brunswick
Board resolved that Brunswick Bank should pursue such negotiations and
authorized the
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execution by Brunswick Bank of a letter of intent with F&M Bancorp. The
letter of intent was signed on December 9, 1994.
From December 9, 1994 until January 10, 1995, the terms of the
definitive Plan were negotiated. After completion of these
negotiations, at a meeting of the Brunswick Board held on January 10,
1995, attended by representatives of Scott & Stringfellow and Venable,
Baetjer and Howard, LLP, counsel to Brunswick Bank, the Brunswick Board
considered the proposed Plan and the related Support Agreement. In
advance of the meeting, copies of drafts of the Plan and the Support
Agreement had been provided to the Brunswick Board. Following
discussion of the terms of the proposed Merger and of related
operational, legal and regulatory issues, Scott & Stringfellow made a
presentation regarding certain financial aspects of the proposed Merger
and stated that it would be able to render an opinion that the terms of
the Merger were fair to the Brunswick Bank Stockholders from a financial
point of view. At the meeting on January 10, 1995, the Brunswick Board,
by a unanimous vote of all those present then unanimously approved the
Merger and the execution of the Plan. Messrs. Forrest Moler and Croghan
were absent because of previously scheduled travel plans, but
subsequently signed the Plan.
Reasons for the Merger
The Brunswick Board believes that the Merger and the Plan are
advisable and fair and in the best interest of Brunswick Bank and the
Brunswick Bank Stockholders. As discussed below, this conclusion is
supported by the opinion of its independent financial advisor. In
considering the terms and conditions of the Merger and the Plan, the
Brunswick Board considered a number of material factors. These were:
The Financial Terms of the Merger. In this regard, the Brunswick
Board was of the view that based on historical and anticipated trading
ranges for the Common Stock of F&M Bancorp and the exchange ratio
offered by F&M Bancorp, the value of consideration to be received by
Brunswick Bank Stockholders represented a fair multiple of Brunswick
Bank's per share book value and earnings. The Brunswick Board also
believed that, based on the proposed exchange ratio and a belief that
F&M Bancorp would continue to pay dividends at its current rate, the
Merger would result in a substantial increase in dividend income to
Brunswick Bank Stockholders. See "Summary of the Transaction --
Selected Consolidated Financial and Other Data;" "Pro Forma Combined
Financial Information." There can, however, be no assurance that
dividends will in the future continue to be paid at the same rate at
which they are currently paid. In addition, the Brunswick Board
compared the premium offered by F&M Bancorp's offer (measured as the
difference between the total transaction value of the Merger and
Brunswick Bank's book value at November 30, 1994) on a percentage basis
to Brunswick's assets and deposits. See "--Opinion of Financial Advisor
- -- Comparable Acquisition Analysis."
The Terms, other than the Financial Terms, and Structure of the
Merger. In this respect the Brunswick Board considered the benefits to
its customers, employees and communities of operating as branches of F&M
Bank. As branches of F&M Bank, Brunswick Bank's present operations would
offer an expanded range of products and services, would have access to
F&M Bancorp's financial and managerial resources, and would benefit from
F&M Bank's greater geographical coverage. The Brunswick Board also
considered matters regarding board representation and tax consequences.
F&M Bancorp offered to appoint a member of the Brunswick Board to the
boards of directors of both F&M Bancorp and F&M Bank. In addition, the
Merger with F&M Bank would qualify as a tax-free reorganization under
the Code. See "-- Federal Income Tax Status."
Certain Financial and Other Information Concerning F&M Bancorp. In
this respect, the Brunswick Board considered, among other things, the
consistently high standing of F&M Bancorp among its peer group of
national and regional financial institutions, measured by profitability,
capital adequacy and asset quality. In addition, based on the offered
exchange ratio and the historical dividends per share, net income per
share and book value per share of the Common Stock of F&M Bancorp, the
Merger would result in substantial increases in the historical dividends
per share, net income per share and book value per share of the shares
held by Brunswick Bank Stockholders. There can, however, be no
assurance that the future dividends per share, income per share or book
value per share of F&M Bancorp will conform to historical values or to
the corresponding pro forma calculations. The Brunswick Board also
considered the higher liquidity of the Common Stock of F&M Bancorp,
which is publicly traded and quoted on the Nasdaq Stock Market (National
Market).
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Other Strategic Alternatives. The Brunswick Board considered the
extensive process followed in order to obtain acquisition proposals and
indications of interest from possible merger partners other than F&M
Bancorp, the prospects of such other possible merger partners, and the
likelihood that such other potential partners would be able to make an
offer comparable to that of F&M Bancorp. The Brunswick Board also
considered the alternative of remaining independent. Based upon the
foregoing considerations, the Brunswick Board determined that none of
the other strategic alternatives presented the advantages of the Merger.
Opinion of Brunswick Bank's Financial Advisor. The Brunswick Board
also considered the presentations made by Scott & Stringfellow and the
opinion of Scott & Stringfellow as to the fairness, from a financial
point of view, to the Brunswick Bank Stockholders of the terms of the
Plan. See "-- Opinion of Financial Advisor."
Certain Other Considerations. The Brunswick Board also considered the
compatibility of the respective businesses and management philosophies
of Brunswick Bank and F&M Bancorp. In addition, the Brunswick Board
concluded that the Merger would provide Brunswick Bank with additional
financial resources which it needs to meet the competitive challenges
presented by recent and anticipated changes in the banking and financial
services industry. Recent changes in state and federal banking laws have
significantly increased the severity and complexity of banking
regulations and the cost of complying with them. Numerous mergers and
consolidations involving Maryland banks have recently occurred,
resulting in an intensification of competition in local, regional and
national banking markets. These changes have made it more difficult for
smaller independent banks, such as Brunswick Bank, to compete with
larger banking organizations.
The Brunswick Board did not find it practicable to quantify or
otherwise assign any relative or specific weights to the factors
considered, and did not attempt to do so. For a presentation of the
interests of certain members of Brunswick Bank's management and the
Brunswick Board, see "Description of Brunswick Bank -- Certain
Information Regarding Directors and Officers of Brunswick Bank."
Recommendation of the Board of Directors of Brunswick Bank
The Brunswick Board believes that the Plan and the Merger are
advisable, are fair to, and are in the best interests of Brunswick Bank
and the Brunswick Bank Stockholders. The Brunswick Board unanimously
recommends that Brunswick Bank Stockholders vote TO APPROVE, RATIFY AND
CONFIRM the Plan and the Merger provided for therein.
Opinion of Financial Advisor
The Brunswick Board retained the investment banking firm of Scott &
Stringfellow to evaluate the terms of the Plan. Scott & Stringfellow
has rendered its opinion to the Brunswick Board that the terms of the
Plan are fair from a financial point of view to Brunswick Bank
Stockholders. In developing this opinion, Scott & Stringfellow reviewed
and analyzed: (a) the Plan; (b) the Registration Statement filed by F&M
Bancorp with the Commission; (c) audited financial statements of
Brunswick Bank for the four years ended December 31, 1994; (d) unaudited
financial statements of Brunswick Bank for the quarters and 12 months
ended December 31, 1993 and 1994, and other internal information
relating to Brunswick Bank prepared by Brunswick Bank's management; (e)
information regarding the trading market for the Common Stock of
Brunswick Bank and the Common Stock of F&M Bancorp and the price ranges
within which the respective stocks have traded; (f) a comparison of
prices paid to relevant financial characteristics such as net worth,
earnings, deposits and assets in certain bank and bank holding company
mergers and acquisitions in Maryland in recent years; (g) F&M Bancorp's
annual reports to stockholders and its financial statements for the four
years ended December 31, 1994; and (h) F&M Bancorp's unaudited financial
statements for the quarters and 12 months ended December 31, 1993 and
1994 and other internal information relating to F&M Bancorp prepared by
F&M Bancorp's management. Scott & Stringfellow has discussed the
background of the Merger, the reasons and basis for the Merger, and the
business and future prospects of Brunswick Bank and F&M Bank
individually and as a combined entity with members of Brunswick Bank's
and F&M Bancorp's management. No instruction or limitations were given
or imposed in connection with the scope of the examination and
investigations made by Scott & Stringfellow. Finally, Scott &
Stringfellow has conducted such other studies, analyses and
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investigations, particularly of the banking industry, and considered
such other information as it deemed appropriate, the material portion of
which is described below. A copy of Scott & Stringfellow's opinion,
which sets forth the assumptions made, matters considered and
qualifications made on the review undertaken, is included as Annex C to
this Proxy Statement/Prospectus and should be read in its entirety.
Scott & Stringfellow evaluated the financial terms of the transaction
using standard valuation methods, including discounted cash flow
analysis, market comparable analysis, comparable acquisition analysis,
and dilution analysis.
Discounted Cash Flow Analysis. Scott & Stringfellow performed a
discounted cash flow analysis under various projections to estimate the
fair market value of the Common Stock of Brunswick Bank. Among other
things, Scott & Stringfellow considered a range of asset and earnings
growth for Brunswick Bank of between 5% and 7% and required equity
capital level of 8% of assets. A range of discount rates from 12% to
14% were applied to the cash flows resulting from the projections during
the first five years and the residual values. The residual values were
estimated by capitalizing the projected final year earnings by the
discount rates, less the projected long-term growth rate of Brunswick
Bank's earnings. The discount rates, growth rates and capital levels
were chosen based on what Scott & Stringfellow, in its judgment,
considered to be appropriate, taking into account, among other things,
Brunswick Bank's past and current financial performance and conditions,
the general level of inflation, rates of return for fixed income and
equity securities in the marketplace generally and particularly in the
banking industry. In all scenarios considered, the present value of the
Common Stock of Brunswick Bank was determined to be less than the value
of the consideration to be received from F&M Bancorp pursuant to the
Merger.
Comparable Acquisition Analysis. Scott & Stringfellow compared the
prices paid to relevant financial characteristics such as tangible net
worth, assets, deposits and earnings in 19 bank and bank holding company
mergers and acquisitions in Maryland since January 1, 1992. In making
this comparison, Scott & Stringfellow paid particular attention to
transactions that have been announced or closed in 1994 in Maryland.
Scott & Stringfellow reviewed all such transactions involving bank and
bank holding companies known to it to have occurred during this period.
Scott & Stringfellow then made a corresponding comparison of price to
financial characteristics with regard to the proposed Merger and found
the consideration offered by F&M Bancorp to be within the pricing ranges
accepted during the recent transactions. Specifically, based upon the
most recent transactions either closed or announced in Maryland since
January 1, 1993, other than the Merger, the average price to tangible
book value in these transactions was 1.89, compared with 2.50 for the
Merger; the average price to earnings ratio was 20.1, compared to 37.4
for the Merger; the average premium to deposits was 17.8%, compared with
24.6% for the Merger; and the average premium to assets was 15.6%,
compared with 22.3% for the Merger. For purposes of computing the
information with respect to the Merger, an assumed consideration of
$270.67 per share for each share of the Common Stock of Brunswick Bank
was used.
Analysis of F&M Bancorp and Maryland Bank Group. Scott & Stringfellow
analyzed the performance and financial condition of F&M Bancorp relative
to a peer group consisting of F&M Bancorp, FCNB Corporation, Citizens
Bancorp, Mercantile Bankshares Corporation, Provident Bankshares
Corporation, First United Corporation, and Mason-Dixon Bancshares, Inc.
(the "Maryland Bank Group"). Among the financial characteristics
compared were the ratio of tangible equity to assets, the ratio of loans
to deposits, net interest margin, nonperforming assets, total assets,
non-accrual loans, and efficiency ratio. Scott & Stringfellow also
compared the liquidity of the Common Stock of the respective
institutions. Additional characteristics compared for the trailing
twelve-month period ended December 31, 1994, were (a) price to tangible
book value ratio, which was 1.95x for F&M Bancorp, compared to an
average of 1.74x for the Maryland Bank Group, (b) price to earnings
ratio, which was 15.1x for F&M Bancorp, compared to an average of 14.7x
for the Maryland Bank Group, (c) return on assets, which was 1.37% for
F&M Bancorp, compared to an average of 1.04% for the Maryland Bank
Group, (d) return on equity, which was 14.7% for F&M Bancorp, compared
to an average of 11.3% for the Maryland Bank Group, and (e) a dividend
yield of 2.8% for F&M Bancorp, compared to an average of 1.4% for the
Maryland Bank Group. Overall, in the opinion of Scott & Stringfellow,
F&M Bancorp's operating performance, financial condition, and liquidity
for its Common Stock were better than average for the Maryland Bank
Group, and F&M Bancorp's market value was reasonable in comparison to
the Maryland Bank Group.
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Dilution Analysis. Based upon publicly available financial information
on Brunswick Bank and F&M Bancorp, Scott & Stringfellow considered the
effect of the transaction on the book value, earnings, and market value
of Brunswick Bank and F&M Bancorp. Scott & Stringfellow concluded from
this analysis that, based on the offered exchange ratio and the
historical dividends per share, net income per share and book value per
share of the Common Stock of F&M Bancorp, the Merger would result in
substantial increases in the historical dividends per share, net income
per share and book value per share of the securities held by Brunswick
Bank Stockholders. See "Summary of the Transaction -- Comparative Per
Share Data;" "Pro Forma Combined Financial Information." There can,
however, be no assurance that the future dividends per share, income per
share or book value per share of F&M Bancorp will conform to the
corresponding pro forma calculations.
The summary set forth above includes the material factors considered
by Scott & Stringfellow. However, it does not purport to be a complete
description of the presentation by Scott & Stringfellow to the Brunswick
Board or of the analyses performed by Scott & Stringfellow. Scott &
Stringfellow believes that its analyses must be considered as a whole
and that selecting portions of its analyses and the factors considered
by it, without considering all analyses and factors, would create an
incomplete view of the process underlying the preparation of its
opinion.
Scott & Stringfellow is a full service investment banking and
brokerage firm headquartered in Richmond, Virginia which provides a
broad array of services to corporations, financial institutions and
state and local governments. The Financial Institutions Group of Scott &
Stringfellow actively works with financial institutions in Maryland,
Virginia, North Carolina, the District of Columbia, and West Virginia on
these and other matters. As part of its investment banking practice, it
is continually engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions, negotiated
underwritings, and secondary distributions of listed and unlisted
securities. Scott & Stringfellow was selected by the Brunswick Board
for its expertise and reputation in providing valuation and merger and
acquisition and advisory services to financial institutions.
Pursuant to an engagement letter dated October 13, 1994 between
Brunswick Bank and Scott & Stringfellow, in exchange for its services,
Scott & Stringfellow will receive a fee of approximately $25,000,
payable at the closing of the Merger.
Interests of Certain Persons in the Merger
On December 13, 1994, Brunswick Bank executed an Employment Severance
Agreement with David E. Brock, its President. Under this agreement, Mr.
Brock is to remain employed as the President of Brunswick Bank. If the
Merger is approved, Mr. Brock's employment with Brunswick Bank is to
terminate on the Effective Date. Upon such termination, Mr. Brock is to
receive a payment of $75,330 and title to an automobile owned by
Brunswick Bank. This payment is to be made as severance pay, as
compensation for services rendered in negotiation and execution of the
Plan, and for compensation increases foregone by Mr. Brock in the past.
Brunswick Bank has also entered into an Agreement for Consulting with
C. Bruce Porter, a longtime employee. Under this agreement, Mr. Porter
is to remain in his present employ with Brunswick Bank until he attains
the age of 65 years. After such time, he is to be employed by Brunswick
Bank as a consultant for no more than 500 hours per year at a
compensation level of $17,000 per year until he attains the age of 70
years. At such time, Brunswick Bank has also agreed to pay Mr. Porter
deferred compensation of $1,416.66 per month for ten years. Brunswick
Bank has also agreed to pay certain deferred compensation, disability,
and death benefits to Mr. Porter's spouse in the event of his death or
disability. After the Effective Date, F&M Bank will continue to observe
Brunswick Bank's obligations to Mr. Porter and his spouse under these
agreements.
Conditions of the Merger
The obligations of F&M Bancorp and F&M Bank to consummate the Merger
are subject to the satisfaction of certain conditions prior to the
Effective Date, including the following: (a) there shall not have been
any materially adverse change in the financial condition, results of
operations, assets, liabilities, or business of Brunswick Bank from
December 31, 1993 to the Effective Date, including a reduction of the
tangible net worth of Brunswick Bank to less than $2,598,000, a decrease
in the net income of Brunswick Bank for fiscal year 1994 to less than
$180,000 (or for
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fiscal year 1995, to less than $180,000 on an annualized basis), the
reduction of core deposits to less than 90% of core deposits on January
10, 1995, or materially adverse changes in, and not in, the ordinary
course of Brunswick Bank's business; (b) the Comptroller must have
approved the Merger and such approval must have become effective, and
any other required regulatory approvals shall have been obtained; (c) no
action or proceeding against F&M Bancorp, F&M Bank, or Brunswick Bank or
the consummation of the transactions contemplated by the Plan shall have
been instituted or threatened, or any investigations undertaken that
might result in any such action or proceeding, no order of any court
entered, and no other event shall have occurred or not occurred, on or
before the Effective Date which, in the opinion of F&M Bancorp's
counsel, renders it impossible for legal reasons for F&M Bancorp or F&M
Bank to consummate the transactions contemplated by the Plan or provides
a substantial basis for concluding that F&M Bancorp or F&M Bank should
not consummate the transactions contemplated by the Plan; (d) all
requisite consents, undertakings, memoranda, agreements, exercises, and
terminations by third parties shall have been obtained or waived by F&M
Bancorp; (e) F&M Bancorp shall have received a letter from Keller Bruner
& Company, L.L.C., its independent auditors, to the effect that the
Merger qualifies for pooling-of-interests accounting treatment if
consummated in accordance with the Plan; (f) Brunswick Bank shall not
have changed its authorized, issued or outstanding capital stock; (g)
Brunswick Bank shall not have declared any dividend with respect to its
Common Stock in excess of quarterly dividends at the rate of $0.55 per
share; (h) Brunswick Bank shall not have increased employee compensation
or benefit levels (except for annual increases not in excess of amounts
established by its regular past practices) and shall not have
established or made any increase in any employment, compensation, bonus,
pension, option, incentive or deferred compensation, retirement, death,
profit sharing, or similar agreement or benefits of any of its past,
present or future officers or employees; (i) Brunswick Bank shall not
have incurred any liability for borrowed money except in the ordinary
course of its banking business nor shall it have placed or permitted any
lien or encumbrance upon any of its properties or assets except for
permitted liens; (j) the holders of two-thirds of the outstanding stock
of Brunswick Bank shall have voted to approve, ratify and confirm the
Merger. It is also a condition to F&M Bancorp's obligation to
consummate the Merger that (k) the holders of no more than 8% of the
Common Stock of Brunswick Bank shall have filed with Brunswick Bank at
or before the Special Meeting a notice in writing that they intend to
dissent from the Plan or shall have voted against the Merger.
Similarly, the obligation of Brunswick Bank to consummate the Merger
is subject to the satisfaction prior to the Effective Date of certain
conditions contained in the Plan, including the following: conditions
(b) and (j) above; (l) there shall not have been any materially adverse
change in the financial condition, results of operations, assets,
liabilities, or business of F&M Bancorp from December 31, 1993 to the
Effective Date; (m) all requisite consents, approvals or waivers shall
have been obtained or waived by Brunswick Bank; (n) Brunswick Bank shall
have received a written opinion from Scott & Stringfellow, Inc. (or such
other recognized investment firm as Brunswick Bank may select), dated
contemporaneously with the date of this Proxy Statement/Prospectus, to
the effect that the consideration to be received in the Merger is fair
to Brunswick Bank Stockholders from a financial point of view.
F&M Bancorp, F&M Bank, and Brunswick Bank may, in their discretion,
waive any of these conditions except those summarized in clauses (b) and
(j) above. Brunswick Bank cannot waive the condition summarized in
clause (c) above. No waiver of conditions contained in the Plan will be
made which would have a material adverse effect on Brunswick Bank
Stockholders, without resubmission of the Merger to a vote of Brunswick
Bank Stockholders.
Support Agreements and Undertakings
The directors of Brunswick Bank and certain related Brunswick Bank
Stockholders who may be deemed to be "affiliates" of Brunswick Bank, as
that term is defined under the rules of the Commission, or who may be
restricted from selling their shares of the Common Stock of Brunswick
Bank under the accounting rules applicable to a pooling- of-interests,
have signed an agreement to support and vote the shares of Common Stock
of Brunswick Bank owned or controlled by them to ratify and confirm the
Plan and the Merger. Such persons have also signed agreements to abide
by all limitations imposed by the Securities Act and by all rules,
regulations and releases promulgated thereunder by the Commission with
respect to the sale or other disposition of the shares of the Common
Stock of F&M Bancorp to be received by them pursuant to the Merger, and
to abide by all limitations imposed by the accounting rules for the
Merger to be accounted for as a pooling-of-interests.
-20-
<PAGE>
Federal Income Tax Status
F&M Bancorp, F&M Bank, and Brunswick Bank will receive an opinion of
Messrs. Piper & Marbury, counsel to F&M Bancorp, to the effect that for
Federal income tax purposes, (a) the transfer of all of the assets of
Brunswick Bank to F&M Bank, and the assumption by F&M Bank of the
liabilities of Brunswick Bank pursuant to the terms of the Plan, will
constitute a reorganization within the meaning of Section 368(a)(1)(A)
and (a)(2)(D) of the Code, and Brunswick Bank, F&M Bank and F&M Bancorp
will each be a "party to the reorganization" within the meaning of
Section 368(b) of the Internal Revenue Code; (b) no gain or loss will be
recognized to a Brunswick Bank Stockholder on the conversion of Common
Stock of Brunswick Bank solely into shares of the Common Stock of F&M
Bancorp, and no gain or loss will be recognized to F&M Bancorp or F&M
Bank upon the receipt by F&M Bank of all of the assets of Brunswick Bank
in exchange for shares of the Common Stock of F&M Bancorp and the
assumption by F&M Bank of the liabilities of Brunswick Bank; (c) the
basis of the shares of the Common Stock of F&M Bancorp received by a
Brunswick Bank Stockholder will be the same as the basis of the shares
of the Common Stock of Brunswick Bank which were converted into F&M
Bancorp shares pursuant to the Merger, and the holding period of shares
of the Common Stock of F&M Bancorp received by a Brunswick Bank
Stockholder will include the period during which he held the shares of
the Common Stock of Brunswick Bank which were converted into F&M Bancorp
shares pursuant to the Merger, provided that the Brunswick Bank Common
Stock is held as a capital asset by the Brunswick Bank Stockholder on
the Effective Date; (d) the basis of each asset of Brunswick Bank in the
hands of F&M Bank will be the same as the basis of such asset in the
hands of Brunswick Bank immediately prior to the Merger, and the holding
period of each such asset in the hands of F&M Bank will include the
periods during which such asset was held by Brunswick Bank; (e) no gain
or loss will be recognized to the stockholders of F&M Bancorp as a
result of the transactions contemplated by the Plan; (f) where cash is
received by a Brunswick Bank Stockholder in lieu of a fractional share
of the Common Stock of F&M Bancorp to which the stockholder may be
entitled, such cash will be treated as received by such stockholder as a
distribution in redemption of his fractional share interest; and (g) the
accumulated earnings and profits of Brunswick Bank on the Effective Date
will be added to the accumulated earnings and profits of F&M Bank and
will be available for subsequent distributions of dividends within the
meaning of Section 316 of the Internal Revenue Code.
The opinion does not apply to Brunswick Bank Stockholders who dissent
and receive cash payment for their shares. Any gain or loss resulting
from such cash payments will be recognized by such dissenting
stockholders for Federal income tax purposes. Such dissenting
stockholders should consult their own tax counsel with respect to the
tax treatment of any recognized gain or loss.
F&M Bancorp, F&M Bank and Brunswick Bank have not requested a ruling
from the Internal Revenue Service on the tax treatment of the Merger.
The discussion set forth above is included for general information
only. It does not address the state, local, or foreign tax aspects of
the Merger. In addition, it does not discuss the federal income tax
considerations that may be relevant to certain persons, and may not
apply to certain holders subject to special tax rules, including dealers
in securities and foreign holders. The discussion is based upon
currently existing provisions of the Code, existing Treasury regulations
thereunder and current administrative rulings and court decisions. All
of the foregoing are subject to change and any such change could affect
the continuing validity of this discussion.
EACH BRUNSWICK BANK STOCKHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX
LAWS.
Accounting Treatment
It is expected that the Merger will be treated as a
pooling-of-interests for accounting purposes. The obligations of F&M
Bancorp under the Plan are conditioned upon the receipt by it of a
letter from its independent certified public accountants to the effect
that the Merger qualifies for pooling-of-interests accounting treatment
under generally accepted accounting principles if consummated in
accordance with the Plan. Under the pooling-of-interests method of
accounting, the historical basis of the assets and liabilities of F&M
Bancorp and Brunswick Bank will be
-21-
<PAGE>
combined at the Effective Date and carried forward at their previously
recorded amounts and the stockholders' equity accounts of Brunswick Bank
will be combined on F&M Bancorp's consolidated balance sheet. Income
and other financial statements of F&M Bancorp issued after consummation
of the Merger will be restated retroactively to reflect the consolidated
operations of F&M Bancorp and Brunswick Bank as if the Merger had taken
place prior to the periods covered by such financial statements.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all of the outstanding shares of the Common
Stock of Brunswick Bank must be exchanged for shares of the Common Stock
of F&M Bancorp. It is a condition to F&M Bancorp's obligation to
consummate the Merger that the holders of no more than 8% of the Common
Stock of Brunswick Bank shall have filed with Brunswick Bank at or
before the Special Meeting a notice in writing that they intend to
dissent from the Plan or shall have voted against the Merger. If this
or one of the other conditions to pooling-of-interests accounting
treatment is not satisfied, the Merger would not qualify for the
pooling-of-interests method of accounting, and a condition to F&M
Bancorp's obligation to consummate the Merger would not be fulfilled.
See "-- Rights of Dissenting Shareholders" and "-- Conditions of the
Merger." F&M Bancorp believes that should the Merger be accounted for
as a purchase, such accounting treatment would have a material adverse
effect on the comparative unaudited per share data set forth above.
Individuals who are affiliated with Brunswick Bank have entered into
agreements with F&M Bancorp providing that they will not sell, transfer
or otherwise dispose of shares of the Common Stock of Brunswick Bank
owned by them until such time as financial results covering at least 30
days of combined operations of F&M Bancorp and Brunswick Bank have been
published.
Certain Differences in Rights of Stockholders of Brunswick Bank and F&M
Bancorp
There are certain differences in the rights of holders of the Common
Stock of Brunswick Bank and of the Common Stock of F&M Bancorp under
governing provisions of their respective organizational documents. Some
of these differences are described below.
Holders of the Common Stock of Brunswick Bank generally have
preemptive rights (i.e., the right to subscribe for their pro rata share
of a new issue of Common Stock before it is offered to others for cash).
Holders of the Common Stock of F&M Bancorp do not have preemptive
rights.
The affirmative vote of the holders of two-thirds of the outstanding
shares of the Common Stock of Brunswick Bank is generally required for
mergers, charter amendments and similar extraordinary transactions
involving Brunswick Bank. For F&M Bancorp, the affirmative vote of the
holders of two-thirds of the outstanding shares of its Common Stock is
generally required for mergers and similar extraordinary transactions.
Charter amendments would require an affirmative vote of a majority of
the outstanding shares of Common Stock of F&M Bancorp.
F&M Bancorp's Charter authorizes its Board of Directors to issue one
or more classes and series of stock, including series of preferred
stock. Holders of shares of such preferred stock may have rights with
respect to (among other things) voting, dividends, or liquidation
preferences which are superior to those of holders of the Common Stock
of F&M Bancorp. The issuance of additional classes or series of capital
stock with voting and conversion rights may adversely affect the voting
power of the holders of capital stock of F&M Bancorp, including the loss
of voting control to others. It could also adversely affect F&M
Bancorp's ability to pay dividends to the holders of its Common Stock or
the liquidation preference of the holders of its Common Stock. See
"Investment Considerations -- Additional Classes and Series of Stock."
Brunswick Bank's Charter only authorizes the issuance of shares of its
Common Stock, and does not authorize the issuance of any other class or
series of capital stock.
F&M Bancorp's Charter also contains a provision limiting the personal
liability of its directors and officers to it or its stockholders for
money damages. Under Maryland law, a corporation is permitted to have
such a charter provision. However, under Maryland law this limitation
of money damages does not apply to the extent that (a) the director or
officer actually received an improper benefit in money, property, or
services, for the amount of the benefit or profit in money, property or
services actually received, or (b) a judgment or other final
adjudication adverse to the director or officer is entered in a
proceeding based on a finding in the proceeding that the director's or
officer's action,
-22-
<PAGE>
or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in the proceeding.
Brunswick Bank's Charter does not contain an equivalent provision
limitating the liability of its directors and officers to it or its
stockholders for money damages.
VOTING INFORMATION
Proxy Solicitation
This Proxy Statement/Prospectus and the accompanying proxy material
are furnished in connection with the solicitation of proxies by the
Brunswick Board for the Special Meeting described in the accompanying
notice. The Special Meeting will be held at the offices of Brunswick
Bank, 1 West Potomac Street, Brunswick, Maryland 21716- 0157 on
______________, 1995 at ___ p.m. local time. Only Brunswick Bank
Stockholders of record at the close of business on ________________,
1995 will be entitled to notice of and to vote at the Special Meeting.
At such record date, Brunswick Bank had outstanding and entitled to vote
24,000 shares of Common Stock. Each share of Common Stock entitles the
holder to one vote. Any proxy given may be revoked by a Brunswick Bank
Stockholder at any time prior to its exercise. Such right of revocation
is not limited or subject to compliance with any formal procedure.
F&M Bancorp will pay the costs of printing and mailing this Proxy
Statement/Prospectus. Brunswick Bank will pay all other expenses which
it may incur in the solicitation of proxies. F&M Bancorp will pay
the filing fees in respect of regulatory approvals required in order
to consummate the Merger, including the registration fee of the Commission,
the filing fees in respect of state "blue sky" laws, and the fee
payable to The National Association of Securities Dealers, Inc. in
respect of the listing on the Nasdaq Stock Market (National Market)
of the shares of the Common Stock of F&M Bancorp to be issued pursuant to
the Plan. The parties do not expect to pay compensation for the
solicitation of proxies but may reimburse brokers and other persons
holding stock in their names, or in the names of nominees, for their
expenses for sending proxy material to principals and obtaining the
proxies. In addition to solicitation of proxies by mail, proxies may
be solicited personally or by telephone or telegram by directors,
officers, and employees of Brunswick Bank without additional
compensation to them.
Vote Required
The favorable vote of two-thirds of the shares outstanding of
Brunswick Bank will be required to approve, ratify and confirm the Plan
and the Merger provided for therein. Because the required vote of
Brunswick Bank Stockholders on the Plan and the Merger is based upon the
total number of outstanding shares of the Common Stock of Brunswick
Bank, the failure to submit a proxy card (or the failure to vote in
person at the Special Meeting), the abstention from voting and any
broker non-vote will have the same effect as a vote against the Plan and
the Merger. As of January 10, 1995 the directors of Brunswick Bank as a
group owned beneficially approximately 7,531 shares of the Common Stock
of Brunswick Bank, or approximately 31.38% of the shares outstanding.
All directors of Brunswick Bank and certain persons related thereto have
executed a Support Agreement which contains their respective agreements
with F&M Bancorp to vote the shares they own to approve, ratify and
confirm the Plan and the Merger provided for therein.
All shares of the Common Stock of Brunswick Bank represented by
properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated in such
proxies. If no instructions are indicated, such shares of the Common
Stock of Brunswick Bank represented by such proxies will be voted to
approve, ratify and confirm the Plan and the Merger provided for
therein.
No vote of the stockholders of F&M Bancorp is required to approve the
Merger. Although the favorable vote of two-thirds of the shares
outstanding of F&M Bank is required to approve, ratify and confirm the
Plan and the Merger provided for therein, F&M Bancorp has passed a
resolution to vote all of the shares to approve, ratify and confirm the
Plan and the Merger provided for therein. F&M Bancorp owns all of the
outstanding shares of the capital stock of F&M Bank.
-23-
<PAGE>
Rights of Dissenting Stockholders
A copy of Section 215a of Title 12 of the United States Code is included
as Annex B to this Proxy Statement/Prospectus. Under the provisions of
this statute, each Brunswick Bank Stockholder who objects to the Plan
has the right to demand that he be paid the value of his shares as of
the Effective Date, if and when it is consummated, in cash. This right
is subject to the following conditions: (a) the right of payment applies
only to shares which are voted against approval of the Merger or are
held by a Brunswick Bank Stockholder who has given written notice of
dissent to Brunswick Bank (attention of David E. Brock at The Bank of
Brunswick, 1 West Potomac Street, Brunswick, Maryland 21716) at or prior
to the Special Meeting of stockholders; (b) such Brunswick Bank
Stockholder must, before 30 days after the Effective Date, make a
written demand for payment to F&M Bank (attention of Gordon M. Cooley,
Esquire at F&M Bank, 110 Thomas Johnson Drive, P.O. Box 518, Frederick,
Maryland 21705-0518); and (c) the written demand must be accompanied by
surrender of the stock certificates representing such shares. The
submission of a signed but otherwise unmarked proxy will be voted to
approve, ratify and confirm the Merger and will serve to waive appraisal
rights. Brunswick Bank Stockholders will be notified of the Effective
Date. Failure to comply with any of the foregoing conditions will
result in the loss of the appraisal right described herein.
The value of the dissenting shares will be determined by a committee
of three appraisers. One is to be selected by the owners of a majority
of the dissenting shares, one by the Board of Directors of F&M Bank, and
the third by the two so chosen. The valuation agreed upon by any two
appraisers will govern. If the appraisal is not completed within 90
days after the Effective Date, the Comptroller will upon written request
of any interested party cause an appraisal to be made which shall be
final and binding on all parties. If the value fixed by the appraisers
is not satisfactory to any dissenting stockholder who has requested
payment, the dissenting stockholder may appeal to the Comptroller within
five days after being notified of the valuation. The Comptroller will
then cause a reappraisal to be made. Such reappraisal will be final and
binding as to the value of the shares of the person making the appeal.
The dissenting stockholders will pay the expenses of their appraiser,
F&M Bank will pay the expenses of its appraiser, and the dissenting
stockholders and F&M Bank will share the expense of the third appraiser.
The expenses of the Comptroller in making the reappraisal or appraisal,
as the case may be, will be paid by F&M Bank.
Under the statute, the shares of stock of the surviving corporation
which would have been delivered to dissenting stockholders had they not
requested payment shall be sold at an advertised public auction. If the
price received is greater than the amount paid to any dissenting
stockholder, the excess of such sales price shall be paid to the
dissenting stockholder. Under the Plan, only shares of the Common Stock
of F&M Bancorp are to be issued to Brunswick Bank Stockholders, and no
shares of the Common Stock of F&M Bank are to be issued. F&M Bancorp
therefore intends to take the position that this provision does not
apply to the Merger.
The foregoing does not purport to be a complete statement of the
procedures for the exercise of appraisal rights. The preservation and
exercise of appraisal rights are conditioned on strict observance of the
above-mentioned procedures of Federal law. Each Brunswick Bank
Stockholder who might exercise appraisal rights is therefore urged to
consult such law and strictly observe its requirements.
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<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined balance sheets and the unaudited pro
forma combined statements of income of F&M Bancorp set forth on the
accompanying pages give effect, using the pooling-of-interests method of
accounting, to the proposed Merger of Brunswick Bank with and into F&M
Bank based upon the proposed minimum exchange ratio of nine shares of
the Common Stock of F&M Bancorp for each share of the Common Stock of
Brunswick Bank. The unaudited pro forma balance sheets are presented
as though the proposed merger had occurred on December 31, 1994.
The unaudited pro forma combined income statements are presented as
though the proposed Merger had taken place on January 1, 1992.
The unaudited pro forma combined financial information set forth on the
accompanying pages is for illustrative purposes only, and therefore is
not necessarily indicative of the financial condition or results of
operations of F&M Bancorp as they would have been had the proposed Merger
occurred during the periods presented or as they may be obtained in
the future. This unaudited pro forma combined financial information is
derived from and should be read in conjunction with the consolidated
financial statements of F&M Bancorp, including the notes thereto, which
are incorporated by reference, and the financial statements of Brunswick
Bank, including the notes thereto, which appear elsewhere in this Proxy
Statement/Prospectus.
-25-
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Bank Pro
F&M of Forma
(Dollars in thousands) Bancorp Brunswick Adjustments Combined
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 22,132 $ 1,194 23,326
Federal funds sold 2,100 -- 2,100
Total cash and cash equivalents 24,232 1,194 25,426
Interest bearing deposits with banks -- 100 100
Loans held for sale 149 -- 149
Investment securities:
Held-to-maturity, at amortized cost 86,291 5,363 91,654
Available-for-sale, at fair value 77,649 -- 77,649
Total investment securities 163,940 5,363 169,303
Loans, net of unearned income 459,272 21,122 480,394
Less: Allowance for credit losses (5,522) (271) (5,793)
Net loans 453,750 20,851 474,601
Bank premises and equipment, net 12,927 787 13,714
Other assets 20,258 312 20,570
Total assets $675,256 $28,607 $703,863
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing $ 86,341 $ 4,222 $ 90,563
Interest-bearing 489,955 21,656 511,611
Total deposits 576,296 25,878 602,174
Federal funds purchased and securities
sold under agreements to repurchase 31,959 -- 31,959
Other short-term borrowings 1,933 -- 1,933
Accrued interest and other liabilities 5,819 96 5,915
Total liabilities 616,007 25,974 641,981
Shareholders' Equity
Common Stock 19,735 300 780 20,815
Surplus 19,614 1,500 (780) 20,334
Retained earnings 22,873 833 23,706
Net unrealized loss on securities
available for sale (2,973) -- (2,973)
Total shareholders' equity 59,249 2,633 61,882
Total liabilities and shareholders'
equity $675,256 $28,607 $703,863
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
Bank Pro
F&M of Forma
(Dollars in thousands) Bancorp Brunswick Adjustments Combined
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 16,848 $ 1,330 $ 18,178
Federal funds sold 7,275 2,209 9,484
Total cash and cash equivalents 24,123 3,539 27,662
Interest bearing deposits with banks -- 200 200
Loans held for sale 8,696 -- 8,696
Investment securities:
Held-to-maturity, at amortized cost 27,487 5,108 32,595
Available-for-sale, at fair value 142,021 -- 142,021
Total investment securities 169,508 5,108 174,616
Loans, net of unearned income 396,337 19,289 415,626
Less: Allowance for credit losses (5,460) (245) (5,705)
Net loans 390,877 19,044 409,921
Bank premises and equipment, net 11,870 732 12,602
Other assets 12,594 323 12,917
Total assets $617,668 $28,946 $646,614
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing $ 72,594 $ 4,069 $ 76,663
Interest-bearing 449,560 22,319 471,879
Total deposits 522,154 26,388 548,542
Federal funds purchased and
securities sold under agreements
to repurchase 30,377 -- 30,377
Other short-term borrowings 2,014 -- 2,014
Accrued interest and other liabilities 4,484 67 4,551
Total liabilities 559,029 26,455 585,484
Shareholders' Equity
Common Stock 18,728 300 780 19,808
Surplus 15,811 1,500 (780) 16,531
Retained earnings 22,589 691 23,280
Net unrealized gain on
securities available for sale 1,511 -- 1,511
Total shareholders' equity 58,639 2,491 61,130
Total liabilities and
shareholders' equity $617,668 $28,946 $646,614
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME FOR THE YEAR ENDED
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Bank
F&M of Pro Forma
(Dollars in thousands except for per share amounts) Bancorp Brunswick Combined
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $35,988 $1,692 $37,680
Interest and dividends on investment securities:
Taxable 5,227 286 5,513
Tax-exempt 3,567 36 3,603
Interest on federal funds sold 222 68 290
Other interest income -- 20 20
Total interest income 45,004 2,102 47,106
Interest expense:
Interest on deposits 15,854 714 16,568
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,208 -- 1,208
Interest on other short-term borrowings 82 -- 82
Total interest expense 17,144 714 17,858
Net interest income 27,860 1,388 29,248
Provision for credit losses 900 10 910
Net interest income after provision for credit losses 26,960 1,378 28,338
Noninterest income:
Trust income 1,144 -- 1,144
Service charges on deposit accounts 2,193 82 2,275
Net gains on sales of securities -- -- --
Net gains on sales of property 725 -- 725
Other operating income 2,629 27 2,656
Total noninterest income 6,691 109 6,800
Noninterest expense:
Salaries and employee benefits 11,620 637 12,257
Occupancy expense 1,437 55 1,492
Equipment expense 1,085 97 1,182
Other operating expense 8,652 413 9,065
Total noninterest expense 22,794 1,202 23,996
Income before provision for income taxes 10,857 285 11,142
Provision for income taxes 2,901 90 2,991
Net income $ 7,956 $ 195 $ 8,151
Earnings per Common Share:
Net income $2.02 $8.11 $1.96
Weighted average number of shares 3,938,805 24,000 4,154,805
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME FOR THE YEAR ENDED
DECEMBER 31, 1993
<TABLE>
<CAPTION>
Bank
F&M of Pro Forma
(Dollars in thousands except for per share amounts) Bancorp Brunswick Combined
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 34,842 $ 1,739 $ 36,581
Interest and dividends on investment securities:
Taxable 5,217 325 5,542
Tax-exempt 3,306 14 3,320
Interest on federal funds sold 322 64 386
Other interest income -- 28 28
Total interest income 43,687 2,170 45,857
Interest expense:
Interest on deposits 15,721 768 16,489
Interest on federal funds purchased and securities
sold under agreements to repurchase 854 -- 854
Interest on other short-term borrowings 48 -- 48
Total interest expense 16,623 768 17,391
Net interest income 27,064 1,402 28,466
Provision for credit losses 1,500 30 1,530
Net interest income after provision for credit losses 25,564 1,372 26,936
Noninterest income:
Trust income 1,091 -- 1,091
Service charges on deposit accounts 1,854 82 1,936
Net gains on sales of securities 2 -- 2
Net gains (losses) on sales of property 139 (47) 92
Other operating income 2,836 35 2,871
Total noninterest income 5,922 70 5,992
Noninterest expense:
Salaries and employee benefits 10,575 629 11,204
Occupancy expense 1,392 56 1,448
Equipment expense 1,048 86 1,134
Other operating expense 7,740 436 8,176
Total noninterest expense 20,755 1,207 21,962
Income before provision for income taxes 10,731 235 10,966
Provision for income taxes 3,128 75 3,203
Net income $ 7,603 $ 160 $ 7,763
Earnings per Common Share:
Net income $1.94 $6.68 $1.87
Weighted average number of shares 3,924,310 24,000 4,140,310
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME FOR THE YEAR ENDED
DECEMBER 31, 1992
<TABLE>
<CAPTION>
Bank
F&M of Pro Forma
(Dollars in thousands except for per share amounts) Bancorp Brunswick Combined
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 37,142 $ 1,640 $ 38,782
Interest and dividends on investment securities:
Taxable 5,262 365 5,627
Tax-exempt 3,092 20 3,116
Interest on federal funds sold 294 117 411
Other interest income -- 66 66
Total interest income 45,790 2,212 48,002
Interest expense:
Interest on deposits 18,640 1,027 19,667
Interest on federal funds purchased and securities
sold under agreements to repurchase 825 -- 825
Interest on other short-term borrowings 59 -- 59
Total interest expense 19,524 1,027 20,551
Net interest income 26,266 1,185 27,451
Provision for credit losses 2,615 47 2,662
Net interest income after provision for credit losses 23,651 1,138 24,789
Noninterest income:
Trust income 771 -- 771
Service charges on deposit accounts 1,789 114 1,903
Net gains (losses) on sales of securities 619 (1) 618
Net gains on sales of property 32 24 56
Other operating income 2,438 40 2,478
Total noninterest income 5,649 177 5,826
Noninterest expense:
Salaries and employee benefits 10,036 586 10,622
Occupancy expense 1,306 139 1,445
Equipment expense 1,040 -- 1,040
Other operating expense 7,043 379 7,422
Total noninterest expense 19,425 1,104 20,529
Income before provision for income taxes 9,875 211 10,086
Provision for income taxes 2,758 59 2,817
Net income $ 7,117 $ 152 $ 7,269
Earnings per Common Share:
Net income $1.82 $6.31 $1.76
Weighted average number of shares 3,917,997 24,000 4,133,997
</TABLE>
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<PAGE>
DESCRIPTION OF F&M BANCORP
F&M Bancorp is a registered bank holding company headquartered in
Frederick, Maryland. F&M Bancorp was organized under the laws of
the State of Maryland in 1983, and became the sole stockholder of
F&M Bank through a reorganization completed in 1984. F&M Bank is F&M
Bancorp's sole direct subsidiary. As a bank holding company, F&M
Bancorp engages in a general banking and trust company business
through F&M Bank. The latter operates 19 offices in Frederick, Carroll,
and Montgomery Counties, Maryland. As of December 31, 1994, F&M
Bancorp had consolidated total assets of approximately $675 million.
F&M Bancorp's principal asset is all of the issued and outstanding
capital stock of F&M Bank. F&M Bank is insured by Federal Deposit
Insurance Corporation (the "FDIC") and is a member of the Federal
Reserve System (the "FRB").
As a registered bank holding company, F&M Bancorp is subject to
regulation under the Federal Bank Holding Company Act of 1956, as
amended, and the rules adopted by the FRB thereunder. Under
applicable FRB policies, a bank holding company such as F&M Bancorp is
expected to act as a source of financial strength to its subsidiary
banks and to commit resources to support its subsidiary banks in
circumstances when it might not do so absent such a policy. Any capital
loans made by a bank holding company to a subsidiary bank would be
subordinate in right of payment to the claims of depositors and certain
other creditors of such subsidiary bank.
The principal executive offices of F&M Bancorp are located at 110 Thomas
Johnson Drive, Frederick, Maryland 21702. Its telephone number is
(301) 694-4000.
General Description of F&M Bancorp's Common Stock, Charter, and By-Laws
The authorized capital of F&M Bancorp consists exclusively of 10,000,000
shares of capital stock, par value $5.00 per share. All are
initially classified as Common Stock. As of December 31, 1994,
there were issued and outstanding 3,946,984 shares of the Common Stock
of F&M Bancorp, which were held by 2,746 owners of record, and
there were 171,530 shares issuable upon the exercise of options to
purchase its Common Stock. F&M Bancorp has issued no warrants to
purchase its Common Stock. On April 12, 1994, the Board of
Directors of F&M Bancorp declared a 5% stock dividend, which was
distributed on May 23, 1994 to stockholders of record as of April
22, 1994. The Common Stock of F&M Bancorp is listed for quotation on the
Nasdaq Stock Market (National Market) under the symbol "FMBN."
The holders of the Common Stock of F&M Bancorp are entitled to one vote
per share on all matters submitted to a vote of the stockholders
and may not cumulate their votes for the election of directors.
Subject to the voting rights of the holders of preferred stock, if any,
the exclusive voting power for all purposes is vested in the
holders of the Common Stock. Each share of the Common Stock of F&M
Bancorp is entitled to participate on a pro rata basis in dividends
and other distributions. The holders of the Common Stock of F&M
Bancorp Stock do not have preemptive rights to subscribe for additional
shares that may be issued by F&M Bancorp, and no share is entitled
in any manner to any preference over any other share. The shares of the
Common Stock of F&M Bancorp to be issued to Brunswick Bank
Stockholders pursuant to the Merger will be fully paid and
non-assessable and the holders thereof will not be subject to call or
assessment under Maryland law. First National Bank of Maryland
serves as the transfer agent for F&M Bancorp.
The Board of Directors of F&M Bancorp may classify and reclassify any
unissued shares of capital stock into other classes and series,
including one or more series of preferred stock, by setting or
changing in any one or more respects the preferences, conversion or
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of such
shares of stock. Such stock may rank senior to the Common Stock in
one or more respects.
F&M Bancorp's Charter may be amended by resolution of its Board of
Directors, setting forth the proposed amendment and declaring it
advisable, followed by the affirmative vote of a majority of all
stockholders entitled to vote on the matter. F&M Bancorp's By-Laws may
be amended by a majority of votes cast at an annual or special
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meeting of the stockholders at which a quorum is present, or by a
majority of votes cast at a regular or special meeting of directors
at which a quorum is present.
F&M Bancorp's Charter provides that the number of directors of F&M
Bancorp shall be 15 and thereafter may be increased or decreased
pursuant to the By-Laws of F&M Bancorp, but shall never be less
than the minimum number permitted by Maryland law. The By-Laws allow a
maximum of 25 directors. The Charter of F&M Bancorp does not
classify the Board of Directors; therefore, all directors are elected
as a single class each year.
Pursuant to its By-Laws, F&M Bancorp holds annual meetings of its
stockholders to elect directors. Except as may be otherwise
provided by its Charter or by statute, any business may be
considered at an annual meeting without the purpose of the meeting
having been specified in the notice sent to stockholders with
respect thereto. Special meetings of stockholders may be called by the
Chairman of the Board of the President or by a majority of the
Board of Directors by vote at a meeting or in writing with or without a
meeting.
Pursuant to the By-Laws, the holders of the Common Stock of F&M Bancorp
may remove any director, with or without cause, by the affirmative vote
of a majority of all the votes entitled to be cast for the election of
directors. Subject to the rights of the holders of preferred stock, if
any, the holders of the Common Stock of F&M Bancorp may elect a
successor to fill a vacancy on the Board of Directors which results from
the removal of a director. A director elected by the stockholders to
fill such a vacancy serves for the balance of the term of the
removed director. A majority of the remaining directors, whether or not
sufficient to constitute a quorum, may fill a vacancy on the Board
of Directors which results from any cause except an increase in the
number of directors. A majority of the entire Board of Directors
may fill a vacancy which results from an increase in the number of
directors. A director elected by the Board of Directors to fill a
vacancy serves until the next annual meeting of stockholders and
until his successor is elected and qualifies.
Business Combinations
Maryland law prohibits certain "business combinations" (including a
merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of
equity securities) between a Maryland corporation and an "Interested
Stockholder." Interested Stockholders are all persons (a) who
beneficially own 10% or more of the voting power of the corporation's
shares or (b) an affiliate or associate of the corporation who, at
any time within the two-year period prior to the date in question, was
an Interested Stockholder or an affiliate or an associate thereof.
Such business combinations are prohibited for five years after the
most recent date on which the Interested Stockholder became an
Interested Stockholder. Thereafter, any such business combination
must be recommended by the board of directors of such corporation and
approved by the affirmative vote of at least (a) 80% of the votes
entitled to be cast by all holders of voting shares of the corporation,
and (b) 66 2/3% of the votes entitled to be cast by all holders of
voting shares of the corporation other than voting shares held by
the Interested Stockholder or an affiliate or associate of the
Interested Stockholder, with whom the business combination is to be
effected, unless, among other things, the corporation's stockholders
receive a minimum price (as defined in Maryland law) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Stockholder for its shares. These
provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the Board of Directors of
the corporation prior to the time that the Interested Stockholder
becomes an Interested Stockholder. A Maryland corporation may adopt an
amendment to its charter electing not to be subject to the special
voting requirements of the foregoing legislation. Any such amendment
would have to be approved by the affirmative vote of at least 80%
of the votes entitled to be cast by all holders of outstanding
shares of voting stock and 66 2/3% of the votes entitled to be cast by
holders of outstanding shares of voting stock who are not
Interested Stockholders. F&M Bancorp has not adopted such an amendment
to its Charter.
Control Share Acquisitions
Maryland law provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights
except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by
the acquiror or by officers or directors who are employees of the
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corporation. Control shares are voting shares of stock which, if
aggregated with all other shares of stock previously acquired by
such a person, would entitle the acquiror to exercise voting power
in electing directors within one of the following ranges of voting
power: (a) 20% or more but less than 33 1/3%; (b) 33 1/3% or more
but less than a majority; or (c) a majority of all voting power.
Control shares do not include shares of stock an acquiring person
is entitled to vote as a result of having previously obtained
stockholder approval. A control share acquisition means, subject
to certain exceptions, the acquisition of, ownership of, or the power
to direct the exercise of voting power with respect to, control
shares.
A person who has made or proposes to make a "control share acquisition,"
upon satisfaction of certain conditions (including an undertaking
to pay expenses), may compel the board of directors to call a
special meeting of stockholders to be held within 50 days of demand
therefor to consider the voting rights of the shares. If no
request for a meeting is made, the corporation may itself present the
question at any stockholders' meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as permitted
by the statute, then, subject to certain conditions and
limitations, the corporation may redeem any or all of the control shares
(except those for which voting rights have previously been
approved) for fair value determined, without regard to voting rights, as
of the date of the last control share acquisition or of any meeting
of stockholders at which the voting rights of such shares are considered
and not approved. If voting rights for "control shares" are
approved at a stockholders' meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the
stock as determined for purposes of such appraisal rights may not be
less than the highest price per share paid in the control share
acquisition, and certain limitations and restrictions otherwise
applicable to the exercise of dissenters' rights do not apply in
the context of a "control share acquisition."
The control share acquisition statute does not apply to stock acquired
in a merger, consolidation or stock exchange if the corporation is
a party to the transaction, or to acquisitions previously approved
or exempted by a provision in the charter or by-laws of the corporation.
F&M Bancorp has not adopted such a provision in its Charter or
By-Laws.
Dividends and Liquidation Preferences
Subject to the rights of the holders of preferred stock, if any, the
holders of the Common Stock of F&M Bancorp are entitled to receive
dividends at such time and in such amounts as the Board of
Directors deems advisable. F&M Bancorp has in the past paid quarterly
cash dividends to its stockholders on or about the 1st day of
February, May, August, and November of each year. F&M Bancorp paid per
share dividends totalling $0.70, $0.75, and $0.78 during 1992,
1993, and 1994, respectively. In the event of any liquidation,
dissolution or winding up of F&M Bancorp, after payment or providing for
the payment of all liabilities and amounts due the holders of
preferred stock, if any, the holders of Common Stock, are entitled to
share ratably in all the remaining assets.
The ability of F&M Bancorp to pay dividends to its stockholders is
dependent primarily upon the earnings and financial condition of
F&M Bank. For the foreseeable future, funds for the payment of
dividends on the Common Stock of F&M Bancorp will be obtained primarily
from dividends paid to F&M Bancorp by F&M Bank. Such dividends are
subject to certain statutory limitations.
Indemnification and Limitation of Liability
The Charter of F&M Bancorp requires it to indemnify its directors and
officers to the full extent provided by the general laws of the
State of Maryland then in force, including the advance of expenses
under the procedures provided by law. The Charter of F&M Bancorp also
authorizes it to indemnify its officers who are not directors to
such further extent as shall be authorized by the Board of Directors and
be consistent with law. These Charter provisions do not limit the
authority of F&M Bancorp to indemnify other employees and agents
consistent with law. Maryland law permits a corporation to indemnify its
directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party
by reason of their service in those or other capacities, unless it
is established that (a)
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the act or omission of the director or officer
was material to the matter giving rise to such proceeding and (i)
was committed in bad faith or (ii) was the result of active and
deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services, or
(c) in the case of any criminal proceeding, the director or officer
had reasonable cause to believe that the action or omission was
unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling
F&M Bancorp pursuant to the foregoing provisions, F&M Bancorp has
been informed that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is
therefore unenforceable.
As permitted by Maryland law, F&M Bancorp has Charter provisions
limiting the personal liability of directors and officers to F&M
Bancorp or its stockholders for money damages to the fullest extent
permitted by Maryland law. Maryland law does not permit such Charter
provisions to limit liability (a) for, and to the extent of, actual
receipt of an improper benefit in money, property or services or (b) in
respect of any adjudication based upon a finding of active and
deliberate dishonesty which was material to the cause of action
adjudicated. The Charter provisions do not affect potential liability
of directors and officers to third parties, such as creditors of
F&M Bancorp.
DESCRIPTION OF BRUNSWICK BANK
Brunswick Bank was incorporated under the laws of the State of Maryland
in 1915 to serve The Town of Brunswick, Maryland and surrounding
areas as a full-service banking institution. Currently, Brunswick
Bank has one other full-service retail branch facility located in
Jefferson, Maryland. Brunswick Bank seeks to provide a high level
of personal service while offering a varied range of financial products
to individuals and small businesses in the Brunswick market area.
Brunswick Bank has a wide variety of types of depositors and
borrowers, but has chosen to concentrate on small businesses and
individual retail customers as its primary target market.
Brunswick Bank's market area covers the western part of Frederick
County, Maryland, the southern tip of Washington County, Maryland,
the eastern tip of Jefferson County, West Virginia and the northern
tip of Loudoun County, Virginia.
Lending Activities
Brunswick Bank offers a full spectrum of lending services to its
customers, including commercial loans, lines of credit, residential
mortgages, home equity loans, personal loans, automobile loans, and
financing arrangements for personal and business equipment. Loan terms,
including interest rates, loan to value ratios and maturities are
tailored as much as possible to the needs of the borrower. A specific
effort is made to keep loan products as flexible as possible within
the guidelines of prudent banking practices in terms of interest
rate risk and credit risk.
In evaluating loan applications, the primary factors taken into
consideration by Brunswick Bank are the ability of the borrowers to
repay the loan from cash flow and the character and integrity of
the borrower. Additional considerations are the financial condition of
the borrower and the value of any underlying collateral. These
factors are evaluated in a number of ways, including financial statement
analysis, credit reference reviews, and on-site visitations.
Brunswick Bank maintains a conservative policy concerning the degree of
authority granted to individual loan officers. Individual and/or
aggregate loan requests require the approval of the Loan Committee
of the Brunswick Board when they exceed $250,000 for residential real
estate loans or $175,000 for loans secured by marketable securities
or other collateral. Generally, Brunswick Bank requires personal
guarantees from one or more of the principals of any entity borrowing
money from it.
Loan business is generated primarily through referrals and
direct-calling efforts. Referrals of loan business come from
Brunswick Bank's directors, present clients of Brunswick Bank, and
professionals, such as lawyers, accountants and financial
intermediaries.
At December 31, 1994, the statutory lending limit to any single borrower
was $394,921 for Brunswick Bank, subject to certain exceptions
available under applicable law. Brunswick Bank extends loans to
its directors and
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executive officers and their related interests only on
the same terms and conditions under which it extends loans to
unaffiliated persons, and limits the aggregate principal amount of such
loans to 100% of capital. At December 31, 1994, the aggregate
principal amount of all direct and indirect loans to directors,
executive officers, employees and their related interests was $568,799.
The following table sets forth the types and amounts of loans made by
Brunswick Bank over the past two years, as well as the respective
proportions of all of the loans of Brunswick Bank which they
represent.
1994 1993
Mortgage $17,157,905 82% $16,513,275 87%
Construction 1,738,812 8% 1,236,608 6%
Commercial 1,197,368 6% 595,561 3%
Installment 1,028,157 5% 943,694 5%
Total Loans 21,122,242 101% 19,289,138 101%
Less allowance for loan losses (271,259) (1%) (245,317) (1%)
Net Loans $20,850,983 100% $19,043,821 100%
For the following types of loans, the maturities are as follows at
December 31, 1994. All of Brunswick Bank's loans have fixed rates, and
it therefore has no floating rate loans.
<TABLE>
<CAPTION>
Loans
Due in one year or Due after one year Due after five
less: but in five or less: years: Amounts
<S> <C> <C> <C> <C>
Construction $ 1,738,812 $ -- $ -- $ 1,738,812
Commercial 1,022,929 174,439 -- 1,197,368
$ 2,936,180
</TABLE>
Brunswick Bank's rollover policy for loan renewals is that loans that
are not current may not be renewed until the loan principal and interest
are brought current. This analysis is performed on a customer basis
whereby all loans with a customer are reviewed at the time of renewal
and no loan with a customer may be renewed if any other loan with that
customer is past due.
Commercial Loans. Commercial loans are written for any business
purpose, equipment purchases, the carrying of accounts receivable, and
the acquisition and construction of rental real estate projects.
Brunswick Bank actively lends to the commercial real estate segment of
the local economy. This type of lending is usually restricted to small
commercial real estate loans.
Residential Mortgage and Home Equity Loans. Brunswick Bank
originates residential mortgage loans in its market area for the
purposes of purchasing, refinancing and construction of new homes.
Brunswick Bank participates in the secondary market through the
Prudential Home Mortgage (Homeowners Network) and private investors, as
well as through its own portfolio of residential real estate loans. All
loans are documented with conforming credit and closing information. In
addition, Brunswick Bank has developed a home equity line of credit
product for its customers. The flexibility of this product permits the
customers to manage their own credit needs on an ongoing basis.
Other Loans. Loans are considered for any worthwhile personal or
business purpose on a case-by-case basis, such as the financing of
automobiles, boats and other durable goods as well as those previously
discussed. The bank does not make any foreign loans.
Risk Elements. No loans were on non-accrual status at December 31,
1994. There were no troubled debt restructurings during 1994 or 1993.
There were no loans 90 days past due or greater; loans 45 days past due
at December 31, 1994 amounted to only $500.
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<PAGE>
Brunswick Bank maintains a "Watch List." Criteria for inclusion on
the list are past performance, potential collection problems based on
management's knowledge of the customer and delinquent payments. At
December 31, 1994, the total of all loans included on Brunswick Bank's
Watch List was $385,000. None of the loans on the Watch List was on
non-accrual status or past due by more than 30 days.
Aside from its concentration in real estate mortgage loans, Brunswick
Bank does not have any concentrations. Total loans to insiders, as
discussed in Note 7 of the financial statements, represent 2.7% of the
outstanding loans.
Summary of Loan Loss Experience. The allowance for loan losses is
established through a provision for loan losses charged to expense.
Loans are charged against the allowance for loan losses when management
believes that the collectibility of the principal is unlikely. The
allowance is an amount that Brunswick Bank's management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and
prior loan loss experience. The evaluations take into consideration
such factors as changes in the nature and volume of the loan portfolio,
overall portfolio quality, review of specific problem loans, and current
economic conditions that may affect the borrowers' ability to pay.
Because 93% of the loan portfolio is in the form of mortgages and loan
losses in general are not significant, and because of the quality of the
existing portfolio, management provides a general reserve based on a
percent of the total outstanding loans. A breakdown by category is not
material or meaningful for Brunswick Bank.
The following table presents a summary of Brunswick Bank's loan loss
experience over the past two years.
1994 1993
Allowance for Loan Losses,
Beginning of Period $ 245,317 $ 196,390
Charge-offs
Mortgage -- --
Construction -- --
Commercial -- 600
Installment 3,112 23,207
Total Charge-offs 3,112 23,807
Recoveries
Mortgage -- --
Construction -- --
Commercial -- 7,500
Installment 19,054 35,234
Total Recoveries 19,054 42,734
Net Recoveries 15,942 18,927
Provision charged to operations 10,000 30,000
Allowance for Loan Losses,
End of Period $ 271,259 $245,317
Loans outstanding at December 31 $21,122,242 $19,289,138
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The following table sets forth loan loss-related items as percentages
of selected items:
1994 1993
Allowance for Loan Losses at December 31, as a
percentage of outstanding loans 1.28% 1.27%
Provision for Loan Losses for the year ended
December 31, as a percentage of outstanding
loans 0.05% 0.16%
Recoveries, net of charge-offs, for the year ended
December 31, as a percentage of outstanding
loans 0.08% 0.10%
Recoveries, net of charge-offs, as a percentage of
net income 8.19% 11.81%
Investment Activities
The investment policy of Brunswick Bank is an integral part of its
overall asset/liability management program. Brunswick Bank's investment
policy is to establish a portfolio which will provide liquidity
necessary to facilitate funding of loans and to cover deposit
fluctuations while at the same time achieving a satisfactory return on
the funds invested. Brunswick Bank seeks to maximize earnings from its
investment portfolio consistent with the safety and liquidity of those
investment assets.
Brunswick Bank is subject to government regulation regarding the
securities in which it may invest. For the most part, these are limited
to securities which are considered investment grade securities. In
addition, Brunswick Bank has its own internal investment policy which
restricts investments to the following categories of securities: U.S.
Treasury securities; obligations of U.S. government agencies and
corporations; mortgage-backed securities, including securities issued by
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation; securities of states and political subdivisions; and
corporate debt, all of which must be considered investment grade by a
recognized rating service.
Sources of Funds
Deposits obtained through Brunswick Bank's offices have traditionally
been the principal source of its funds for use in lending and for other
general business purposes. At December 31, 1994, total deposits in
Brunswick Bank amounted to approximately $25.9 million. Certificates of
deposit and savings deposits are Brunswick Bank's primary source of
deposit funds, representing over 60% of the deposit base.
In order to serve better the needs of its customers, Brunswick Bank
offers several deposit options including IRAs, standard savings,
checking, and NOW accounts.
Community Reinvestment Act
In order to respond to the needs and concerns of the communities which
it serves, Brunswick Bank has consistently sought to ascertain the needs
of its customers and prospective customers. To this end, officers and
representatives of Brunswick Bank meet and discuss credit needs and
programs with community groups and organizations and representatives of
government and agencies.
Brunswick Bank promotes the active involvement of its employees in
community groups and civic associations, and maintains contact with
public officials in Frederick County. Branch managers and lenders
determine from this involvement and contact how best to address credit
needs in the market place. Brunswick Bank's residential real estate
lending area originates a large number of mortgage loans. Brunswick Bank
also helps meet the needs of its community by providing extended service
hours and an officer calling program. Brunswick Bank also has deposit
products and services that are cost effectively geared to all segments
of its community.
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<PAGE>
Properties
Brunswick Bank owns the buildings in which both its Brunswick and
Jefferson, Maryland offices are located. The branch in Jefferson
consists of a one story building. The building has three full-service
drive-up facilities with a drive-up automated teller machine attached.
The Brunswick office is a two story building with an attached drive-up
facility that has one drive-up lane and one walk-up window.
Market for Company Common Stock; Dividends
The Common Stock of Brunswick Bank is not currently traded or listed
on any exchange or automated quotation system and historically has not
been actively traded.
Holders of the Common Stock of Brunswick Bank are entitled to receive
dividends as and when declared by the Brunswick Board. Historically,
Brunswick Bank has paid quarterly cash dividends on or about January
6th, April 6th, July 6th, and October 6th of each year. Generally,
declaration of cash dividends by the Brunswick Board depends on a number
of factors, including capital requirements, regulatory limitations, the
operating results and financial condition of Brunswick Bank, and general
economic conditions.
The Common Stock of Brunswick Bank is not registered under the
Federal securities laws and is not listed on a national securities
exchange. Trades in the Common Stock of Brunswick Bank are made in the
over-the-counter market through privately negotiated transactions. The
table below sets forth the highest known prices at which the Common
Stock of Brunswick Bank has traded since the third quarter of 1993. This
information has been obtained from Ferris, Baker Watts Incorporated and
does not necessarily reflect the actual market or intrinsic value of the
Common Stock of Brunswick Bank, due to the sporadic nature of the trades
in the absence of an organized and active market.
Year and Quarter Highest Dividends
Known Price Declared
1993:
Third Quarter $105 $0.55
Fourth Quarter 105 0.55
1994:
First Quarter 112 0.55
Second Quarter 108 0.55
Third Quarter 109 0.55
Fourth Quarter 110 0.55
1995:
First Quarter * 0.55
________________________
* There were no trades during this quarter.
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MANAGEMENT OF BRUNSWICK BANK
Directors and Executive Officers of Brunswick Bank
The following table sets forth the respective name and age of each
director and executive officer of Brunswick Bank. Each of the following
persons shall serve in the capacity noted until the earlier of the
consummation of the Merger or until his successor is elected and
qualified.
<TABLE>
<CAPTION>
Principal Occupation
Name and (Age) Served as Director Since During Past Five Years
<S> <C> <C>
M. Roland Biser (71) 1973 Retired
David E. Brock (47) 1991 President of Brunswick Bank
John T. Croghan (71) 1984 Owner of John T. Croghan, Inc., a
general contractor
Herbert L. Daugherty (66) 1980 President of Herb Daugherty Real Estate,
Inc.
James A. Draper (40) 1992 Partner of Draper & McGinley, Certified
Public Accountants
William A. Hemp (41) 1980 President of Hemps, Inc.
Robert G. Hooper (52) 1978 Managing Director and Branch
Manager of Ferris, Baker Watts
Incorporated
Forrest G. Moler, Jr. (1) (63) 1982 Retired
Robert K. Moler (1) (67) 1963 Retired; former owner of
Prescription Arts, Inc.
William E. Sauser (53) 1982 Attorney and part owner of Sauser
& Blair, P.A.
Charles Thornton (40) 1993 Certified Public Accountant,
Charles Thornton, CPA
Floyd C. Wickham (73) 1978 Retired
</TABLE>
________________________
(1) Messrs. Forest G. Moler, Jr. and Robert K. Moler are brothers.
Remuneration of Directors and Officers
The following table sets forth information concerning the aggregate
annual remuneration of each of the three highest paid officers during
Brunswick Bank's fiscal year ended December 31, 1994.
Capacity in Which
Name of Individual Remuneration was Received Aggregate Remuneration
David E. Brock (1) President $64,863
Faith Foster Assistant Vice-President 34,788
Melody K. Marshall Secretary and Cashier 30,115
________________________
(1) See "--Interest of Management and Others in Certain Transactions"
and "Proposed Merger of Brunswick Bank and F&M Bank - Interests of
Certain Persons in the Merger" for a description of certain
compensation arrangements with Mr. Brock.
Stock Ownership of Directors and Officers of Brunswick Bank
The following table sets forth certain information regarding each
director and executive officer of Brunswick Bank and shows the number
and percentage of shares of the Common Stock of Brunswick Bank
beneficially owned as
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of December 1, 1994 by each officer or director of
Brunswick and each person known by Brunswick Bank to own beneficially
more than five percent of the Common Stock of Brunswick Bank. Except as
otherwise indicated, all shares are owned directly, and each person
possesses sole voting and investment power with respect to all shares of
the Common Stock of Brunswick Bank owned by such person.
Number of Shares Percentage of
Name Beneficially Owned Class
M. Roland Biser 140 * %
David E. Brock 9 *
John T. Croghan 2,128 8.87
Herbert L. Daugherty (1) 627 2.61
James A. Draper 612 2.55
William A. Hemp 255 1.06
Robert G. Hooper 480 2.00
Dixie D. Kilham (2) 546 2.28
Forrest G. Moler, Jr. (3) 408 2.00
Robert K. Moler (3) 1,756 7.32
William E. Sauser 100 *
Charles Thornton 161 *
Floyd C. Wickham 309 1.29
All Directors and executive
officers as a group
(13 persons) 7,531 31.38%
________________________
* Less than 1%.
(1) Includes 327 shares in the name of Herbert L. Daugherty Real Estate,
a corporation wholly owned by Mr. Daugherty.
(2) Mr. Kilham retired from the Brunswick Board in 1995 upon attaining
the mandatory retirement age provided by Brunswick Bank's By-Laws.
(3) Includes 595 shares in the name of Moler Company, a corporation
owned by Robert K. Moler and Forrest G. Moler, Jr. Also includes
328 shares held by Helen Moler which Robert K. Moler has authority
to vote pursuant to a power of attorney.
Interest of Management and Others in Certain Transactions
In 1993 and 1994, and up to the present time, Brunswick Bank entered
into transactions with certain of its officers, directors or associates.
All consisted of extensions of credit by Brunswick Bank in the ordinary
course of its business. Each transaction was made on substantially the
same terms, including interest rates, collateral requirements, and
repayment terms, as those prevailing at the time for comparable
transactions with the general public. In the opinion of management,
none of the transactions involve more than the normal risk of
collectability or present other unfavorable features. Brunswick Bank
has had, and expects in the future to have, banking transactions in the
ordinary course of its business with its directors, officers and their
associates, on the same terms, including interest rates, collateral
requirements, and repayment terms on loans, as those prevailing at the
same time for comparable transactions with others.
As set forth in "Remuneration of Directors and Officers," Mr. Brock
received compensation for his services as President and Chief Executive
Officer of $64,863 in 1994. In 1993 Mr. Brock received compensation of
approximately $61,000 for such services.
-40-
<PAGE>
EXPERTS
The financial statements of F&M Bancorp as of December 31, 1994 and
1993 and for the three years ended December 31, 1994, which are included
in F&M Bancorp's Annual Report on Form 10-K for the year ended December
31, 1994 and are presented or incorporated by reference in this Proxy
Statement/Prospectus, have been audited by Keller Bruner & Company,
L.L.C., independent public accountants as indicated in their reports
with respect thereto, and are presented or incorporated herein in
reliance upon the authority of said firm as experts in giving said
reports.
The financial statements of Brunswick Bank as of December 31, 1994
and 1993 have been audited by Linton, Shafer & Company, P.A.,
independent public accountants as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the shares of the Common Stock of F&M Bancorp to be
issued in connection with the Merger will be passed upon by the law firm
of Piper & Marbury, counsel to F&M Bancorp. Piper & Marbury will also
pass upon the tax consequences of the Merger. As of February 16, 1995,
the partners and associates of Piper & Marbury owned beneficially and in
the aggregate 2,450 shares of the Common Stock of F&M Bancorp. Piper &
Marbury is located at 36 South Charles Street, Baltimore, Maryland. The
law firm of Venable, Baetjer and Howard, LLP, located at 1800 Mercantile
Bank & Trust Building, Two Hopkins Plaza, Baltimore, Maryland, has acted
as special counsel to Brunswick Bank in connection with the Merger.
OTHER MATTERS
The Brunswick Board knows of no other matters other than those
discussed in this Proxy Statement/Prospectus which will be presented at
the Special Meeting. However, if any other matters are properly brought
before the Special Meeting, any proxy given pursuant to this
solicitation will be voted in accordance with the recommendations of the
management of Brunswick Bank.
ADDITIONAL INFORMATION ABOUT F&M BANCORP
Additional information relating to the business of F&M Bancorp,
consolidated financial statements of F&M Bancorp and other related
matters is set forth in or incorporated by reference in F&M Bancorp's
Annual Report on Form 10-K and the Annual Report to Stockholders for the
year ended December 31, 1994, which are incorporated by reference
herein. See "Incorporation of Certain Documents by Reference."
-41-
<PAGE>
The Bank of Brunswick
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Bank of Brunswick
We have audited the accompanying balance sheets of the Bank of
Brunswick as of December 31, 1994 and 1993, and the related statements
of income, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the bank's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Bank of
Brunswick as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
LINTON, SHAFER & COMPANY
January 11, 1995
Frederick, Maryland
F-1
<PAGE>
The Bank of Brunswick
Balance Sheets
December 31,
1994 1993
Assets
Cash and due from banks $1,193,642 $1,329,428
Federal funds sold -- 2,209,244
Cash and cash equivalents 1,193,642 3,538,672
Interest bearing deposits with banks 100,000 200,000
Investment securities
U.S. Treasury and federal agencies 4,156,475 3,999,158
States and political subdivisions 1,006,940 533,731
Other 199,978 575,297
Total Investment securities 5,363,393 5,108,186
Loans
Mortgage 18,896,717 17,749,883
Commercial 1,197,368 595,561
Installment 1,028,157 943,694
Total Loans 21,122,242 19,289,138
Less allowance for loan losses (271,259) (245,317)
Net Loans 20,850,983 19,043,821
Bank premises and equipment, net 786,991 731,793
Other 311,590 323,140
Total Assets $28,606,599 $28,945,612
Liabilities
Deposits:
Demand $ 4,221,639 $ 4,068,576
Interest bearing demand 5,553,489 5,279,728
Savings 9,299,074 9,570,484
Time, $100,000 and over 898,953 736,605
Other time 5,904,775 6,732,573
Total Deposits 25,877,930 26,387,966
Accrued interest and other payables 77,966 44,910
Income taxes payable 8,547 6,731
Deferred taxes 9,350 15,100
Total Liabilities 25,973,793 26,454,707
Stockholders' Equity
Common stock, par value $12.50,
24,000 shares issued and outstanding 300,000 300,000
Surplus 1,500,000 1,500,000
Retained earnings 832,806 690,905
Total Stockholders' Equity 2,632,806 2,490,905
Total Liabilities and Stockholders' Equity $ 28,606,599 $ 28,945,612
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
The Bank of Brunswick
Income Statements
For the years ended December 31,
1994 1993
Interest income
Interest and fees on loans $1,692,316 $1,738,770
Interest on deposits with banks 19,880 28,423
Interest on investment securities
Taxable 285,867 325,020
Tax exempt 36,141 13,844
Interest on federal funds sold 68,260 64,325
Total interest income 2,102,464 2,170,382
Less interest expense 714,169 768,209
Net interest income 1,388,295 1,402,173
Provision for loan losses (10,000) (30,000)
Net interest income after
provision for loan losses 1,378,295 1,372,173
Service charges and other income 108,769 70,273
1,487,064 1,442,446
Operating expenses
Salaries and employee benefits 637,049 629,408
Occupancy and equipment costs 151,861 142,102
Other 413,491 436,050
Total operating expenses 1,202,401 1,207,560
Income before provision for
income taxes 284,663 234,886
Provision for income taxes 89,962 74,588
NET INCOME $ 194,701 $ 160,298
Net income per share of common stock $ 8.11 $ 6.68
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
The Bank of Brunswick
Statements of Cash Flows
For the years ended December 31,
1994 1993
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net income $ 194,701 $160,298
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 10,000 30,000
Depreciation and amortization 80,693 66,845
Loss on sale of investments -- 47,233
Changes in assets and liabilities:
Other assets 11,550 65,762
Accrued interest and other payables 33,056 (16,131)
Taxes payable (3,934) 9,763
Net cash provided by operating activities 326,066 363,770
Cash flows from investing activities
Purchases of investment securities (2,870,404) (1,734,435)
Maturities of investment securities 2,715,197 2,505,905
Net change in loans (1,833,104) (2,672,864)
Charge-offs, net of recoveries 15,942 18,927
Proceeds from sale of equipment -- 17,000
Purchases of property and equipment (135,891) (175,268)
Net cash used in investing activities (2,108,260) (2,040,735)
Cash flows from financing activities
Net change in deposit accounts 426,824 437,640
Net change in time deposits (936,860) (1,440,334)
Cash dividends (52,800) (52,800)
Net cash used in financing activities (562,836) (1,055,494)
Net decrease in cash and cash equivalents (2,345,030) (2,732,459)
Cash and cash equivalents, beginning of year 3,538,672 6,271,131
Cash and cash equivalents, end of year $ 1,193,642 $ 3,538,672
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
The Bank of Brunswick
Statements of Stockholders' Equity
For the years ended December 31,
1994 1993
Common Stock, par value $12.50 per share, 24,000
shares issued and outstanding
Balance at beginning of year $ 300,000 $ 300,000
Changes during year 0 0
Balance at end of year $ 300,000 $ 300,000
Surplus
Balance at beginning of year $1,500,000 $1,500,000
Changes during year 0 0
Balance at end of year $1,500,000 $1,500,000
Retained earnings
Balance at beginning of year $690,905 $583,407
Cash dividends ($2.20 per share for 1994 and
1993) (52,800) (52,800)
Net income 194,701 160,298
Balance at end of year $832,806 $690,905
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
The Bank of Brunswick
Notes to Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Bank is a state chartered banking institution whose accounts
are insured by the Federal Deposit Insurance Corporation. The Bank
is principally engaged in the commercial banking business specializing
in mortgage loans to persons living in Brunswick and Jefferson, Maryland
and surrounding areas. Accordingly, the borrowers' ability to repay is
dependent on general economic conditions in the region. The
accounting and reporting policies and practices of the Bank of Brunswick
conform with generally accepted accounting principles and to
general practices within the banking industry. The significant
accounting policies of the Bank of Brunswick are summarized below.
Investment securities. Investments are stated at cost, adjusted
for amortization of premiums and accretion of discounts.
Securities are for investment purposes only and are held to
maturity. The Bank has the ability and intent to hold these
securities until maturity. The carrying value of investments was not
materially different than the market value at December 31, 1993.
Declines in the fair value of individual held-to- maturity
securities at December 31, 1994 has been considered by management to be
temporary and not indicative of a permanent impairment of value.
Loans and Allowance for loan losses. Loans are stated at the
amount of unpaid principal, reduced by unearned discount and an
allowance for loan losses. Interest on loans is accrued based on
the principal amount outstanding. The allowance for loan losses is
established through a provision for loan losses charged to expense.
Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will
be adequate to absorb possible losses on existing loans that may
become uncollectible, based on evaluations of the collectibility of
loans and prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the
borrowers' ability to pay.
Bank premises and equipment. Bank premises and equipment are
stated at cost less accumulated depreciation and amortization.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets as follows: bank premises,
31-35 years; furniture and equipment, 5-20 years; automobile, 5
years; for financial reporting purposes. Accelerated methods are used
for income tax purposes.
Income taxes. Provisions for income taxes are based on amounts
reported in the income statement (after exclusion of non-taxable income
such as interest on state and municipal securities) and include
deferred taxes on temporary differences in the recognition of income and
expense for tax and financial statement purposes. Deferred taxes
are computed on the liability method as described in SFAS No. 109,
Accounting for Income Taxes.
Common Stock. The Bank is authorized to issue 500,000 shares of
Common Stock.
Cash and cash equivalents. Cash and cash equivalents are
defined as "cash and due from banks" and "federal funds sold" for
purposes of the statement of cash flows. Cash paid for interest for
the years ended December 31, 1994 and 1993 were $705,587 and $778,179,
respectively.
F-6
<PAGE>
The Bank of Brunswick
Notes to Financial Statements
(2) ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses were as follows:
1994 1993
Balance at beginning of year $245,317 $196,390
Provision for losses 10,000 30,000
Loans charged-off (3,112) (23,807)
Recoveries 19,054 42,734
Balance at end of year $271,259 $245,317
(3) BANK PREMISES AND EQUIPMENT
Investments in bank premises and equipment are as follows:
1994 1993
Land $ 115,432 $ 115,432
Banking House 560,812 550,222
Furniture and Fixtures 734,659 640,507
Automobile 20,033 17,953
1,430,936 1,324,114
Less: Accumulated depreciation 643,945 592,321
Bank premises and equipment, net $786,991 $731,793
F-7
<PAGE>
The Bank of Brunswick
Notes to Financial Statements
(4) INVESTMENT SECURITIES
The carrying value and related market value of investment securities at
December 31 are presented below:
1994 1993
Carrying Market Carrying Market
Value Value Value Value
U.S. Treasury obligations $3,166,705 $3,105,704 $2,829,723 $2,901,757
U.S. government agencies
and corporate mortgage
backed securities 989,769 958,624 1,169,435 1,183,590
Obligations of states &
political subdivisions 1,006,940 918,176 533,731 526,248
Other 199,979 201,251 575,297 592,934
Totals $5,363,393 $5,183,755 $5,108,186 $5,204,529
Management does not anticipate a requirement to sell, at a loss,
any of the above securities for liquidity or other operating purposes.
Investment securities of $800,000 were pledged to secure public
deposits at December 31, 1994 and 1993.
Proceeds from sales of investments in debt securities during
1994 and 1993 were $0.
A reconciliation of the amortized cost to the estimated market
values of investments at December 31, 1994 is presented below:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury obligations $3,166,705 $3,101 $(64,102) $3,105,704
U.S. government agencies 961,786 1,530 (32,715) 930,601
Mortgage backed securities 27,983 40 -- 28,023
States and political
subdivisions 1,006,940 -- (88,764) 918,176
Other 199,979 1,272 -- 201,251
Totals $5,363,393 $5,943 $(185,581) $5,183,755
</TABLE>
F-8
<PAGE>
The Bank of Brunswick
Notes to Financial Statements
The amortized cost and estimated market value of investments at
December 31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated Market
Amortized Cost Value
Due in one year or less $2,053,856 $1,946,240
Due after one year through five years 2,955,831 2,904,224
Due after five years through ten years 99,472 86,594
Due after ten years 226,251 218,674
Mortgage backed securities 27,983 28,023
Totals $5,363,393 $5,183,755
A reconciliation of the amortized cost to the estimated market
values of investments at December 31, 1993, is as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market Value
Cost Gains Losses
<S> <C> <C> <C> <C>
U.S. Treasury obligations $2,829,723 $ 74,154 $ (2,120) $2,901,757
U.S. government agencies 1,109,788 14,630 (540) 1,123,878
Mortgage backed securities 59,647 65 -- 59,712
States and political
subdivisions 533,731 -- (7,483) 526,248
Other 575,297 17,637 -- 592,934
Totals $5,108,186 $106,486 $(10,143) $5,204,529
</TABLE>
The amortized cost and estimated market value of investments at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated Market
Amortized Cost Value
Due in one year or less $1,650,505 $1,679,464
Due after one year through five years 3,043,690 3,104,742
Due after five years through ten years 195,000 193,157
Due after ten years 159,344 167,454
Mortgage backed securities 59,647 59,712
Totals $5,108,186 $5,204,529
F-9
<PAGE>
The Bank of Brunswick
Notes to Financial Statements
(5) INCOME TAXES
Permanent differences between the Bank's effective income tax
rate and the statutory income tax rate result from tax exempt interest
income and certain expenses of the Bank that are not tax deductible.
The deferred income tax liability results from temporary differences
between tax and book depreciation and loan loss provisions, and the tax
effect of changing to the accrual basis of accounting.
The components of the income tax provision are:
1994 1993
Current
Federal $74,745 $71,248
State 20,967 18,665
Deferred (5,750) (15,325)
Total Tax Provision $89,962 $74,588
Cash paid for taxes for the years ended December 31, 1994 and
1993 were $93,896 and $83,181, respectively.
The provision for income taxes differs from the amount of income
tax determined by applying the statutory U.S. federal income tax rate to
net income before taxes as a result of the following differences:
1994 1993
Tax based on statutory rate $96,785 $79,860
Effect of lower marginal rates (2,500) (5,000)
Effect of tax-exempt income (15,530) (7,600)
Other (1,893) (3,372)
State income taxes, net of
federal taxes 13,100 10,700
Total income taxes $89,962 $74,588
The components of the deferred income tax liability are as
follows:
1994 1993
Deferred tax liability:
Federal $(79,950) $(65,550)
State (15,600) (13,000)
$(95,550) $(78,550)
Deferred tax asset:
Federal $72,200 $53,250
State 14,000 10,200
86,200 63,450
Net deferred tax liability $(9,350) $(15,100)
F-10
<PAGE>
The Bank of Brunswick
Notes to Financial Statements
The tax effects of each type of significant item that gave rise
to deferred taxes are:
1994 1993
Depreciation $95,550 $78,550
Allowance for loan losses (74,700) (63,450)
Other (11,500) --
Net deferred tax liability $(9,350) $(15,100)
(6) EMPLOYEE BENEFIT PLANS
The Bank has a defined contribution Profit Sharing Plan and
Trust for all employees with six months and 1,000 hours of service and
who have attained age 21. The Bank's annual contribution to the plan is
at the discretion of the Board of Directors. Total contributions to the
plan were $10,200 in 1994 and $10,000 in 1993.
Under a deferred compensation agreement with the Executive Vice
President, the Bank has agreed to pay certain amounts annually for a
specified number of years after his retirement or death. Deferred
compensation expense for 1994 and 1993 was $18,990 and $7,583,
respectively.
(7) RELATED PARTY TRANSACTIONS
Certain related parties (directors and officers of the Bank,
including families and companies in which they are principal owners)
were loan customers of the Bank in the ordinary course of business.
Loan transactions with directors and officers were made on substantially
the same terms as those prevailing at the time for comparable loans to
other persons and did not involve more than normal risk of
collectibility.
Total direct and indirect related party loans represented 2.7%
of the total outstanding loans of the Bank at December 31, 1994 and 4.7%
at December 31, 1993.
(8) COMMITMENTS AND REGULATORY MATTERS
The Bank's financial statements do not reflect various
commitments and contingent liabilities which arise in the normal course
of business and which involve elements of credit risk. These
commitments and contingent liabilities are commitments to extend credit
and standby letters of credit. A summary of the Bank's commitments and
contingent liabilities is as follows:
1994 1993
Standby letters of credit $ 44,840 $65,230
Commitments to extend credit 262,297 27,196
The Bank does not anticipate any material losses as a result of
these transactions.
The Bank closed its Point of Rocks branch office in September,
1993. The Bank leased space for the branch under a five year operating
lease which also expired in 1993.
F-11
<PAGE>
The Bank of Brunswick
Notes to Financial Statements
Total rent expense for the year ended December 31, 1994 and 1993
was approximately $0 and $11,420 which included common area costs.
Bank management is pleased to report they were released from
their Memorandum of Understanding with the FDIC on September 7, 1993.
(9) RECLASSIFICATIONS
Certain reclassifications have been made to the 1993 financial
statements to conform to the 1994 presentation.
(10) PENDING ACQUISITION
On December 9, 1994, the Bank announced it had reached an
agreement in principle with F&M Bancorp to be acquired. Under the terms
of the agreement, F&M Bancorp will acquire all Bank of Brunswick
outstanding capital stock in a tax-free exchange transaction. The
Bank's stock will be exchanged for F&M Bancorp common stock based on 2.5
times the net tangible book value per share of the Bank of Brunswick on
the Effective date, but in any event shall not be less than nine shares
of F&M stock for one share of its common stock. The transaction is to be
completed in June 1995.
Due to the pending acquisition, the acquiring financial
institution may choose to terminate the existing profit sharing plan of
the Bank. On December 13, 1994 the Board of Directors authorized the
plan participants to become 100 percent vested in their accounts.
F-12
<PAGE>
ANNEX A
Plan and Agreement to Merge, dated as of January 10, 1995, by and among
F&M Bancorp, F&M Bank, and Brunswick Bank
TABLE OF CONTENTS
1. Effective Date A-4
2. Events Preceding Effectiveness A-4
3. Representations and Warranties of Brunswick Bank A-5
3.1. Organization, Standing, and Capitalization of Brunswick Bank A-5
3.2. Financial Statements A-5
3.3. Taxes A-6
3.4. No Undisclosed Liabilities A-6
3.5. Absence of Certain Changes or Events A-6
3.6. Complete and Accurate Disclosure A-7
3.7. Title to Properties; Absence of Liens and Encumbrances;
Compliance with Laws A-7
3.8. Contracts A-7
3.9. Litigation, Etc. A-8
3.10. Environmental Matters A-8
3.11. Labor Matters A-8
3.12. Pension and Welfare Matters A-9
3.13. Related Party Transactions A-10
3.14. No Conflict with Other Documents A-10
3.15. Compliance with Laws; Governmental Authorizations A-10
3.16. Authority; Enforceability A-10
3.17. Insurance A-10
3.18. Financial Institutions Bond A-11
3.19. Brokers A-11
4. Representations and Warranties of F&M Bancorp A-11
4.1. Organization and Standing of F&M Bancorp A-11
4.2. Financial Statements A-12
4.3. No Undisclosed Liabilities A-12
4.4. Absence of Certain Changes or Events A-12
4.5. Complete and Accurate Disclosure A-12
4.6. No Conflict with Other Documents A-12
4.7. Compliance with Laws; Governmental Authorizations A-13
4.8. Authority; Enforceability A-13
5. Covenants of Brunswick Bank A-13
5.1. Information A-13
5.2. Conduct of Business A-13
5.3. Consents A-14
5.4. Meetings of Stockholders of Brunswick Bank A-14
5.5. Events Preceding Effectiveness A-14
5.6. Exclusive Dealing A-14
5.7. Affiliate Agreements A-14
5.8. Regulatory Approvals A-15
A-1
<PAGE>
5.9. Advice of Changes A-15
5.10. Public Announcements A-15
5.11. Taxes A-15
6. Covenants of F&M Bancorp and F&M Bank A-15
6.1. Applications to Governmental Regulatory Authorities A-15
6.2. Registration of Shares A-16
6.3. Confidential Treatment of Information A-16
6.4. Events Preceding Effectiveness A-16
6.5. Consents A-16
6.6. Advice of Changes A-16
6.7. Stockholders' Meeting A-16
7. Conditions Precedent to F&M Bancorp's Obligations A-17
7.1. Representations, Warranties, and Covenants A-17
7.2. No Adverse Changes A-17
7.3. Events Preceding the Effective Date A-17
7.4. Other Evidence A-17
7.5. No Adverse Proceedings or Events A-17
7.6. Consents, Etc. A-17
7.7. Opinion of Tax Counsel A-17
7.8 Pooling-of-Interests Accounting A-17
8. Conditions Precedent to Brunswick Bank's Obligations A-18
8.1. Representations, Warranties, and Covenants A-18
8.2. No Adverse Changes A-18
8.3. Events Preceding the Effective Date A-18
8.4. Other Evidence A-18
8.5. Consents, Etc A-18
8.6. Opinion of Tax Counsel A-18
8.7. Fairness Opinion A-18
9. Terms of the Merger A-18
9.1. The Merger A-18
9.2. Name of Receiving Association A-18
9.3. Business and Offices of Receiving Association A-18
9.4. Capital Accounts of Receiving Association A-19
9.5. Transfer of Assets and Liabilities A-19
9.6. Articles of Association A-19
9.7. Terms of the Merger A-19
9.8. Anti-Dilution Provision A-20
9.9. Rights of Dissenting Stockholders A-20
9.10. Board of Directors of the Association A-20
10. Boards of Directors and Employment Matters A-21
11. Opinion of Tax Counsel A-22
12. Amendment of the Plan A-23
13. Abandonment of the Plan A-23
14. Expenses A-23
15. Notices A-23
16. Entire Agreement; Effect A-23
17. Representations, Warranties and Agreements A-23
A-2
<PAGE>
18. Governing Law A-24
19. General A-24
APPENDIX I A-28
APPENDIX II A-31
A-3
<PAGE>
PLAN AND AGREEMENT TO MERGE
PLAN AND AGREEMENT TO MERGE (this "Plan"), dated as of January 10,
1995 by and among F&M Bancorp, a Maryland corporation and bank holding
company ("F&M Bancorp"), Farmers and Mechanics National Bank, a national
banking association which is the wholly-owned subsidiary of F&M Bancorp
("F&M Bank"), and The Bank of Brunswick, a Maryland state-chartered bank
("Brunswick Bank"). W I T N E S S E T H:
WHEREAS, F&M Bancorp and F&M Bank desire to have Brunswick Bank
merge with F&M Bank in such a manner that, upon the merger becoming
effective, F&M Bank will be the surviving national banking association
and all of its Common Stock will continue to be owned by F&M Bancorp,
subject to the terms and conditions and based upon Brunswick Bank's
representations, warranties and covenants hereinafter set forth, such
merger hereinafter referred to as the "Merger;" and
WHEREAS, Brunswick Bank desires that it be merged with F&M Bank
in the manner set forth above, and that the issued and outstanding
shares of Common Stock of Brunswick Bank be exchanged for Common Stock
of F&M Bancorp, subject to the terms and conditions and based upon F&M
Bancorp's and F&M Bank's representations, warranties and covenants
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and the mutual benefits to be derived
herefrom, the parties agree as follows:
1. Effective Date. The effective date of this Plan and the Merger
(the "Effective Date") shall be the date designated by the Comptroller
of the Currency of the United States (the "Comptroller") in his
certificate of merger issued pursuant to the provisions of 12 U.S.C.
Section 215a. F&M Bancorp shall request the Comptroller to make such
certificate of merger effective on either the last day of the month, or
the first day of the month following the month, in which both (a) all
events listed in Section 2 shall have occurred; and (b) all conditions
precedent listed in Sections 7 and 8 have been fulfilled or waived.
2. Events Preceding Effectiveness. On or before the Effective Date
the following shall have occurred:
(a) A majority of the Boards of Directors of each of Brunswick
Bank, F&M Bancorp, and F&M Bank shall have approved and agreed to this
Plan and the Merger;
(b) the Board of Directors of Brunswick Bank shall call a meeting
of the stockholders of Brunswick Bank. Notice of the time and place
of the meeting shall be provided in accordance with 12 U.S.C. Section
215a(a)(2), and this Plan and the Merger shall have been ratified and
confirmed by the affirmative vote of not less than two-thirds of the
issued and outstanding voting stock of Brunswick Bank at the meeting,
in accordance with 12 U.S.C. Section 215a(a)(2);
(c) the Board of Directors of F&M Bank shall call a meeting of the
stockholders of F&M Bank. Notice of the time and place of the meeting
shall be provided in accordance with 12 U.S.C. Section 215a(a)(2), and
this Plan and the Merger shall have been ratified and confirmed by the
affirmative vote of not less than two-thirds of the issued and
outstanding voting stock of F&M Bank at the meeting, in accordance
with 12 U.S.C. Section 215a(a)(2);
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(d) the Comptroller shall have approved the Merger pursuant to
the provisions of 12 U.S.C. Sections 215a and 1828(c), and such
approval shall have become effective after the statutory waiting
period;
(e) F&M Bancorp shall have filed a Registration Statement with
the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), pertaining
to the shares of Common Stock of F&M Bancorp to be issued to the
stockholders of Brunswick Bank pursuant to this Plan and the Merger,
and such Registration Statement shall have become effective and there
shall not be in effect a stop order with respect thereto;
(f) F&M Bancorp shall have made such filings and obtained such
approvals as are necessary under the state securities or "blue sky"
laws pertaining to the shares of Common Stock of F&M Bancorp to be
issued to the stockholders of Brunswick Bank pursuant to this Plan and
the Merger; and
(g) the Comptroller shall have issued his certificate of merger
pursuant to 12 U.S.C. Section 215a.
3. Representations and Warranties of Brunswick Bank. Brunswick Bank
represents and warrants to F&M Bancorp as follows (the phrase
"heretofore disclosed" as used in this Section 3 refers to a schedule
dated the date hereof delivered by Brunswick Bank to F&M Bancorp):
3.1. Organization, Standing, and Capitalization of Brunswick Bank.
(a) Brunswick Bank is a duly organized and validly existing
state-chartered bank and is in good standing under the laws of the
State of Maryland. Brunswick Bank has the corporate power and
authority to own and hold its material properties and to carry on its
business as it is now being conducted. Brunswick Bank's deposits are
insured under the provisions of the Federal Deposit Insurance Act, as
amended, and is not a member of the Federal Reserve System. Brunswick
Bank has no subsidiaries or affiliated companies and is not a party to
any joint ventures or partnerships.
(b) Certified copies of all charter documents and by-laws of
Brunswick Bank have heretofore been delivered to F&M Bancorp, and all
such copies are true and correct as of the date hereof. Brunswick
Bank's minute book, which it has made available to F&M Bancorp for
inspection, is complete in all material respects and accurately
records the actions taken by the stockholders and directors of
Brunswick Bank.
(c) The authorized capital stock of Brunswick Bank consists
exclusively of 500,000 shares of Common Stock, par value $12.50 per
share, 24,000 of which are validly issued and outstanding, fully paid,
and non-assessable. There are no outstanding options, warrants,
rights, or obligations of any kind entitling the holder thereof to
acquire shares of the Common Stock of Brunswick Bank, and there are no
outstanding securities or instruments of any kind that are convertible
into shares of the Common Stock of Brunswick Bank.
3.2. Financial Statements. Brunswick Bank has delivered to F&M
Bancorp copies of the following financial statements of Brunswick Bank,
all of which are true and complete in all material respects, have been
prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods covered by such financial
statements, and present fairly the financial position, results of
operations, cash flows, and changes in stockholders' equity of Brunswick
Bank at the dates of and for the periods covered by such
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financial statements, subject, in the case of the unaudited Internal
Financial Statements, to normal, immaterial year-end adjustments:
(a) Financial Statements of Brunswick Bank at December 31, 1989,
1990, 1991, 1992, 1993 and for each of the years then ended, as
reported upon by Linton, Shafer & Company, P.A. ("LS&C"); and
(b) unaudited Internal Financial Statements of Brunswick Bank at
September 30, 1994 and for the nine months then ended.
3.3. Taxes. Brunswick Bank has delivered to F&M Bancorp its tax
returns to federal, state, county, municipal or foreign taxing
authorities for the taxable year 1991 and all taxable years since 1991.
Brunswick Bank has filed with appropriate federal, state, county,
municipal or foreign taxing authorities all tax returns required to be
filed and has paid or reserved for all taxes shown to be due on such
returns and all penalties and interest payable in respect thereof.
Brunswick Bank has not received from any taxing authority any notice of
deficiency or assessment of additional taxes not paid or any notice of
an intention to commence an examination or audit of its tax returns, and
no tax audits by any taxing authority are in process. Brunswick Bank
has granted no waiver of any statute of limitations or otherwise agreed
to any extension of a period for the assessment of any federal, state,
county, municipal or foreign income tax. The accruals and reserves
reflected in the financial statements which Brunswick Bank has provided
to F&M Bancorp as described in Section 3.2 are adequate to cover all
taxes (including interest and penalties, if any, thereon) that are
payable or accrued as a result of Brunswick Bank's operations for all
periods prior to the date of such financial statements. For purposes of
this Section 3.3, any reference to Brunswick Bank shall be deemed to
include any corporation more than 50% of the outstanding capital stock
(by vote or value) of which is owned by Brunswick Bank.
3.4. No Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the financial statements referred to in
Section 3.2, Brunswick Bank at the dates of such financial statements
had no material liabilities or obligations (whether accrued, absolute,
or contingent) required under generally accepted accounting principles
to be reflected thereon which would materially and adversely affect the
fair presentation of such financial statements. Brunswick Bank has not
incurred any liability since the date of the financial statements
referred to in Section 3.2(b) which would materially and adversely
affect Brunswick Bank's business as it is presently conducted, other
than liabilities which have been incurred in the ordinary course of
business.
3.5. Absence of Certain Changes or Events. Except as heretofore
disclosed to F&M Bancorp or as permitted by Section 5.2(d), since
December 31, 1993, there has not been:
(a) Any change in Brunswick Bank's financial position, results of
operations, assets, liabilities, or business, other than changes in
the ordinary course of business which have not been materially
adverse;
(b) any increase in salaries or wages of directors, officers, or
employees of Brunswick Bank other than in the ordinary course of
business; or any establishment or increase of any employment,
compensation, bonus, pension, option, incentive or deferred
compensation, retirement payments, profit sharing, or similar
agreement or benefit, authorized, granted, or accrued to any
directors, officers or employees of Brunswick Bank other than in the
ordinary course of business; or
(c) any declaration, payment, or set aside by Brunswick Bank of
any dividend or distribution in respect of its Common Stock, or any
purchase, issuance or sale of any of its Common Stock.
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3.6. Complete and Accurate Disclosure. Neither this Plan (insofar as
it relates to Brunswick Bank, the Common Stock of Brunswick Bank, and
the involvement of Brunswick Bank in the transactions contemplated
hereby) nor any financial statement, schedule, certificate, or other
statement or document delivered by Brunswick Bank to F&M Bancorp in
connection with this Plan, when considered in the aggregate, contains
any statement which, at the time and in light of the circumstances under
which it is made, is false or misleading with respect to any material
fact or omits to state any material fact necessary to make the
statements contained herein or therein not false or misleading.
3.7. Title to Properties; Absence of Liens and Encumbrances;
Compliance with Laws. Except as heretofore disclosed to F&M Bancorp,
Brunswick Bank has good and marketable title to all of its properties
and assets, including those reflected in the financial statements
referred to in Section 3.2, except as sold or otherwise disposed of for
fair value and only in the ordinary course of business, free and clear
of all liens and encumbrances, except (i) with respect to property as to
which it is a lessee, (ii) with respect to real estate owned by
Brunswick Bank, for use, occupancy and similar restrictions of public
record that may be observed by an inspection of the property, and such
other utility and other easements and encumbrances as do not materially
adversely affect the fair market value of such real property, and (iii)
liens to secure borrowings, liens to secure governmental deposits, and
liens for current taxes not yet due and payable. Brunswick Bank neither
owns nor leases real property except as heretofore disclosed to F&M
Bancorp, and is not in default under any material lease of real or
personal property to which it is a party. The structures and other
improvements to real estate, furniture, fixtures and equipment reflected
in Brunswick Bank's financial statements or acquired subsequent to
December 31, 1993 are in good operating condition and repair (ordinary
wear and tear excepted) and comply in all respects with all applicable
laws, building codes, zoning ordinances and other similar laws, except
where any noncompliance would not materially detract from the value, or
interfere with the present or Brunswick Bank's proposed use, of such
structures, improvements, furniture, fixtures and equipment. Brunswick
Bank owns or has the rights to use all real and personal properties and
assets that are material to the conduct of its business as presently
conducted.
3.8. Contracts. Except for the plans, contracts and agreements of
Brunswick Bank heretofore delivered to F&M Bancorp, Brunswick Bank is
not party to or subject to:
(a) Any employment, consultation, or compensation contract or
arrangement (other than those terminable at will) with any officer,
consultant, director, or employee;
(b) any plan, contract, program, understanding, or agreement
providing for bonuses, pensions, severance pay, options, stock
purchases or any other form of retirement, incentive or deferred
compensation, retirement payments, death benefits, profit sharing, or
any health, accident or other welfare benefit, or any other employee
or retired employee benefit in which any employee, former employee,
retired employee (or beneficiary of any of them) of Brunswick Bank is
entitled to participate except as heretofore disclosed to F&M Bancorp;
(c) any contract or agreement with any labor union;
(d) any lease of real or personal property with annual rentals in
excess of $2,000;
(e) any agreement for services or for the purchase or disposition
of any equipment or supplies except individual purchase orders for
office supplies incurred in the ordinary course of business of $2,000
or less;
(f) any instrument evidencing or relating to indebtedness for
borrowed money except for customer accounts, deposits, certificates of
deposit, federal funds purchased, and the like which may be construed
as borrowings and except for loans made by Brunswick Bank as lender in
the ordinary course of its business;
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(g) any lease or other contract containing covenants not to enter
into or consummate the transactions contemplated hereby or which
provides for payments in excess of $2,000 and will be terminated or
violated by the Merger or in respect of which the Merger would cause a
default or acceleration of obligations; or
(h) any other material contract or agreement not of the type
covered by any of the other specific terms of this Section 3.8.
Each of the instruments delivered pursuant to this Section 3.8 is valid
and in full force and effect. Brunswick Bank is neither in default nor
has it received any notice that it is in default, nor to its knowledge
is any other party in default, under any material agreements,
instruments, or obligations to which Brunswick Bank is a party or by
which it is bound.
3.9. Litigation, Etc. Except as heretofore disclosed to F&M Bancorp,
(a) there is no litigation, proceeding, or investigation pending or, to
the knowledge of Brunswick Bank, threatened against Brunswick Bank which
would result in any materially adverse change in its condition
(financial or otherwise), assets, liabilities, business, operations or
future prospects; (b) there are no outstanding orders, writs,
injunctions, judgments, decrees, regulations, directives, consent
agreements or memoranda of understanding issued by any federal, state or
local court or governmental authority or arbitration tribunal issued
against or with the consent of Brunswick Bank that materially and
adversely affect its condition (financial or otherwise), assets,
liabilities, business, operations or future prospects or that in any
manner restrict Brunswick Bank's right to carry on its business as
presently conducted; and (c) Brunswick Bank is aware of no fact or
condition presently existing that might give rise to any litigation,
investigation or proceeding which, if determined adversely to Brunswick
Bank, would materially and adversely affect its condition (financial or
otherwise), assets, liabilities, business, operations or future
prospects or would restrict in any manner Brunswick Bank's right to
carry on its business as presently conducted. Brunswick Bank has
disclosed to F&M Bancorp all litigation in which Brunswick Bank is
involved as a party (other than bankruptcy proceedings in which
Brunswick Bank has filed proofs of claim or routine collection and
foreclosure suits initiated in the ordinary course of business in which
the amount sought to be recovered is less than $2,000).
3.10. Environmental Matters. To Brunswick Bank's knowledge, no
environmental contaminant, pollutant, toxic or hazardous substance or
other similar substance has been generated, used, stored, processed,
disposed of or discharged on or into any of the real estate now or
previously owned or acquired (including without limitation any real
estate acquired by means of foreclosure or exercise of any other
creditor's right) or leased by Brunswick Bank, except for such hazardous
substances as may be used in the everyday business of a bank office. In
particular, without limiting the generality of the foregoing sentence,
to Brunswick Bank's knowledge, (a) no materials containing asbestos have
been used or incorporated in any building or other structure or
improvement located on any of the real estate now or previously owned or
acquired (including without limitation any real estate acquired by means
of foreclosure or exercise of any other creditor's right) or leased by
Brunswick Bank; (b) no electrical transformers, fluorescent light
fixtures with ballasts or other equipment containing PCB's are or have
been located on any of the real estate now or previously owned or
acquired (including without limitation any real estate acquired by means
of foreclosure or exercise of any other creditor's right) or leased by
Brunswick Bank; and (c) no underground storage tanks for the storage of
gasoline, petroleum products or other toxic or hazardous substances or
similar substances are or have ever been located on any of the real
estate now or previously owned or acquired (including without limitation
any real estate acquired by means of foreclosure or exercise of any
other creditor's right) or leased by Brunswick Bank.
3.11. Labor Matters. To Brunswick Bank's knowledge, no organization
effort with respect to any of the employees of Brunswick Bank is pending
or threatened, and no labor dispute, strike, work stoppage, employee
action or labor relation problem which may materially affect Brunswick
Bank currently is pending or threatened.
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3.12. Pension and Welfare Matters. Brunswick Bank has heretofore
disclosed to F&M Bancorp in respect of the plans, contracts, programs,
understandings or agreements delivered under Section 3.8(b) copies of
the latest summary plan descriptions, Forms 5500, tax determination
letters from the Internal Revenue Service (the "IRS"), and actuarial
reports, as applicable. With respect to the plans, contracts, or
agreements delivered to F&M Bancorp under Section 3.8(b) (for purposes
of this Section 3.12, the "plans"), except as heretofore disclosed (a)
each such plan has been operated in all material respects in accordance
with its terms and in accordance with all applicable laws including, but
not limited to, the Employee Retirement Income Security Act of 1974
("ERISA"), the Internal Revenue Code of 1986, as amended (the "Code"),
the Consolidated Omnibus Budget Reconciliation Act of 1985 and state
health care continuation laws; (b) all reporting and disclosure
requirements of ERISA imposed upon each such plan have been complied
with, and all required governmental filings have been made with respect
to the plans; (c) neither any plan nor Brunswick Bank, any director,
officer, employee, agent or representative of Brunswick Bank, nor, to
Brunswick Bank's knowledge, any fiduciary of any plan has engaged in any
transaction in connection with any of the plans which would be subject
to a civil penalty assessed pursuant to Section 502(i) of ERISA, or a
tax imposed by Section 4975 of the Code that could reasonably be
expected to have a material adverse effect on such plan, any parties in
interest, fiduciaries or Brunswick Bank's business; (d) no such plan has
any accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, with respect to the
latest five plan years, nor any liability to the Pension Benefit
Guaranty Corporation (the "PBGC") (other than normal premium payments);
(e) if applicable, the assets of each such funded plan equal or exceed
the liability for accrued benefits of all participants in such plan when
such liabilities are valued (i) on a termination basis using PBGC
interest and other assumptions and (ii) on a minimum funding basis using
the appropriate actuarial methods, tables, and assumptions; (f) no
contributions to any such plan from Brunswick Bank are currently past
due and, if applicable, all past service and other liabilities currently
existing but payable in the future, if any, are reflected in the latest
actuarial report in accordance with sound actuarial principles; (g) no
proceedings, investigations, filings, or other matters (excluding any
determination letter application that has been or may be filed prior to
the Effective Date) are pending before the IRS, the Department of Labor,
the PBGC, or other public or quasi-public body in connection with any
such plan; (h) with respect to plans intended to qualify under Section
401(a) of the Code, (i) either Brunswick Bank has received a favorable
determination letter from the IRS with respect to the plan documents or
the remedial amendment period (within the meaning of regulation under
Section 401(b) of the Code) has not ended with respect to an application
for a determination letter, and (ii) nothing has occurred with respect
to the operation or administration of any such plans which would cause
the loss of such qualifications or exemptions or the imposition of any
liability, penalty or tax under ERISA or the Code that could reasonably
be expected to have a material adverse effect on such plan or Brunswick
Bank's business; (i) through the Effective Date, there will be no
changes in the operation of the plans or in the documents constituting
or affecting the plans except for amendments and operational changes
required by applicable law which do not materially increase the cost of
such plans; (j) no employees, former employees, or retired employees of
Brunswick Bank, as a result of their employment with Brunswick Bank, are
participants in any "multiemployer plan" which is a "pension plan," as
such terms are defined in Sections 3(2) and 3(37) of ERISA and Brunswick
Bank has no current, contingent or potential liability with respect to
any such plan; (k) no "reportable event," as such term is defined in
Section 4043(c) of ERISA, has occurred with respect to any plan since
the effective date of ERISA; (l) there are no pending or threatened
claims by or disputes with any participants or beneficiaries of the
plans, except plan benefit claims arising in the normal course of the
operations of the plans (other than terminated plans) and as to which no
dispute exists; (m) Brunswick Bank has no knowledge of any facts which
could give rise to any claims against any plan or the fiduciaries of any
plan, except for plan benefit claims arising in the normal course of the
operations of the plans (other than terminated plans); (n) neither
Brunswick Bank nor any fiduciary of any plan has given notice to any
fiduciary liability insurer of any claims or potential claims in
connection with any of the plans; (o) each of the plans which benefits
retired employees of Brunswick Bank may effectively be terminated or
amended, in any manner and at any time, without further liability to its
participants, by its sponsoring employer; (p) Brunswick Bank has at all
times in all material respects complied with all applicable employee
termination notice and similar laws; (q) Brunswick Bank has at all times
complied in all material respects with all applicable family leave and
similar laws; (r) if applicable, Brunswick Bank has at all times
complied in all material respects with all applicable requirements of
the Worker Adjustment and Retraining Notification Act and all similar
state
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laws, and with respect to the transactions contemplated by this
Agreement, Brunswick Bank represents that no actions under such laws are
required; (s) Brunswick Bank neither has provided, nor is required to
provide, security to any pension plan or to any single-employer plan of
an ERISA Affiliate pursuant to Section 401(a)(29) of the Code; (t) there
has been no announcement or legally binding commitment by Brunswick Bank
to create an additional plan, or to amend a plan except for amendments
required by applicable law which do not materially increase the cost of
such plan, and Brunswick Bank does not have any obligations for retiree
health and life benefits under any plan that cannot be terminated
without incurring any liability thereunder; and (u) as to any terminated
plans, all obligations for plan benefits or other liabilities have been
satisfied in full.
3.13. Related Party Transactions. Except as heretofore disclosed to
F&M Bancorp, Brunswick Bank has no contract, extension of credit,
business arrangement or other relationship of any kind with any of the
following persons: (a) any executive officer or director of Brunswick
Bank; (b) any stockholder owning five percent or more of the outstanding
Common Stock of Brunswick Bank; or (c) any "affiliate" (as defined in
the SEC Rule 405) of the foregoing persons or any business in which any
of the foregoing persons is an officer, director, employee or five
percent or greater equity owner.
3.14. No Conflict with Other Documents. Except as heretofore
disclosed to F&M Bancorp, neither the execution and delivery of this
Plan nor the carrying out of the transactions contemplated hereunder
will result in any violation, termination, or default or acceleration
of, or be in conflict with, any terms of any contract or other
instrument to which Brunswick Bank is a party, or of any judgment,
decree, or order applicable to Brunswick Bank, or result in the creation
of any lien, charge, or encumbrance upon any of its properties or
assets, except for any of the foregoing which would not have a material
adverse effect upon the financial condition, assets, liabilities,
business or operations of Brunswick Bank.
3.15. Compliance with Laws; Governmental Authorizations. Except
where noncompliance would not have a material and adverse effect upon
the condition (financial or otherwise), assets, liabilities, business,
operations or future prospects of Brunswick Bank, (a) Brunswick Bank is
in compliance with all statutes, laws, ordinances, rules, regulations,
judgments, orders, decrees, directives, consent agreements, memoranda of
understanding, permits, concessions, grants franchises, licenses, and
other governmental authorizations or approvals applicable to Brunswick
Bank or to any of its properties; and (b) all permits, concessions,
grants, franchises, licenses and other governmental authorizations and
approvals necessary for the conduct of Brunswick Bank's business as
presently conducted have been duly obtained and are in full force and
effect, except for any of the foregoing the absence of which would not
have a material adverse effect on the condition (financial or
otherwise), assets, liabilities, business, operations or future
prospects of Brunswick Bank., and there are no proceedings pending or to
Brunswick Bank's knowledge threatened which may result in the
revocation, cancellation, suspension or materially adverse modification
of any thereof.
3.16. Authority; Enforceability. The execution, delivery, and
performance of this Plan by Brunswick Bank have been duly and validly
authorized by its Board of Directors, subject only to requisite approval
by appropriate governmental regulatory authorities and stockholders.
Subject to receipt of (a) such regulatory approvals and (b) such
stockholder approval, this Plan is a valid and binding agreement of
Brunswick Bank, enforceable against it in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
3.17. Insurance. All insurance policies held by Brunswick Bank
relating to its operations (except for title insurance policies),
including without limitation all financial institutions bonds, have been
scheduled by Brunswick Bank for F&M Bancorp, and Brunswick Bank has made
copies of such policies available to F&M Bancorp for its inspection.
All such policies are in full force and effect. Brunswick Bank has
received no notices of cancellation with respect to any such policies
and has no reason to expect that it will receive a notice of
cancellation from any of its present insurance carriers; provided,
however, that Brunswick Bank makes no representation as to the effect of
this Plan or the Merger on its present financial institutions bond or
bonds.
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3.18. Financial Institutions Bond. Since January 1, 1989, Brunswick
Bank has continuously maintained in full force and effect one or more
financial institutions bonds insuring Brunswick Bank against acts of
dishonesty by each of its employees. No claim has been made under any
such bond since such date and Brunswick Bank is not aware of any fact or
condition presently existing which might form the basis of a claim under
any such bond. Brunswick Bank has no reason to expect that its present
financial institutions bond or bonds will not be renewed by its carrier
on substantially the same terms as those now in effect; provided,
however, that Brunswick Bank makes no representation as to the effect of
this Plan or the Merger on its present financial institutions bond or
bonds.
3.19. Brokers. Except as to Scott & Stringfellow, Inc., financial
advisors to Brunswick Bank, all negotiations relating to this Plan and
the transactions contemplated hereunder have been carried on by
Brunswick Bank directly or through its counsel and there has been no
intervention of any person as the result of any action of Brunswick Bank
(and, so far as known to Brunswick Bank, no intervention of any other
person) in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission, finder's fee, or other
like payment. Brunswick has provided F&M Bancorp with a copy of its
agreement with Scott & Stringfellow, Inc.
4. Representations and Warranties of F&M Bancorp. F&M Bancorp and
F&M Bank each represents and warrants to Brunswick Bank as follows (the
phrase "heretofore disclosed" as used in this Section 4 refers to a
schedule dated the date hereof delivered by F&M Bancorp or F&M Bank, as
the case may be, to Brunswick Bank):
4.1. Organization and Standing of F&M Bancorp.
(a) F&M Bancorp is a duly organized and validly existing
corporation, in good standing under the laws of the State of Maryland.
F&M Bancorp has the corporate power and lawful authority to own and
hold its properties and to carry on its business as it is now being
conducted. F&M Bancorp is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended.
(b) The authorized capital stock of F&M Bancorp consists
exclusively of 10,000,000 shares of Common Stock, par value $5.00 per
share, 3,942,397 of which are validly issued and outstanding, fully
paid, and non-assessable. F&M Bancorp has reserved 50,000 shares of
its Common Stock for issuance under its Dividend Reinvestment and
Stock Purchase Plan, 50,000 shares of its Common Stock for issuance
under its Employee Stock Purchase Plan, and 215,103 shares of its
Common Stock for issuance under its Stock Option Plan for key
employees. At the date of this Plan, there were outstanding options
to purchase 179,916 shares of F&M Bancorp's Common Stock at prices
ranging from $6.94 to $22.38 pursuant to this Stock Option Plan.
There are no other outstanding options, warrants, rights, or
obligations of any kind entitling the holder thereof to acquire shares
of the Common Stock of F&M Bancorp, and there are no outstanding
securities or instruments of any kind that are convertible into shares
of the Common Stock of F&M Bancorp. The Common Stock of F&M Bancorp
deliverable pursuant to this Plan will be, prior to its issuance, duly
authorized for issuance and will, when issued and delivered in
accordance with this Plan, be duly and validly issued, fully paid and
nonassessable.
(c) F&M Bancorp's sole direct subsidiary is F&M Bank. F&M Bank
is duly organized and validly existing as a national banking
association and is in good standing under the laws of the United
States. F&M Bank has the corporate power and lawful authority to own
and hold its properties and to carry on its business as it is now
being conducted. F&M Bank is an insured bank under the provisions of
the Federal Deposit Insurance Act, as amended, and is a member of the
Federal Reserve System.
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(d) The authorized capital stock of F&M Bank consists exclusively
of 800,000 shares of Common Stock, par value $5.00 per share, 725,000
of which are validly issued and outstanding, fully paid, and
non-assessable. All outstanding shares of the Common Stock of F&M
Bank are held by F&M Bancorp. There are no other outstanding options,
warrants, rights, or obligations of any kind entitling the holder
thereof to acquire shares of the Common Stock of F&M Bank, and there
are no outstanding securities or instruments of any kind that are
convertible into shares of the Common Stock of F&M Bank.
(e) Certified copies of all charter documents and by-laws of F&M
Bancorp and F&M Bank have heretofore been delivered to Brunswick Bank,
and all such copies are true and correct as of the date hereof.
4.2. Financial Statements. F&M Bancorp has delivered to Brunswick
Bank copies of the following consolidated financial statements of F&M
Bancorp and its subsidiaries, all of which are true and complete in all
material respects, have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the
periods covered by such consolidated financial statements and present
fairly the financial position, results of operations, cash flows, and
changes in shareholders' equity of F&M Bancorp and its subsidiaries at
the dates of and for the periods covered by such financial statements:
(a) Consolidated Financial Statements of F&M Bancorp and its
subsidiaries at December 31, 1989, 1990, 1991, 1992 and 1993 and for
each of the years then ended, as reported upon by Keller Bruner &
Company, L.L.C. ("KB&C"); and
(b) unaudited Internal Consolidated Financial Statements of F&M
Bancorp and its subsidiaries at September 30, 1994 and for the nine
months then ended.
4.3. No Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the financial statements referred to in
Section 4.2, F&M Bancorp at the dates of such financial statements had
no material liabilities or obligations (whether accrued, absolute, or
contingent) required under generally accepted accounting principles to
be reflected thereon which would materially and adversely affect the
fair presentation of such financial statements. F&M Bancorp has not
incurred any liability since the date of the financial statements
referred to in Section 4.2(b) which would materially and adversely
affect F&M Bancorp's business as it is presently conducted, other than
liabilities which have been reasonably incurred in the ordinary course
of business.
4.4. Absence of Certain Changes or Events. Except as heretofore
disclosed to Brunswick Bank, since December 31, 1993, there has not been
any change in F&M Bancorp's financial position, results of operations,
assets, liabilities, or business, other than changes in the ordinary
course of business which have not been materially adverse.
4.5. Complete and Accurate Disclosure. Neither this Plan (insofar as
it relates to F&M Bancorp, the Common Stock of F&M Bancorp, and the
involvement of F&M Bancorp in the transactions contemplated hereby) nor
any financial statement, certificate, or other statement or document
delivered by F&M Bancorp to Brunswick Bank in connection with this Plan
contains any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with
respect to any material fact or omits to state any material fact
necessary to make the statements contained herein or therein not false
or misleading.
4.6. No Conflict with Other Documents. Neither the execution and
delivery of this Plan nor the carrying out of the transactions
contemplated hereunder will result in any violation, termination, or
modification of, or be in conflict with, any terms of any contract or
other instrument to which F&M Bancorp or F&M Bank are a party, or of any
judgment, decree, or order applicable to F&M Bancorp or F&M Bank, or
result in the creation of any lien, charge, or encumbrance upon any of
their properties or assets.
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4.7. Compliance with Laws; Governmental Authorizations. Except where
noncompliance would not have a material and adverse effect upon the
condition (financial or otherwise), assets, liabilities, business,
operations or future prospects of F&M Bancorp and F&M Bank, (a) F&M
Bancorp and F&M Bank are in compliance with all statutes, laws,
ordinances, rules, regulations, judgments, orders, decrees, directives,
consent agreements, memoranda of understanding, permits, concessions,
grants franchises, licenses, and other governmental authorizations or
approvals applicable to F&M Bancorp and F&M Bank or to any of their
properties; and (b) all permits, concessions, grants, franchises,
licenses and other governmental authorizations and approvals necessary
for the conduct of F&M Bancorp's and F&M Bank's business as presently
conducted have been duly obtained and are in full force and effect, and
there are no proceedings pending or threatened which may result in the
revocation, cancellation, suspension or materially adverse modification
of any thereof.
4.8. Authority; Enforceability. The execution, delivery, and
performance of this Plan by F&M Bancorp and F&M Bank have been duly and
validly authorized by their respective Boards of Directors, subject only
to requisite approval by the stockholder of F&M Bank and appropriate
governmental regulatory authorities. Subject to receipt of (a) such
regulatory approval and (b) in the case of F&M Bank, such stockholder
approval, this Plan is a valid and binding agreement of each of F&M
Bancorp and F&M Bank, enforceable against it in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
5. Covenants of Brunswick Bank. Except as otherwise consented to in
writing by F&M Bancorp after the date of this Plan, Brunswick Bank
covenants to and agrees with F&M Bancorp as follows:
5.1. Information. Brunswick Bank will give to F&M Bancorp and to its
officers, accountants, counsel, financial advisers, and other
representatives full access during Brunswick Bank's normal business
hours throughout the period prior to the Effective Date to all of
Brunswick Bank's properties, books, contracts, commitments, reports of
examination (consistent with applicable law), depositor and stockholder
lists, and records. Brunswick Bank will, at its own expense, furnish
F&M Bancorp during such period with all such information concerning
Brunswick Bank's affairs as F&M Bancorp may reasonably request,
including information for use in determining if the conditions of
Section 7.2 have been satisfied, necessary to prepare the regulatory
filings or applications to be filed with governmental regulatory
authorities to obtain the approvals referred to in Section 2, for the
preparation of and inclusion in the Registration Statement referred to
in Section 6.2, and for use in any other necessary filings to be made
with appropriate governmental regulatory authorities. In particular,
without limiting the generality of the foregoing sentence, the
information provided and the representations made by Brunswick Bank to
F&M Bancorp in connection with the Registration Statement described in
Section 6.2, both at the time such information and representations are
provided and made and at the Effective Date, will be true and accurate
in all material respects and will not contain any false or misleading
statement with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order (a) to
make the statements made therein not false or misleading, or (b) to
correct any statement contained in an earlier communication with respect
to such information or representations which has become false or
misleading.
5.2. Conduct of Business. After the date of this Plan and pending
the Effective Date, (a) Brunswick Bank will conduct its business only in
the ordinary course; (b) Brunswick Bank shall not effect any change or
amendment in its Charter or By-Laws; (c) Brunswick Bank shall not change
its authorized, issued or outstanding capital stock; (d) Brunswick Bank
shall not declare any dividends in respect of its Common Stock in excess
of quarterly dividends at the rate of $.55 per share, with record dates
after the first quarter timed to correspond to the record dates for
quarterly dividends paid by F&M Bancorp; (e) Brunswick Bank shall not
increase employee compensation or benefit levels (except for annual
increases not in excess of amounts established by its regular past
practices) and shall not establish or make any increase in any
employment, compensation, bonus, pension, option, incentive or deferred
compensation, retirement, death, profit sharing, or similar agreements
or benefits of any of its past, present or future officers or employees,
other than insurance for the benefit of retired officers and employees
the total cost of which insurance shall not exceed $3,000 in the
aggregate or additional
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premiums to obtain an extension of director' and officers' liability
coverage; (f) Brunswick Bank shall not make any change in any of its
accounting policies or practices unless required by generally accepted
accounting principles or take any action which would cause the Merger
not to be accounted for as a pooling-of- interests; and (g) Brunswick
Bank shall not incur any liability for borrowed money except in the
ordinary course of its banking business or place upon or permit any lien
or encumbrance upon any of its properties or assets except liens of the
type permitted in the exceptions to Section 3.7. Pending the Effective
Date, Brunswick Bank shall (x) use commercially reasonable efforts to
preserve its business organization and assets and to keep available the
services of its full-time officers and employees, (y) continue in effect
the present method of conducting its business, and (z) consult with F&M
Bancorp as to making decisions or actions in matters (i) other than
those in the ordinary course of business or (ii) involving any capital
expenditures in excess of $2,000.
5.3. Consents. Brunswick Bank will use commercially reasonable
efforts to obtain any consents, approvals, or waivers from third parties
necessary to the assignments and transfers contemplated hereby with
respect to leases or other contracts, if any, delivered to F&M Bancorp
pursuant to Section 3.8 or any other agreements requiring the same.
5.4. Meetings of Stockholders of Brunswick Bank. Brunswick Bank will
duly call and will convene a meeting of its stockholders to act upon the
transactions contemplated hereby as soon as practicable, will recommend
approval of this Plan and the Merger to its stockholders, and will use
commercially reasonable efforts to obtain a favorable vote thereon. The
calling and holding of such meeting and all notices, transactions,
documents, and information related thereto will be in compliance with
all applicable laws.
5.5. Events Preceding Effectiveness. Brunswick Bank will use
commercially reasonable efforts to assure that each of the events
specified in Section 2 which require action on its part shall occur on
or before the Effective Date.
5.6. Exclusive Dealing.
(a) Except as it may be required by Maryland law to act upon
unsolicited bids by interested purchasers, Brunswick Bank shall not
hereafter directly or indirectly, through any representative or
otherwise, solicit or entertain offers from, negotiate with, or in any
manner encourage, discuss, accept or consider any proposal of any
other person or group relating to the acquisition of the capital stock
of Brunswick Bank, its assets or business, in whole or in part,
whether through direct purchase, merger, consolidation, share exchange
or other business combination.
(b) Brunswick shall pay to F&M Bancorp a termination fee of
$94,000, and shall pay its own expenses in connection with the
negotiation and execution of this Plan and preparations for the
Merger, in the event that Brunswick accepts or recommends to its
stockholders an acquisition proposal other than the Merger. Such
payment shall be made within 5 business days after the acceptance or
recommendation of the other acquisition proposal.
5.7. Affiliate Agreements. Within 10 days of the date of this Plan,
Brunswick Bank shall deliver or cause to be delivered to F&M Bancorp
memoranda and agreements substantially in the form heretofore provided
by F&M Bancorp to Brunswick Bank from each of its executive officers and
directors (and shall use commercially reasonable efforts to obtain and
deliver such memoranda and agreements from each stockholder of Brunswick
Bank) who (a) may be deemed to be an "affiliate" of Brunswick Bank, as
that term is defined for purposes of the SEC Rules 145 and 405 or (b)
may be restricted under the accounting rules applicable to a
pooling-of-interests, in form and substance satisfactory to F&M Bancorp,
under the terms of which each such officer, director or stockholder
acknowledges and agrees (i) to abide by all limitations imposed by the
Securities Act and by all rules, regulations and releases promulgated
thereunder by the SEC with respect to the sale or other disposition of
the shares of the Common Stock of F&M Bancorp to be received by such
person pursuant to the
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Merger, (ii) to abide by all limitations imposed by the accounting rules
for the Merger to be accounted for as a pooling-of-interests, and (iii)
to support and vote the shares of Common Stock of Brunswick Bank owned
or controlled by them to ratify and confirm this Plan and the Merger.
5.8. Regulatory Approvals. Brunswick Bank will, where necessary,
cooperate with F&M Bancorp's efforts to obtain all necessary regulatory
approvals of the transactions contemplated by this Plan, and will at its
own expense provide F&M Bancorp with such information concerning
Brunswick Bank as may be necessary to complete the relevant applications
for such regulatory approvals.
5.9. Advice of Changes. Between the date of this Plan and the
Effective Date, Brunswick Bank shall promptly advise F&M Bancorp in
writing of any fact which, if existing or known at the date hereof,
would have been required to be set forth or disclosed in or pursuant to
this Plan or of any fact which, if existing or known as of the date
hereof, would have made any of the representations contained herein
untrue in any material respect.
5.10. Public Announcements. Between the date of this Plan and the
Effective Date, Brunswick Bank will consult with F&M Bancorp before
issuing any press release or otherwise making any public statements with
respect to this Plan and the transactions contemplated hereby and shall
not issue any such press release or make any such public statement prior
to such consultation, except as counsel may advise is required by law.
5.11. Taxes. Brunswick Bank shall have filed with appropriate
federal, state, county, municipal or foreign taxing authorities all tax
returns required to be filed on or before the Effective Date and shall
have paid (or shall have made adequate provision or set up an adequate
actual reserve on the financial statements referred to in Section 3.2
for the payment of) all taxes imposed by any taxing authority with
respect to any Pre- Closing Tax Period (as hereinafter defined),
together with any interest, additions or penalties related to any such
taxes. For purposes of this Section 5.11, any reference to Brunswick
Bank shall be deemed to include any corporation more than 50% of the
outstanding capital stock (by vote or value) of which is owned by
Brunswick Bank. "Pre-Closing Tax Period" shall mean (i) each taxable
period that ends on or before the Effective Date and (ii) any taxable
period that includes (but does not end on) the Effective Date (the
period described in this clause (ii) being hereafter referred to as a
"Straddle Period"). In the case of any tax for a Straddle Period, the
covenant in the first sentence of this Section 5.11 shall be limited to
the Pre-Closing Tax Amount determined as follows:
(a) 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 Date and the denominator of which is the
total number of days in the Straddle Period; and
(b) in the case of any other tax, the "Pre-Closing Tax Amount"
shall be the amount of such tax for which Brunswick Bank would have
been liable if the Straddle Period had ended as of the close of
business on the day of the Effective Date.
6. Covenants of F&M Bancorp and F&M Bank. Except as otherwise
consented to in writing by Brunswick Bank after the date of this Plan,
F&M Bancorp and F&M Bank each covenants to and agrees with Brunswick
Bank as follows:
6.1. Applications to Governmental Regulatory Authorities. F&M Bancorp
or F&M Bank will promptly prepare and file with the appropriate
governmental regulatory authorities an application requesting the
regulatory approval referred to in Section 2(d) and will use
commercially reasonable efforts to secure favorable action on such
application.
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6.2. Registration of Shares. F&M Bancorp with the assistance of
Brunswick Bank and its representatives will promptly file a Registration
Statement with the SEC under the Securities Act in compliance with all
relevant rules and regulations of the SEC pursuant to which
non-dissenting holders of the Common Stock of Brunswick Bank will be
issued shares of the Common Stock of F&M Bancorp in exchange for their
shares of the Common Stock of Brunswick Bank. The number of shares to
be registered will be an amount sufficient to allow all of the shares of
the Common Stock of F&M Bancorp issued to holders of the Common Stock of
Brunswick Bank pursuant to this Plan to be registered under the
Securities Act, provided that the total number of shares to be
registered shall in no event be less than 216,000. F&M Bancorp will use
commercially reasonable efforts to secure the effectiveness of the
Registration Statement and, after the Registration Statement has been
declared effective, will issue the shares so registered to the
non-dissenting holders of the Common Stock of Brunswick Bank on the
Effective Date. F&M Bancorp may rely upon all information provided to
it by Brunswick Bank in the preparation of the Registration Statement,
any post-effective amendment thereto and the Proxy Statement and shall
not be liable for any untrue statement of a material fact or any
omission to state a material fact in the Registration Statement, the
post-effective amendment or the Proxy Statement, if such statement is
made in reliance upon any information provided to it by Brunswick Bank
or by any of its officers or authorized representatives. F&M Bancorp,
relying on certain blue sky information provided by Brunswick Bank,
shall promptly take all such actions as may be necessary or appropriate
in order to comply with all applicable securities laws of any state
having jurisdiction over the transactions contemplated by this Plan and
the Merger. Prior to the Effective Date, F&M Bancorp will cause the
listing of the Common Stock of F&M Bancorp deliverable pursuant to this
Plan on The National Market of The National Association of Securities
Dealers, Inc.
6.3. Confidential Treatment of Information. F&M Bancorp will hold
the information relating to Brunswick Bank which is specifically
identified by Brunswick Bank as either non-public, confidential or
proprietary in nature ("Confidential Information") referred to in
Section 5.1 in confidence except to the extent that it is required to
disclose Confidential Information to stockholders, to the public, or in
filings with governmental regulatory authorities, and will not use
Confidential Information except in connection with this Plan and the
transactions contemplated hereby. In the event that the Merger
contemplated by this Plan is not consummated, F&M Bancorp will return to
Brunswick Bank all copies of documents and materials furnished to F&M
Bancorp; provided that the legal department of F&M Bancorp may retain
one copy of such documents and materials. The term "Confidential
Information" shall not include information relating to Brunswick Bank
that (i) is or becomes generally available to the public other than as a
result of disclosure by F&M Bancorp, F&M Bank or any of their respective
representatives in breach of this Section 6.3, or (ii) becomes available
to F&M Bancorp, or F&M Bank on a non-confidential basis from a source
(other than F&M Bancorp, F&M Bank or their respective representatives)
whom F&M Bancorp and F&M Bank have no reason to believe is prohibited
from disclosing such information by a legal or contractual obligation to
Brunswick Bank.
6.4. Events Preceding Effectiveness. F&M Bancorp will use
commercially reasonable efforts to assure that each of the events
specified in Section 2 shall occur on or before the Effective Date.
6.5. Consents. F&M Bancorp will use commercially reasonable efforts
to obtain any consents, approvals or waivers from third parties required
in connection with the transactions contemplated hereunder.
6.6. Advice of Changes. Between the date of this Plan and the
Effective Date, F&M Bancorp shall promptly advise Brunswick Bank in
writing of any fact which, if existing or known at the date hereof,
would have been required to be set forth or disclosed in or pursuant to
this Plan or of any fact which, if existing or known as of the date
hereof, would have made any of the representations contained herein
untrue in any material respect.
6.7. Stockholders' Meeting. F&M Bancorp shall cause F&M Bank to duly
call and convene a stockholders' meeting to act upon the transactions
contemplated hereby in accordance with 12 U.S.C. Section 215a, and shall
vote in favor of this Plan and the Merger at such stockholders' meeting.
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7. Conditions Precedent to F&M Bancorp's Obligations. Unless waived
in writing by F&M Bancorp in its sole discretion, all obligations of F&M
Bancorp hereunder shall be subject to the fulfillment prior to or at the
Effective Date of the following conditions:
7.1. Representations, Warranties, and Covenants. The representations
and warranties of Brunswick Bank herein contained shall be true in all
material respects as of the Effective Date, shall be deemed made again
at and as of the Effective Date, and shall be true in all material
respects as so made again; Brunswick Bank shall have performed all
obligations and complied in all material respects with all covenants
required by this Plan to be performed or complied with by it on or prior
to the Effective Date; and F&M Bancorp shall have received from
Brunswick Bank an officers' certificate to his knowledge, information
and belief in such detail as F&M Bancorp may reasonably request, dated
the Effective Date and signed by its President and Secretary, to the
foregoing effect.
7.2. No Adverse Changes. There shall not have been any materially
adverse change in the financial condition, results of operations,
assets, liabilities, or business of Brunswick Bank from December 31,
1993 to the Effective Date. For purposes of this Section 7.2, a
"materially adverse change" shall include, without limitation, (a) a
reduction of the tangible net worth of Brunswick Bank to less than
$2,598,000, (b) a decrease in the net income of Brunswick Bank for
fiscal year 1994 to less than $180,000 (or for fiscal year 1995, to less
than $180,000 on an annualized basis), (c) the reduction of core
deposits to less than 90% of core deposits on the date of this Plan, or
(d) materially adverse changes in, and not in, the ordinary course of
Brunswick Bank's business (in the case of (a) and (b), the expenses of
the transaction under this Plan shall not be taken into account). A
series of minor unrelated events may also in the aggregate have a
materially adverse effect on the business of Brunswick Bank.
7.3. Events Preceding the Effective Date. Each of the events set
forth in Section 2 shall have occurred and any other required regulatory
approvals shall have been obtained.
7.4. Other Evidence. Brunswick Bank shall have delivered to F&M
Bancorp such further certificates and documents evidencing due action in
accordance with this Plan, including certified copies of all applicable
proceedings of stockholders or directors of Brunswick Bank pertaining to
the transactions under this Plan, as F&M Bancorp shall reasonably
request.
7.5. No Adverse Proceedings or Events. No action or proceeding
against F&M Bancorp, F&M Bank, or Brunswick Bank or the consummation of
the transactions contemplated by this Plan shall have been instituted or
threatened, or any investigations undertaken that might result in any
such action or proceeding, no order of any court entered, and no other
event shall have occurred or not occurred, on or before the Effective
Date, which, in the opinion of F&M Bancorp's counsel, (a) renders it
impossible for legal reasons for F&M Bancorp or F&M Bank to consummate
the transactions contemplated by this Plan or (b) provides a substantial
basis for concluding for legal reasons that F&M Bancorp or F&M Bank
should not consummate the transactions contemplated by this Plan.
7.6. Consents, Etc. All requisite consents, undertakings, memoranda,
agreements, exercises, and terminations by third parties which Brunswick
Bank has covenanted to use commercially reasonable efforts to obtain
under Sections 5.3 and 5.7 shall have been obtained or waived by F&M
Bancorp.
7.7. Opinion of Tax Counsel. F&M Bancorp shall have received the
opinion from its tax counsel required by Section 11.
7.8 Pooling-of-Interests Accounting. The holders of no more than 8%
of the outstanding Common Stock of Brunswick Bank shall have shall have
filed with the presiding officer, at or before the stockholders' meeting
at which this Plan and the Merger will be considered, a notice in
writing that they dissent to this Plan, or shall have voted against the
Merger pursuant to 12 U.S.C. Section 215a(b), and F&M Bancorp shall
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have received a letter from KB&C to the effect that the Merger qualifies
for pooling-of-interests accounting treatment if consummated in
accordance with this Plan; provided, that such condition shall be void
and of no further force and effect if F&M Bancorp has not received such
letter because of any action or inaction of F&M Bancorp or F&M Bank.
8. Conditions Precedent to Brunswick Bank's Obligations. Unless
waived in writing by Brunswick Bank in its sole discretion, all
obligations of Brunswick Bank hereunder shall be subject to the
fulfillment prior to or at the Effective Date of the following
conditions:
8.1. Representations, Warranties, and Covenants. The representations
and warranties of F&M Bancorp and F&M Bank herein contained shall be
true in all material respects as of the Effective Date, shall be deemed
made again at and as of the Effective Date, and shall be true in all
material respects as so made again; F&M Bancorp and F&M Bank shall have
performed all obligations and complied in all material respects with all
covenants required by this Plan to be performed or complied with by them
on or prior to the Effective Date; and Brunswick Bank shall have
received from F&M Bancorp and F&M Bank officers' certificates to his
knowledge, information and belief in such detail as Brunswick Bank may
reasonably request, dated the Effective Date and signed by their
respective President and Secretary or Cashier, to the foregoing effect.
8.2. No Adverse Changes. There shall not have been any materially
adverse change in the financial condition, results of operations,
assets, liabilities, or business of F&M Bancorp from December 31, 1993
to the Effective Date.
8.3. Events Preceding the Effective Date. Each of the events set
forth in Section 2 shall have occurred and any other required regulatory
approvals shall have been obtained.
8.4. Other Evidence. F&M Bancorp shall have delivered to Brunswick
Bank such further certificates and documents evidencing due action in
accordance with this Plan, including certified copies of all applicable
proceedings of directors of F&M Bancorp pertaining to the transactions
under this Plan, as Brunswick Bank shall reasonably request.
8.5. Consents, Etc. All requisite consents, approvals or waivers
which F&M Bancorp has covenanted to use commercially reasonable efforts
to obtain under Section 6.5 shall have been obtained or waived by
Brunswick Bank.
8.6. Opinion of Tax Counsel. Brunswick Bank shall have received the
opinion from tax counsel to F&M Bancorp required by Section 11.
8.7. Fairness Opinion. Brunswick Bank shall have received a written
opinion from Scott & Stringfellow, Inc. (or such other recognized
investment firm as Brunswick Bank may select), dated contemporaneously
with the date of the Proxy Statement, to the effect that the
consideration to be received in the Merger is fair to the stockholders
of Brunswick Bank from a financial point of view.
9. Terms of the Merger.
9.1. The Merger. Brunswick Bank shall be merged into F&M Bank under
the charter of the latter.
9.2. Name of Receiving Association. The name of the receiving
association (the "Association") shall be "Farmers and Mechanics National
Bank."
9.3. Business and Offices of Receiving Association. The business of
the Association shall be that of a national banking association. This
business shall be conducted by the Association at its main office which
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shall be located at Frederick, Maryland, and at its legally established
branch offices, such main office to be the same as that of F&M Bank and
such branch offices to be the same as the branch offices of F&M Bank and
the main and branch offices of Brunswick Bank at the Effective Date.
9.4. Capital Accounts of Receiving Association. The amount of the
authorized capital stock of the Association shall be $4,000,000
consisting of 800,000 shares of Common Stock, par value $5.00 per share.
Immediately following the Effective Date, the Association shall have a
surplus and undivided profits (including capital reserves) which when
combined with the outstanding capital stock will be equal to the
combined capital structures of the merging banks as of the Effective
Date. The amount (aggregate par value) of capital stock of the
Association outstanding upon consummation of the Merger shall be
$3,625,000, consisting of 725,000 shares of Common Stock, par value
$5.00 per share.
9.5. Transfer of Assets and Liabilities. All assets of Brunswick
Bank, as they exist at the Effective Date, shall pass to and vest in the
Association without any conveyance or other transfer; and the
Association shall be responsible for all of the liabilities of every
kind and description, including liabilities arising out of the operation
of a trust department, of each of the merging banks existing as of the
Effective Date.
9.6. Articles of Association. As of the Effective Date of the
Merger, as specified in the certificate of merger to be issued by the
Comptroller, the Articles of Association of the Association shall read
in their entirety as shown in Appendix I to this Plan.
9.7. Terms of the Merger. On the Effective Date:
(a) each issued and outstanding share of the Common Stock of
Brunswick Bank shall, without further act, be automatically converted
into and become a number of shares of the Common Stock of F&M Bancorp
whose aggregate value (determined using the average closing price of
the Common Stock of F&M Bancorp on Nasdaq for the 20 business days
immediately preceding the Effective Date) is equal to 2.5 times the
net tangible book value per share of Brunswick Bank on the Effective
Date (as determined pursuant to Section 9.7(e)), rounded to the
nearest one hundredth of a share, but in any event such number shall
be not less than nine shares of the Common Stock of F&M Bancorp; cash
will be paid in lieu of fractional shares; and dissenting shares will
be treated in accordance with the procedures set forth in 12 U.S.C.
Section 215a;
(b) and thereafter certificates representing such shares of
Common Stock of Brunswick Bank shall represent the right to receive
certificates representing shares of Common Stock of F&M Bancorp in the
aforementioned proportions; such Brunswick Bank certificates at any
time after the determination by an independent accounting firm in
Section 9.7(e) may be exchanged by the holders thereof for new
certificates for the appropriate number of shares of Common Stock of
F&M Bancorp, and the payment of cash in lieu of fractions, dividends,
and other distributions on said stock may be withheld until the
Brunswick Bank certificates are surrendered for exchange to F&M
Bancorp or an exchange agent designated by F&M Bancorp; when such new
certificates are issued, the holders thereof shall be entitled to be
paid the amount (without any interest thereon) of all such withheld
cash in lieu of fractions, dividends, or other distributions which
have theretofore become payable with respect to such shares of Common
Stock of F&M Bancorp;
(c) each share of Common Stock of F&M Bank issued and outstanding
at the Effective Date shall remain issued and outstanding as one share
of Common Stock of the Association, without any action on the part of
the holder thereof;
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<PAGE>
(d) the shares of the Common Stock of Brunswick Bank issued and
outstanding at the Effective Date shall be canceled; and
(e) net tangible book value shall mean the total tangible assets
of Brunswick Bank as of the close of business on the Effective Date
minus the total liabilities of Brunswick Bank as of the close of
business on the Effective Date calculated in conformity with generally
accepted accounting principles applied on a basis consistent with past
practice of Brunswick Bank. For purposes of determining net tangible
book value, only normal and recurring items of income and expense
(including any additional premiums to obtain extended directors' and
officers' liability coverage) shall be considered; provided, that
transactional expenses hereunder (other than such additional premiums)
and expenses (other than expenses arising from normal accruals in
accordance with current practice of Brunswick Bank) arising under the
agreements listed in Section 10(f) shall not be deducted as an
expense. The determination of net tangible book value shall be made
by KB&C (or other independent accounting firm chosen jointly by F&M
Bancorp and Brunswick Bank) within 15 business days of the Effective
Date. As part of such determination, KB&C (or other independent
accounting firm chosen jointly by F&M Bancorp and Brunswick Bank)
shall deliver to F&M Bancorp (i) a reviewed balance sheet of Brunswick
Bank as of the close of business on the Effective Date, and related
statements of income, changes in stockholders' equity and cash flows
for the period commencing upon the day after the end of the last
period in respect of which LS&C has provided an audit report with
respect to Brunswick Bank and ending as of the close of business on
the Effective Date, together with a review report covering such
financial statements and specifying that they are not aware of any
material modifications that should be made to such financial
statements in order for them to be calculated in conformity with
generally accepted accounting principles applied on a basis consistent
with past practice of Brunswick Bank, and (ii) a schedule reflecting
the calculation of the net tangible book value of Brunswick Bank as of
the close of business on the Effective Date in accordance with the
terms of this Section 9.7(e), together with a review report covering
such schedule and specifying the nothing came to their attention that
caused them to believe that the calculation of net tangible book value
is not in accordance with the terms of this Section 9.7(e).
9.8. Anti-Dilution Provision. Nothing in this Plan shall limit the
right of F&M Bancorp to issue or repurchase any of its stock or other
securities in any manner and for any consideration permitted by law
either in connection with acquisitions of new affiliates or otherwise,
prior to or after the Effective Date; provided, however, that if F&M
Bancorp takes any action which establishes, prior to the Effective Date,
a record date or effective date for a stock dividend on its Common
Stock, a split or reverse split of its Common Stock or any distribution
on all shares of its Common Stock other than cash dividends, F&M Bancorp
will take such action as shall be necessary in order that each share of
Common Stock of Brunswick Bank will be converted into the same number of
shares of the Common Stock of F&M Bancorp (whether such number is
greater or less than the number otherwise provided for herein) that the
owner of such shares would have owned immediately after the record date
or effective date of such event had the Effective Date occurred
immediately before such record date or effective date, and the exchange
rate set forth in Section 9.7(a) shall be adjusted accordingly.
Brunswick Bank hereby agrees to any revision in the exchange ratio
pursuant to this Section 9.8.
9.9. Rights of Dissenting Stockholders. Each holder of shares of the
Common Stock of Brunswick Bank which are voted against the approval of
the Merger who perfects his appraisal rights pursuant to the provisions
of 12 U.S.C. Section 215a (a "dissenting stockholder") shall be entitled
to receive from the Association in cash the value of such shares of the
Common Stock of Brunswick Bank determined in accordance with the
provisions of 12 U.S.C. Section 215a. F&M Bancorp shall contribute to
the capital of the Association an amount equal to that paid by the
Association to the dissenting stockholders of Brunswick Bank.
9.10. Board of Directors of the Association. The Board of Directors
of F&M Bank, as constituted when the Merger becomes effective, with the
addition of one director from the Board of Directors of
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<PAGE>
Brunswick Bank chosen in accordance with Section 10(a), shall serve as
the Board of Directors of the Association until the next annual meeting
of stockholders of the Association and until such time as their
successors have been elected and have qualified.
10. Boards of Directors and Employment Matters. Upon the Effective
Date:
(a) One of the directors of Brunswick Bank will be elected to the
Boards of Directors of both F&M Bancorp and F&M Bank to serve until
the next annual meeting of stockholders and until his successor is
elected and has qualified. The Nominating Committee of the Board of
Directors of F&M Bancorp will designate the director to be so elected.
(b) The officers and employees of Brunswick Bank will continue in
their employment with F&M Bank as temporary, at-will employees at the
same compensation level they received with Brunswick Bank before the
Effective Date. The full time officers and employees of Brunswick
Bank will also receive all benefits provided to full-time officers and
employees of F&M Bank, and the part-time officers and employees of
Brunswick Bank will receive all benefits provided to part-time
officers and employees of F&M Bank. After the Effective Date, F&M
Bank will interview the former officers and employees of Brunswick
Bank for consideration for continued employment at-will with F&M Bank.
Offers of continued employment at will at F&M Bank, at compensation
levels then offered to officers and employees of equivalent status at
F&M Bank, and with the same benefits as are available to other
employees of equivalent status at F&M Bank, will be made to former
officers and employees of Brunswick Bank as are necessary to fill
available positions. Except as provided in Section 10(e), length of
service with Brunswick Bank will be counted for benefit accrual with
F&M Bank for all benefit plans.
(c) Payments of $1,000, $500, or $250 will be made to each of
those officers, full-time employees, or part-time employees,
respectively, of Brunswick Bank who become employed by F&M Bank on the
Effective Date and either (i) remain employed by F&M Bank for six
months continuously thereafter or (ii) leave such employment at the
request of F&M Bank within six months after the Effective Date. Such
payments shall be made six months after the Effective Date, in the
case of those who remain in the employment of F&M Bank, or within 15
business days after the date of termination, in the case of those who
are requested to leave employment.
(d) In addition to any payments required under Section 10(c), a
severance payment will be made to those employees of Brunswick Bank
who become employed by F&M Bank on the Effective Date but are not
offered a position of continued employment by F&M Bank. The amount of
the severance payment for each such employee will be two weeks' pay at
the most recent compensation level of that employee for each year that
the employee has been employed by Brunswick Bank. The severance
payment shall be made within 15 business days after the date of
termination of the employee.
(e) The profit sharing plan of Brunswick Bank in the discretion
of F&M Bancorp will be continued, frozen, terminated, or merged with
the 401(k) Plan of F&M Bank. After the Effective Date all full-time
officers and employees of Brunswick Bank may participate in the 401(k)
Plan of F&M Bank and shall participate in the other employee benefit
programs available to employees of F&M Bank to the extent they are
eligible to do so under the terms of such plans or programs as are in
force on the Effective Date with credit given for their prior service
with Brunswick Bank for purposes of allocation, eligibility and
vesting.
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<PAGE>
(f) F&M Bancorp agrees to cause F&M Bank to assume the
obligations and duties of Brunswick Bank, without modification, under
the Employment Severance Agreement dated December 13, 1994 with David
E. Brock and the Agreement for Consultation, the Agreement for
Employment Benefits and the Agreement for Deferred Compensation all
dated August 1, 1993 with C. Bruce Porter, and will not assume any
other obligation of Brunswick Bank to Messrs. Brock and Porter.
(g) F&M Bancorp and F&M Bank will discontinue health and life
insurance benefits to retired officers and employees of Brunswick Bank
except to the extent that coverage may continue after, and Brunswick
Bank may have paid for the coverage prior to, the Effective Date.
11. Opinion of Tax Counsel. F&M Bancorp and Brunswick Bank shall
have received an opinion from tax counsel to F&M Bancorp to the effect
that:
(a) The transfer of all of the assets of Brunswick Bank to F&M
Bank, and the assumption by F&M Bank of the liabilities of Brunswick
Bank pursuant to the terms of this Plan, will constitute a
reorganization within the meaning of Section 368(a)(1)(A) and
(a)(2)(D) of the Code. Brunswick Bank, F&M Bank and F&M Bancorp will
each be a "party to the reorganization" within the meaning of Section
368(b) of the Code.
(b) No gain or loss will be recognized to a stockholder of
Brunswick Bank on the conversion of Common Stock of Brunswick Bank
solely into shares of the Common Stock of F&M Bancorp. No gain or loss
will be recognized to F&M Bancorp or F&M Bank upon the receipt by F&M
Bank of all of the assets of Brunswick Bank in exchange for shares of
the Common Stock of F&M Bancorp and the assumption by F&M Bank of the
liabilities of Brunswick Bank.
(c) The basis of the shares of the Common Stock of F&M Bancorp
received by a stockholder of Brunswick Bank will be the same as the
basis of the shares of the Common Stock of Brunswick Bank which were
converted into F&M Bancorp shares pursuant to the Merger. The holding
period of shares of the Common Stock of F&M Bancorp received by a
stockholder of Brunswick Bank will include the period during which he
held the shares of the Common Stock of Brunswick Bank which were
converted into F&M Bancorp shares pursuant to the Merger, provided
that the Brunswick Bank Common Stock is held as a capital asset by the
Brunswick Bank stockholder on the Effective Date.
(d) The basis of each asset of Brunswick Bank in the hands of F&M
Bank will be the same as the basis of such asset in the hands of
Brunswick Bank immediately prior to the Merger; the holding period of
each such asset in the hands of F&M Bank will include the periods
during which such asset was held by Brunswick Bank.
(e) No gain or loss will be recognized to the stockholders of F&M
Bancorp as a result of the transactions contemplated by this Plan.
(f) Where cash is received by a stockholder of Brunswick Bank in
lieu of a fractional share of the Common Stock of F&M Bancorp to which
the stockholder may be entitled, such cash will be treated as received
by the stockholder as a distribution in redemption of his fractional
share interest.
A-22
<PAGE>
(g) The accumulated earnings and profits of Brunswick Bank on the
Effective Date will be added to the accumulated earnings and profits
of F&M Bank and will be available for subsequent distributions of
dividends within the meaning of Section 316 of the Code.
12. Amendment of the Plan. This Plan may be amended at any time
prior to the Effective Date in response to comments of governmental
regulatory authorities or otherwise; provided that any such amendment is
in writing and is approved by the Board of Directors of each of the
parties hereto.
13. Abandonment of the Plan. Anything herein to the contrary
notwithstanding, and notwithstanding any stockholder vote or approval,
this Plan may be terminated and abandoned (a) by mutual consent of the
Boards of Directors of Brunswick Bank and F&M Bancorp, or (b) if the
Merger shall not have become effective on or before September 30, 1995,
by action of the Board of Directors of either party and the delivery of
written notice by either party to the other, (c) unilaterally by action
of the Board of Directors of F&M Bancorp in their sole discretion if F&M
Bancorp receives information from any governmental regulatory authority,
which by law is required to approve the Merger or any other aspect of
the transactions provided for herein or which has the authority to
challenge the validity of the Merger or the transactions in judicial
proceedings or otherwise, that provides a substantial basis for
concluding that the required regulatory approval will not be granted or
that the Merger or such transactions will be so challenged, or (d) by
action of the Board of Directors of Brunswick Bank in their sole
discretion in accordance with Section 5.6.
14. Expenses. Whether or not the transactions hereunder are
consummated, each party to the Plan shall pay its own expenses relating
hereto, including fees and disbursements of its counsel and accountants;
provided, however, that F&M Bancorp shall pay (a) filing fees in respect
of regulatory approvals required in order to consummate the Merger,
including the registration fee of the SEC, filing fees in respect of
state "blue sky" laws, the fee payable to The National Association of
Securities Dealers, Inc. in respect of the listing on The National
Market System of the shares of F&M Bancorp Common Stock to be issued
pursuant to this Plan and (b) the costs of printing and mailing the
prospectus and Proxy Statement. The foregoing shall not be construed as
a limitation of damages in the event of breach.
15. Notices. All notices, requests, demands, and other
communications under or connected with this Plan shall be in writing,
and (a) if to F&M Bancorp or F&M Bank, shall be addressed to F&M
Bancorp, 110 Thomas Johnson Drive, Post Office Box 518, Frederick,
Maryland 21705, attention of Gordon M. Cooley, Secretary and Legal
Officer, with a copy to its counsel, Piper & Marbury, 36 South Charles
Street, Baltimore, Maryland 21201-3010, attention of James J. Winn, Jr.,
Esquire; or (b) if to Brunswick Bank, shall be addressed to The Bank of
Brunswick, 1 West Potomac Street, Post Office Box 157, Brunswick,
Maryland 21716-1198, attention of David Brock, President and Chief
Executive Officer, with a copy to its counsel, Venable, Baetjer &
Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins Plaza,
Baltimore, Maryland 21201, attention of Francis X. Gallagher, Esquire
and to Sauser & Blair, P.A., 3809 Jefferson Pike, Jefferson, Maryland
21755-0508, attention of William E. Sauser, Esquire. Any such notices,
requests, demands, and other communications shall be mailed, postage
prepaid, first class mail, or delivered personally and shall be
sufficient and effective when delivered to or received at the address as
specified. Each of the parties may change the address at which it is to
receive communications by like written notice to the other.
16. Entire Agreement; Effect. This Plan (including the financial
statements, lists, schedules, and documents delivered pursuant hereto,
which are made a part hereof) is intended by the parties to and does
constitute the entire agreement of the parties with respect to the
transaction contemplated hereunder. This Plan supersedes any and all
prior understandings, including prior letters of intent, and it may not
be changed, waived, discharged, or terminated orally, but only in
writing by a party against which enforcement of the change, waiver,
discharge, or termination is sought.
17. Representations, Warranties and Agreements. Except as set forth
in this Section 17, all representations, warranties and agreements of
F&M Bancorp and Brunswick Bank made in this Plan, or in any
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<PAGE>
instrument delivered by F&M Bancorp or Brunswick Bank pursuant to this
Plan, shall expire at the Effective Date. In the event of the
consummation of the transactions contemplated hereby, the agreements
contained in or referred to in Sections 9 and 10 shall survive the
Effective Date. In the event of the termination of this Plan in
accordance with its terms, the agreements contained in or referred to in
Sections 5.6, 6.3 and 14 shall survive such termination. Except as
provided in the first sentence of this Section 17, nothing contained
herein shall be construed to limit the liability of a party to another
party for damages caused by a breach of this Plan.
18. Governing Law. This Plan shall be governed by, and shall be
interpreted in accordance with, the laws of the State of Maryland or, to
the extent applicable, the federal laws of the United States of America.
19. General. The section headings contained in this Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretations of this Plan. This Plan may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
This Plan shall inure to the benefit of and be binding upon the parties
hereto and their respective successors but shall not be assigned to and
shall not create any rights in favor of any other party. Any purported
assignment in violation of this Section 19 shall be void.
A-24
<PAGE>
IN WITNESS WHEREOF, F&M Bancorp, F&M Bank, and Brunswick Bank have
caused this Plan to be duly executed by their respective chairmen or
presidents, and their respective seals to be hereunto affixed and
attested by their respective secretaries, thereunto duly authorized as
of the date first above written.
ATTEST: [SEAL] F&M BANCORP
/s/Gordon M. Cooley By: /s/ Charles W. Hoff, III
- ------------------- -----------------------------
Gordon M. Cooley Charles W. Hoff, III
Secretary Chairman of the Board and
Chief Executive Officer
ATTEST: [SEAL] FARMERS AND MECHANICS
NATIONAL BANK
/s/ Alice E. Stonebreaker By: /s/ Charles W. Hoff, III
- ------------------- -----------------------------
Alice E. Stonebreaker Charles W. Hoff, III
Cashier Chairman of the Board and
Chief Executive Officer
ATTEST: [SEAL] THE BANK OF BRUNSWICK
/s/ Melody K. Marshall By: /s/ David E. Brock
- ------------------- -----------------------------
Melody K. Marshall David E. Brock
Secretary President and Chief
Executive Officer
A-25
<PAGE>
A majority of the Boards of Directors of F&M Bancorp and Farmers and
Mechanics National Bank:
/s/ Charles W. Hoff, III By: /s/ R. Carl Benna
- ------------------- -----------------------------
Charles W. Hoff, III R. Carl Benna
/s/ John D. Brunk /s/ Beverly B. Byron
- ------------------- -----------------------------
John D. Brunk Beverly B. Byron
/s/ Faye E. Cannon /s/ Martha E. Church, Ph.D.
- ------------------- -----------------------------
Faye E. Cannon Martha E. Church, Ph.D.
/s/ Albert H. Cohen /s/ George B. Delaplaine, Jr.
- ------------------- -----------------------------
Albert H. Cohen George B. Delaplaine, Jr.
/s/ Maurice A. Gladhill /s/ Charles A. Nicodemus
- ------------------- -----------------------------
Maurice A. Gladhill Charles A. Nicodemus
/s/ H. Deets Warfield, Jr. /s/ John C. Warfield
- ------------------- -----------------------------
H. Deets Warfield, Jr. John C. Warfield
/s/ Thomas R. Winkler
- -------------------
Thomas R. Winkler
A-26
<PAGE>
A majority of the Board of Directors of The Bank of Brunswick:
/s/ M. Roland Biser /s/ David E. Brock
- ------------------- -----------------------------
M. Roland Biser David E. Brock
/s/ John T. Croghan /s/ Herbert L. Daugherty
- ------------------- -----------------------------
John T. Croghan Herbert L. Daugherty
/s/ James A. Draper /s/ William A. Hemp
- ------------------- -----------------------------
James A. Draper William A. Hemp
/s/ Robert G. Hooper /s/ Dixie D. Kilham
- ------------------- -----------------------------
Robert G. Hooper Dixie D. Kilham
/s/ Forrest G. Moler, Jr. /s/ Robert K. Moler
- ------------------- -----------------------------
Forrest G. Moler, Jr. Robert K. Moler
/s/ William E. Sauser /s/ Charles Thornton
- ------------------- -----------------------------
William E. Sauser Charles Thornton
/s/ Floyd C. Wickham
- -------------------
Floyd C. Wickham
A-27
<PAGE>
APPENDIX I
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
FARMERS AND MECHANICS NATIONAL BANK
For the purpose of organizing an Association to carry on the business
of banking under the laws of the United States, the undersigned do enter
into the following Articles of Association:
FIRST: The title of this association (hereinafter called the
"Association") shall be "Farmers and Mechanics National Bank".
SECOND: The main office of the Association shall be in Frederick,
Frederick County, Maryland. The general business of the Association
shall be conducted at its main office and its branches.
THIRD: The Board of Directors of the Association shall consist of
not less than 5 nor more than 25 persons, the exact number of Directors
within such minimum and maximum limits to be fixed and determined from
time to time by resolution of a majority of the full Board of Directors
or by resolution of the shareholders at any annual or special meeting
thereof. Unless otherwise provided by the laws of the United States,
any vacancy in the Board of Directors for any reason, including an
increase in the number thereof, may be filled by action of the Board of
Directors. The By-Laws may fix as a mandatory retirement date for
directors the annual meeting next following the age of 70 years.
FOURTH: The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought
before said meeting shall be held at the main office of the Association
or such other place as the Board of Directors may designate, on the day
of each year specified therefor in the By- Laws, but if no election is
held on that day, it may be held on any subsequent day according to the
provisions of law; and all elections shall be held according to such
lawful regulations as may be prescribed by the Board of Directors.
FIFTH: The authorized amount of capital stock of the Association
shall be 800,000 shares of Common Stock of the par value of $5.00 each,
but said capital stock may be increased or decreased from time to time,
in accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association
shall have any pre-emptive or preferential right of subscription to any
shares of any class of stock of the Association, whether now or
hereafter authorized, or to any obligations convertible into stock of
the Association, issued, or sold, nor any right of subscription to any
thereof other than such, if any, as the Board of Directors in its
discretion may from time to time determine and at such price as the
Board of Directors may from time to time fix.
The Association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the
approval of the shareholders.
SIXTH: The Board of Directors shall appoint one of its members
President of the Association, who shall be Chairman of the Board, unless
the Board appoints another director to be the Chairman. The Board of
Directors may also appoint another director to be Vice Chairman of the
Board. The Board of Directors shall have the power to appoint one or
more Vice Presidents; and to appoint a Cashier and such other officers
and employees as may be required to transact business of the
Association.
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<PAGE>
The Board of Directors shall have the power to define the duties of
the officers and employees of the Association; to fix the salaries to be
paid to them; to require bonds from them and to fix the penalty thereof;
to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and
affairs of the Association; to make all By-Laws that it may be lawful
for them to make; and generally to do and perform all acts that it may
be legal for a Board of Directors to do and perform.
SEVENTH: The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of
Frederick, Maryland, without the approval of the shareholders but
subject to the approval of the Comptroller of the Currency; and shall
have the power to establish or change the location of any branch or
branches of the Association to any other location without the approval
of the shareholders but subject to the approval of the Comptroller of
the Currency.
EIGHTH: The corporate existence of the Association shall continue
until terminated in accordance with the laws of the United States.
NINTH: The Board of Directors of the Association, or any one or more
shareholders owning, in the aggregate, not less than twenty-five percent
of the stock of the Association, may call a special meeting of
shareholders at any time. Unless otherwise provided by the laws of the
United States, a notice of the time, place, and purpose of every annual
and special meeting of the shareholders shall be given by first-class
mail, postage prepaid, mailed at least ten days prior to the date of
such meeting to each shareholder of record at his address as shown upon
the books of the Association.
TENTH: This Association shall indemnify (a) its directors to the
full extent permitted by the general laws of the State of Maryland now
or hereafter in force, including the advance of expenses under the
procedures provided by such laws; (b) its officers to the same extent it
shall indemnify its directors; (c) its officers who are not directors to
such further extent as shall be authorized by the affirmative vote of a
majority of its Board of Directors and be consistent with such laws; and
(d) its other employees and agents to the extent as shall be authorized
by the affirmative vote of a majority of its Board of Directors and be
consistent with such laws; provided, however, that the Association
shall not indemnify its directors, officers, employees, or agents
against expenses, penalties, or other payments incurred in an
administrative proceeding or action instituted by an appropriate bank
regulatory agency which proceeding or action results in a final order
assessing civil money penalties or requiring affirmative action by a
director, officer, employee, or agent in the form of payments to the
Association.
This Association may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of this
Association to the extent as shall be authorized by the affirmative vote
of a majority of its Board of Directors and be consistent with the
general laws of the State of Maryland now or hereafter in force;
provided, however, that this Association shall not purchase or maintain
insurance on behalf of its directors, officers, employees, or agents for
expenses, penalties, or other payments incurred in an administrative
proceeding or action instituted by an appropriate bank regulatory agency
which proceeding or action results in a final order assessing civil
money penalties or requiring affirmative action by a director, officer,
employee, or agent in the form of payments to this Association.
ELEVENTH: These Articles of Association may be amended at any
regular or special meeting of the shareholders by the affirmative vote
of the holders of a majority of the stock of the Association, unless the
vote of the holders of a greater amount of stock is required by law, and
in that case by the vote of the holders of such greater amount.
IN WITNESS WHEREOF, we have hereunto set our hands this 21st day of
February, 1984.
/s/ Charles W. Hoff, III
/s/ Guy W. Nusz
/s/ Michael M. Cooney
A-29
<PAGE>
/s/ Ernest E. Watkins
/s/ Geneva B. Delphey
A-30
<PAGE>
APPENDIX II
LIST OF SCHEDULES
A. Schedules to be Provided by Brunswick Bank to F&M Bancorp.
<TABLE>
<CAPTION>
<S> <C>
Schedule 3.1(b). Certified charter and by-laws of Brunswick Bank.
Schedule 3.2(a). Financial Statements of Brunswick Bank at December
31, 1989, 1990, 1991, 1992, 1993 and for each of
the years then ended, as reported upon by Linton
Shafer & Co., P.A.
Schedule 3.2(b). Unaudited Internal Financial Statements of Brunswick
Bank at September 30, 1994 and for the nine months
then ended.
Schedule 3.3. Tax Returns of Brunswick Bank to Federal, State,
County, Municipal or Foreign Taxing Authorities
for the taxable years 1989, 1990, 1991, 1992,
and 1993.
Schedule 3.5. List of Certain Changes or Events.
Schedule 3.7.1. List of Liens and Encumbrances on Property.
Schedule 3.7.2. List of Leases.
Schedule 3.8. Plans, Contracts and Agreements.
Schedule 3.9. Litigation, Etc.
Schedule 3.12. Pension and Welfare Matters.
Schedule 3.13. Related Party Transactions.
Schedule 3.14. No Conflicts with Other Documents.
Schedule 3.17. Insurance Policies, including Financial
Institutions Bonds.
Schedule 3.19. Agreement between Brunswick Bank and Scott &
Stringfellow, Inc.
</TABLE>
B. Schedules to be Provided by F&M Bancorp to Brunswick Bank.
<TABLE>
<CAPTION>
<S> <C>
Schedule 4.1(e). Certified charter and by-laws of F&M Bancorp
and F&M Bank.
Schedule 4.2(a). Consolidated Financial Statements of F&M Bancorp
and its subsidiary at December 31, 1989,
1990, 1991, 1992 and 1993 and for each of
the years then ended, as reported upon by
Keller Bruner & Company, L.L.C.
Schedule 4.2(b). Unaudited Internal Consolidated Financial
Statements of F&M Bancorp and its subsidiary
at September 30, 1994 and for the nine months
then ended.
Schedule 4.4. List of Certain Changes or Events.
</TABLE>
A-31
<PAGE>
ANNEX B
TITLE 12, UNITED STATES CODE, SECTION 215A
(Section Mark) 215a. Merger of national banks or State banks into
national banks
(a) Approval of Comptroller, board and shareholders; merger agreement;
notice; capital stock; liability of receiving association
One or more national banking associations or one or more State
banks, with the approval of the Comptroller, under an agreement not
inconsistent with this subchapter, may merge into a national banking
association located within the same State, under the character of the
receiving association. The merger agreement shall --
(1) be agreed upon in writing by a majority of the board of
directors of each association or State bank participating in the
plan of merger;
(2) be ratified and confirmed by the affirmative vote of the
shareholders of each such association or State bank owning at
least two-thirds of its capital stock outstanding, or by a greater
proportion of such capital stock in the case of a State bank if
the laws of the State where it is organized so require, at a
meeting to be held on the call of the directors, after publishing
notice of the time, place, and object of the meeting for four
consecutive weeks in a newspaper of general circulation published
in the place where the association or State bank is located, or,
if there is no such newspaper, then in the newspaper of general
circulation published nearest thereto, and after sending such
notice to each shareholder of record by certified or registered
mail at least ten days prior to the meeting, except to those
shareholders who specifically waive notice, but any additional
notice shall be given to the shareholders of such State bank which
may be required by the laws of the State where it is organized.
Publication of notice may be waived, in cases where the
Comptroller determines that an emergency exists justifying such
waiver, by unanimous action of the shareholders of the association
or State banks;
(3) specify the amount of the capital stock of the receiving
association, which shall not be less than that required under
existing law for the organization of a national bank in the place
in which it is located and which will be outstanding upon
completion of the merger, the amount of stock (if any) to be
allocated, and cash (if any) to be paid, to the shareholders of
the association or State bank being merged into the receiving
association; and
(4) provide that the receiving association shall be liable for
all liabilities of the association or State bank being merged into
the receiving association.
(b) Dissenting shareholders
If a merger shall be voted for at the called meetings by the
necessary majorities of the shareholders of each association or State
bank participating in the plan of merger, and thereafter the merger
shall be approved by the Comptroller, any shareholder of any association
or State bank to be merged into the receiving association who has voted
against such merger at the meeting of the association or bank of which
he is a stockholder, or has given notice in writing at or prior to such
meeting to the presiding officer that he dissents from the plan of
merger, shall be entitled to receive the value of the shares so held by
him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days
after the date of consummation of the merger, accompanied by the
surrender of his stock certificates.
(c) Valuation of Shares
The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal
made by a committee of three persons, composed of (1) one selected by
the vote of the holders of the majority of the stock, the owners of
which are entitled to payment in cash; (2) one selected by the
B-1
<PAGE>
directors of the receiving association; and (3) one selected by the two
so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory
to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised
value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value
of the shares of the appellant.
(d) Application to shareholders of merging associations; appraisal
by Comptroller; expenses of receiving association; sale and
resale of shares; State appraisal and merger law
If, within ninety days from the date of consummation of the
merger, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such
shares, the Comptroller shall upon written request of any interested
party cause an appraisal to be made which shall be final and binding on
all parties. The expenses of the Comptroller in making the reappraisal
or the appraisal, as the case may be, shall be paid by the receiving
association. The value of the shares ascertained shall be promptly paid
to the dissenting shareholders by the receiving association. The shares
of stock of the receiving association which would have been delivered to
such dissenting shareholders had they not requested payment shall be
sold by the receiving association at an advertised public auction, and
the receiving association shall have the right to purchase any of such
shares at such public auction, if it is the highest bidder therefor, for
the purpose of reselling such shares within thirty days thereafter to
such person or persons and at such price not less than par as its board
of directors by resolution may determine. If the shares are sold at
public auction at a price greater than the amount paid to the dissenting
shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any
State bank shall be determined in the manner prescribed by the law of
the State in such cases, rather than as provided in this section, if
such provision is made in the State law; and no such merger shall be in
contravention of the law of the State under which such bank is
incorporated. The provisions of this subsection shall apply only to
shareholders of (and stock owned by them in) a bank or association being
merged into the receiving association.
(e) Status of receiving association; property rights and interests
vested and held as fiduciary
The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and
continued in the receiving association and such receiving association
shall be deemed to be the same corporation as each bank or banking
association participating in the merger. All rights, franchises, and
interests of the individual merging banks or banking associations in and
to every type of property (real, personal, and mixed) and choses in
action shall be transferred to and vested in the receiving association
by virtue of such merger without any deed or other transfer. The
receiving association, upon the merger and without any order or other
action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises, and interests, including appointments,
designations, and nominations, and all other rights and interests as
trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, and committee of estates of
lunatics, and in every other fiduciary capacity, in the same manner and
to the same extent as such rights, franchises, and interests were held
or enjoyed by any one of the merging banks or banking associations at
the time of the merger, subject to the conditions hereinafter provided.
(f) Removal as fiduciary; discrimination
Where any merging bank or banking association, at the time of
the merger, was acting under appointment of any court as trustee,
executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, or committee of estates of lunatics, or in
any other fiduciary capacity, the receiving association shall be subject
to removal by a court of competent jurisdiction in the same manner and
to the same extent as was such merging bank or banking association prior
to the merger. Nothing contained in this section shall be considered to
impair in any manner the right of any court to remove the receiving
association and to appoint in lieu thereof a substitute trustee,
executor, or other fiduciary, except that such right shall not be
exercised in such a manner as to discriminate against national banking
associations, nor shall any receiving association be removed solely
because of the fact that it is a national banking association.
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<PAGE>
(g) Issuance of stock by receiving association; preemptive rights
Stock of the receiving association may be issued as provided by
the terms of the merger agreement, free from any preemptive rights of
the shareholders of the respective merging banks.
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<PAGE>
ANNEX C
Opinion of Scott & Stringfellow, Inc.
, 1995
Board of Directors
The Bank of Brunswick
Brunswick, Maryland
Gentlemen:
You have asked us to render our opinion relating to the fairness,
from a financial point of view, to the stockholders of The Bank of
Brunswick ("Brunswick Bank") of the terms of a Plan and Agreement to
Merge among F&M Bancorp ("F&M Bancorp"), Farmers & Mechanics National
Bank ("F&M Bank") and Brunswick Bank dated January 10, 1995 (the
"Plan"). The Plan provides for the merger of Brunswick Bank with and
into F&M Bank (the "Merger") and further provides that each share of
Common Stock of Brunswick Bank which is issued and outstanding
immediately prior to the Effective Date of the Merger shall be converted
into and become a number of shares of the Common Stock of F&M Bancorp
whose aggregate value is equal to 2.5 times the net tangible book value
per share of Brunswick Bank on the Effective Date, but in any event such
number shall be not less than nine shares of Common Stock of F&M
Bancorp.
In developing our opinion, we have, among other things, reviewed and
analyzed: (1) the Plan; (2) the Form S-4 Registration Statement filed
with the Securities and Exchange Commission in connection with the
Merger; (3) Brunswick Bank's financial statements for the four years
ended December 31, 1994; (4) Brunswick Bank's unaudited financial
statements for the three months ended December 31, 1993 and 1994, and
other internal information relating to Brunswick Bank prepared by
Brunswick Bank's management; (5) information regarding the trading
market for the Common Stocks of Brunswick Bank and F&M Bancorp and the
price ranges within which the respective stocks have traded; (6) the
relationship of prices paid to relevant financial data such as net
worth, loans, deposits and earnings in certain bank and bank holding
company mergers and acquisitions in Maryland in recent years; (7) F&M
Bancorp's annual reports to shareholders and its financial statements
for the four years ended December 31, 1994; and (8) F&M Bancorp's
unaudited financial statements for the three months ended December 31,
1993 and 1994, and other internal information relating to F&M Bancorp
prepared by F&M Bancorp's management. We have discussed with members of
management of Brunswick Bank and F&M Bancorp the background to the
Merger, reasons and basis for the Merger and the business and future
prospects of Brunswick Bank and F&M Bancorp individually and as a
combined entity. Finally, we have conducted such other studies, analyses
and investigations, particularly of the bank industry, and considered
such other information as we deemed appropriate.
In conducting our review and arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of the information
furnished to us by or on behalf of Brunswick Bank and F&M Bancorp. We
have not attempted independently to verify such information, nor have we
made any independent appraisal of the assets of Brunswick Bank or F&M
Bancorp. We have taken into account our assessment of general economic,
financial market and industry conditions as they exist and can be
evaluated at the date hereof, as well as our experience in business
valuation in general.
On the basis of our analyses and review and in reliance on the
accuracy and completeness of the information furnished to us and subject
to the conditions noted above, it is our opinion that, as of the date
hereof
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<PAGE>
the terms of the Plan are fair from a financial point of view to the
stockholders of the Common Stock of Brunswick Bank.
Very truly yours,
SCOTT & STRINGFELLOW, INC.
By:
--------------------------------
Gary S. Penrose
Managing Director, Financial Institutions Group
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
(a) Section 2-418 of the Corporations and Associations
Article of the Annotated Code of Maryland permits a corporation to
indemnify its present and former directors, among others, against
judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which
they may be made a party by reason of their services in those or other
capacities, unless it is established that (a) the act or omission of the
director or officer was material to the matter giving rise to such
proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty; or (b) the director or officer
actually received an improper personal benefit in money, property, or
services; or (c) in the case of any criminal proceeding, the director or
officer had reasonable cause to believe that the act or omission was
unlawful. Maryland law permits a corporation to indemnify a present and
former officer to the same extent as a director, and to provide
additional indemnification to an officer who is not also a director. In
addition, Section 2-418(f) of the Corporations and Associations Article
of the Annotated Code of Maryland permits a corporation to pay or
reimburse, in advance of the final disposition of a proceeding,
reasonable expenses (including attorney's fees) incurred by a present or
former director or officer made a party to the proceeding by reason of
his service in that capacity, provided that the corporation shall have
received (a) a written affirmation by the director or officer of his
good faith belief that he has met the standard of conduct necessary for
indemnification by the corporation; and (b) a written undertaking by or
on his behalf to repay the amount paid or reimbursed by the corporation
if it shall ultimately be determined that the standard of conduct was
not met.
The Registrant has provided for indemnification of directors,
officers, employees, and agents in Article Eighth, Section (5) of its
charter, as amended. This provision reads as follows:
(5) The Corporation shall indemnify (a) its directors
to the full extent provided by the general laws of the State of
Maryland now or hereafter in force, including the advance of
expenses under the procedures provided by such laws; (b) its
officers to the same extent it shall indemnify its directors;
and (c) its officers who are not directors to such further
extent as shall be authorized by the Board of Directors and be
consistent with law. The foregoing shall not limit the authority
of the Corporation to indemnify other employees and agents
consistent with law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) Under Maryland law, a corporation is permitted to limit
by provision in its articles of incorporation the liability of directors
and officers, so that no director or officer of the corporation shall be
liable to the corporation or to any stockholder for money damages except
to the extent that (i) the director or officer actually received an
improper benefit in money, property, or services, for the amount of the
benefit or profit in money, property or services actually received, or
(ii) a judgment or other final adjudication adverse to the director or
officer is entered in a proceeding based on a finding in the proceeding
that the director's or officer's action, or failure to act, was the
result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding.
II-1
<PAGE>
The Registrant has limited the liability of its directors and
officers for money damages in Article Eighth, Section (6) of its
charter, as amended. This provision reads as follows:
(6) To the fullest extent permitted by Maryland
statutory or decisional law, as amended or interpreted, no
director or officer of this Corporation shall be personally
liable to the Corporation or its stockholders for money damages.
No amendment of the charter of the Corporation or repeal of any
of its provisions shall limit or eliminate the benefits provided
to directors and officers under this provision with respect to
any act or omission which occurred prior to such amendment or
repeal.
Item 21. Exhibits and Financial Statement Schedules.
2. Plan and Agreement to Merge, dated as of January 10,
1995, by and among F&M Bancorp, F&M Bank, and The Bank
of Brunswick.
3.1. Articles of Incorporation of F&M Bancorp dated December
6, 1983, together with Amendments thereto dated April 9,
1985, April 12 ,1988, and April 11, 1989 (filed as an
exhibit with the quarterly report on Form 10-Q for the
second quarter of 1989 and incorporated by reference
herein).
3.2. By-Laws of F&M Bancorp (filed as Exhibit 3-B to the
Company's Registration Statement on Form S-14
(Registration No. 2-88390) and incorporated by reference
herein).
5. Opinion of Piper & Marbury regarding legality of shares.
8. Opinion of Piper & Marbury regarding tax matters.
23.1. Consent of Linton, Shafer & Company, P.A.
23.2. Consent of Keller Bruner & Company, L.L.C.
23.3. Consent of Piper & Marbury (included in Exhibit 5).
23.4. Consent of Scott & Stringfellow, Inc.
24. Power of Attorney.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to
be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant
pursuant to Section 13
II-2
<PAGE>
or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are incorporated by
reference in the registration statement.
(2) That for the purpose of determining any
liability under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes to
deliver or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and where interim
financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause
to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
(c) The undersigned registrant hereby undertakes to
respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent
to the effective date of the registration statement through the date of
responding to the request.
(d) The undersigned registrant hereby undertakes to
supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein, that was
not the subject of and included in the registration statement when it
became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act,
the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City
of Frederick, State of Maryland, on March 30, 1995.
F&M BANCORP
By: /s/ Charles W. Hoff, III
---------------------------------
Charles W. Hoff, III
Chairman of the Board and
Chief Executive Officer
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed by the following
persons in the capacities indicated on March 30, 1995.
Signature Title and Capacity
/s/ Charles W. Hoff, III Chairman of the Board and Chief Executive
Charles W. Hoff, III Officer
(Principal Executive Officer)
/s/ Faye E. Cannon President and Chief Operating Officer
Faye E. Cannon (Principal Executive Officer)
/s/ Kenneth M. Sabanosh Vice President and Treasurer
Kenneth M. Sabanosh (Principal Financial Officer and Principal Accounting
Officer)
A majority of the Board of Directors:
Charles W. Hoff, III, R. Carl Benna, John D. Brunk, Beverly B. Byron,
Faye E. Cannon, Martha E. Church, Ph.D., Albert H. Cohen, George B.
Delaplaine, Jr., Charles A. Nicodemus, H. Deets Warfield, Jr., John C.
Warfield, and Thomas R. Winkler
By: /s/ Charles W. Hoff, III For himself and as Attorney-in-Fact.
II-5
<PAGE>
EXHIBIT INDEX
(Exhibits described in Item 21 and listed in this index
are incorporated by reference.)
<TABLE>
<CAPTION>
Sequentially
Exhibit Document Numbered Page
<S> <C> <C>
2. Plan and Agreement to Merge, dated as of January 10, 1995, by
and among F&M Bancorp, F&M Bank, and The Bank of Brunswick. *
3.1. Articles of Incorporation of F&M Bancorp dated December 6,
1983, together with Amendments thereto dated April 9, 1985,
April 12 ,1988, and April 11, 1989. (dagger)
3.2. By-Laws of F&M Bancorp (filed as Exhibit 3-B to the Company's
Registration Statement on Form S-14. (dagger)
5. Opinion of Piper & Marbury regarding legality of shares. (double dagger)
8. Opinion of Piper & Marbury regarding tax matters. (double dagger)
23.1. Consent of Linton, Shafer & Company, P.A. II-7
23.2. Consent of Keller Bruner & Company, L.L.C. II-8
23.3. Consent of Piper & Marbury (included in Exhibit 5). (double dagger)
23.4. Consent of Scott & Stringfellow, Inc. II-9
24. Power of Attorney. II-10
</TABLE>
* Included as Annex A to Proxy Statement/Prospectus.
(dagger) Previously filed and incorporated herein by reference.
(double dagger) To be filed by amendment.
II-6
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Bank of Brunswick
We hereby consent to the use in F&M Bancorp's Form S-4 of our
report dated January 11, 1995 relating to the financial statements and
schedules of The Bank of Brunswick and to the use of our name as it
appears under the caption "Experts."
LINTON, SHAFER & COMPANY
March 24, 1995
Frederick, Maryland
II-7
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-4 of our report, dated January 20,
1995, except for Note 19, as to which the date is January 31, 1995,
relating to the consolidated financial statements of F&M Bancorp that is
incorporated by reference in the annual report on Form 10-K of F&M
Bancorp for the year ended December 31, 1994, and to the reference to
our Firm under the caption "Experts" in the Prospectus.
KELLER BRUNER & COMPANY, L.L.C.
Frederick, Maryland
April 3, 1995
II-8
<PAGE>
CONSENT OF INVESTMENT BANKERS
Gentlemen:
We consent to the use, quotation and summarization in the
Registration Statement on Form S-4 of our fairness opinion rendered to
the Board of Directors of the Brunswick Bank in connection with the
merger of Brunswick Bank with and into F&M Bank and to the use of our
name, and the statements with respect to us, appearing in the
Registration Statement.
Sincerely,
SCOTT & STRINGFELLOW, INC.
Gary S. Penrose
Managing Director
Financial Institutions Group
April 3, 1995
Richmond, Virginia
II-9
<PAGE>
F&M BANCORP
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned Officers
and Directors of F&M BANCORP, hereby constitute and appoint CHARLES W.
HOFF, III and FAYE E. CANNON, and each of them, the true and lawful
agents and attorneys-in-fact of the undersigned with full power and
authority in said agents and attorneys-in-fact, and in any one or more
of them, to sign for the undersigned and in their respective names as
Officers and as Directors of the Corporation a Registration Statement on
Form S-4, or other appropriate form, of the Corporation to be filed with
the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933, as amended, and any amendment or amendments to
such Registration Statement, relating to a proposed issue of shares of
Common Stock of the Corporation pursuant to the Plan and Agreement to
Merge providing for the merger of The Bank of Brunswick with and into
Farmers and Mechanics National Bank; hereby ratifying and confirming all
acts taken by such agents and attorneys-in-fact, or any one or more of
them, as herein authorized.
Dated: January 10, 1995
Name Title
/s/ Charles W. Hoff, III Chairman of the Board, Chief Executive
Charles W. Hoff, III Officer and Director
(Principal Executive Officer)
/s/ Kenneth M. Sabanosh Vice President and Treasurer
Kenneth M. Sabanosh (Principal Financial Officer and Principal
Accounting Officer)
/s/ Carl Benna Director
R. Carl Benna
/s/ John D. Brunk Director
John D. Brunk
/s/ Beverly B. Byron Director
Beverly B. Byron
/s/ Faye E. Cannon Director
Faye E. Cannon
/s/ Martha E. Church, Ph.D. Director
Martha E. Church, Ph.D.
/s/ Albert H. Cohen Director
Albert H. Cohen
/s/ George B. Delaplaine, Jr. Director
George B. Delaplaine, Jr.
/s/ Charles A. Nicodemus Director
Charles A. Nicodemus
II-10
<PAGE>
/s/ H. Deets Warfield, Jr. Director
H. Deets Warfield, Jr.
/s/ John C. Warfield Director
John C. Warfield
/s/ Thomas R. Winkler Director
Thomas R. Winkler
II-11
