UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Home Federal Corporation
------------------------
(Name of Issuer)
Option to Purchase Shares of Common Stock, par value $1.00 per share
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(Title of Class of Securities)
436919104
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(CUSIP Number)
James J. Winn, Jr., Esq.
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
(410) 539-2530
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 2, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: |_|
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Check the following box if a fee is being paid with this statement: |X|
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Page 1 of 62 Pages
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CUSIP No.: 436919104 Page 2 of 62 Pages
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(1) NAME OF REPORTING PERSON: F&M Bancorp
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 52-1316473
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS*
WC
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Organized as a corporation in the State of Maryland.
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NUMBER OF (7) SOLE VOTING POWER
SHARES 501,282 (upon exercise of Option)
BENEFICIALLY ------------------------------------------
OWNED BY (8) SHARED VOTING POWER
EACH None
REPORTING ------------------------------------------
PERSON (9) SOLE DISPOSITIVE POWER
501,282 (upon exercise of Option)
------------------------------------------
(10) SHARED DISPOSITIVE POWER
None
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
501,282 (upon exercise of Option)
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(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9% (calculated by dividing (i) the 501,282 shares
underlying the Option held by the Reporting Person by (ii)
the 2,519,010 shares of Common Stock outstanding).
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(14) TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No.: 436919104 Page 3 of 62
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Item 1. Security and Issuer
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The class of equity securities to which this statement on Schedule 13D
(this "Statement") relates is an Option (the "Option") to purchase 501,282
shares of the common stock, par value $1.00 per share (the "Common Stock"), of
Home Federal Corporation, a Maryland corporation (the "Issuer"), which has its
principal executive offices at 122-128 West Washington Street, Hagerstown,
Maryland 21740.
F&M Bancorp acquired the Option to purchase securities of the Issuer
pursuant to the Stock Option Agreement dated April 2, 1996 between F&M Bancorp
and the Issuer. This was entered into in connection with the proposed merger of
the Issuer with and into F&M Bancorp (the "Merger") pursuant to the Plan and
Agreement to Merge dated as of April 2, 1996 by and between F&M Bancorp and the
Issuer (the "Plan").
F&M Bancorp may exercise the Option upon the occurrence of certain
events (each a "Purchase Event"). The Stock Option Agreement provides that a
Purchase Event shall mean the occurrence of any of the following events: (i) the
Issuer or Home Federal Savings Bank, its primary subsidiary, without having
received F&M Bancorp's prior written consent, shall have entered into an
agreement with any person to: (x) merge, consolidate or enter into any similar
transaction with the Issuer except as contemplated in the Plan; (y) purchase,
lease or otherwise acquire all or substantially all of the assets of the Issuer
or Home Federal Savings Bank; or (z) purchase or otherwise acquire (including by
way of merger, consolidation, share exchange or any similar transaction)
securities representing 15% or more of the voting power of the Issuer or Home
Federal Savings Bank; (ii) any person (other than the Issuer and Home Federal
Savings Bank in a fiduciary capacity, or F&M Bancorp or its primary subsidiary,
Farmers and Mechanics National Bank in a fiduciary capacity) shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 15% or more
of the outstanding shares of the Issuer's Common Stock; (iii) any person shall
have made a bona fide proposal to the Issuer by public announcement or written
communication that is or becomes the subject of public disclosure to acquire the
Issuer or Home Federal Savings Bank by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, and following
such bona fide proposal the stockholders of the Issuer vote not to adopt the
Plan; or (iv) the Issuer shall have willfully breached certain specified
covenants contained in the Stock Option Agreement following a bona fide proposal
to the Issuer or Home Federal Savings Bank to acquire the Issuer or Home Federal
Savings Bank by merger, consolidation, purchase of all or substantially all of
its assets or any other similar transaction, which breach would entitle F&M
Bancorp to terminate the Plan (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the date on which
F&M Bancorp shall notify the Issuer of its intent to exercise the Option. None
of these events have yet occurred.
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CUSIP No.: 436919104 Page 4 of 62
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Item 2. Identity and Background
-----------------------
This Statement is being filed by F&M Bancorp, a Maryland corporation.
F&M Bancorp is a registered bank holding company and owns all of the issued and
outstanding capital stock of Farmers and Mechanics National Bank, a national
banking association. Its principal address (and the address of its principal
business) is 110 Thomas Johnson Drive, Frederick, Maryland 21702.
During the last five years, F&M Bancorp has not been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors) or
been subject to a judgment, decree or final order of a judicial or
administrative body of competent jurisdiction enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
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Consideration for the Merger will be in the form of shares of the
Common Stock of F&M Bancorp. Consideration for the acquisition of shares of the
Issuer through exercise of the Option will be cash paid from working capital of
F&M Bancorp. No separate consideration was paid to acquire the Option. No
borrowings were made for the purpose of acquiring the securities.
Copies of the Stock Option Agreement and of the Plan are filed as
exhibits to this Schedule 13D.
Item 4. Purpose of Transaction
----------------------
F&M Bancorp acquired the Option in connection with its proposed
acquisition of the Issuer. The execution of the Stock Option Agreement was a
precondition to F&M Bancorp's execution of the Plan. The Option is intended to
increase the likelihood that the Merger will be consummated and to provide to
F&M Bancorp compensation for the value it has provided to the stockholders of
the Issuer by entering into the Plan.
After the Merger is consummated, the separate corporate existence of
the Issuer will cease. The employment of all present officers of the Issuer will
terminate, although they will continue as officers of a subsidiary of the
Issuer, and one present officer of the Issuer will be appointed to serve as an
officer of F&M Bancorp. All shares of the Common Stock of the Issuer will be
automatically converted into shares of the Common Stock of F&M Bancorp. The
subsidiaries of the Issuer will continue as subsidiaries of F&M Bancorp. After
the Merger, F&M Bancorp will name two directors of the Issuer to serve on its
board of directors, and F&M Bancorp will appoint two persons to serve as
directors of Home Federal Savings Bank.
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CUSIP No.: 436919104 Page 5 of 62
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Item 5. Interest in Securities of Issuer
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Prior to the execution of the Stock Option Agreement, F&M Bancorp did
not beneficially own or have the sole power to vote or dispose of any shares of
Common Stock of the Issuer.
As a result of the execution of the Stock Option Agreement, F&M Bancorp
would have, upon exercise of the Option, beneficial ownership and the sole power
to vote and dispose of 501,282 shares of Common Stock of the Issuer.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
--------------------------------------------------------------
In connection with the Merger, certain stockholders of the Issuer are
to enter into a Support Agreement pursuant to which they agree to vote their
shares of Common Stock of the Issuer in favor of the Merger. A copy of the form
of this Support Agreement is filed as an exhibit to this Schedule 13D.
There are presently no other contracts, arrangements, understandings or
relationships (legal or otherwise) among F&M Bancorp and any other person, with
respect to any securities of the Issuer, including, but not limited to, transfer
or voting of any securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees or profits, division of profits or loss,
or the giving or withholding of proxies.
Item 7. Material to be filed as Exhibits
---------------------------------
1. Plan and Agreement to Merge dated as of April 2, 1996 by and among F&M
Bancorp and Home Federal Corporation (page 7).
2. Stock Option Agreement dated as of April 2, 1996 between Home Federal
Corporation and F&M Bancorp (page 52).
3. Form of Support Agreement dated as of April 2, 1996 between F&M
Bancorp and certain stockholders of Home Federal Corporation
(page 59).
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CUSIP No.: 436919104 Page 6 of 62
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
F&M Bancorp certifies that the information set forth in this Statement is true,
complete and correct.
Date: April 10, 1996 F&M BANCORP
By:/s/ Charles W. Hoff,
--------------------
Charles W. Hoff, III
Chairman and Chief Executive Officer
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CUSIP No.: 436919104 Page 7 of 62
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EXHIBIT 1. PLAN AND AGREEMENT TO MERGE
PLAN AND AGREEMENT TO MERGE (this "Plan"), dated as of April 2, 1996 by
and among F&M Bancorp ("F&M Bancorp"), a Maryland corporation, and Home Federal
Corporation ("Home Corporation"), a Maryland corporation.
W I T N E S S E T H:
WHEREAS, F&M Bancorp is a bank holding company and the holder of all of
the issued and outstanding capital stock of Farmers and Mechanics National Bank
("F&M Bank"), a national banking association; and Home Corporation is a thrift
holding company and the holder of all of the issued and outstanding capital
stock of Home Federal Savings Bank ("Home Bank"), a federally-chartered savings
bank; and
WHEREAS, F&M Bancorp desires to have Home Corporation merge with F&M
Bancorp in such a manner that, upon the merger becoming effective, F&M Bancorp
will be the surviving Maryland corporation and all of the issued and outstanding
shares of the Common Stock of Home Corporation will be converted into shares of
the Common Stock of F&M Bancorp, subject to the terms and conditions and based
upon Home Corporation's representations, warranties and covenants hereinafter
set forth, such merger hereinafter referred to as the "Merger;" and
WHEREAS, Home Corporation desires that it be merged with F&M Bancorp in
the manner set forth above, and that the issued and outstanding shares of the
Common Stock of Home Corporation be converted into shares of the Common Stock of
F&M Bancorp, subject to the terms and conditions and based upon F&M Bancorp'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. Pursuant to MD. CORPS. & ASS'NS CODE SS. 3-113(a),
the effective date of this Plan and the Merger (the "Effective Date") shall be
either (a) the 15th day of the month following the month in which the
Calculation Date (defined in Section 9.2(a) hereof) occurs; or (b) such other
date as F&M Bancorp and Home Corporation may agree upon. F&M Bancorp and Home
Corporation will prepare and execute Articles of Merger in substantially the
form attached hereto as Appendix II which will set forth the Effective Date, and
will file the Articles of Merger with the Maryland State Department of
Assessments and Taxation.
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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
Home Corporation and F&M Bancorp shall have approved and agreed to this
Plan and the Merger;
(b) A majority of the Boards of Directors of each of
Home Corporation and F&M Bancorp shall have approved and agreed to the
Stock Option Agreement in the form attached hereto as Appendix III; and
Home Corporation shall have authorized and reserved an adequate number
of shares of its Common Stock for issuance upon exercise of the option
granted by such Stock Option Agreement, and taken all actions necessary
to fulfill its obligations thereunder;
(c) the Board of Directors of Home Corporation shall
call a meeting of the stockholders of Home Corporation. Notice of the
time and place of the meeting shall be provided in accordance with MD.
CORPS. & ASS'NS CODE SS. 2-504, 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 Home
Corporation at the meeting, in accordance with MD. CORPS. & ASS'NS CODE
SS. 3-105(d);
(d) the Board of Directors of F&M Bancorp shall
call a meeting of the stockholders of F&M Bancorp. Notice of the time
and place of the meeting shall be provided in accordance with MD.
CORPS. & ASS'NS CODE SS. 2-504, 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 MD. CORPS. & ASS'NS CODE SS. 3-105(d);
(e) F&M Bancorp shall have procured the required
approval, consent, waiver or other administrative action with respect
to this Plan and the transactions contemplated hereby (i) by the Office
of Thrift Supervision under the Savings and Loan Holding Company Act
and (ii) by the Board of Governors of the Federal Reserve System under
the Bank Holding Company Act of 1956;
(f) the parties shall have procured all other
regulatory approvals, consents, waivers or administrative actions of
governmental entities or other persons or agencies that are necessary
or appropriate to the consummation of the transactions contemplated by
this Plan, and no approval, consent, waiver or administrative action
referred to in this Section 2(f) shall have included any condition or
requirement that would (i) result in a materially adverse effect on F&M
Bancorp or Home Corporation or (ii) so materially and adversely affect
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the economic or business benefits of the Merger that F&M Bancorp, in
the sole judgment of F&M Bancorp, would not have entered into this Plan
had such conditions or requirements been known at the date hereof;
(g) 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 Home Corporation 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;
(h) 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 Home Corporation pursuant to this
Plan and the Merger; and
(i) In accordance with Section 10(c) of this Plan,
F&M Bancorp shall have offered to enter into an employment agreement
with Richard W. Phoebus, Sr. substantially in the form attached hereto
as Appendix VI, and with each of Celia S. Ausherman, Steven G. Hull
and Salvatore M. Savino substantially in the form attached hereto
as Appendix VII.
3. Representations and Warranties of Home Corporation. Home
Corporation represents and warrants to F&M Bancorp as follows:
3.1. Organization, Standing, and Capitalization of Home
Corporation and Home Bank.
(a) Home Corporation is a duly organized and validly
existing corporation and is in good standing under the laws of the
State of Maryland. Home Corporation 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. Home Corporation is a registered
thrift holding company under the Savings and Loan Holding Company Act.
Home Corporation has no subsidiaries or affiliated companies and is not
a party to any joint venture or partnership other than as listed on
Schedule 3.1(a) hereto (collectively, the "Home Subsidiaries").
(b) Home Bank is a duly organized and validly
existing federally-chartered savings bank and is in good standing under
the federal laws of the United States. Home Bank's deposits are insured
under the provisions of the Federal Deposit Insurance Act, as amended.
Each of the other Home Subsidiaries is a duly organized and validly
existing corporation and is in good standing under the laws of the
jurisdiction of its incorporation as set forth on Schedule 3.1(a). Each
of the Home Subsidiaries 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. All shares of capital stock of all of the Home
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Subsidiaries are validly issued and outstanding, fully paid, and
non-assessable. Except as disclosed in Schedule 3.1(b), each of the
Home Subsidiaries is wholly owned by its parent corporation. There are
no outstanding options, warrants, rights, or obligations of any kind
entitling the holder thereof to acquire shares of the capital stock of
any of the Home Subsidiaries, and there are no outstanding securities
or instruments of any kind that are convertible into shares of the
capital stock of any of the Home Subsidiaries. Except as disclosed in
Schedule 3.1(b), none of the Home Subsidiaries is a party to any joint
venture or partnership.
(c) Copies of all charter documents and by-laws of
Home Corporation and each of the Home Subsidiaries are attached as
Schedule 3.1(c) hereto, and all such copies are true and correct as of
the date hereof. The minute books of Home Corporation and each of the
Home Subsidiaries, which have been made available to F&M Bancorp for
inspection, are complete in all material respects and accurately record
the actions taken by the stockholders and directors of Home Corporation
and each of the Home Subsidiaries.
(d) The authorized capital stock of Home Corporation
consists exclusively of 10,000,000 shares of Common Stock, par value
$1.00 per share, 2,519,010 shares of which are validly issued and
outstanding, fully paid, and non-assessable, and 5,000,000 shares of
Preferred Stock, par value $0.10 per shares, none of which are issued
or outstanding. Except for the option to be granted to F&M Bancorp
pursuant to the Stock Option Agreement attached hereto as Appendix III
and as disclosed in Schedule 3.1(d), there are no outstanding options,
warrants, rights, or obligations of any kind entitling the holder
thereof to acquire shares of the Common Stock of Home Corporation, and
there are no outstanding securities or instruments of any kind that are
convertible into shares of the Common Stock of Home Corporation.
3.2. Financial Statements. Home Corporation has provided in
Schedule 3.2 hereto copies of the following consolidated financial statements of
Home Corporation and the Home 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
consolidated financial position, results of operations, cash flows, and changes
in stockholders' equity of Home Corporation and the Home Subsidiaries at the
dates of and for the periods covered by such financial statements:
Consolidated Financial Statements of Home Corporation and the Home
Subsidiaries at December 31, 1991, 1992, 1993, 1994 and 1995 and for
each of the years then ended, as reported upon by Smith Elliott Kearns
& Company.
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3.3. Taxes. Schedule 3.3 hereto sets forth the tax returns to
federal, state, county, municipal or foreign taxing authorities for the taxable
year 1991 and all taxable years through and including 1994 for Home Corporation
and the Home Subsidiaries. Home Corporation and the Home Subsidiaries have filed
with appropriate federal, state, county, municipal or foreign taxing authorities
all tax returns required to be filed (taking any applicable extensions into
consideration) and have paid or reserved for all taxes shown to be due on such
returns and all penalties and interest payable in respect thereof. Except as
disclosed in Schedule 3.3, neither Home Corporation nor any of the Home
Subsidiaries have 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. Except as disclosed on Schedule 3.3, neither
Home Corporation nor any of the Home Subsidiaries have granted any 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 consolidated financial statements which
Home Corporation 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 the operations of Home Corporation
and the Home Subsidiaries for all periods prior to the date of such consolidated
financial statements. For purposes of this Section 3.3, any reference to the
Home Subsidiaries shall be deemed to include any entity listed on Schedules
3.1(a) and 3.1 (b).
3.4. No Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated financial statements referred
to in Section 3.2, neither Home Corporation nor any of the Home Subsidiaries at
the dates of such consolidated financial statements had any 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. Neither Home Corporation nor any of the Home Subsidiaries have
incurred any liability since the date of the consolidated financial statements
referred to in Section 3.2 which would materially and adversely affect the
condition (financial or otherwise), assets, liabilities, business or operations
of Home Corporation and the Home Subsidiaries, taken as a whole, other than
liabilities which have been incurred in the ordinary course of business.
3.5. Absence of Certain Changes or Events. Since December 31,
1995, there has not been:
(a) Any materially adverse change in the financial
position, results of operations, assets, liabilities, or business of
Home Corporation or the Home Subsidiaries, other than changes in the
ordinary course of business;
(b) any increase in salaries or wages of directors,
officers, or employees of Home Corporation or the Home Subsidiaries
other than in the ordinary course of business; or any establishment or
increase of any employment, compensation, bonus, pension, option,
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incentive or deferred compensation, retirement payments, profit
sharing, or similar agreement or benefit, authorized, granted, or
accrued to any directors, officers or employees of Home Corporation or
the Home Subsidiaries other than in the ordinary course of business,
except as set forth in Schedule 3.5; or
(c) except with respect to the dividend payment of
$0.04 per share of Common Stock declared on February 15, 1996, to be
paid on March 29, 1996, any declaration, payment, or set aside by Home
Corporation of any dividend or distribution in respect of its Common
Stock, or any purchase, issuance or sale of any of its Common Stock.
3.6. Complete and Accurate Disclosure. Neither this Plan
(insofar as it relates to Home Corporation and the Home Subsidiaries, the Common
Stock of Home Corporation, and the involvement of Home Corporation in the
transactions contemplated hereby) nor any financial statement, schedule,
certificate, or other statement or document set forth on a schedule by Home
Corporation 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 disclosed on Schedule 3.7, Home Corporation and
each of the Home Subsidiaries has good and marketable title to all of their
respective properties and assets, including those reflected in the consolidated
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 they are lessees, (ii) with respect to real estate owned by Home
Corporation or the Home Subsidiaries, 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. Neither Home Corporation nor
any of the Home Subsidiaries owns or leases real property except as disclosed on
Schedule 3.7, and is not in default under any material lease of real or personal
property to which it is a party. As of the date hereof, except as disclosed on
Schedule 3.7, the real properties, structures, buildings, equipment, and the
tangible personal property owned, operated or leased by Home Corporation or any
of the Home Subsidiaries are (x) in good repair, order and condition, except for
depletion, depreciation and ordinary wear and tear, (y) suitable for the uses
for which they were intended and (z) free from any known structural defects. As
of the date hereof, there are no laws, conditions of record or other impediments
which materially interfere with the intended uses by Home Corporation or any of
the Home Subsidiaries of the real property or tangible personal property owned
or leased by it, except as set forth in Schedule 3.7. Neither Home Corporation
nor any of the Home Subsidiaries have received any notice of any violation of
any applicable law, building code, zoning ordinance or other similar law. Home
Corporation and the Home Subsidiaries own or have the rights to use all real and
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personal properties and assets that are material to the conduct of the business
as presently conducted of Home Corporation and the Home Subsidiaries, taken as a
whole.
3.8. Contracts. Except for the plans, contracts and agreements
of Home Corporation and the Home Subsidiaries disclosed on Schedule 3.8, neither
Home Corporation nor any of the Home Subsidiaries is a 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 Home Corporation or
any of the Home Subsidiaries is entitled to participate except as
disclosed on Schedule 3.8;
(c) any contract or agreement with any labor union;
(d) any lease of real or personal property with
annual rentals in excess of $5,000;
(e) any agreement for services in excess of $5,000
per year 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 $5,000 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 Home Bank
as lender in the ordinary course of its business;
(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 contract or agreement not of the type
covered by any of the other specific terms of this Section 3.8
obligating Home Corporation or any Home Subsidiary to expenditures in
excess of $25,000.
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Each of the instruments disclosed on Section 3.8 is valid and in full force and
effect. Neither Home Corporation nor any of the Home Subsidiaries are in default
nor have any of them received any notice that they are in default, nor to their
actual knowledge is any other party in default, under any material agreements,
instruments, or obligations to which Home Corporation or any of the Home
Subsidiaries is a party or by which they are bound.
3.9. Litigation, Etc. Except as disclosed on Schedule 3.9, (a)
there is no litigation, proceeding, or investigation pending or, to the
knowledge of Home Corporation, threatened against Home Corporation or any of the
Home Subsidiaries which would result in any materially adverse change in the
condition (financial or otherwise), assets, liabilities, business, operations,
or future prospects of Home Corporation and the Home Subsidiaries, taken as a
whole; (b) there are no outstanding orders, writs, injunctions, judgments,
decrees, 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 Home Corporation or any of the
Home Subsidiaries that materially and adversely affect the condition (financial
or otherwise), assets, liabilities, business, operations, or future prospects or
that in any manner restrict Home Corporation's right to carry on its business or
that of the Home Subsidiaries as presently conducted; and (c) Home Corporation
is aware of no fact or condition presently existing that might give rise to any
litigation, investigation or proceeding which, if determined adversely to Home
Corporation or any of the Home Subsidiaries, would materially and adversely
affect the condition (financial or otherwise), assets, liabilities, business,
operations, or future prospects of Home Corporation and the Home Subsidiaries,
taken as a whole, or would restrict in any manner Home Corporation's right to
carry on its business or that of the Home Subsidiaries as presently conducted.
Home Corporation has disclosed on Schedule 3.9 all litigation in which Home
Corporation or any of the Home Subsidiaries is involved as a party (other than
bankruptcy proceedings in which Home Corporation or any of the Home Subsidiaries
has filed proofs of claim or routine collection and foreclosure suits initiated
in the ordinary course of business).
3.10. Environmental Matters. (a) For purposes of this
Section 3.10, the following terms shall have the indicated meaning:
"Property" or "Properties" means all branch properties
presently or formerly owned or operated by Home Corporation and each of the Home
Subsidiaries, all other real property presently owned or operated by Home
Corporation and each of the Home Subsidiaries, and any real properties formerly
owned or operated by Home Corporation and each of the Home Subsidiaries on or
after January 1, 1994 and subsequently disposed of.
"Environmental Law" means (i) any applicable federal, state or
local statute, law, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, directive,
requirement or agreement with any court, governmental authority or other
regulatory or administrative agency or commission, domestic or foreign
("Governmental Entity") now existing, relating to the use, storage, treatment,
generation, transportation, processing, handling, labeling, production, release
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CUSIP No.: 436919104 Page 15 of 62
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or disposal of Hazardous Substances, each as amended, or (ii) any common law
that may impose liability or obligations for injuries or damages due to the
presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance, whether liquid,
solid or gas, listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, under any applicable Environmental Law, whether by
type or by quantity. Hazardous Substance includes, without limitation, (i) any
"hazardous substance" as defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and (ii) any substance regulated by
the Resource Conservation and Recovery Act, as amended.
(b) Except as disclosed on Schedule 3.10 or as would not
individually or in the aggregate have a materially adverse effect on the
condition (financial or otherwise), assets, liabilities, business or operations
of Home Corporation and the Home Subsidiaries, taken as a whole:
(i) neither Home Corporation nor any of the Home
Subsidiaries has received any written notices, demand letters or
written requests for information from any Governmental Entity or any
third party indicating that Home Corporation or any Home Subsidiary may
be in violation of, or liable under, any Environmental Law;
(ii) there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened against Home Corporation or any Home
Subsidiary alleging that they may be in violation of, or liable under,
any Environmental Law;
(iii) no reports have been filed with any
Governmental Entity, nor to the knowledge of Home Corporation are any
reports required to be filed with any Governmental Entity, by Home
Corporation or any of the Home Subsidiaries concerning the release of
any Hazardous Substance or the violation of any Environmental Law on or
at any of the Properties;
(iv) to the knowledge of Home Corporation or except
as disclosed on Schedule 3.10, there are no underground storage tanks
on, in or under any of the Properties and no underground storage tanks
have been closed or removed from any Property while such Property was
owned or operated by Home Corporation or any of the Home Subsidiaries;
(v) to the knowledge of Home Corporation or except as
disclosed on Schedule 3.10, 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 Properties, except for such hazardous substances as may
be used in the everyday business of a bank office; and
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(vi) to the knowledge of Home Corporation or except
as disclosed on Schedule 3.10, no materials containing asbestos have
been used or incorporated in any building or other structure or
improvement located on any of the Properties.
(c) There are no permits or licenses required under any
Environmental Law in respect of any of the Properties presently or formerly
owned or operated by Home Corporation or any of the Home Subsidiaries that the
absence of which could, individually or in the aggregate, have a materially
adverse effect on the condition (financial or otherwise), assets, liabilities,
business or operations of Home Corporation and the Home Subsidiaries, taken as a
whole.
(d) Home Corporation has disclosed on Schedule 3.10 a copy
of its current policy regarding compliance with Environmental Laws.
3.11. Labor Matters. To Home Corporation's knowledge, no
organization effort with respect to any of the employees of Home Corporation or
any of the Home Subsidiaries is pending or threatened, and no labor dispute,
strike, work stoppage, employee action or labor relation problem which may
materially affect Home Corporation or any of the Home Subsidiaries currently is
pending or threatened.
3.12. Pension and Welfare Matters. Home Corporation has
disclosed on Schedule 3.12 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, for
Home Corporation and each of the Home Subsidiaries. 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"), (a) each such plan has been
operated in all material respects in accordance with its terms in all material
respects 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 in all material respects, and all required governmental
filings have been made with respect to the plans; (c) neither any plan nor Home
Corporation, nor any of the Home Subsidiaries, nor, to Home Corporation's
knowledge, any director, officer, employee, agent or representative of Home
Corporation or any of the Home Subsidiaries, nor, to Home Corporation'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 the condition (financial or otherwise), assets, liabilities, business or
operations of Home Corporation and the Home Subsidiaries, taken as a whole, or
on such plan, any parties in interest, or fiduciaries; (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
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CUSIP No.: 436919104 Page 17 of 62
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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 Home Corporation or any of the Home
Subsidiaries 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 Home Corporation or any of the Home Subsidiaries have
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 the condition (financial or otherwise), assets, liabilities,
business or operations of Home Corporation and the Home Subsidiaries, taken as a
whole, or on such plan; (i) except as disclosed in Schedule 3.12, 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 Home Corporation or any of the Home Subsidiaries, as a result of their
employment with Home Corporation or any of the Home Subsidiaries, 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 neither Home
Corporation nor any of the Home Subsidiaries has any 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) Home Corporation 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 Home Corporation nor any of the Home Subsidiaries
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) except as disclosed in Schedule 3.12, each of the plans which benefits
retired employees of Home Corporation or any of the Home Subsidiaries may
effectively be terminated or amended, in any manner and at any time, without
further liability to its participants, by its sponsoring employer; (p) Home
Corporation and each of the Home Subsidiaries have at all times in all material
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CUSIP No.: 436919104 Page 18 of 62
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respects complied with all applicable employee termination notice and similar
laws; (q) Home Corporation and each of the Home Subsidiaries have at all times
complied in all material respects with all applicable family leave and similar
laws; (r) if applicable, Home Corporation and each of the Home Subsidiaries have
at all times complied in all material respects with all applicable requirements
of the Worker Adjustment and Retraining Notification Act and all similar state
laws; (s) neither Home Corporation nor any of the Home Subsidiaries 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 Home
Corporation or any of the Home Subsidiaries 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 neither Home Corporation nor any
of the Home Subsidiaries has any obligation 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 disclosed on
Schedule 3.13, neither Home Corporation nor any of the Home Subsidiaries has any
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
Home Corporation or any of the Home Subsidiaries; (b) any stockholder owning
five percent or more of the outstanding Common Stock of Home Corporation; 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 disclosed on
Schedule 3.14, 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 Home Corporation or any of the Home
Subsidiaries is a party, or of any judgment, decree, or order applicable to Home
Corporation or any of the Home Subsidiaries, 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 Home
Corporation and the Home Subsidiaries, taken as a whole.
3.15. Compliance with Laws; Governmental Authorizations. (a)
Except where noncompliance would not have a material and adverse effect upon the
condition (financial or otherwise), assets, liabilities, business or operations
of Home Corporation and the Home Subsidiaries, taken as a whole, (i) Home
Corporation and each of the Home Subsidiaries 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 Home Corporation, the Home Subsidiaries, or any of
their properties; and (ii) all permits, concessions, grants, franchises,
licenses and other governmental authorizations and approvals necessary for the
conduct of the business of Home Corporation and the Home Subsidiaries as
presently conducted have been duly obtained and are in full force and effect,
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CUSIP No.: 436919104 Page 19 of 62
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and there are no proceedings pending or, to Home Corporation's knowledge,
threatened which may result in the revocation, cancellation, suspension or
materially adverse modification of any thereof.
(b) Home Corporation has filed all reports that it was
required to file with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), all of which complied in all material respects
with all applicable requirements of the Exchange Act and the rules and
regulations adopted thereunder. As of their respective dates, each such report,
statement, form or other document, including without limitation, any financial
statements or schedules included therein, did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
3.16. Authority; Enforceability. The execution, delivery, and
performance of this Plan by Home Corporation have been duly and validly
authorized by its Board of Directors, subject only to requisite approval by
appropriate governmental regulatory authorities and stockholders. This Plan is a
valid and binding agreement of Home Corporation, 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 Home
Corporation and the Home Subsidiaries relating to their operations (except for
title insurance policies), including without limitation all financial
institutions bonds, are set forth on Schedule 3.17. All such policies are in
full force and effect. Neither Home Corporation nor any of the Home Subsidiaries
has received any notice 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 Home Corporation
makes no representation as to the effect of this Plan or the Merger on its
present financial institutions bond or bonds.
3.18. Financial Institutions Bond. Since January 1, 1989, Home
Corporation and the Home Subsidiaries have continuously maintained in full force
and effect one or more financial institutions bonds insuring Home Corporation
and the Home Subsidiaries against acts of dishonesty by each of their employees.
No claim has been made under any such bond since such date and Home Corporation
is not aware of any fact or condition presently existing which forms the basis
of a claim under any such bond. Home Corporation and the Home Subsidiaries have
no reason to expect that their present financial institutions bond or bonds will
not be renewed by their carrier on substantially the same terms as those now in
effect; provided, however, that Home Corporation makes no representation as to
the effect of this Plan or the Merger on its present financial institutions bond
or bonds.
3.19. Brokers; Financial Advisors. All negotiations relating
to this Plan and the transactions contemplated hereunder have been carried on by
Home Corporation directly or through its counsel and there has been no
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CUSIP No.: 436919104 Page 20 of 62
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intervention of any person as the result of any action of Home Corporation (and,
so far as known to Home Corporation, 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. Home
Corporation has provided F&M Bancorp with a copy of its agreement with Charles
Webb & Company, which has been engaged to deliver an opinion as to the fairness
of the transactions contemplated by this Plan to Home Corporation.
4. Representations and Warranties of F&M Bancorp. F&M Bancorp
represents and warrants to Home Corporation as follows:
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, 4,421,337 of which are validly issued and outstanding
on March 19, 1996, 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
346,480 shares of its Common Stock for issuance under its Stock Option
Plans. On March 19, 1996, there were outstanding options to purchase
211,209 shares of F&M Bancorp's Common Stock at prices ranging from
$11.75 to $29.125 pursuant to these Stock Option Plans. 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 has no subsidiaries other than as
listed on Schedule 4.1(c) hereto (collectively, the "F&M
Subsidiaries"), and is not a party to any joint ventures or
partnerships. Each of the F&M Subsidiaries is a duly organized and
validly existing corporation and is in good standing under the laws of
the jurisdiction of its incorporation. Each of the F&M Subsidiaries 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.
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CUSIP No.: 436919104 Page 21 of 62
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All shares of capital stock of all of the F&M Subsidiaries are validly
issued and outstanding, fully paid, and non-assessable. Except as
disclosed on Schedule 4.1(c), each of the F&M Subsidiaries is wholly
owned by its parent corporation. There are no outstanding options,
warrants, rights, or obligations of any kind entitling the holder
thereof to acquire shares of the capital stock of any of the F&M
Subsidiaries, and there are no outstanding securities or instruments of
any kind that are convertible into shares of the capital stock of any
of the F&M Subsidiaries. Except as disclosed on Schedule 4.1(c) hereto,
none of the F&M Subsidiaries is a party to any joint venture or
partnership.
(d) 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 federal 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.
(e) Copies of all charter documents and by-laws of
F&M Bancorp and each of the F&M Subsidiaries are attached hereto as
Schedule 4.1(e), and all such copies are true and correct as of the
date hereof. The minute books of F&M Bancorp and each of the F&M
Subsidiaries, which have been made available to Home Corporation for
inspection, are complete in all material respects and accurately record
the actions taken by the stockholders and directors of F&M Bancorp and
each of the F&M Subsidiaries.
4.2. Financial Statements. F&M Bancorp has provided in
Schedule 4.2 hereto copies of the Consolidated Financial Statements of F&M
Bancorp and the F&M Subsidiaries at December 31, 1991, 1992, 1993, 1994 and 1995
and for each of the years then ended, as reported upon by Keller Bruner &
Company, L.L.C., 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
the F&M Subsidiaries at the dates of and for the periods covered by such
financial statements.
4.3. No Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the consolidated financial statements referred
to in Section 4.2, neither F&M Bancorp nor any of the F&M Subsidiaries at the
dates of such consolidated financial statements had any 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. Neither
F&M Bancorp nor any of the F&M Subsidiaries has incurred any liability since the
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CUSIP No.: 436919104 Page 22 of 62
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date of the financial statements referred to in Section 4.2 which would
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business or operations of F&M Bancorp and the F&M Subsidiaries,
taken as a whole, other than liabilities which have been reasonably incurred in
the ordinary course of business.
4.4. Absence of Certain Changes or Events. Since December 31,
1995, there has not been any materially adverse change in the financial
position, results of operations, assets, liabilities, or business of F&M Bancorp
or any of the F&M Subsidiaries, other than changes in the ordinary course of
business.
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 set forth on a
schedule delivered by F&M Bancorp to Home Corporation 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. Litigation, Etc. Except as disclosed on Schedule 4.6, (a)
there is no litigation, proceeding, or investigation pending or, to the
knowledge of F&M Bancorp, threatened against F&M Bancorp or any of the F&M
Subsidiaries which would result in any materially adverse change in the
condition (financial or otherwise), assets, liabilities, business, operations,
or future prospects of F&M Bancorp and the F&M Subsidiaries, taken as a whole;
(b) there are no outstanding orders, writs, injunctions, judgments, decrees,
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 F&M Bancorp or any of the F&M Subsidiaries
that materially and adversely affect the condition (financial or otherwise),
assets, liabilities, business, operations or future prospects or that in any
manner restrict F&M Bancorp's right to carry on its business or that of the F&M
Subsidiaries as presently conducted; and (c) F&M Bancorp is aware of no fact or
condition presently existing that might give rise to any litigation,
investigation or proceeding which, if determined adversely to F&M Bancorp or any
of the F&M Subsidiaries, would materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business, operations, or future
prospects of F&M Bancorp and the F&M Subsidiaries, taken as a whole, or would
restrict in any manner F&M Bancorp's right to carry on its business or that of
the F&M Subsidiaries as presently conducted. F&M Bancorp has disclosed on
Schedule 4.6 all litigation in which F&M Bancorp or any of the F&M Subsidiaries
is involved as a party (other than bankruptcy proceedings in which F&M Bancorp
or any of the F&M Subsidiaries has filed proofs of claim or routine collection
and foreclosure suits initiated in the ordinary course of business).
4.7. 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
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Bancorp or any of the F&M Subsidiaries are a party, or of any judgment, decree,
or order applicable to F&M Bancorp or any of the F&M Subsidiaries, or result in
the creation of any lien, charge, or encumbrance upon any of their 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 F&M Bancorp and the F&M Subsidiaries, taken as a whole.
4.8. Compliance with Laws; Governmental Authorizations. (a)
Except where noncompliance would not have a material and adverse effect upon the
condition (financial or otherwise), assets, liabilities, business or operations
of F&M Bancorp and the F&M Subsidiaries, taken as a whole, (i) F&M Bancorp and
the F&M Subsidiaries 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
the F&M Subsidiaries or to any of their properties; and (ii) all permits,
concessions, grants, franchises, licenses and other governmental authorizations
and approvals necessary for the conduct of the business of F&M Bancorp and the
F&M Subsidiaries 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.
(b) F&M Bancorp has filed all reports that it was required to
file with the SEC under the Exchange Act, all of which complied in all material
respects with all applicable requirements of the Exchange Act and the rules and
regulations adopted thereunder. As of their respective dates, each such report,
statement, form or other document, including without limitation, any financial
statements or schedules included therein, did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
4.9. Authority; Enforceability. The execution, delivery, and
performance of this Plan by F&M Bancorp has been duly and validly authorized by
its Board of Directors, subject only to requisite approval by the stockholders
of F&M Bancorp and appropriate governmental regulatory authorities. This Plan is
a valid and binding agreement of F&M Bancorp, 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.
4.10. Brokers. All negotiations relating to this Plan and the
transactions contemplated hereunder have been carried on by F&M Bancorp directly
or through its counsel and there has been no intervention of any person as the
result of any action of F&M Bancorp (and, so far as known to F&M Bancorp, 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.
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4.11. Beneficial Ownership of Home Corporation Common Stock.
As of the date hereof, F&M Bancorp does not beneficially own any shares of Home
Corporation Common Stock or have any option, warrant or right of any kind to
acquire the beneficial ownership of any Home Corporation Common Stock, except
pursuant to the terms of this Plan, the terms of the Stock Option Agreement,
attached hereto as Appendix III, or in a fiduciary capacity.
5. Covenants of Home Corporation. Except as otherwise consented to in
writing by F&M Bancorp after the date of this Plan, Home Corporation covenants
to and agrees with F&M Bancorp as follows:
5.1. Information. (a) Home Corporation shall, upon reasonable
notice, give to F&M Bancorp and to its officers, accountants, counsel, financial
advisers, and other representatives reasonable access during Home Corporation's
and the Home Subsidiaries' normal business hours throughout the period prior to
the Effective Date to all of their properties, books, contracts, commitments,
reports of examination (consistent with applicable law), depositor and
stockholder lists, and records. Home Corporation and the Home Subsidiaries will,
at their own expense, furnish F&M Bancorp during such period with all such
information concerning their affairs as F&M Bancorp may reasonably request,
including information for use in determining if the conditions of Section 7.3
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, and for use in any other necessary filings to be made
with appropriate governmental regulatory authorities.
(b) Home Corporation will not, and will cause its
representatives not to, use any information obtained pursuant to Section 6.3 for
any purpose unrelated to the consummation of the transactions contemplated by
this Plan. Subject to the requirements of law, Home Corporation will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to Section 6.3 unless such
information (i) was already known to Home Corporation, (ii) becomes available to
Home Corporation from other sources not known by Home Corporation to be bound by
a confidentiality obligation, (iii) is disclosed with prior written approval of
F&M Bancorp and the F&M Subsidiaries, or (iv) is or becomes readily
ascertainable from published information or trade sources. In the event that
this Plan is terminated or the transactions contemplated by this Plan shall
otherwise fail to be consummated, Home Corporation shall promptly cause all
copies of documents or extracts thereof containing information and data as to
F&M Bancorp and the F&M Subsidiaries to be returned.
5.2. Conduct of Business. After the date of this Plan and
pending the Effective Date, (a) Home Corporation and the Home Subsidiaries will
conduct their business only in the ordinary course; (b) Home Corporation and the
Home Subsidiaries shall not effect any change or amendment in their respective
Charters or By-Laws; (c) except with respect to Home Corporation stock options
outstanding on the date of this Plan which are or may become subject to
exercise, Home Corporation and the Home Subsidiaries shall not change their
authorized, issued or outstanding capital stock; (d) Home Corporation shall not
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declare any dividends in respect of its Common Stock; (e) except as disclosed in
Schedule 5.2(d), Home Corporation and the Home Subsidiaries shall not increase
employee compensation or benefit levels (except for annual increases not in
excess of amounts established by its regular past practices), 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 additional premiums to obtain an extension of
directors' and officers' liability coverage for six years (which Home
Corporation is authorized to obtain), and shall not modify the existing
employment agreements with Richard W. Phoebus, Sr., Celia S. Ausherman, Steven
G. Hull and Salvatore M. Savino; (f) Home Corporation and the Home Subsidiaries
shall not make any change in any of their 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;
(g) Home Corporation and the Home Subsidiaries shall not incur any liability for
borrowed money except extensions of credit from the Federal Home Loan Bank of
Atlanta (in which no single transaction shall exceed $5,000,000) and otherwise
in the ordinary course of their banking business or place upon or permit any
lien or encumbrance upon any of their properties or assets except liens of the
type permitted in the exceptions to Section 3.7; and (h) Home Bank shall accept
no further applications from its directors for participation in, and shall not
designate any of its directors as additional participants in, its Amended and
Restated Executive Compensation Plan for Directors. Pending the Effective Date,
Home Corporation and the Home Subsidiaries shall (x) use commercially reasonable
efforts to preserve their business organization and assets and to keep available
the services of their full-time officers and employees, (y) continue in effect
the present method of conducting their 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) except as disclosed in Schedule 5.2(z)(ii),
involving any capital expenditures in excess of $25,000.
5.3. Consents. Home Corporation and the Home Subsidiaries 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. Meeting of Stockholders of Home Corporation; Document
Preparation. (a) Home Corporation will duly call and will convene a meeting of
its stockholders to act upon the transactions contemplated hereby as soon as
practicable. Except to the extent legally required for the discharge by the
board of directors of its fiduciary duties, Home Corporation 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.
(b) Home Corporation shall furnish F&M Bancorp with such
information concerning Home Corporation and the Home Subsidiaries as is
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necessary in order to cause the Proxy Statement/Prospectus (as defined in
Section 6.2 hereof), insofar as it relates to such corporations, to comply with
Section 6.2 hereof. Home Corporation agrees promptly to advise F&M Bancorp if at
any time prior to the Home Corporation stockholder's meeting, any information
provided by Home Corporation in the Proxy Statement/Prospectus becomes incorrect
or incomplete in any material respect and to provide F&M Bancorp with the
information needed to correct such inaccuracy or omission. Home Corporation
shall furnish F&M Bancorp with such supplemental information as may be necessary
in order to cause the Proxy Statement/Prospectus, insofar as it relates to Home
Corporation and the Home Subsidiaries, to comply with Section 6.2 after the
mailing thereof to Home Corporation stockholders. The information provided and
the representations made by Home Corporation and Home 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. Home
Corporation may rely upon all information provided to it by F&M Bancorp and its
representatives in the preparation of the Proxy Statement/Prospectus and shall
not be liable for any untrue statement of a material fact or any omission to
state a material fact in the Proxy Statement/Prospectus, if such statement is
made in reliance upon any information provided to it by F&M Bancorp or by any of
its officers or authorized representatives.
(c) Home Corporation shall promptly furnish F&M Bancorp with
such information regarding the Home Corporation stockholders as F&M Bancorp
requires to enable it to determine what filings are required under applicable
state securities laws. Home Corporation authorizes F&M Bancorp to utilize in
such filings the information concerning Home Corporation and the Home
Subsidiaries provided to F&M Bancorp in connection with, or contained in, the
Proxy Statement/Prospectus. Home Corporation shall promptly notify F&M Bancorp
of all communications, oral or written, with the SEC concerning the Registration
Statement and the Proxy Statement/Prospectus.
5.5. Events Preceding Effectiveness. Home Corporation and the
Home Subsidiaries 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. No Solicitation of Other Offers. Home Corporation agrees
that neither it nor any of the Home Subsidiaries nor any of their respective
officers, directors and employees shall, and Home Corporation shall direct and
use its best efforts to cause its and the Home Subsidiaries' agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of the Home Subsidiaries) not to, directly
or indirectly, take any action to solicit or initiate any inquiries or the
making of any offer or proposal (including without limitation any proposal to
stockholders of Home Corporation) with respect to a merger, consolidation,
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business combination, liquidation, reorganization, sale or other disposition of
any significant portion of assets (except Problem Assets, as defined in Section
9.7(a)), sale of shares of capital stock, or similar transactions involving Home
Corporation or any of the Home Subsidiaries (any such inquiry, offer or
proposal, an "Acquisition Proposal"), or, except as may be legally required for
the discharge by the board of directors of its fiduciary duties, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal. As of
the time hereof, Home Corporation is not engaged in any negotiations or
discussions relating to an Acquisition Proposal. Home Corporation shall promptly
notify F&M Bancorp orally and in writing of any Acquisition Proposal or any
inquiries with respect thereto, such written notification to include the
identity of the Person making such inquiry or Acquisition Proposal and such
other information with respect thereto as is reasonably necessary to apprise F&M
Bancorp of the material terms of such Acquisition Proposal. Home Corporation
shall give F&M Bancorp contemporaneous written notice upon engaging in
discussions or negotiations with, or providing any information regarding Home
Corporation or any of the Home Subsidiaries to, any such person regarding an
Acquisition Proposal.
5.7. Reservation of Shares. Home Corporation shall have
reserved a sufficient number of shares of its Common Stock for issuance upon
exercise of the option granted pursuant to the Stock Option Agreement, attached
hereto as Appendix III, which is to be executed by F&M Bancorp and Home
Corporation, and shall have taken all other actions necessary to fulfill its
obligations thereunder.
5.8. Affiliate Agreements. Within 10 days of the date of this
Plan, Home Corporation shall deliver or cause to be delivered to F&M Bancorp
memoranda substantially in the form attached hereto as Appendix IV (the
"Affiliates' Memoranda") and agreements substantially in the form attached
hereto as Appendix V (the "Support Agreements") 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 Home
Corporation who (a) may be deemed to be an "affiliate" of Home Corporation, 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).
Under the terms of the Affiliates' Memoranda, each such officer, director or
stockholder shall acknowledge and agree (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 Merger, and (ii) to abide by all limitations imposed by the accounting
rules for the Merger to be accounted for as a pooling-of-interests. Under the
terms of the Support Agreements, each such officer, director or stockholder
shall agree to support and vote the shares of Common Stock of Home Corporation
owned or controlled by him or her to ratify and confirm this Plan and the
Merger.
5.9. Regulatory Approvals. Home Corporation and the Home
Subsidiaries will, where necessary, cooperate with F&M Bancorp's efforts to
obtain all necessary regulatory approvals of the transactions contemplated by
this Plan.
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5.10. Current Information; Advice of Changes. (a) During the
period from the date of this Plan to the Effective Date, Home Corporation will
cause one or more of its designated representatives to confer on a monthly or
more frequent basis with representatives of F&M Bancorp regarding its business,
operations, properties, assets and financial condition and matters relating to
the completion of the transactions contemplated herein. As soon as reasonably
available, but in no event more than 45 days after the end of each fiscal
quarter (other than the last fiscal quarter of each fiscal year) ending after
the date of this Plan, Home Corporation will deliver to F&M Bancorp its
quarterly reports on Form 10-Q, as filed with the SEC under the Exchange Act. As
soon as reasonably available, but in no event more than 90 days after the
calendar year, Home Corporation will deliver to F&M Bancorp its Annual Report on
Form 10-K as filed with the SEC under the Exchange Act.
(b) Between the date of this Plan and the Effective Date, Home
Corporation 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.
5.11. Public Announcements. Between the date of this Plan and
the Effective Date, Home Corporation and the Home Subsidiaries 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.
5.12. Taxes. Home Corporation shall have filed with
appropriate federal, state, county, municipal or foreign taxing authorities all
tax returns required to be filed (taking any applicable extensions into
consideration) 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 5.12, any reference to Home
Corporation shall be deemed to include any corporation more than 50% of the
outstanding capital stock (by vote or value) of which is owned by Home
Corporation. "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 5.12
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
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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 Home Corporation
would have been liable if the Straddle Period had ended as of the close
of business on the day of the Effective Date.
5.13. Pooling-of-Interests. Home Corporation shall use its
best efforts not to permit any of the directors, officers, employees,
stockholders, agents, consultants or other representatives of Home Corporation
or any of the Home Subsidiaries to take any action that would preclude F&M
Bancorp from treating the Merger as a "pooling-of-interests" for financial
reporting purposes.
5.14. Directors' Agreement. Home Corporation shall present the
Directors' Agreement, in substantially the form attached hereto as Appendix X,
to each of Howard B. Bowen and John J. McElwee, Jr., both of whom are directors
of Home Bank and participants in its Amended and Restated Executive Compensation
Plan for Directors, and shall cause each of them to enter into such Directors'
Agreement with F&M Bancorp.
6. Covenants of F&M Bancorp. Except as otherwise consented to in
writing by Home Corporation after the date of this Plan, F&M Bancorp covenants
to and agrees with Home Corporation as follows:
6.1. Applications to Governmental Regulatory Authorities. F&M
Bancorp will promptly prepare and file with the appropriate governmental
regulatory authorities an application requesting the regulatory approvals
referred to in Section 2(e) and 2(f) and will use commercially reasonable
efforts to secure favorable action on such applications, including without
limitation commercially reasonable efforts to pursue an appeal of a denial of a
regulatory approval.
6.2. Registration of Shares. F&M Bancorp, with the assistance
of Home Corporation and its representatives, will promptly file a Registration
Statement with the SEC which shall include a joint proxy statement for F&M
Bancorp and Home Corporation and a prospectus which shall satisfy all applicable
requirements of applicable state and federal laws, including the Securities Act,
the Exchange Act and applicable state securities laws and the rules and
regulations thereunder (such joint proxy statement and prospectus, together with
any and all amendments or supplements thereto, being herein referred to as the
"Proxy Statement/Prospectus," and the various documents to be filed by F&M
Bancorp under the Securities Act with the SEC to register the F&M Bancorp Common
Stock into which shares of the Common Stock of Home Corporation held by
non-dissenting stockholders will be converted, including the Proxy
Statement/Prospectus, are referred to herein as the "Registration Statement").
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
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CUSIP No.: 436919104 Page 30 of 62
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Stock of Home Corporation pursuant to this Plan to be registered under the
Securities Act. 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 Home Corporation on the
Effective Date. F&M Bancorp may rely upon all information provided to it by Home
Corporation and its representatives 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 Home Corporation or by any of its officers or
authorized representatives. F&M Bancorp shall promptly take all such actions as
may be necessary or appropriate in order to comply in all material respects with
all applicable securities laws of any state having jurisdiction over the
transactions contemplated by this Plan and the Merger. F&M Bancorp shall furnish
Home Corporation with copies of all such filings and keep Home Corporation
advised of the status thereof. F&M Bancorp shall promptly notify Home
Corporation of all communications, oral or written, with the SEC concerning the
Registration Statement and the Proxy Statement/Prospectus. 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. ("Nasdaq").
6.3. Information.
(a) F&M Bancorp shall, upon reasonable notice, give to Home
Corporation and to its officers, accountants, counsel, financial advisors, and
other representatives, reasonable access during F&M Bancorp's normal business
hours throughout the period prior to the Effective Date to all of their
properties, books, contracts, commitments, reports of examination (consistent
with applicable law), depositor and stockholder lists, and records. F&M Bancorp
and the F&M Subsidiaries will, at their own expense, furnish Home Corporation
during such period with all such information concerning their affairs as Home
Corporation may reasonably request.
(b) F&M Bancorp acknowledges that information received by it
concerning Home Corporation and the Home Subsidiaries and their operations is
subject to the Confidentiality Agreement dated July 3, 1995 between F&M Bancorp
and Home Corporation. Without limiting the foregoing, F&M Bancorp will not, and
will cause its representatives not to, use any information obtained pursuant to
Section 5.1 for any purpose unrelated to the consummation of the transactions
contemplated by this Plan. Subject to the requirements of law, F&M Bancorp will
keep confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to Section 5.1 unless such
information (i) was already known to F&M Bancorp, (ii) becomes available to F&M
Bancorp from other sources not known by F&M Bancorp to be bound by a
confidentiality obligation, (iii) is disclosed with prior written approval of
Home Corporation and the Home Subsidiaries, or (iv) is or becomes readily
ascertainable from published information or trade sources. In the event that
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this Plan is terminated or the transactions contemplated by this Plan shall
otherwise fail to be consummated, F&M Bancorp shall promptly cause all copies of
documents or extracts thereof containing information and data as to Home
Corporation and the Home Subsidiaries to be returned; provided that the legal
department of F&M Bancorp may retain one copy of such documents and materials.
In the event that this Plan has been terminated or the transactions contemplated
hereby shall have failed to be consummated and F&M Bancorp or any of its agents
or representatives are requested or required (by oral questions,
interrogatories, requests for information or documents in legal proceedings,
subpoena, civil investigative demand or other similar process) to disclose any
of the materials delivered or obtained pursuant to the Plan (the "Home
Corporation Documentation"), F&M Bancorp shall provide Home Corporation with
prompt written notice of any such request or requirement so that Home
Corporation may seek a protective order or other appropriate remedy. If, in the
absence of a protective order or other remedy, F&M Bancorp or any of its agents
or representatives are compelled to disclose any of such Home Corporation
Documentation to any tribunal or else stand liable for contempt or suffer other
censure or penalty, F&M Bancorp or its agents or representatives may, without
liability hereunder, disclose to such tribunal only that portion of the Home
Corporation Documentation which F&M Bancorp's counsel advises F&M Bancorp is
legally required to be disclosed, provided that F&M Bancorp shall exercise its
best efforts to preserve the confidentiality of the Home Corporation
Documentation, including, without limitation, by cooperating with Home
Corporation to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Home Corporation
Documentation by such tribunal.
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. Current Information; Advice of Changes. (a) During the
period from the date of this Plan to the Effective Date, F&M Bancorp will cause
one or more of its designated representatives to confer on a monthly or more
frequent basis with representatives of Home Corporation regarding its business,
operations, properties, assets and financial condition and matters relating to
the completion of the transactions contemplated herein. As soon as reasonably
available, but in no event more than 45 days after the end of each fiscal
quarter (other than the last fiscal quarter of each fiscal year) ending after
the date of this Plan, F&M Bancorp will deliver to Home Corporation its
quarterly reports on Form 10-Q, as filed with the SEC under the Exchange Act. As
soon as reasonably available, but in no event more than 90 days after the
calendar year, F&M Bancorp will deliver to Home Corporation its Annual Report on
Form 10-K as filed with the SEC under the Exchange Act.
(b) Between the date of this Plan and the Effective Date, F&M
Bancorp shall promptly advise Home Corporation in writing of any fact which, if
existing or known at the date hereof, would have been required to be set forth
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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. Meeting of Stockholders of F&M Bancorp; Document
Preparation. (a) F&M Bancorp shall duly call and convene a stockholders' meeting
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.
(b) F&M Bancorp shall furnish such information concerning F&M
Bancorp and the F&M Subsidiaries as is necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to such corporations, to comply with
Section 6.2 hereof. F&M Bancorp agrees promptly to advise Home Corporation if at
any time prior to the F&M Bancorp stockholders' meeting, any information
provided by F&M Bancorp in the Proxy Statement/Prospectus becomes incorrect or
incomplete in any material respect and to provide Home Corporation with the
information needed to correct such inaccuracy or omission. F&M Bancorp shall
furnish Home Corporation with such supplemental information as may be necessary
in order to cause the Proxy Statement/Prospectus, insofar as it relates to F&M
Bancorp and the F&M Subsidiaries, to comply with Section 6.2 after the mailing
thereof to F&M Bancorp stockholders. The information provided and the
representations made by F&M Bancorp in connection with the Proxy
Statement/Prospectus, 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.
6.8. Employment Agreements. Pursuant to Section 10(c) of
this Plan, between the date of this Plan and the Effective Date, F&M Bancorp
shall offer to enter into an employment agreement with Richard W. Phoebus, Sr.
substantially in the form attached hereto as Appendix VI, and with each of Celia
S. Ausherman, Steven G. Hull and Salvatore M. Savino substantially in the form
attached hereto as Appendix VII.
6.9. F&M Bancorp Common Stock. At the Effective Date, the F&M
Bancorp Common Stock to be issued in exchange for the Home Corporation Common
Stock pursuant to the terms of this Plan shall be duly authorized, validly
issued, fully paid, and non-assessable, free of preemptive rights and free and
clear of all liens, encumbrances or restrictions created by or through F&M
Bancorp, with no personal liability attaching to the ownership thereof. The F&M
Bancorp Common Stock to be issued upon exchange for the Home Corporation Common
Stock pursuant to the terms of this Plan will be issued in all material respects
in accordance with applicable state and federal laws, rules and regulations.
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6.10. Maintenance of Separate Existence. For a period of three
(3) years after the Effective Date, F&M Bancorp shall (i) preserve the separate
corporate existence of Home Bank; and (ii) continue in office the directors of
Home Bank who are serving in such capacity on the Effective Date for the
remainder of their current terms and until their successors are elected and have
qualified (subject to the addition of two directors pursuant to Section 10(b) of
this Plan); provided, however, that during the three-year period following the
Effective Date, F&M Bancorp may terminate the separate corporate existence of
Home Bank if Maryland or federal laws or regulations governing financial
institutions are amended in such a way as to have a materially adverse effect on
the business, operations or future prospects of F&M Bancorp if it were to
continue to operate Home Bank as a separate corporate entity.
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 Home Corporation herein contained shall be
true in all material respects as of the date hereof, shall be deemed made again
at and as of the Effective Date, and shall be true in all material respects as
so made again; Home Corporation and the Home Subsidiaries shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions required by this Plan to be
performed or complied with by them on or prior to the Effective Date; and F&M
Bancorp shall have received from Home Corporation an officers' certificate to
their knowledge, information and belief in such detail as F&M Bancorp may
reasonably request, dated the Effective Date and signed by its Chairman and
Chief Executive Officer 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 Home Corporation and the Home Subsidiaries,
taken as a whole, from December 31, 1995 to the Effective Date. For purposes of
this Section 7.2, a "materially adverse change" shall include, without
limitation, (a) a reduction of the stockholders' equity of Home Corporation to
less than $18,382,000, (b) a decrease in the net income of Home Corporation for
fiscal year 1996 to less than $1,000,000 on an annualized basis, (c) the
reduction of core deposits (i.e., all deposits excepting certificates of deposit
in excess of $100,000) of Home Bank to less than 95% of core deposits of Home
Bank on December 31, 1995, or (d) an increase in Home Corporation's ratio of
non-performing assets to total assets from that reported as of December 31, 1995
to greater than 7.5 % at any time before the Effective Date (in the case of (a)
and (b), the expenses of the transaction under this Plan shall not be taken into
account).
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.
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7.4. Other Evidence. Home Corporation 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 Home Corporation pertaining to the
transactions under this Plan, as F&M Bancorp shall reasonably request.
7.5. No Adverse Proceedings, Events or Regulatory
Requirements. No action or proceeding against F&M Bancorp or any of the F&M
Subsidiaries or against Home Corporation or any of the Home Subsidiaries shall
be pending which seeks to prevent consummation of the transactions contemplated
by this Plan; and no order of any court shall have been entered which prohibits
consummation of the Merger and the transactions contemplated by this Plan. No
approval, consent, waiver or administrative action shall have included any
condition or requirement that would (i) result in a materially adverse effect on
F&M Bancorp or Home Corporation or (ii) so materially and adversely affect the
economic or business benefits of the Merger that F&M Bancorp, in the sole
judgment of F&M Bancorp, would not have entered into this Plan had such
conditions or requirements been known at the date hereof.
7.6. Consents, Etc. All requisite consents, undertakings,
memoranda, agreements, exercises, and terminations by third parties which Home
Corporation and the Home Subsidiaries have covenanted to use commercially
reasonable efforts to obtain under Sections 5.3 and 5.8 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. Opinion of Counsel. F&M Bancorp shall have received an
opinion of counsel to Home Corporation, dated the Effective Date, in form and
substance reasonably satisfactory to F&M Bancorp, covering the matters set forth
in Appendix VIII hereto.
7.9 Pooling-of-Interests Accounting. The holders of no more
than 8% of the outstanding Common Stock of Home Corporation shall have taken all
appropriate steps required by MD. CORPS. & ASS'NS CODE SS. 3-203(a)(1) and (2)
to dissent to this Plan, and F&M Bancorp shall have received a letter from an
independent accounting firm chosen by F&M Bancorp 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.
7.10. Directors' Agreement. Each of Howard B. Bowen and
John J. McElwee, Jr. shall have entered into a Directors' Agreement with
F&M Bancorp in the form attached hereto as Appendix X.
8. Conditions Precedent to Home Corporation's Obligations. Unless
waived in writing by Home Corporation in its sole discretion, all obligations of
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Home Corporation 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 herein contained shall be true in
all material respects as of the date hereof, 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 shall have performed in all material respects all obligations
and agreements, and complied in all material respects with all covenants and
conditions required by this Plan to be performed or complied with by it on or
prior to the Effective Date; and Home Corporation shall have received from F&M
Bancorp an officers' certificate to their knowledge, information and belief in
such detail as Home Corporation may reasonably request, dated the Effective Date
and signed by its 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, 1995 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 Home
Corporation 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 Home Corporation 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 Home
Corporation.
8.6. Opinion of Tax Counsel. Home Corporation shall have
received the opinion from tax counsel to F&M Bancorp required by Section 11.
8.7. Fairness Opinion. Home Corporation shall have received a
written opinion from Charles Webb & Company (or such other recognized investment
firm as Home Corporation 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 Home Corporation from a financial point of
view.
8.8. Employment Agreements. Pursuant to Section 10(c) of this
Plan, F&M Bancorp shall have offered to enter into an employment agreement with
Richard W. Phoebus, Sr. substantially in the form attached hereto as Appendix
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VI, and shall have offered to enter into an employment agreement with each
of Celia S. Ausherman, Steven G. Hull and Salvatore M. Savino substantially
in the form attached hereto as Appendix VII.
8.9. Opinion of Counsel. Home Corporation shall have received
an opinion of counsel to F&M Bancorp, dated the Effective Date, in form and
substance reasonably satisfactory to Home Corporation, covering the matters set
forth in Appendix IX hereto.
9. Terms of the Merger.
9.1. Structure of the Merger. At the Effective Date, subject
to the terms and conditions of this Plan, Home Corporation will merge (the
"Merger") with and into F&M Bancorp, the separate corporate existence of Home
Corporation shall cease, and F&M Bancorp shall continue as the successor
corporation (the "Successor Corporation"). Home Bank shall become a wholly-owned
direct subsidiary of the Successor Corporation. From and after the Effective
Date, the Merger shall have the effects set forth in MD. CORPS. & ASS'NS CODE
SS. 3-114.
9.2. Conversion of Stock; Conversion Ratio.
(a) On the Effective Date, each share of the Home
Corporation Common Stock outstanding immediately prior to the Effective
Date (other than shares held by persons who perfect their dissenters'
rights under Maryland law), shall, without any action on the part of
the holder thereof, be canceled and converted into the number of shares
of F&M Bancorp Common Stock (rounded to the nearest 0.01 share) which
results after multiplication by the Conversion Ratio. The Conversion
Ratio shall be a fraction, the numerator of which is the product of (i)
1.65 multiplied by (ii) the book value (calculated in accordance with
Section 9.7) per share of Home Corporation Common Stock on the
Calculation Date, and the denominator of which is the Average Market
Value of a share of F&M Bancorp Common Stock. The Calculation Date
shall be the last day of the month during which (i) all events listed
in Section 2 shall have occurred and (ii) all conditions precedent
listed in Sections 7 and 8 shall have been fulfilled or waived.
(b) For purposes of the computation of the Conversion
Ratio, if, at the Calculation Date, the Average Market Value of F&M
Bancorp Common Stock is greater than 1.9 times the book value per share
of F&M Bancorp Common Stock determined in accordance with generally
accepted accounting principles, then in lieu of the Average Market
Value, F&M Bancorp shall use a per share price for its Common Stock
equal to 1.9 times the book value per share of its Common Stock as of
the Calculation Date, determined in accordance with generally accepted
accounting principles.
(c) The Average Market Value of each share of the F&M
Bancorp Common Stock shall be the arithmetic average of closing prices
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of F&M Bancorp Common Stock in the Composite Transaction Summary to the
extent reported in The Wall Street Journal for the twenty (20)
consecutive trading days preceding the Calculation Date.
(d) No certificates for fractional shares of F&M
Bancorp Common Stock shall be issued; in lieu thereof, each holder
otherwise entitled to a fractional interest shall receive an amount in
cash based on the Average Market Value of F&M Bancorp Common Stock on
the Calculation Date. Each such holder shall have no other rights with
respect to such fractional interest.
9.3. Exchange Procedure.
(a) After the Effective Date, certificates
representing such shares of Common Stock of Home Corporation shall
represent the right to receive certificates representing shares of
Common Stock of F&M Bancorp determined in accordance with Section 9.2
hereof; such Home Corporation certificates at any time after the
Effective Date may be exchanged by the holders thereof for new
certificates for the appropriate number of shares of Common Stock of
F&M Bancorp by forwarding such Home Corporation Common Stock
certificates and the letter of transmittal provided by F&M Bancorp to
the transfer agent for F&M Bancorp Common Stock, and the payment of
cash in lieu of fractions, dividends, and other distributions on said
stock may be withheld until the Home Corporation certificates are
surrendered for exchange to the transfer agent for F&M Bancorp Common
Stock; 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.
(b) As soon as possible after the Effective Date, the
transfer agent for F&M Bancorp Common Stock shall send or cause to be
sent a notice and transmittal form to each recordholder of a
certificate theretofore evidencing shares of the Home Corporation
Common Stock (other than to holders who have perfected their
dissenters' rights under Maryland law).
(c) All shares of F&M Bancorp Common Stock into which
shares of Home Corporation Common Stock shall have been converted shall
be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Home Corporation Common Stock.
9.4. Stock Options.
(a) At the Effective Date, all options granted by
Home Corporation which are outstanding under all Stock Option Plans
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previously adopted by Home Corporation to purchase shares of Home
Corporation Common Stock, which are outstanding and unexercised
immediately prior thereto (each, an "Outstanding Option"), shall be
converted as to each whole share subject to such Outstanding Option
into an option (each, an "Exchange Option") to purchase a number of
shares of the Common Stock of F&M Bancorp equal to the number of shares
of Home Corporation Common Stock which could have been purchased under
the Outstanding Option multiplied by the Conversion Ratio.
(b) The per share exercise price of each Exchange
Option shall be equal to the price per share set forth in the
Outstanding Option divided by the Conversion Ratio, rounded up to the
nearest whole cent.
(c) The Exchange Option shall otherwise have the same
duration and other terms as the Outstanding Option.
(d) The adjustments provided herein with respect to
any options which are "incentive stock options" (as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"))
shall be effected in a manner consistent with Section 424(a) of the
Code.
9.5. Articles of Incorporation of the Successor Corporation.
The Articles of Incorporation of F&M Bancorp, as in effect immediately prior to
the Effective Date, shall be the Articles of Incorporation of the Successor
Corporation until thereafter amended as provided by law.
9.6. By-Laws of the Successor Corporation. The By-Laws of F&M
Bancorp, as in effect immediately prior to the Effective Date, shall be the
By-Laws of the Successor Corporation until thereafter amended as provided by
law.
9.7. Calculation of Home Corporation's Book Value. For
purposes of Section 9.2 hereof, the book value of Home Corporation shall mean,
subject to addition or subtraction for the items set forth in paragraphs (a)
through (c) below, the calculation as of the Calculation Date of Home
Corporation's total assets minus its total liabilities, calculated in conformity
with generally accepted accounting principles applied on a basis consistent with
past practices of Home Corporation:
(a) Home Corporation's Allowance for Possible Losses
(as shown on Schedule 9.7(a) hereof) (its "Total Allowance") as of the
close of business on the Calculation Date shall be 35.12% of its
Problem Assets on the Calculation Date, with any adjustments to the
Total Allowance and other accounts necessary to achieve this percentage
being accounted for in a manner that reflects the principles of
Financial Accounting Standards Board Statement 109 ("FAS 109") and any
other generally accepted accounting principles applicable to income
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taxes. For purposes of this calculation, Problem Assets consist of (i)
loans classified as substandard, doubtful or loss and (ii) other real
estate owned at the Calculation Date, based upon loan classification
standards in effect as of December 31, 1995. No Problem Assets at
December 31, 1995 (except for consumer loans and one-to-four family
residential loans) shall be reduced or eliminated at the Calculation
Date except to the extent payment is received by Home Bank or written
off. Home Corporation has scheduled its Problem Assets at December 31,
1995 on Schedule 9.7(a).
(b) If a special recapitalization assessment for the
Savings Association Insurance Fund is imposed on Home Bank on or before
the Calculation Date, the amount of the special recapitalization
assessment shall be added back to Home Corporation's book value as of
the close of business on the Calculation Date and the income tax
accounts of Home Corporation shall be adjusted to reflect the treatment
that would have been required under FAS 109 and any other generally
accepted accounting principles applicable to income taxes as if the
amount added back had never been imposed; provided that such
calculation shall not increase book value by more than $925,000.
(c) For purposes of determining 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) shall not be
deducted as an expense.
(d) Home Corporation shall prepare and provide to F&M
Bancorp a schedule reflecting the calculation of its book value as of
the Calculation Date, determined in accordance with the terms of this
Section 9.7 within 10 days of the Calculation Date. Such schedule shall
be submitted along with a report of Home Corporation's independent
auditors which shall indicate that they have reviewed (i) each of the
reports filed by Home Corporation with the SEC since the date of the
1995 audited consolidated 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 Home Corporation, and (ii) the
schedule reflecting the calculation of the book value as of the
Calculation Date in accordance with the terms of this Section 9.7 and
specifying that nothing came to their attention that caused them to
believe that the calculation of book value is not in accordance with
the terms of this Section 9.7. Such schedule and supporting
documentation are referred to as the Book Value Documentation. F&M
Bancorp's certified public accountants shall, within 5 days of the
receipt of the Book Value Documentation, either confirm in writing to
Home Corporation that it finds the determination of book value to be
acceptable or, if such is not the case, F&M Bancorp's independent
certified public accountants shall set forth specifically and with
particularity the basis for its disagreement. In the event that F&M
Bancorp believes that an adjustment to book value is required,
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representatives of F&M Bancorp, Home Corporation and each of their
independent certified public accountants shall meet within 5 days to
discuss any areas of disagreement. In the event that the parties hereto
determine to adjust Home Corporation's book value from that previously
determined, Home Corporation shall promptly make the appropriate
adjustments. If the parties hereto cannot reach agreement within 5 days
of first meeting on this matter, they shall submit the matter for
determination to a mutually acceptable independent third party
independent accounting firm, whose determination shall be required
within 10 days thereafter and shall be binding upon the parties.
9.8. Anti-Dilution Provision. 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 Home Corporation 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 Conversion Ratio set forth in Section 9.2 shall
be adjusted accordingly. Home Corporation 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 Home Corporation which are voted against the approval of
the Merger who perfects his appraisal rights pursuant to the provisions of MD.
CORPS. & ASS'NS CODE SS. 3-201 et seq. (a "dissenting stockholder") shall be
entitled to receive from F&M Bancorp in cash the value of such shares of the
Common Stock of Home Corporation determined in accordance with the provisions of
MD. CORPS. & ASS'NS CODE SS. 3-201 et seq.
9.10. Restriction on Issuance or Repurchase of Securities.
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.
10. Boards of Directors and Employment Matters. Upon the Effective
Date:
(a) Promptly after the Effective Date of the Merger,
F&M Bancorp will cause its Board of Directors to be expanded to include
two additional members. Two of the directors of Home Corporation will
then be elected to fill the two newly created vacancies until the next
annual meeting of the stockholders of F&M Bancorp and until their
successors are elected and have qualified. Prior to the Effective Date
of the Merger, the Board of Directors of Home Corporation will
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designate the directors to be so elected, subject to the approval of
the Nominating Committee of the Board of Directors of F&M Bancorp.
(b) The members of the Board of Directors of Home
Bank on the Effective Date will serve for the remainder of their
current terms and until their successors are elected and have
qualified. However, after the Effective Date, F&M Bancorp, as the sole
stockholder of Home Bank, will cause the Board of Directors of Home
Bank to be expanded to include two additional members, and shall
appoint two individuals designated by the Nominating Committee of the
Board of Directors of F&M Bancorp to fill the two newly created
vacancies.
(c) F&M Bancorp will offer to enter into an
employment agreement substantially in the form attached hereto as
Appendix VI with Richard W. Phoebus, Sr., the President and Chief
Executive Officer of Home Corporation and Home Bank. F&M Bancorp will
also offer to enter into employment agreements substantially in the
form attached hereto as Appendix VII with each of Celia S. Ausherman,
Steven G. Hull and Salvatore M. Savino (collectively and together with
Mr. Phoebus, the "Contract Employees"). F&M Bancorp will offer to enter
into each of these employment agreements before the Effective Date, but
the effectiveness of each is to be conditioned upon the completion of
the Merger. All such employment agreements shall constitute the entire
understanding with respect to employment arrangements between F&M
Bancorp and each of the Contract Employees, and shall supersede any and
all prior understandings, written or oral, including any prior
employment agreements between the Contract Employees and Home
Corporation or Home Bank. The Contract Employees shall not be subject
to the employment, compensation, severance, or benefit plan eligibility
and participation arrangements set forth in Sections 10(e), (f), (g)
and (h) of this Plan.
(d) The employment of all officers and employees of
Home Corporation will terminate on the Effective Date. One officer of
Home Corporation will be appointed to serve as an officer of F&M
Bancorp. Such officer will be designated by Home Corporation, subject
to the approval of the Board of Directors of F&M Bancorp. Such officer
may also continue to hold responsibilities he or she held at Home Bank
prior to the Effective Date, and shall only be compensated in his or
her capacity as an officer of Home Bank.
(e) The officers and employees of Home Bank, other
than the Contract Employees, will continue in their employment with
Home Bank as at-will employees at the same compensation level they
received with Home Bank before the Effective Date.
(f) Payments of $1,000, $500, or $250 will be made to
each of those officers, full-time employees, or part-time employees,
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respectively, of Home Bank, other than the Contract Employees, who
either (i) remain employed by Home Bank for six months continuously
thereafter or (ii) leave such employment at the request of Home 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 Home Bank, or within 15 business days after the date
of termination, in the case of those who are requested to leave
employment.
(g) In addition to any payments required under
Section 10(f), a severance payment will be made to those employees of
Home Bank, other than the Contract Employees, who remain employed by
Home Bank on the Effective Date, but leave such employment at the
request of Home Bank within six months after the Effective Date for
other than just cause. The amount of the severance payment for each
such employee will be two weeks' pay at the most recent compensation
level of that employee. The severance payment shall be made within 15
business days after the date of termination of the employee.
(h) F&M Bancorp will review the benefits provided to
employees of Home Bank under the employee benefit plans maintained by
Home Bank and disclosed pursuant to Section 3.8(b). F&M Bancorp will
provide the employees of Home Bank who continue as at-will employees of
F&M Bancorp after the Effective Date either with benefits under F&M
Bancorp's employee benefit plans or with benefits under Home Bank's
employee benefit plans, whichever F&M Bancorp in its sole discretion
deems to be more advantageous taken as a whole (and not on a
plan-by-plan basis) to the employees of Home Bank. In that connection,
F&M Bancorp may, in its sole discretion, freeze or terminate the
employee benefit plans of Home Bank, merge them with one or more
employee benefit plans of F&M Bancorp, or continue to maintain them. If
F&M Bancorp decides to freeze, terminate or merge the employee benefit
plans of Home Bank, after the Effective Date all full-time officers and
employees of Home Bank who continue as at-will employees of Home Bank
may participate in the equivalent employee benefit plans of F&M Bancorp
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 Home Bank for purposes of allocation,
eligibility and vesting.
(i) Except as disclosed on Schedule 3.8, F&M Bancorp
will discontinue health and life insurance benefits to retired officers
and employees of Home Corporation except to the extent that coverage
may continue after, and Home Corporation may have paid for the coverage
prior to, the Effective Date.
(j) For such period of time as is covered by any
extension of the directors' and officers' liability coverage of Home
Corporation and the Home Subsidiaries, but in no event longer than 6
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years from the Effective Date, after the Effective Date F&M Bancorp
agrees to cause Home Bank, or if such entity is no longer in existence,
F&M Bancorp shall continue to indemnify all persons who, as of the
Effective Date, are directors, officers, employees and agents of Home
Corporation or the Home Subsidiaries to the same extent that such
persons are indemnified pursuant to the Articles of Incorporation or
By-Laws of Home Corporation and/or the Home Subsidiaries on the date
hereof, with respect to matters occurring prior to the Effective Date.
11. Opinion of Tax Counsel. F&M Bancorp and Home Corporation 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 Home
Corporation to F&M Bancorp, and the assumption by F&M Bancorp of the
liabilities of Home Corporation pursuant to the terms of this Plan,
will constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Code. Home Corporation 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 Home Corporation on the conversion of Common Stock of
Home Corporation solely into shares of the Common Stock of F&M Bancorp.
No gain or loss will be recognized by Home Corporation upon the
transfer of all of its assets to F&M Bancorp in exchange for shares of
the Common Stock of F&M Bancorp and the assumption by F&M Bancorp of
the liabilities of Home Corporation. No gain or loss will be recognized
to F&M Bancorp upon the receipt by F&M Bancorp of all of the assets of
Home Corporation in exchange for shares of the Common Stock of F&M
Bancorp and the assumption by F&M Bancorp of the liabilities of Home
Corporation.
(c) The basis of the shares of the Common Stock of
F&M Bancorp received by a stockholder of Home Corporation will be the
same as the basis of the shares of the Common Stock of Home Corporation
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 Home Corporation will include the period
during which he held the shares of the Common Stock of Home Corporation
which were converted into F&M Bancorp shares pursuant to the Merger,
provided that the shares of Common Stock of Home Corporation is held as
a capital asset by the stockholder of Home Corporation on the Effective
Date.
(d) The basis of each asset of Home Corporation in
the hands of F&M Bancorp will be the same as the basis of such asset in
the hands of Home Corporation immediately prior to the Merger; the
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holding period of each such asset in the hands of F&M Bancorp will
include the periods during which such asset was held by Home
Corporation.
(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 Home
Corporation 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.
(g) The accumulated earnings and profits of Home
Corporation on the Effective Date will be added to the accumulated
earnings and profits of F&M Bancorp 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; Effect Thereof. 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
Home Corporation and F&M Bancorp, or
(b) by F&M Bancorp or Home Corporation, if its Board
of Directors so determines, in the event of the failure of the
stockholders of F&M Bancorp or Home Corporation to approve this Plan at
the meetings of stockholders called to consider such approval, unless
in each case the failure of such occurrence shall be due to the failure
of the party seeking to terminate this Plan to perform or observe its
agreement set forth herein to be performed or observed by such party at
or before the Effective Date; or
(c) by F&M Bancorp or Home Corporation, if its Board
of Directors so determines, in the event of a material breach by the
other party hereto of any representation, warranty, covenant or
agreement contained herein which is not cured or not curable within 60
days after written notice of such breach is given to the party
committing such breach by the other party; or
(d) by F&M Bancorp by written notice to Home
Corporation if prior to December 31, 1996 (i) any approval, consent or
waiver of any governmental entity required to permit consummation of
the transactions contemplated hereby shall have been denied, (ii) any
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approval, consent or waiver of any governmental entity required to
permit consummation of the transactions contemplated hereby shall
include any condition or requirement that would (i) result in a
materially adverse effect on F&M Bancorp or Home Corporation or (ii) so
materially and adversely affect the economic or business benefits of
the Merger that F&M Bancorp, in the sole judgment of F&M Bancorp, would
not have entered into this Plan had such conditions or requirements
been known at the date hereof, (iii) any action or proceeding against
F&M Bancorp or any of the F&M Subsidiaries or against Home Corporation
or any of the Home Subsidiaries shall be pending which seeks to prevent
consummation of the transactions contemplated by this Plan, or (iv) any
court shall have entered an order which prohibits consummation of the
Merger and the transactions contemplated by this Plan, or
(e) by F&M Bancorp or Home Corporation, by action of
the Board of Directors of either party and the delivery of written
notice by either party to the other, in the event that the Merger is
not consummated by December 31, 1996, unless the failure to so
consummate by such time is due to the breach of any representation,
warranty, agreement or covenant contained in this Plan by the party
seeking to terminate, or if prior to December 31, 1996, any
governmental entity of competent jurisdiction shall have issued a
final, unappealable order or ruling enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Plan, or
(f) by action of the Board of Directors of Home
Corporation in their sole discretion in accordance with Section 5.6,
or
(g) By either F&M Bancorp or Home Corporation if, at
the Calculation Date, the Average Market Value (as defined in Section
9.2(c)) of F&M Bancorp Common Stock is less than 1.6 times the book
value per share of F&M Bancorp Common Stock determined in accordance
with generally accepted accounting principles; provided, however, that
if F&M Bancorp elects (and Home Corporation agrees), for purposes of
the computation of the Conversion Ratio (as defined in Section 9.2(a)),
F&M Bancorp may use a per share price for the F&M Bancorp Common Stock
of 1.6 times the book value per share of its Common Stock on the
Calculation Date, determined in accordance with generally accepted
accounting principles, in lieu of the Average Market Value. In either
such case, F&M Bancorp or Home Corporation, as the case may be, shall
give prompt written notice to Home Corporation or F&M Bancorp of such
election and Home Corporation or F&M Bancorp, as the case may be, shall
then provide prompt written notice to F&M Bancorp or Home Corporation
of its willingness to proceed with such modification; and, under such
circumstances, no abandonment or termination shall be deemed to have
occurred pursuant to this Section 13(e), and this Plan shall remain in
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full force and effect in accordance with its terms, except as the per
share price for the Common Stock of F&M Bancorp shall have been so
modified; or
(h) in the event of the termination of this Plan by
either F&M Bancorp or Home Corporation, as provided above, this Plan
shall thereafter become void and there shall be no liability on the
part of any party hereto or their respective officers or directors,
except that any such termination shall be without prejudice to the
rights of any party hereto arising out of the willful breach of any
other party of any covenant or willful misrepresentation contained in
this Plan.
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 Nasdaq 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 Proxy
Statement/Prospectus. 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, 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 L.L.P.,
36 South Charles Street, Baltimore, Maryland 21201-3010, attention of James J.
Winn, Jr., Esquire; or (b) if to Home Corporation, shall be addressed to Home
Federal Corporation, 122-128 West Washington Street, Hagerstown, Maryland 21740,
attention of Richard W. Phoebus, Sr., President and Chief Executive Officer,
with a copy to its counsel, Elias, Matz, Tiernan & Herrick L.L.P., 12th floor,
The Walker Building, 734 15th Street, N.W., Washington, D.C., 20005, attention
of Norman B. Antin, 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.
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17. Representations, Warranties and Agreements. Except as set forth in
this Section 17, all representations, warranties and agreements of F&M Bancorp
and Home Corporation made in this Plan, or in any instrument delivered by F&M
Bancorp or Home Corporation 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 5.1, 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.
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IN WITNESS WHEREOF, F&M Bancorp and Home Corporation 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] HOME FEDERAL CORPORATION
/s/ Celia S. Ausherman By: /s/ Richard W. Phoebus, Sr.
- ---------------------- ----------------------------
Celia S. Ausherman Richard W. Phoebus, Sr.
Secretary President and Chief Executive Officer
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APPENDIX I
LIST OF SCHEDULES
A. Schedules to be Provided by Home Corporation to F&M Bancorp.
Schedule 3.1(a). List of subsidiaries of Home Corporation and their
places of incorporation.
Schedule 3.1(b). Ownership of Home Subsidiaries; Joint Ventures and
Partnerships.
Schedule 3.1(c). Charters and by-laws of Home Corporation and each of the
Home Subsidiaries.
Schedule 3.1(d). List of outstanding options, warrants, rights,
or obligations of any kind entitling the holder thereof
to acquire shares of the Common Stock of Home
Corporation or outstanding securities or instruments
that are convertible into shares of the Common Stock of
Home Corporation.
Schedule 3.2. Consolidated Financial Statements of Home Corporation at
December 31, 1991, 1992, 1993, 1994 and 1995 and for
each of the years then ended, as reported upon by Smith,
Elliott, Kearns & Company.
Schedule 3.3. Tax Returns of Home Corporation to Federal, State,
County, Municipal or Foreign Taxing Authorities for the
taxable years 1990, 1991, 1992, 1993 and 1994.
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 3.10. Environmental Matters.
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 Home Corporation and Charles Webb &
Company.
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Schedule 5.2(e) Increases in Employee Compensation or Benefit Levels.
Schedule 5.2(z)(ii) Capital Expenditures In Excess of $25,000.
Schedule 9.7(a). Schedule of Home Corporation's (i) loans
classified as substandard, doubtful or loss; and (ii)
real estate owned; Home Corporation's Allowance for
Possible Losses.
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B. Schedules to be Provided by F&M Bancorp to Home Corporation.
Schedule 4.1(c). List of subsidiaries of F&M Bancorp.
Schedule 4.1(e). Charters and by-laws of F&M Bancorp and each of the F&M
Subsidiaries.
Schedule 4.2. Consolidated Financial Statements of F&M Bancorp
and its subsidiary at December 31, 1990, 1991, 1992,
1993, 1994 and 1995 and for each of the years then
ended, as reported upon by Keller Bruner & Company,
L.L.C.
Schedule 4.4. List of Certain Changes or Events.
Schedule 4.6. Litigation, Etc.
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EXHIBIT 2. STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Option Agreement") dated as of April
2, 1996, between HOME FEDERAL CORPORATION ("Home Corporation"), a Maryland
corporation, and F&M BANCORP ("F&M Bancorp"), a Maryland corporation, recites
and provides:
A. The Board of Directors of Home Corporation and F&M Bancorp have
approved a Plan and Agreement to Merge dated April 2, 1996 (the "Plan")
providing for the merger (the "Merger") of Home Corporation with and into F&M
Bancorp.
B. As a condition to and as consideration for F&M Bancorp's entry into
the Plan and to induce such entry, Home Corporation has agreed to grant to F&M
Bancorp the option set forth herein to purchase authorized but unissued shares
of Home Corporation Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
Capitalized terms defined in the Plan and used herein shall have the
same meanings as in the Plan.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Home Corporation
hereby grants to F&M Bancorp an option (the "Option") to purchase up to 501,282
shares of Home Corporation Common Stock at an exercise price of $8.25 per share
payable in cash as provided in Section 4; provided, however, that in the event
Home Corporation issues or agrees to issue any shares of Home Corporation Common
Stock (other than as permitted under the Plan) at a price less than $8.25 per
share (as adjusted pursuant to Section 6), the exercise price shall be such
lesser price.
3. Exercise of Option.
(a) Unless F&M Bancorp shall have breached in any material
respect any covenant or representation contained in the Plan and such breach has
not been cured, F&M Bancorp may exercise the Option, in whole or part, at any
time or from time to time if a Purchase Event (as defined below) shall have
occurred and be continuing; provided that to the extent the Option shall not
have been exercised, it shall terminate and be of no further force and effect
upon the earliest to occur of (i) the Effective Date of the Merger, or (ii) the
termination of the Plan in accordance with the provisions thereof prior to the
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occurrence of a Purchase Event (other than as a result of a willful breach by
Home Corporation of any Specified Covenant or as a result of failure of Home
Corporation's stockholders to approve the Plan by the vote required under
applicable law or under Home Corporation's Charter), or (iii) 12 months after
termination of the Plan due to a willful breach by Home Corporation of any
Specified Covenant or failure of Home Corporation's stockholders to approve the
Plan by the vote required under applicable law or under Home Corporation's
Charter; provided, however, that any purchase of shares upon exercise of the
Option shall be subject to compliance with applicable law, including, without
limitation, the Bank Holding Company Act of 1956, as amended. Any exercise of
the Option shall be subject to compliance with applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Home Corporation or Home Federal Savings Bank
("Home Bank"), without having received F&M Bancorp's prior written
consent, shall have entered into an agreement with any person (x) to
merge or consolidate, or enter into any similar transaction, except as
contemplated in the Plan, (y) to purchase, lease or otherwise acquire
all or substantially all of the assets of Home Corporation or Home
Bank, or (z) to purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 15% or more of the voting power of Home
Corporation or Home Bank;
(ii) any person (other than Home Corporation or Home
Bank in a fiduciary capacity, or F&M Bancorp or Farmers and Mechanics
National Bank in a fiduciary capacity) shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 15% or more
of the outstanding shares of Home Corporation Common Stock after the
date hereof (the term "beneficial ownership" for purposes of this
Option Agreement having the meaning assigned thereto in Section 13(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") and the
regulations promulgated thereunder);
(iii) any person shall have made a bona fide proposal
to Home Corporation by public announcement or written communication
that is or becomes the subject of public disclosure to acquire Home
Corporation or Home Bank by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, and
following such bona fide proposal the stockholders of Home Corporation
vote not to adopt the Plan; or
(iv) Home Corporation shall have willfully breached
any Specified Covenant following a bona fide proposal to Home
Corporation or Home Bank to acquire Home Corporation or Home Bank by
merger, consolidation, purchase of all or substantially all of its
assets or any other similar transaction, which breach would entitle F&M
Bancorp to terminate the Plan (without regard to the cure periods
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provided for therein) and such breach shall not have been cured prior
to the Notice Date (as defined below).
If more than one of the transactions giving rise to a
Purchase Event under this Section 3(b) is undertaken or effected, then
all such transactions shall give rise only to one Purchase Event, which
Purchase Event shall be deemed continuing for all purposes hereunder
until all such transactions are abandoned. As used in this Option
Agreement, "person" shall have the meanings specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event F&M Bancorp wishes to exercise the Option, it
shall send to Home Corporation a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise, and (ii) a place and date not earlier
than three business days nor later than 60 business days after the Notice Date
for the closing of such purchase ("Closing Date"); provided that if prior
notification to or approval of any federal or state regulatory agency is
required in connection with such purchase, F&M Bancorp shall promptly file the
required notice or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification period has
expired or been terminated or such approval has been obtained and any requisite
waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant
made by Home Corporation or Home Bank and contained in Section 5 of the Plan.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3, F&M Bancorp shall
pay to Home Corporation the aggregate purchase price for the shares of Home
Corporation Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a bank account designated by
Home Corporation.
(b) At such closing, simultaneously with the delivery of funds
as provided in subsection (a), Home Corporation shall deliver to F&M Bancorp a
certificate or certificates representing the number of shares of Home
Corporation Common Stock purchased by F&M Bancorp, and F&M Bancorp shall deliver
to Home Corporation a letter agreeing that F&M Bancorp will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement.
(c) Certificates for Home Corporation Common Stock delivered
at a closing hereunder shall be endorsed with a restrictive legend which shall
read substantially as follows:
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"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO CERTAIN PROVISIONS OF A STOCK OPTION AGREEMENT BETWEEN THE
REGISTERED HOLDER HEREOF AND HOME FEDERAL CORPORATION AND TO RESALE
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF HOME
FEDERAL CORPORATION. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY HOME FEDERAL CORPORATION
OF A WRITTEN REQUEST."
It is understood and agreed that the above legend shall be
removed by delivery of substitute certificate(s) without such legend if F&M
Bancorp shall have delivered to Home Corporation a copy of a letter from the
staff of the Securities and Exchange Commission, or an opinion of counsel, in
form and substance satisfactory to Home Corporation, to the effect that such
legend is not required for purposes of the Securities Act of 1933, as amended
(the "Securities Act").
5. Representations.
Home Corporation represents, warrants and covenants to F&M Bancorp as
follows:
(a) Home Corporation shall at all times maintain sufficient
authorized but unissued shares of Home Corporation Common Stock so that the
Option may be exercised without authorization of additional shares of Home
Corporation Common Stock.
(b) The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization.
In the event of any change in Home Corporation Common Stock by reason
of stock dividends, split-ups, mergers, recapitalizations, combinations,
exchanges of shares or the like, the type and number of shares subject to the
Option, and the purchase price per share, as the case may be, shall be adjusted
appropriately. In the event that any additional shares of Home Corporation
Common Stock are issued or otherwise become outstanding after the date of this
Option Agreement (other than pursuant to this Option Agreement), the number of
shares of Home Corporation Common Stock subject to the Option shall be adjusted
so that, after such issuance, it equals 19.9% of the number of shares of Home
Corporation Common Stock then issued and outstanding without giving effect to
any shares subject or issued pursuant to the Option. Nothing contained in this
Section 6 shall be deemed to authorize Home Corporation to breach any provision
of the Plan.
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7. Registration Rights.
If requested by F&M Bancorp, Home Corporation shall as expeditiously as
possible file a registration statement on a form of general use under the
Securities Act if necessary in order to permit the sale or other disposition of
the shares of Home Corporation Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method of sale or other
disposition requested by F&M Bancorp. F&M Bancorp shall provide all information
reasonably requested by Home Corporation for inclusion in any registration
statement to be filed hereunder. Home Corporation will use its best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 270 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sales or other dispositions. Only one registration may be effected
under this Section 7 at Home Corporation's expense, and which shall not include
underwriting commissions and the fees and disbursements of F&M Bancorp's counsel
attributable to the registration of such Home Corporation Common Stock. The
filing of any registration statement hereunder may be delayed for such period of
time as may reasonably be required to facilitate any public distribution by Home
Corporation of Home Corporation Common Stock. If requested by F&M Bancorp, in
connection with any such registration, Home Corporation will become a party to
any underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements. Upon receiving any request from F&M Bancorp or assignee thereof
under this Section 7, Home Corporation agrees to send a copy thereof to F&M
Bancorp and to any assignee thereof known to Home Corporation, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
8. Severability.
If any term, provision, covenant or restriction contained in this
Option Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire the full
number of shares of Home Corporation Common Stock provided in Section 2 (as
adjusted pursuant to Section 6), it is the express intention of Home Corporation
to allow the holder to acquire such lesser number of shares as may be
permissible, without any amendment or modification hereof.
9. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
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its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Entire Agreement.Except as otherwise expressly provided
herein, this Option Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing F&M Bancorp may assign in whole or in part its rights and obligations
hereunder; provided, however, that to the extent required by applicable
regulatory authorities, F&M Bancorp may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Home Corporation, (iii) an assignment to a single party (e.g.,
a broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on F&M Bancorp's behalf, or (iv) any other manner approved
by applicable regulatory authorities.
(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the address provided for in or pursuant to Section 15 of the Plan.
(e) Counterparts. This Option Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
HOME FEDERAL CORPORATION
By: /s/ Richard W. Phoebus, Sr.
---------------------------
Richard W. Phoebus, Sr.
President and Chief Executive Officer
F&M BANCORP
By: /s/ Charles W. Hoff, III
---------------------------
Charles W. Hoff, III
Chairman of the Board and Chief Executive Officer
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EXHIBIT 3. FORM OF SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") dated as of April 2, 1996,
between F&M Bancorp, a Maryland corporation and registered bank holding company
("F&M Bancorp"), and each of the individuals listed on Schedule A attached
hereto (collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Stockholders (i) collectively possess the sole or joint
right to vote, or direct the voting of, an aggregate of ___________ shares of
common stock, par value $1.00 per share (the "Shares"), of Home Federal
Corporation, a Maryland corporation and registered thrift holding company ("Home
Corporation"), which constitute approximately _____ % of the outstanding capital
stock of Home Corporation, and (ii) individually possess the right to vote, or
to direct the voting of, the number of Shares set forth opposite such
Stockholder's name on Schedule A hereto; and
WHEREAS, the Stockholders (i) collectively possess the sole or joint
power to dispose of, or to direct the disposition of, an aggregate of
___________ Shares, which constitute approximately _____ % of the outstanding
capital stock of Home Corporation, and (ii) individually possess the power to
dispose of, or direct the disposition of, the number of Shares set forth
opposite such Stockholder's name on Schedule A hereto; and
WHEREAS, F&M Bancorp has entered into a Plan and Agreement to Merge
with Home Corporation, dated as of the business day immediately prior to the
date hereof (the "Plan"), pursuant to which F&M Bancorp would acquire Home
Corporation through the merger of Home Corporation with and into F&M Bancorp
(the "Merger"), with shares of the Common Stock of F&M Bancorp to be issued to
the stockholders of Home Corporation; and
WHEREAS, pursuant to Section 5.8 of the Plan, Home Corporation has
covenanted to obtain agreements from each of its officers and directors (and to
use commercially reasonable efforts to obtain agreements from any such other
person identified herein as a Stockholder) in which the officers, directors, and
Stockholders of Home Corporation would agree to support the Merger; and the
Stockholders have in accordance with such covenant agreed to support the Merger.
NOW, THEREFORE, to induce F&M Bancorp to enter into the Plan and in
consideration of the mutual covenants and agreements set forth herein and in the
Plan and the mutual benefits to be derived herefrom and therefrom, the parties
agree as follows:
1. Representations of Stockholders. Each of the Stockholders,
severally, and not jointly, represents that:
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(a)(1) such Stockholder possesses the sole or joint right to
vote, or direct the voting of, all of the Shares set forth on Schedule
A opposite the Stockholder's name, (2) such number of Shares
constitutes all of the Shares with respect to which the Stockholder
possesses the sole or joint right to vote, or direct the voting of, as
the case may be, and (3) except as to Shares held only under a power of
attorney or as guardian or custodian, such Stockholder has good and
merchantable title to all of the Shares indicated on said list opposite
the Stockholder's name, free of all restrictions and encumbrances of
every kind and character, except as indicated on Schedule A.
(b)(1) such Stockholder possesses the sole or joint power to
dispose of, or direct the disposition of, the Shares set forth on
Schedule A opposite the Stockholder's name, (2) such number of Shares
constitutes all of the Shares with respect to which the Stockholder
possesses or will possess the sole or joint power to dispose of or
direct the disposition of, and (3) except as to Shares held only under
a power of attorney, such Stockholder has good and merchantable title
to all of the Shares indicated on said list opposite the Stockholder's
name free of all restrictions and encumbrances of any kind or character
except as indicated on Schedule A.
(c) such Stockholder does not own, of record or beneficially,
any Shares that are not reflected on Schedule A. For the purposes of
this Agreement, beneficial ownership has the meaning set forth in Rule
13d-3 of the Securities Exchange Act of 1934, as amended.
(d) such Stockholder has full right, power, and authority to
enter into, deliver and perform this Agreement; this Agreement has been
duly executed and delivered by such Stockholder; and this Agreement
constitutes the legal, valid, and binding obligation of the
Stockholder, and is enforceable in accordance with its terms.
2. Covenants of Stockholders. Each of the Stockholders, severally and
not jointly, covenants as follows:
(a) Restrictions on Transfer. With respect to Shares listed on
Schedule A, during the term of this Agreement, such Stockholder shall
not voluntarily pledge, hypothecate, grant a security interest in,
sell, transfer, or otherwise dispose of or encumber any of such Shares
and will not enter into any agreement, arrangement, or understanding
(other than a proxy for the purpose of voting his or her Shares in
accordance with Subparagraph 2(c) hereof) which would, during that term
(i) restrict, (ii) establish a right of first refusal to, or (iii)
otherwise relate to the transfer or voting of such Shares; provided,
however, this restriction shall not apply to a transfer of any of the
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CUSIP No.: 436919104 Page 61 of 62
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Shares by the Stockholder to his or her spouse, children, or
grandchildren, subject to the conditions that any transferee,
recipient, or custodian of any such transferee or recipient must
execute an agreement substantially in the form of this Agreement in a
form satisfactory to F&M Bancorp, and Schedule A hereto may be revised
by F&M Bancorp to reflect such transfer.
(b) Other Restrictions. During the term of this Agreement,
such Stockholder, as a Stockholder, shall not, directly or indirectly,
solicit, initiate, or encourage inquiries or proposals from, or
participate in any discussions or negotiations with, or provide any
information to, any individual, corporation, partnership, or other
person, entity, or group (other than F&M Bancorp, any of its
subsidiaries, and their respective officers, employees,
representatives, and agents) concerning any sale of assets, sale of
shares of capital stock, merger, consolidation, share exchange, or
similar transactions involving Home Corporation. Such Stockholder shall
promptly advise F&M Bancorp of, and communicate to F&M Bancorp the
terms of, any such inquiry or proposal addressed either to such
Stockholder or to Home Corporation that such Stockholder receives or of
which such Stockholder has knowledge.
(c) Merger. With respect to the Shares listed on Schedule A
pursuant to Subparagraph 1(a) hereof, each of the Stockholders shall
vote such Shares to ratify and confirm the Plan and the Merger and the
transactions contemplated thereby. Each of the Stockholders, as a
Stockholder, further agrees to use all commercially reasonable efforts
to cause the Merger to be effected.
(d) Additional Shares. The provisions of subparagraphs (a) and
(c) above shall apply to all Shares currently owned and hereafter
acquired, of record or beneficially, by each of the Stockholders.
3. Termination. This Agreement shall terminate upon the termination
of the Plan.
4. Governing Law. This Agreement shall in all respects be governed by
and construed under the laws of Maryland, all rights and remedies being governed
by such laws.
5. Benefit of Agreement. This Agreement shall be binding upon and inure
to the benefit of, and shall be enforceable by, the parties hereto and their
respective personal representatives, successors, and assigns, except that
neither party may transfer or assign any of its respective rights or obligations
hereunder without the prior written consent of the other party or, if by F&M
Bancorp, in accordance with the Plan.
6. Counterparts. For convenience of the parties hereto, this Agreement
may be executed in several counterparts, each of which shall be deemed an
original, all of which together shall constitute one and the same instrument.
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CUSIP No.: 436919104 Page 62 of 62
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IN WITNESS WHEREOF, F&M Bancorp and the Stockholders have caused this
Agreement to be duly executed as of the day and year first above written.
F&M BANCORP
By: --------------------
Charles W. Hoff, III
Chairman and Chief Executive Officer
STOCKHOLDERS:
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