SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 2, 1996
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F&M BANCORP
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(Exact name of registrant as specified in its charter)
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Maryland 0-12638 52-1316473
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(State of Incorporation) (Commission File Number) (IRS Employer Identification No.)
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110 Thomas Johnson Drive
Frederick, Maryland 21702
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(Address of principal executive offices) (Zip Code)
(301) 694-4000
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(Registrant's telephone number)
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Item 5. Other Events.
On April 2, 1996, F&M Bancorp announced the execution of a Plan and
Agreement to Merge (the "Plan") dated as of April 2, 1996 by and among F&M
Bancorp, a Maryland bank holding company, and Home Federal Corporation, a
Maryland thrift holding company and the owner of all of the issued and
outstanding capital stock of Home Federal Savings Bank of Hagerstown, Maryland.
Pursuant to the terms of the Plan, Home Federal Corporation is to merge
with and into F&M Bancorp (the "Merger"). F&M Bancorp will be the surviving
Maryland corporation. On the effective date of the Merger, each issued and
outstanding share of the Common Stock of Home Federal Corporation shall be
automatically converted into and become a number of shares of the Common Stock
of F&M Bancorp whose aggregate value is equal to 1.65 times the book value per
share of Home Federal Corporation at the end of the month preceding the
effective date, rounded to the nearest one hundredth of a share. The
stockholders of Home Federal Corporation will thus become stockholders of F&M
Bancorp, and F&M Bancorp will become the owner of all of the issued and
outstanding capital stock of Home Federal Savings Bank. It is expected that the
effective date of the Merger will occur during the fourth quarter of 1996.
There are 2,519,010 shares of the Common Stock of Home Federal
Corporation outstanding. Options to acquire 68,601 shares of the Common Stock of
Home Federal Corporation will be converted into options to acquire shares of the
Common Stock of F&M Bancorp on similar terms. F&M Bancorp and Home Federal
Corporation also executed a Stock Option Agreement granting F&M Bancorp an
option to purchase 501,282 shares of the Common Stock of Home Federal
Corporation at $8.25 per share if the Plan is terminated in certain
circumstances. On April 1, 1996, the day preceding announcement of the Merger,
the per share price of the Common Stock of Home Federal Corporation closed at
$8.25, and the per share price of the Common Stock of F&M Bancorp closed at
$29.625. Both stocks are quoted on the Nasdaq National Market System.
Consummation of the Merger is subject to the fulfillment of the
conditions specified in the Plan. Among the conditions are the approval of the
stockholders of both F&M Bancorp and Home Federal Corporation. An affirmative
vote of two-thirds of the issued and outstanding shares of Common Stock of each
of F&M Bancorp and Home Federal Corporation is required to approve the Merger.
F&M Bancorp and Home Federal Corporation will call and hold special meetings of
their respective stockholders for the purpose of voting upon the Plan and the
Merger. Among the other conditions that must be satisfied are the approval of
the relevant federal regulatory authorities and qualification of the Merger for
favorable tax and accounting treatment.
F&M Bancorp is headquartered in Frederick, Maryland and conducts a
general banking and trust company business through its banking subsidiary,
Farmers and Mechanics National Bank. Farmers and Mechanics National Bank
operates 24 offices located in Frederick, Carroll, and Montgomery Counties,
Maryland. At December 31, 1995, Farmers and Mechanics National Bank had total
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assets of $740 million, total deposits of $621 million, and total loans, net of
unearned income, of $485 million. Home Federal Corporation is headquartered in
Hagerstown, Maryland and operates 8 offices in Washington County, Maryland
through Home Federal Savings Bank. At December 31, 1995, Home Federal
Corporation had $215 million in assets.
Pursuant to General Instruction F to Form 8-K, the press release dated
April 2, 1996 announcing execution of the Plan is attached to this Current
Report as Exhibit 1, and is hereby incorporated by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
1. Press Release of F&M Bancorp dated April 2, 1996.
2. Plan and Agreement to Merge dated as of April 2, 1996
by and among F&M Bancorp and Home Federal Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 8, 1996 F&M BANCORP
By:/s/ Charles W. Hoff, III
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Charles W. Hoff, III
Chairman and Chief Executive Officer
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EXHIBIT INDEX
Page
1. Press Release of F&M Bancorp dated April 2, 1996 5
2. Plan and Agreement to Merge dated April 2, 1996
by and among F&M Bancorp and Home Federal Corporation. 7
The registrant agrees to furnish supplementally a copy of any omitted schedule
or annex to the Plan and Agreement to Merge to the Commission upon request.
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EXHIBIT 1. PRESS RELEASE OF F&M BANCORP
Charles W. Hoff, III, Chairman of the Board and Chief Executive Officer
of F&M Bancorp headquartered in Frederick, Maryland, and Richard W. Phoebus,
Sr., President and Chief Executive Officer of Home Federal Corporation and Home
Federal Savings Bank, located in Hagerstown, Maryland, announced today that F&M
Bancorp has entered into a definitive agreement to acquire Home Federal
Corporation and its subsidiaries.
Under the terms of the agreement, Home Federal Corporation will merge
into F&M Bancorp, which will continue to operate Home Federal Savings Bank
following consummation of the transaction. Each outstanding share of common
stock of Home Federal Corporation will be exchanged for newly issued shares of
F&M Bancorp at a conversion ratio equal to 1.65 times the per share book value
of Home Federal Corporation common stock which shall be determined at the end of
the month immediately preceding the closing. The value of F&M Bancorp common
stock to be exchanged will be based on the average NASDAQ closing price for the
20 business days preceding that date. The transaction is expected to be
completed during the fourth quarter of 1996. If the merger consideration had
been based on Home Federal Corporation's December 31, 1995 book value of $7.30
per share, each Home Federal Corporation share would have been exchanged in the
merger transaction for $12.05 of F&M Bancorp common stock. Using the December
31, 1995 closing stock price of F&M Bancorp common stock of $29.75, each share
of Home Federal Corporation common stock would have been exchanged for .41
shares of F&M Bancorp common stock.
Two directors of Home Federal Corporation will be invited to serve as
directors of F&M Bancorp. The acquisition is subject to the approval of federal
regulatory authorities and shareholder approval of both companies. Charles Webb
& Company is serving as financial advisor to Home Federal Corporation in this
transaction.
Home Federal Corporation had total assets as of December 31, 1995 of
approximately $214,615,000. F&M Bancorp had total assets as of December 31, 1995
of approximately $739,854,000. Home Federal Savings Bank, the primary subsidiary
of Home Federal Corporation, currently operates eight banking offices and eleven
ATMs in both Washington and Allegheny Counties in Maryland. Home Federal
Corporation currently has 2,519,010 shares of common stock outstanding, and F&M
Bancorp currently has 4,419,424 shares of common stock outstanding.
Mr. Phoebus stated, "The proposed transaction provides a unique
opportunity for Home Federal Savings Bank and for the stockholders of Home
Federal Corporation, as well as for our employees, customers, and the community.
By this affiliation with F&M Bancorp and the increased resources which the
merger makes available, Home Federal can look forward to continued growth by
expanding its products, services and delivery systems to our existing customers
and new customers as well. We are very pleased that Home Federal will be able to
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continue to operate as a subsidiary of F&M Bancorp, allowing our employees to
continue to serve our customer base through our eight Home Federal offices."
"We are delighted to welcome Home Federal Savings Bank to F&M Bancorp,"
stated Faye Cannon, President of F&M Bancorp. "This transaction provides the
opportunity for F&M Bancorp to grow and expand into contiguous Washington
County, a significant industrial and transportation hub for Western Maryland. We
value the importance of placing the customer at the center of our business and
this community banking philosophy is one that is shared by Home Federal. Through
this affiliation, both organizations will be able to enhance the delivery of
products and services to our individual and business customers, while building
long term value for stockholders."
As a subsidiary of F&M Bancorp, Farmers and Mechanics National Bank is
the fifth largest banking institution headquartered in Maryland and operates as
a full service commercial bank through 24 full service community banking offices
and 32 ATMs throughout Frederick, Carroll, and Montgomery Counties in central
Maryland. Farmers and Mechanics National Bank, a member of the FDIC, provides
financial services to both individuals and business markets and is a member of
the MOST, CIRRUS, MAC, and VISA regional, national, and international ATM
networks.
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EXHIBIT 2. 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.
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;
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(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 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
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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 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
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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.
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
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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, 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,
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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 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:
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(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.
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.
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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 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
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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
(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.
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(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 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
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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 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
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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, 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
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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 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,
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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. 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
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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
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.
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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 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
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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.
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
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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
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
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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 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
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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, 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
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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.
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
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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 of the Straddle Period and the Effective
Date and the denominator of which is the total number of days in the
Straddle Period; and
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(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
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
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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
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
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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 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.
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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.
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
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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.
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
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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 Home
Corporation hereunder shall be subject to the fulfillment prior to or at the
Effective Date of the following conditions:
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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 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.
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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 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.
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(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 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
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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 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
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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, 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
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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 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
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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, 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
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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 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
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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 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.
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(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 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
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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 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
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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.
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,
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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.
Schedule9.7(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 ach 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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