<PAGE>
Confidential, For Use of the Commission Only.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Parety other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Baltimore Bancorp
-------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Baltimore Bancorp
-------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
17,242,164*
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1/
The Merger Consideration is equal to $20.75 per share of Common Stock.
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$348,867,184**
----------------------------------------------------------------------
1/ Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
N/A
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
N/A
------------------------------------------------------------------------
3) Filing Party:
N/A
------------------------------------------------------------------------
4) Date Filed:
N/A
------------------------------------------------------------------------
*Consists of 16,228,990 shares of Common Stock to be canceled in exchange
for the right to receive the Merger Consideration and 1,013,174 shares of
Common Stock that would be issued upon conversion of stock options.
**Includes $12,115,641 representing the aggregate amount to be paid upon
exchange and cancellation of all stock options.
<PAGE>
Confidential, For Use of the Commission Only.
Preliminary Copy
[LETTERHEAD OF BALTIMORE BANCORP]
September __, 1994
To the Stockholders of
Baltimore Bancorp:
You are cordially invited to attend a Special Meeting of
Stockholders of Baltimore Bancorp to be held at 10:00 a.m. on Friday, November
4, 1994, at The Bank of Baltimore, 4th Floor, 7 East Baltimore Street,
Baltimore, Maryland 21202.
As described in the enclosed Proxy Statement, at the Special
Meeting, you will be asked to consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Merger, dated as of March 21, 1994, as amended,
among First Fidelity Bancorporation, Annabel Lee Corporation, a direct wholly
owned subsidiary of First Fidelity, and Baltimore Bancorp, pursuant to which
First Fidelity will acquire Baltimore Bancorp through the merger of Annabel Lee
with and into Baltimore Bancorp. In the merger, stockholders of Baltimore
Bancorp will receive a cash payment of $20.75 for each share of Baltimore
Bancorp Common Stock.
Your Board of Directors has determined that the merger is in
the best interests of Baltimore Bancorp and its stockholders and has unanimously
approved the merger. The Board unanimously recommends that you vote "FOR"
approval and adoption of the Merger Agreement and the transactions contemplated
thereby.
Consummation of the merger is subject to certain conditions,
including approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of at least two-thirds of the
outstanding shares of Common Stock entitled to be voted and the approval of the
merger by various regulatory agencies. Only holders of Common Stock of record at
the close of business on September 27, 1994 are entitled to notice of and to
vote at the Special Meeting or any adjournments or postponements thereof.
You are urged to read the accompanying Proxy Statement, which
provides you with a description of the terms of the proposed merger. A copy of
the Merger Agreement is included as Appendix A to the enclosed Proxy Statement.
It is very important that your shares be represented at the
Special Meeting. Whether or not you plan to attend the Special Meeting, you are
requested to complete, date, sign and return the proxy card in the enclosed
postage paid envelope. Failure to return a properly executed proxy card or to
vote at the Special Meeting will have the same effect as a vote against the
Merger Agreement. Please do not send in your stock certificates until you have
received a letter of transmittal, which will be sent to you promptly after the
merger is consummated.
On behalf of the Board of Directors, I urge you to vote "FOR"
approval and adoption of the Merger Agreement and the transactions contemplated
thereby.
Sincerely,
Edwin F. Hale, Sr.
Chairman of the Board
<PAGE>
Confidential, For Use of the Commission Only.
Preliminary Copy
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON
NOVEMBER 4, 1994
NOTICE IS HEREBY GIVEN that a special meeting of stockholders
(the "Special Meeting") of Baltimore Bancorp (the "Company") will be held on
Friday, November 4, 1994, at 10:00 a.m., at The Bank of Baltimore, 4th Floor, 7
East Baltimore Street, Baltimore, Maryland 21202, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt
an Agreement and Plan of Merger, dated as of March 21, 1994, as amended
(the "Merger Agreement"), by and among First Fidelity Bancorporation, a
New Jersey corporation ("First Fidelity"), Annabel Lee Corporation, a
Maryland corporation and a direct wholly owned subsidiary of First
Fidelity ("Merger Sub"), and the Company (a copy of which is attached
to the accompanying Proxy Statement as Appendix A) and the transactions
contemplated thereby. As more fully described in the Proxy Statement,
the Merger Agreement provides that (i) Merger Sub will be merged with
and into the Company (the "Merger" or "Holding Company Merger"), with
the Company being the surviving corporation, (ii) the Company will
thereupon become a direct wholly owned subsidiary of First Fidelity and
(iii) each outstanding share of common stock, par value $5.00 per
share, of the Company (the "Common Stock"), except for shares held by
First Fidelity, will be converted into the right to receive $20.75 in
cash.
(2) To transact such other business as may properly come before
the Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on
September 27, 1994 as the record date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting. Only holders of Common
Stock of record at the close of business on that date will be entitled to notice
of and to vote at the Special Meeting or any adjournments or postponements
thereof.
The accompanying Proxy Statement describes the Merger
Agreement, the proposed Merger and the actions to be taken in connection with
the Merger. To ensure that your vote will be counted, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed postage paid
envelope, whether or not you plan to attend the Special Meeting. Your proxy may
be revoked in the manner described in the accompanying Proxy Statement at any
time before it is voted at the Special Meeting.
In the event that there are not sufficient votes to approve and
adopt the Merger Agreement and the transactions contemplated thereby at the time
of the Special Meeting, the Special Meeting may be adjourned in order to permit
further solicitation of proxies by the Company.
By Order of the Board of Directors
Edwin F. Hale, Sr.
Chairman of the Board
Baltimore, Maryland
September __, 1994
<PAGE>
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF COMMON
STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF THE OUTSTANDING
SHARES OF COMMON STOCK ENTITLED TO BE VOTED IS REQUIRED TO APPROVE AND ADOPT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. WE URGE YOU TO SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING IN PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
ITS EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. ANY
STOCKHOLDER PRESENT AT THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENT OR
POSTPONEMENT THEREOF, MAY REVOKE SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON THE
MERGER AGREEMENT BEFORE THE SPECIAL MEETING.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION.............................................................. 1
ADDITIONAL INFORMATION.................................................... 2
SUMMARY................................................................... 3
THE SPECIAL MEETING....................................................... 12
Matters To Be Considered at the Special Meeting...................... 12
Record Date and Voting............................................... 12
Vote Required; Revocability of Proxies............................... 13
Appraisal Rights..................................................... 13
Solicitation of Proxies.............................................. 13
Security Ownership by Company Management and First Fidelity.......... 14
PARTIES TO THE MERGER..................................................... 14
The Company.......................................................... 14
First Fidelity....................................................... 14
Merger Sub........................................................... 15
THE MERGER................................................................ 15
General.............................................................. 15
The Merger........................................................... 15
Background of the Merger............................................. 17
Reasons for the Merger............................................... 18
Opinion of Financial Advisor......................................... 19
Effective Date and Effective Time.................................... 22
Effect of the Merger................................................. 22
Exchange of Common Stock for Cash.................................... 23
Representations and Warranties....................................... 24
Conditions to Consummation of the Merger............................. 24
Regulatory Approvals................................................. 24
Conduct of Business Pending the Merger............................... 25
No Solicitation...................................................... 26
Interests of Certain Persons in the Merger........................... 27
Effect on Company Benefit Plans and Related Matters.................. 30
Waiver and Amendment; Termination.................................... 30
Accounting Treatment................................................. 31
Expenses............................................................. 31
THE OPTION AGREEMENT...................................................... 32
General.............................................................. 32
Effect of Option Agreement........................................... 32
Terms of Option Agreement............................................ 32
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 34
MARKET PRICES AND DIVIDENDS ON COMMON STOCK............................... 35
Market Prices........................................................ 35
Dividends............................................................ 35
STOCK OWNED BY MANAGEMENT................................................. 36
PRINCIPAL HOLDERS OF VOTING SECURITIES.................................... 38
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 39
INDEPENDENT AUDITORS...................................................... 39
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS.......................... 40
OTHER MATTERS............................................................. 40
APPENDIX A Agreement and Plan of Merger dated as of March 21, 1994, as amended
APPENDIX B Fairness Opinion of Alex. Brown & Sons Incorporated
APPENDIX C Stock Option Agreement dated as of March 22, 1994
<PAGE>
Confidential, For Use of the Commission Only.
Preliminary Copy
BALTIMORE BANCORP
120 East Baltimore Street
Baltimore, Maryland 21202
(410) 244-3360
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
NOVEMBER 4, 1994
----------------------
INTRODUCTION
----------------------
This Proxy Statement is being furnished to the holders of
common stock, par value $5.00 per share (the "Common Stock"), of Baltimore
Bancorp, a Maryland corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors" or the "Board") for use at the special meeting of stockholders (the
"Special Meeting") to be held on Friday, November 4, 1994 at 10:00 a.m., at The
Bank of Baltimore, 4th Floor, 7 East Baltimore Street, Baltimore, Maryland
21202, and at any adjournments or postponements thereof. The Board of Directors
has fixed the close of business on September 27, 1994 as the record date (the
"Record Date") for the Special Meeting with respect to this solicitation.
At the Special Meeting, the holders of Common Stock will
consider and vote upon a proposal to approve and adopt an Agreement and Plan of
Merger, dated as of March 21, 1994, as amended (the "Merger Agreement"), by and
among First Fidelity Bancorporation, a New Jersey corporation ("First
Fidelity"), Annabel Lee Corporation, a Maryland corporation and a direct wholly
owned subsidiary of First Fidelity ("Merger Sub"), and the Company and the
transactions contemplated thereby. Pursuant to the Merger Agreement, (i) Merger
Sub will be merged with and into the Company (the "Merger" or "Holding Company
Merger"), with the Company being the surviving corporation, (ii) the Company
will thereupon become a direct wholly owned subsidiary of First Fidelity and
(iii) each outstanding share of Common Stock (except for shares held by First
Fidelity) will be converted into the right to receive $20.75 in cash (the
"Merger Consideration"). The Merger Agreement is attached to this Proxy
Statement as Appendix A. This Proxy Statement, the accompanying Notice of
Special Meeting and the accompanying proxy are first being mailed to
stockholders on or about September 30, 1994.
The Board of Directors unanimously recommends that stockholders
vote "FOR" approval and adoption of the Merger Agreement and the transactions
contemplated thereby.
All information contained in this Proxy Statement concerning
First Fidelity and Merger Sub has been supplied by First Fidelity. Except as
otherwise indicated, all other information contained in this Proxy Statement has
been supplied by the Company.
No person is authorized to give any information or to make any
representations not contained in this Proxy Statement and, if given or made,
such information or representation should not be relied upon as having been
authorized by the Company.
Stockholders are urged to read and consider carefully the
information contained in the Proxy Statement and to consult with their personal
financial and tax advisors.
<PAGE>
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
------------------------
The date of this Proxy Statement is September __, 1994.
------------------------
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder, and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
("SEC"). Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's regional offices located at Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661 and Suite 1300, Seven World
Trade Center, New York, New York 10048. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the Common Stock is listed on
the New York Stock Exchange ("NYSE"), and such reports, proxy statements and
other information concerning the Company are also available for inspection at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
<PAGE>
SUMMARY
The following is a summary of certain information contained
elsewhere in this Proxy Statement. This summary is not intended to be a complete
description and is qualified in its entirety by reference to the more detailed
information contained in this Proxy Statement or incorporated by reference in
this Proxy Statement, or in the documents attached as Appendices hereto. Each
stockholder is urged to give careful consideration to all of the information
contained in this Proxy Statement and the Appendices before voting.
The Special Meeting
Matters To Be Considered at the Special Meeting. The Special
Meeting is scheduled to be held at 10:00 a.m. on Friday, November 4, 1994 at The
Bank of Baltimore, 4th Floor, 7 East Baltimore Street, Baltimore, Maryland
21202. At the Special Meeting, stockholders of the Company will consider and
vote upon (i) a proposal to approve and adopt the Merger Agreement, by and among
First Fidelity, Merger Sub and the Company and the transactions contemplated
thereby and (ii) such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof. See "The Special Meeting
- - - - - - -- Matters To Be Considered at the Special Meeting."
Record Date and Voting. The Record Date for the Special Meeting
is the close of business on September 27, 1994. At the close of business on the
Record Date, there were ___________ shares of Common Stock outstanding and
entitled to vote, held by _____ stockholders of record. Each holder of Common
Stock on the Record Date will be entitled to one vote for each share held of
record upon each matter properly submitted at the Special Meeting or at any
postponement or adjournment thereof. The presence, either in person or by proxy,
of a majority of the outstanding shares of Common Stock entitled to be voted is
necessary to constitute a quorum at the Special Meeting. See "The Special
Meeting -- Record Date and Voting."
Vote Required; Revocability of Proxies. Approval and adoption
of the Merger Agreement and the transactions contemplated thereby will require
the affirmative vote of at least two-thirds of the outstanding shares of Common
Stock entitled to be voted at the Special Meeting.
Since the required vote of the stockholders of the Company on
the Merger Agreement and the transactions contemplated thereby is based upon the
total number of outstanding shares of Common Stock, the failure to submit a
proxy card (or vote in person at the Special Meeting) or the abstention from
voting by a stockholder will have the same effect as a "NO" vote with respect to
the Merger Agreement and the transactions contemplated thereby. See "The Special
Meeting -- Vote Required; Revocability of Proxies."
The presence of a stockholder at the Special Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder may revoke
a proxy at any time prior to its exercise by (i) delivering to James A. Gast,
Corporate Secretary, Baltimore Bancorp, 120 East Baltimore Street, Baltimore,
Maryland 21202, a written notice of revocation prior to the Special Meeting,
(ii) delivering to the Company prior to the Special Meeting a duly executed
proxy bearing a later date or (iii) attending the Special Meeting and voting in
person.
Appraisal Rights. Stockholders of the Company have no appraisal
rights in connection with the Merger Agreement and the consummation of the
transactions contemplated thereby. See "The Special Meeting--Appraisal Rights."
Security Ownership by Company Management and First Fidelity. As
of the Record Date, (i) the directors and executive officers of the Company
beneficially owned, in the aggregate, _____ shares of Common Stock (excluding
____ shares which could be acquired upon the exercise of options), representing
approximately ___% of such shares outstanding and (ii) First Fidelity
beneficially owned 546,800 shares of Common Stock (excluding an option for
3,300,000 shares of Common Stock exercisable pursuant to the terms and
conditions of the Option Agreement (as hereinafter defined)), representing 3.26%
of such shares outstanding. To the knowledge of the Company, such directors and
executive officers of the Company and First Fidelity intend to vote their
outstanding shares of Common Stock for the approval and adoption of the Merger
Agreement and the transactions contemplated thereby. See "Stock Owned by
Management," "Principal Holders of Voting Securities" and "The Option
Agreement."
Parties to the Merger
The Company. Baltimore Bancorp is a Maryland corporation
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended ("BHCA"). The Company's principal subsidiary is The Bank of Baltimore
(the "Bank"). The Bank is engaged in a general commercial and retail banking
business serving individuals, businesses and governmental units throughout the
region from southern Pennsylvania to northern Virginia with primary emphasis in
Baltimore and in the Baltimore and Washington, D.C. suburbs. As of June 30,
1994, the Company had total assets, deposits and stockholders' equity of $2.1
billion, $1.9 billion and $150.9 million, respectively. With 41 banking offices
in Maryland, the Company was the third largest bank holding company
headquartered in Maryland in terms of assets and deposits. The address of the
Company's principal executive offices is 120 East Baltimore Street, Baltimore,
Maryland 21202, and its telephone number is (410) 244-3360. See "Parties to the
Merger -- The Company."
First Fidelity. First Fidelity Bancorporation is a New Jersey
corporation registered as a bank holding company under the BHCA. First Fidelity
serves the mid-Atlantic region and provides a full range of banking services
through its subsidiary banks, First Fidelity Bank, N.A., First Fidelity Bank,
N.A., New York, Union Trust Company and First Fidelity Bank, FSB. First Fidelity
also provides leasing, retail brokerage, community development assistance and
insurance services through its non-bank and banking-related subsidiaries. As of
June 30, 1994, First Fidelity had total assets, deposits and stockholders'
equity of $33.9 billion, $27.4 billion and $2.8 billion, respectively. With more
than 650 banking offices in New Jersey, eastern Pennsylvania, New York,
Connecticut and Maryland, First Fidelity ranks as one of the 25 largest United
States bank holding companies and is the largest banking organization
headquartered in New Jersey. The address of First Fidelity's principal executive
offices is 2673 Main Street, P.O. Box 6980, Lawrenceville, New Jersey 08648, and
its telephone number is (201) 565-3200. See "Parties to the Merger -- First
Fidelity."
Merger Sub. Annabel Lee Corporation is a Maryland
corporation and a direct wholly owned subsidiary of First Fidelity. Pursuant to
the terms of the Merger Agreement, at the effective time, Merger Sub will be
merged with and into the Company, with the Company being the surviving
corporation. See "Parties to the Merger -- Merger Sub" and "The Merger."
The Merger
The Merger Agreement provides that First Fidelity will acquire
the Company pursuant to the merger of Merger Sub with and into the Company, with
the Company being the surviving corporation. The Merger will occur as part of
the consummation of certain alternative transactions described below as the
"Thrift Merger Alternative" and the "Bank Merger Alternative" which are designed
to allow First Fidelity to acquire the Company under existing regulatory
restrictions. Each outstanding share of Common Stock, except for certain shares
held by First Fidelity, will be converted into the right to receive a cash
payment of $20.75.
Thrift Merger Alternative. The Merger Agreement also provides,
immediately prior to the Holding Company Merger, that the Bank will be
transformed into a federal savings bank by merging the Bank into a newly-formed
federal savings bank subsidiary of the Company, which will be known as "The Bank
of Baltimore Interim Federal Savings Bank" ("BOB-FSB") and will be the surviving
entity to the merger (the "First Thrift Merger"). As a result of the First
Thrift Merger, the Company will become a savings and loan holding company and
will no longer be a registered bank holding company. Upon the Holding Company
Merger, the Company will become a wholly owned subsidiary of First Fidelity.
After the Holding Company Merger, First Fidelity will contribute the outstanding
capital stock of its existing wholly owned federal savings bank subsidiary,
First Fidelity Bank, FSB ("FFB-FSB"), which is headquartered in Beltsville,
Maryland, to the Company (the "Thrift Contribution"). Immediately following the
Thrift Contribution, BOB-FSB will be merged with FFB-FSB, with FFB-FSB being the
surviving institution (the "Second Thrift Merger"). The Second Thrift Merger
would consolidate all of First Fidelity's banking offices in Maryland into a
single federal savings bank subsidiary. The First Thrift Merger, the Thrift
Contribution and the Second Thrift Merger are hereinafter collectively referred
to as the "Thrift Merger Alternative."
Section 3(d) of the BHCA -- the so-called Douglas Amendment --
prohibits the Board of Governors of the Federal Reserve System (the "Federal
Reserve") from approving an application by a bank holding company to acquire a
bank located outside the state in which the operations of such bank holding
company's banking subsidiaries were principally conducted unless the acquisition
of a state bank by an out-of-state bank holding company is specifically
authorized by the laws of the state in which such bank is located. Maryland law
does not specifically authorize for purposes of the Douglas Amendment the
acquisition of a Maryland bank, such as the Bank, by a New Jersey based bank
holding company, such as First Fidelity. Under the Thrift Merger Alternative,
the Bank would be transformed into a thrift by the First Thrift Merger, and the
Company would not own a "bank" at the time of the Holding Company Merger, since
a federal savings bank is expressly excluded from the definition of a "bank"
under the BHCA. Consequently, the Holding Company Merger would not then be
prohibited by the Douglas Amendment. Although sections 5-903 and 12-207 of the
Maryland banking law on their face would appear to prohibit the acquisition by
an out-of-state bank holding company, such as First Fidelity, of a federal
savings bank located in Maryland, such as BOB-FSB, the Company has received a
copy of a reasoned advice of counsel of the Assistant Attorney General of the
State of Maryland addressed to the Maryland Bank Commissioner and a reasoned
opinion of First Fidelity's Maryland counsel as to the legality under Maryland
law of the Holding Company Merger following the First Thrift Merger, when
Maryland law is interpreted consistently with the commerce clause of the United
States Constitution. Both the reasoned advice of counsel and the reasoned
opinion of First Fidelity's Maryland counsel conclude that certain provisions of
Maryland law governing interstate acquisitions of federal savings banks, as
applied to the Holding Company Merger, are unconstitutional under the commerce
clause.
Bank Merger Alternative. Subsequent to entering into the Merger
Agreement, First Fidelity has had discussions with the Office of the Comptroller
of the Currency (the "OCC") concerning, and has filed an application for
approval of, the relocation of the main office of its principal national bank
subsidiary, First Fidelity Bank, National Association ("FFB-NA"), from Salem,
New Jersey to Elkton, Maryland (the "Main Office Relocation"). If the Main
Office Relocation is approved, First Fidelity may elect to utilize an
alternative structure (the "Bank Merger Alternative"), in lieu of the Thrift
Merger Alternative, to acquire the Bank and the Company in a manner consistent
with the Douglas Amendment. Under the Bank Merger Alternative, FFB-NA would
relocate its main office to Elkton, Maryland and establish a branch office at
its current main office location in Salem, New Jersey. Immediately after the
Main Office Relocation, the Bank would be merged into FFB-NA, with FFB-NA being
the surviving institution (the "Bank Merger"). As part of the Bank Merger, the
outstanding common stock of the Bank would be exchanged for common stock and
preferred stock of FFB-NA, and the Company would hold not more than 15% of the
total equity of FFB-NA. Immediately after the Bank Merger, the Holding Company
Merger would be consummated. The ability of the Company and First Fidelity to
effect the Bank Merger Alternative will depend, in part, upon the application of
the BHCA and the Douglas Amendment to the Holding Company Merger after the Bank
Merger, and First Fidelity is in the process of discussing the foregoing with
the Federal Reserve Board. For essentially the same reasons described above,
First Fidelity believes that sections 5-903 and 12-207 of the Maryland banking
law, when applied consistently with the commerce and supremacy clauses of the
U.S. Constitution, should not be applied to prohibit the Bank Merger
Alternative. If First Fidelity proceeds with the Bank Merger Alternative, First
Fidelity will seek appropriate assurances to that effect. Under the Maryland
General Corporation Law, if the Bank Merger were to be deemed to constitute a
transfer of all or substantially all of the Company's assets, approval of the
Merger Agreement and the transactions contemplated thereby by the Company's
stockholders will be deemed to be approval of such transfer of assets in
connection with the consummation of the Bank Merger Alternative immediately
before the consummation of the Holding Company Merger.
Background and Reasons for the Merger
The Board of Directors believes that the terms of the Merger
Agreement are in the best interests of the Company and its stockholders.
Accordingly, the Board has approved the terms of the Merger and unanimously
recommends that stockholders vote "FOR" approval and adoption of the Merger
Agreement and the transactions contemplated thereby. See "The Merger --
Background of the Merger" and "-- Reasons for the Merger."
Opinion of Financial Advisor
On March 21, 1994, Alex. Brown & Sons Incorporated ("Alex.
Brown") delivered its written opinion to the Board of Directors that, as of such
date, the Merger Consideration to be received by the stockholders of the Company
was fair to such stockholders from a financial point of view. This opinion was
updated by Alex. Brown for the Board of Directors as of the date of this Proxy
Statement. The full text of the opinion of Alex. Brown is attached as Appendix B
to this Proxy Statement. Stockholders are urged to read the opinion in its
entirety for a description of the procedures followed, the assumptions made, the
matters considered and the limits on the review undertaken in rendering the
opinion. For further information concerning Alex. Brown's services as financial
advisor, its opinion and its fees and expense arrangements, see "The Merger --
Opinion of Financial Advisor."
Effective Date and Effective Time
It is anticipated that articles of merger will be filed with
the Maryland State Department of Assessments and Taxation (the "Maryland
Department") in accordance with the requirements of the Maryland General
Corporation Law on (i) a business day designated by First Fidelity within 10
days after the date of receipt of all regulatory and stockholder approvals,
expiration of applicable waiting periods and the satisfaction or waiver of all
conditions to the consummation of the Merger or (ii) on such later date as the
parties may agree. The date of such filing with and acceptance by the Maryland
Department of such articles of merger or such date thereafter as is specified in
the articles of merger will be the "Effective Date" of the Merger. The
"Effective Time" of the Merger will be the time of such filing with and
acceptance by the Maryland Department of such articles of merger or as otherwise
specifically set forth therein.
Effect of the Merger
Pursuant to the Merger Agreement, at the Effective Time, the
articles of incorporation and bylaws of the Company will be amended in their
entirety to conform to the articles of incorporation and bylaws of Merger Sub in
effect immediately prior to such time. At the Effective Time, the directors and
officers of Merger Sub will become the directors and officers of the Company as
the surviving corporation.
In connection with the Thrift Merger Alternative, First
Fidelity intends to invite the directors of the Bank serving prior to the
Effective Time, who do not become employees of FFB-FSB, to become directors of
FFB-FSB subsequent to the Second Thrift Merger for a period of not less than two
years at a level of compensation not less than that currently paid to
nonemployee directors of the Bank. If the Bank Merger Alternative is selected,
First Fidelity intends to invite such directors of the Bank to become members of
a Maryland regional advisory board of directors of FFB-NA following the Holding
Company Merger for a similar period and compensation. In addition, following the
Holding Company Merger, First Fidelity intends to select from among the
directors of the Bank or other prominent business leaders in the Maryland
community a person to become a director of First Fidelity to serve for not less
than two years. See "The Merger -- Effect of the Merger" and "-- Interests of
Certain Persons in the Merger."
Exchange of Common Stock for Cash
Promptly after the Effective Time, First Fidelity Bank, N.A.,
as exchange agent (the "Exchange Agent"), will provide written instructions to
each stockholder of record of the Company regarding the manner in which
stockholders of the Company may exchange their shares of Common Stock for
payment of the Merger Consideration. No interest will be paid on the Merger
Consideration. Stockholders should not surrender their shares of Common Stock
until they have received these written instructions from the Exchange Agent. See
"The Merger -- Exchange of Common Stock for Cash."
Conditions; Regulatory Approvals
Consummation of the Merger and the payment of the Merger
Consideration pursuant to the Merger Agreement are subject to various
conditions, including receipt of the stockholder approval solicited hereby,
receipt of the necessary regulatory approvals and satisfaction of other
customary closing conditions.
The Thrift Merger Alternative would require the prior approval
of (i) the Office of Thrift Supervision (the "OTS") under the Home Owners' Loan
Act of 1933, as amended ("HOLA"), for the chartering of BOB-FSB, the acquisition
of BOB-FSB by the Company, the First Thrift Merger, the Holding Company Merger,
the Thrift Contribution and the Second Thrift Merger, (ii) the Federal Reserve
under the BHCA for both the Company and First Fidelity to acquire control of
BOB-FSB as a nonbanking subsidiary and for First Fidelity to acquire control of
most of the Company's existing nonbanking subsidiaries and (iii) the OTS and the
Federal Deposit Insurance Corporation (the "FDIC") under the HOLA and the
Federal Deposit Insurance Act, as amended (the "FDIA"), for BOB-FSB and FFB-FSB
to continue to operate the Bank's existing subsidiaries as operating
subsidiaries or service corporation subsidiaries after the First Thrift Merger
and the Second Thrift Merger, respectively; and (iv) the OTS under the FDIA for
BOB-FSB to acquire, via the First Thrift Merger, the deposits of the Bank. In
addition, Banco Santander, S.A. ("Banco Santander"), a Spanish banking
organization, which owns approximately 24.8% of First Fidelity's voting stock,
has submitted (i) an application for approval of the OTS of the Holding Company
Merger under HOLA, and (ii) an application for approval of the Federal Reserve
to acquire control, indirectly via First Fidelity, of BOB-FSB as a nonbanking
subsidiary and most of the Company's existing nonbanking subsidiaries.
The Bank Merger Alternative, if elected by First Fidelity in
lieu of the Thrift Merger Alternative, would require the prior approval of the
OCC for the Main Office Relocation and the Bank Merger under the National Bank
Act and the FDIA.
It is contemplated that no additional regulatory approvals will
be required for consummation of the Holding Company Merger and either the Thrift
Merger Alternative or the Bank Merger Alternative, as the case may be, except as
described above. There can be no assurance that the requisite regulatory
approvals will be obtained, or, if such regulatory approvals are obtained, as to
the date of any such approvals. There also can be no assurance that any
approvals will not contain a condition or requirement which causes such
approvals to fail to satisfy the conditions set forth in the Merger Agreement.
See "The Merger -- Regulatory Approvals," "-- Conditions to Consummation of the
Merger" and "-- Waiver and Amendment; Termination."
Conduct of Business Pending the Merger
Prior to the Effective Time, the Merger Agreement requires the
Company to conduct its business in the ordinary course consistent with past
practice and subject to certain operating restrictions. The Company has agreed,
among other things, to maintain its current organization, management and capital
structure and to comply with certain limitations on incurrence of indebtedness,
increases in compensation and acquisitions or dispositions of assets. See "The
Merger -- Conduct of Business Pending the Merger."
No Solicitation
The Company has agreed in the Merger Agreement that it will not
initiate, solicit or encourage any inquiries or the making of any proposal or
offer with respect to an Acquisition Proposal (as hereinafter defined), and
except to the extent legally required for the discharge by the Board of
Directors of its fiduciary duties as advised in writing by counsel to the Board,
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, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. The Company has agreed to notify First Fidelity
immediately if any such inquiries or requests for information are received or if
any such negotiations are sought. See "The Merger -- No Solicitation."
Interests of Certain Persons in the Merger
Certain members of the Company's management and Board of
Directors may be deemed to have interests in the Merger in addition to their
interest as stockholders of the Company generally. The Bank previously entered
into severance agreements with certain members of the Company's and the Bank's
senior management. Subject to the terms of such agreements, such individuals may
be entitled to payments as a consequence of the Merger. In addition, the holders
of stock options, which include members of the Company's management and Board of
Directors, will have the right to receive cash payments in exchange for the
cancellation of the stock options. See "The Merger -- Interests of Certain
Persons in the Merger" and "-- Effect on Company Benefit Plans and Related
Matters."
Termination
The Merger Agreement may be terminated, and the Merger
abandoned, prior to the Effective Time, either before or after its approval by
the holders of Common Stock as follows: (i) by the mutual consent of the Company
and First Fidelity, (ii) by the Company or First Fidelity in the event of (a)
the failure of the holders of the Common Stock to approve the Merger Agreement
or (b) a material breach by the other party thereto of any representation,
warranty, covenant or agreement contained in the Merger Agreement (or, in the
case of the Company, in the Option Agreement) which is not cured or curable
within 30 days after written notice of such breach is given, (iii) by the
Company or First Fidelity if either (a) any approval, consent or waiver of a
governmental authority required to permit consummation of the transactions
contemplated by the Merger Agreement is denied or (b) any governmental authority
of competent jurisdiction shall have issued a final, unappealable order
enjoining or otherwise prohibiting consummation of the transactions contemplated
by the Merger Agreement and (iv) by the Company or First Fidelity in the event
the Merger is not consummated by March 31, 1995, unless the failure to
consummate by such time is due to a material breach of any representation,
warranty or covenant contained in the Merger Agreement by the party seeking to
terminate. See "The Merger -- Waiver and Amendment; Termination."
Accounting Treatment
The Merger will be treated as a "purchase" for accounting
purposes. See "The Merger -- Accounting Treatment."
The Option Agreement
As a condition precedent to First Fidelity's entering into the
Merger Agreement and in consideration therefor (without other consideration or
monetary payment), First Fidelity and the Company entered into a Stock Option
Agreement, dated as of March 22, 1994 (the "Option Agreement"). The Option
Agreement may have the effect of discouraging the making of alternative
acquisition-related proposals and increasing the likelihood that the Merger will
be consummated in accordance with the terms of the Merger Agreement.
Pursuant to the Option Agreement, the Company granted First
Fidelity an option (the "Option") to purchase, under certain circumstances and
subject to adjustment, up to 3,300,000 authorized but unissued shares of Common
Stock, or approximately 19.8% of the shares of Common Stock then outstanding, at
a price of $19.31 per share (the average of the low and high reported sales
price per share on the NYSE on the first trading day after the announcement of
the Merger Agreement). The Option is exercisable upon the occurrence of certain
events that create the potential for a third party to acquire the Company. To
the knowledge of the Company, no event that would permit exercise of the Option
has occurred as of the date hereof. If the Option becomes exercisable, First
Fidelity or any permitted transferee of First Fidelity can, in certain
circumstances, require the Company to repurchase for a formula price the Option
(in lieu of its exercise) or any shares of Common Stock purchased upon exercise
of the Option. The Option Agreement is attached as Appendix C to this Proxy
Statement. See "The Option Agreement."
Certain Federal Income Tax Consequences
The Merger will be a taxable transaction to Company
stockholders. Stockholders of the Company will recognize gain or loss in the
Merger in an amount determined by the difference between the cash received and
their tax basis in the Common Stock exchanged therefor. For further information
regarding certain federal income tax consequences to stockholders, see "Certain
Federal Income Tax Consequences."
Market Prices and Dividends on Common Stock
The Common Stock is listed on the NYSE under the name Baltimore
Bancorp and traded under the symbol "BBB". On January 12, 1994, the last trading
day before the public announcement that the Company was having preliminary
discussions with several major bank holding companies regarding a possible sale
of the Company, the reported closing sale price per share of Common Stock on the
NYSE was $14.00. On March 18, 1994, the last trading day before the public
announcement of the execution of the Merger Agreement, the reported closing sale
price per share of Common Stock on the NYSE was $18.00. On September __, 1994,
the last full trading day prior to the date of this Proxy Statement, the
reported closing sale price per share of Common Stock on the NYSE was $____. For
additional information concerning historical market prices of the Common Stock,
see "Market Prices and Dividends on Common Stock."
In November 1993, the Company reinstated the payment of
quarterly cash dividends following the suspension of dividends by the Company
subsequent to the third quarter of 1991. The Company has paid quarterly cash
dividends of $.05 per share of Common Stock for the fourth quarter of 1993 and
the first three quarters of 1994. Whether the Company will declare a cash
dividend for the fourth quarter of 1994 will depend on whether the Effective
Time precedes declaration and record dates which the Company customarily
followed prior to the execution of the Merger Agreement.
Selected Consolidated Financial Data
The following is selected consolidated financial data for the
Company and its subsidiaries for the six month periods ended June 30, 1994 and
1993 and for each of the five years ended December 31, 1989 through 1993. The
consolidated financial information for the six month periods ended June 30, 1994
and 1993 has not been audited, but in the opinion of management of the Company,
all adjustments necessary for a fair presentation have been included. The
results of operations for the six months ended June 30, 1994 are not necessarily
indicative of the results of operations that may be expected for the entire
year. The data is qualified in its entirety by the detailed information and
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1993 and in the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1994 and June 30, 1994, available as
described under "Incorporation of Certain Documents by Reference," and the other
information contained or incorporated by reference elsewhere in this Proxy
Statement.
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
----------------- -------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Interest income $ 78,167 $ 86,504 $ 171,242 $ 217,008 $ 292,738 $ 331,734 $ 326,001
Interest expense 31,143 40,111 75,993 131,391 215,747 248,038 245,480
Net interest income 47,024 46,393 95,249 85,617 76,991 83,696 80,521
Provision for possible loan losses 5,000 12,000 22,000 29,881 125,368 25,120 7,341
Gains (losses) on available-for-
sale securities 526 6,101 9,549 (2,894) 1,782 -- --
Gains (losses) on investment
securities -- 361 1,031 3,877 (5,731) 1,747 3,650
Other operating income 15,798 16,171 29,739 50,466 23,825 17,167 11,792
Other operating expenses 48,406 49,234 105,733 92,331 133,728 72,785 63,702
Income taxes (benefit) 3,055 264 (2,435) 400 (35,527) 826 7,598
Extraordinary item(1) -- -- -- 56 213 5,131 308
Net income (loss) 6,887 7,528 10,270 14,510 (126,489) 9,010 17,630
PER SHARE (PRIMARY):
Income (loss) before
extraordinary item $ .40 $ .52 $ .66 $ 1.13 $ (9.94) $ .31 $ 1.36
Extraordinary item(1) -- -- -- -- .02 .40 .02
Net income (loss) .40 .52 .66 1.13 (9.92) .71 1.38
Cash dividends declared .10 -- .05 -- .40 .60 .5375
Book value 9.00 9.61 9.73 9.38 8.42 18.45 18.62
PER SHARE (FULLY DILUTED):
Income (loss) before
extraordinary item $ .40 $ .52 $ .66 $ 1.13 $ (9.94) $ .31 $ 1.34
Extraordinary item(1) -- -- -- -- .02 .40 .02
Net income (loss) .40 .52 .66 1.13 (9.92) .71 1.36
AT PERIOD-END:
Loans held for sale $ 72,692 $ 96,578 $ 167,336 $ 65,101 $ 220,347 $ 14,956 $ --
Available-for-sale securities 600,299 -- 542,196 178,294 155,800 261,232 --
Investment securities -- 545,997 -- 420,666 597,756 646,598 925,655
Loans (net of unearned income) 1,250,142 1,426,666 1,308,445 1,521,450 1,949,233 2,226,043 2,218,151
Earning assets 1,955,052 2,135,617 2,086,299 2,239,398 3,002,264 3,342,001 3,242,308
Total assets 2,111,327 2,304,640 2,232,191 2,429,329 3,186,293 3,523,429 3,461,722
Core deposits(2) 1,867,153 1,974,206 1,944,737 1,988,952 2,249,689 2,145,865 2,021,265
Total deposits 1,883,515 2,086,435 1,961,517 2,236,370 2,947,978 2,911,255 2,710,283
Borrowings 47,196 29,693 79,226 33,367 74,725 314,560 446,679
Stockholders' equity 150,910 155,592 162,285 126,405 107,195 235,288 237,299
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
----------------- ------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
AVERAGE BALANCES:
Loans held for sale $ 103,554 $ 62,763 $ 103,549 $ 168,764 $ 33,862 $ 14,072 $ 5,892
Available for sale securities (3) 585,792 9,620 190,780 73,061 3,604 -- --
Investment securities -- 539,435 352,846 566,004 737,106 908,733 917,741
Loans (net of unearned income) 1,262,708 1,469,364 1,417,304 1,713,120 2,262,975 2,258,486 2,191,514
Earning assets 2,008,546 2,192,473 2,157,302 2,729,079 3,192,383 3,276,217 3,193,932
Total assets 2,150,740 2,352,975 2,318,310 2,865,895 3,359,263 3,463,207 3,397,961
Core deposits (2) 1,867,225 1,994,460 1,978,390 2,113,938 2,182,892 2,070,766 1,955,382
Total deposits 1,918,901 2,150,960 2,092,030 2,634,425 2,875,458 2,763,377 2,762,647
Borrowings 45,279 32,125 46,818 66,412 208,773 395,371 325,134
Stockholders' equity 156,126 139,087 149,055 116,136 221,265 241,810 233,286
EARNINGS RATIOS:
Return on average total assets .64% .64% .44% .51% (3.77)% .26% .52%
Return on average stockholders' equity 8.82 10.82 6.89 12.49 (57.17) 3.73 7.56
Dividend payout ratio 25 -- 7.58 -- N/M 84.51 38.95
Net yield on average earning assets 4.69 4.24 4.42 3.15 2.44 2.59 2.57
CREDIT RATIOS:
Nonperforming loans to total loans 1.71% 6.93% 2.59% 8.04% 8.63% 2.00% .89%
Nonperforming assets to total assets 2.92 7.70 3.66 8.57 7.45 2.01 .85
Allowance to total loans 2.46 4.09 2.96 4.33 3.97 1.59 .76
Allowance to nonperforming loans 143.36 58.96 114.12 53.89 45.99 79.54 85.79
Net loan losses to average loans 2.05 2.67 3.47 2.41 3.69 .29 .30
CAPITAL RATIOS:
Average stockholders' equity to
average assets 7.26% 5.91% 6.43% 4.05% 6.59% 6.98% 6.87%
Tier 1 risk-based capital 10.64 8.59 9.67 6.81 3.98 7.20 N/R
Total risk-based capital 12.27 10.18 11.28 8.39 5.51 8.41 N/R
Bank only:
Adjusted Tier 1 leverage capital 7.88 6.77 7.08 5.10 3.34 5.92 N/R
Tier 1 risk-based capital 10.83 8.93 9.72 7.12 4.16 7.47 N/R
Total risk-based capital 12.09 10.20 10.99 8.39 5.42 8.28 N/R
NONFINANCIAL DATA:
Employees (full time
equivalent basis) 1,108 1,136 1,163 1,114 1,225 1,101 1,088
Branch offices 41 46 42 47 51 51 51
Electronic banking facilities (ATMs) 49 52 50 53 57 57 51
<FN>
(1) Gain, net of taxes, from early extinguishment of debt.
(2) Total deposits, excluding brokered deposits and jumbo certificates of deposits.
(3) At December 31, 1993 the Company adopted Statement of Financial Accounting Standards No. 115.
N/M = Not meaningful.
N/R = Not required by banking regulations.
</FN>
</TABLE>
<PAGE>
THE SPECIAL MEETING
Matters To Be Considered at the Special Meeting
Each copy of this Proxy Statement mailed to holders of Common
Stock of the Company is accompanied by a proxy card furnished in connection with
the solicitation of proxies by the Board of Directors for use at the Special
Meeting. The Special Meeting is scheduled to be held at The Bank of Baltimore,
4th Floor, 7 East Baltimore Street, Baltimore, Maryland 21202, on Friday,
November 4, 1994 at 10:00 a.m. At the Special Meeting, holders of Common Stock
will consider and vote upon (i) the approval and adoption of the Merger
Agreement, by and among First Fidelity, Merger Sub and the Company (a copy of
which is attached to this Proxy Statement as Appendix A) and the transactions
contemplated thereby and (ii) such other matters as may properly be brought
before the Special Meeting.
HOLDERS OF COMMON STOCK ARE REQUESTED PROMPTLY TO COMPLETE,
DATE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD TO THE COMPANY IN THE ENCLOSED
POSTAGE PAID ENVELOPE. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO
VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT.
Record Date and Voting
The Board of Directors has fixed the close of business on
September 27, 1994 as the Record Date for the determination of the holders of
Common Stock entitled to receive notice of and to vote at the Special Meeting.
Only holders of record of Common Stock at the close of business on that date
will be entitled to vote at the Special Meeting or at any postponement or
adjournment thereof. At the close of business on the Record Date, there were
____________ shares of Common Stock outstanding and entitled to vote at the
Special Meeting, held by _____________ stockholders of record.
Each holder of Common Stock on the Record Date will be entitled
to one vote for each share held of record upon each matter properly submitted at
the Special Meeting or at any postponement or adjournment thereof. The presence,
in person or by proxy, of at least a majority of the outstanding shares of
Common Stock entitled to be voted at the Special Meeting is necessary to
constitute a quorum thereat. Abstentions are included in the calculation of the
number of votes represented at a meeting for purposes of determining whether a
quorum has been achieved.
If the enclosed proxy card is properly executed and received by
the Company in time to be voted at the Special Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
Executed proxies with no instructions indicated thereon will be voted "FOR" the
Merger Agreement and the transactions contemplated thereby.
The Board is not aware of any matters other than those set
forth in the Notice of Special Meeting of Stockholders that may be brought
before the Special Meeting. If any other matters properly come before the
Special Meeting, the persons named in the accompanying proxy will vote the
shares represented by all properly executed proxies on such matters in such
manner as shall be determined by a majority of the Board.
STOCKHOLDERS SHOULD NOT FORWARD ANY COMMON STOCK CERTIFICATES
WITH THEIR PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, STOCK
CERTIFICATES SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A
LETTER OF TRANSMITTAL WHICH WOULD BE SENT TO STOCKHOLDERS BY THE EXCHANGE AGENT
PROMPTLY AFTER THE EFFECTIVE TIME.
Vote Required; Revocability of Proxies
The affirmative vote of at least two-thirds of the outstanding
shares of Common Stock entitled to be voted is required in order to approve and
adopt the Merger Agreement and the transactions contemplated thereby.
THE REQUIRED VOTE OF THE STOCKHOLDERS OF THE COMPANY ON THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY IS BASED UPON THE
TOTAL NUMBER OF OUTSTANDING SHARES OF COMMON STOCK, AND NOT UPON THE NUMBER OF
SHARES WHICH ARE ACTUALLY VOTED. ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD
OR TO VOTE IN PERSON AT THE SPECIAL MEETING OR THE ABSTENTION FROM VOTING BY A
STOCKHOLDER WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
The presence of a stockholder at the Special Meeting will not
automatically revoke such stockholder's proxy. However, a stockholder may revoke
a proxy at any time prior to its exercise by (i) delivering to James A. Gast,
Corporate Secretary, Baltimore Bancorp, 120 East Baltimore Street, Baltimore,
Maryland 21202, a written notice of revocation prior to the Special Meeting,
(ii) delivering to the Company prior to the Special Meeting a duly executed
proxy bearing a later date or (iii) attending the Special Meeting and voting in
person.
If a quorum is not obtained, or if fewer shares of Common Stock
are voted in favor of approval and adoption of the Merger Agreement and the
transactions contemplated thereby than the number required for approval, it is
expected that the Special Meeting will be postponed or adjourned for the purpose
of allowing additional time for obtaining additional proxies or votes, and, at
any subsequent reconvening of the Special Meeting, all proxies will be voted in
the same manner as such proxies would have been voted at the original convening
of the Special Meeting (except for any proxies which have theretofore
effectively been revoked or withdrawn).
No vote of First Fidelity stockholders is required in
connection with the Merger Agreement.
The obligations of the Company and First Fidelity to consummate
the Merger Agreement are subject, among other things, to the condition that the
stockholders of the Company approve and adopt the Merger Agreement and the
transactions contemplated thereby.
Appraisal Rights
Stockholders of the Company have no appraisal rights in
connection with the Merger Agreement and the consummation of the transactions
contemplated thereby, and assuming the Merger Agreement is approved and adopted
by the Company's stockholders, any dissenting, nonvoting or objecting
stockholders will be bound by the vote and will not have any appraisal rights
under Maryland law.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and
employees of the Company and its subsidiaries may solicit proxies for the
Special Meeting from stockholders personally or by telephone or telegram without
additional remuneration therefor. The Company will also provide persons, firms,
banks and corporations holding shares in their names or in the names of
nominees, which in either case are beneficially owned by others, proxy material
for transmittal to such beneficial owners and will reimburse such record owners
for their reasonable expenses in doing so. The Company has retained MacKenzie
Partners, Inc., a proxy soliciting firm ("MacKenzie"), to assist in the
solicitation of proxies at a fee of $12,500, plus reimbursement of certain
out-of-pocket expenses. The cost of solicitation of proxies for the Special
Meeting, including the fees of MacKenzie, will be borne by the Company.
Security Ownership by Company Management and First Fidelity
As of the Record Date, (i) the directors and executive officers
of the Company beneficially owned, in the aggregate, _____ shares of Common
Stock (excluding ____ shares which could be acquired upon the exercise of
options), representing approximately ___% of such shares outstanding and (ii)
First Fidelity beneficially owned 546,800 shares of Common Stock (excluding an
option for 3,300,000 shares of Common Stock exercisable pursuant to the terms
and conditions of the Option Agreement), representing 3.26% of such shares
outstanding. To the knowledge of the Company, such directors and executive
officers of the Company and First Fidelity intend to vote their outstanding
shares of Common Stock for the approval and adoption of the Merger Agreement and
the transactions contemplated thereby. See "Stock Owned by Management,"
"Principal Holders of Voting Securities" and "The Option Agreement."
PARTIES TO THE MERGER
The Company
Baltimore Bancorp is a Maryland corporation registered as a
bank holding company under the BHCA. The Company's principal subsidiary is The
Bank of Baltimore. The Bank is a commercial bank chartered under the laws of the
State of Maryland, and is the surviving institution in the 1984 merger with The
Savings Bank of Baltimore ("Savings Bank"). The Savings Bank operated as a
Maryland-chartered mutual savings bank, commencing operations in 1818. The
Company and the Bank were formed to facilitate the reorganization of the Savings
Bank into a holding company structure and to give it the ability to access the
capital markets.
The Bank is engaged in a general commercial and retail banking
business serving individuals, businesses and governmental units throughout the
region from southern Pennsylvania to northern Virginia with primary emphasis in
Baltimore and in the Baltimore and Washington, D.C. suburbs. As of June 30,
1994, the Company had total assets, deposits and stockholders' equity of $2.1
billion, $1.9 billion and $150.9 million, respectively, making the Company the
third largest bank holding company headquartered in Maryland in terms of assets
and deposits.
The Bank operates 41 banking offices throughout nine counties
in Maryland and in Baltimore City as follows: 15 in Baltimore County, 13 in
Montgomery County, four in Baltimore City, three in Anne Arundel County, and one
in each of Carroll, Charles, Harford, Howard, Prince Georges and St. Marys
Counties.
The address of the Company's principal executive offices is 120
East Baltimore Street, Baltimore, Maryland 21202, and its telephone number is
(410) 244-3360.
First Fidelity
First Fidelity Bancorporation is a New Jersey corporation
registered as a bank holding company under the BHCA. First Fidelity serves the
mid-Atlantic region and provides a full range of banking services through its
subsidiary banks, First Fidelity Bank, N.A., First Fidelity Bank, N.A., New
York, Union Trust Company and First Fidelity Bank, FSB. As of June 30, 1994,
First Fidelity had total assets, deposits and stockholders' equity of $33.9
billion, $27.4 billion and $2.8 billion, respectively, is the largest banking
organization headquartered in New Jersey and ranks among the 25 largest bank
holding companies in the United States. First Fidelity was incorporated under
New Jersey law in 1987 to succeed to and hold all of the capital stock of First
Fidelity Incorporated, a New Jersey-based bank holding company, and Fidelcor,
Inc., a Pennsylvania-based bank holding company, in a transaction that became
effective in February 1988.
First Fidelity has a centralized organizational structure, with
functions such as asset and liability management, corporate operations and
systems, credit policy, audit, legal services and financial planning being
conducted at the holding company level, while day-to-day banking activities are
managed by First Fidelity's bank subsidiaries. As of June 30, 1994, such
subsidiaries operated a general banking business from more than 650 full-service
banking offices located in New Jersey, eastern Pennsylvania, New York,
Connecticut and Maryland. Such bank subsidiaries also have offices in London and
New York City. First Fidelity also has several nonbank subsidiaries, including
entities which provide insurance brokerage services, community development
assistance, retail brokerage services and automobile and equipment leasing.
The address of First Fidelity's principal executive offices is
2673 Main Street, P.O. Box 6980, Lawrenceville, New Jersey 08648, and its
telephone number is (201) 565-3200.
Merger Sub
Annabel Lee Corporation is a Maryland corporation and a direct
wholly owned subsidiary of First Fidelity. Pursuant to the terms of the Merger
Agreement, at the Effective Time, Merger Sub will be merged with and into the
Company, with the Company being the surviving corporation and the separate
existence of Merger Sub ceasing. See "The Merger."
THE MERGER
General
The following information, insofar as it relates to matters
contained in the Merger Agreement or the Option Agreement, is qualified in its
entirety by reference to the Merger Agreement and the Option Agreement, which
are incorporated by reference and attached hereto as Appendix A and Appendix C,
respectively. Stockholders are urged to read the Merger Agreement and the Option
Agreement in their entirety.
The Merger
The Merger Agreement provides that First Fidelity will acquire
the Company pursuant to the merger of Merger Sub with and into the Company, with
the Company being the surviving corporation and the separate existence of Merger
Sub ceasing. The Merger will occur as part of the consummation of certain
alternative transactions described below as the "Thrift Merger Alternative" and
the "Bank Merger Alternative" which are designed to allow First Fidelity to
acquire the Company under existing regulatory restrictions. Each outstanding
share of Common Stock will be converted into the right to receive a cash payment
of $20.75, except for shares held directly or indirectly by First Fidelity
(other than in a fiduciary capacity or in satisfaction of a debt previously
contracted) which will be canceled and for which no exchange or payment will be
made.
Thrift Merger Alternative. The Merger Agreement also provides,
immediately prior to the Holding Company Merger, that the Bank will be
transformed into a federal savings bank by merging the Bank into a newly-formed
federal savings bank subsidiary of the Company, which will be known as "The Bank
of Baltimore Interim Federal Savings Bank" ("BOB-FSB") and will be the surviving
entity to the merger (the "First Thrift Merger"). As a result of the First
Thrift Merger, the Company will become a savings and loan holding company and
will no longer be a registered bank holding company. Upon the Holding Company
Merger, the Company will become a wholly owned subsidiary of First Fidelity.
After the Holding Company Merger, First Fidelity will contribute the outstanding
capital stock of its existing wholly owned federal savings bank subsidiary,
First Fidelity Bank, FSB ("FFB-FSB"), which is headquartered in Beltsville,
Maryland, to the Company (the "Thrift Contribution"). Immediately following the
Thrift Contribution, BOB-FSB will be merged with FFB-FSB, with FFB-FSB being the
surviving institution (the "Second Thrift Merger"). The Second Thrift Merger
would consolidate all of First Fidelity's banking offices in Maryland into a
single federal savings bank subsidiary. The First Thrift Merger, the Thrift
Contribution and the Second Thrift Merger are hereinafter collectively referred
to as the "Thrift Merger Alternative."
Section 3(d) of the BHCA -- the so-called Douglas Amendment --
prohibits the Federal Reserve from approving an application by a bank holding
company to acquire a bank located outside the state in which the operations of
such bank holding company's banking subsidiaries were principally conducted
unless the acquisition of a state bank by an out-of-state bank holding company
is specifically authorized by the laws of the state in which such bank is
located. Maryland law does not specifically authorize for purposes of the
Douglas Amendment the acquisition of a Maryland bank, such as the Bank, by a New
Jersey based bank holding company, such as First Fidelity. Under the Thrift
Merger Alternative, the Bank would be transformed into a thrift by the First
Thrift Merger, and the Company would not own a "bank" at the time of the Holding
Company Merger, since a federal savings bank is expressly excluded from the
definition of a "bank" under the BHCA. Consequently, the Holding Company Merger
would not then be prohibited by the Douglas Amendment. Although sections 5-903
and 12-207 of the Maryland banking law on their face would appear to prohibit
the acquisition by an out-of-state bank holding company, such as First Fidelity,
of a federal savings bank located in Maryland, such as BOB-FSB, the Company has
received a copy of a reasoned advice of counsel of the Assistant Attorney
General of the State of Maryland addressed to the Maryland Bank Commissioner and
a reasoned opinion of First Fidelity's Maryland counsel as to the legality under
Maryland law of the Holding Company Merger following the First Thrift Merger,
when Maryland law is interpreted consistently with the commerce clause of the
United States Constitution. Both the reasoned advice of counsel and the reasoned
opinion of First Fidelity's Maryland counsel conclude that certain provisions of
Maryland law governing interstate acquisitions of federal savings banks, as
applied to the Holding Company Merger, are unconstitutional under the commerce
clause.
Bank Merger Alternative. Subsequent to entering into the Merger
Agreement, First Fidelity has had discussions with the OCC concerning, and has
filed an application for approval of, the relocation of the main office of its
principal national bank subsidiary, First Fidelity Bank, National Association
("FFB-NA"), from Salem, New Jersey to Elkton, Maryland (the "Main Office
Relocation"). If the Main Office Relocation is approved, First Fidelity may
elect to utilize an alternative structure (the "Bank Merger Alternative"), in
lieu of the Thrift Merger Alternative, to acquire the Bank and the Company in a
manner consistent with the Douglas Amendment. Under the Bank Merger Alternative,
FFB-NA would relocate its main office to Elkton, Maryland and establish a branch
office at its current main office location in Salem, New Jersey. Immediately
after the Main Office Relocation, the Bank would be merged into FFB-NA, with
FFB-NA being the surviving institution (the "Bank Merger"). As part of the Bank
Merger, the outstanding common stock of the Bank would be exchanged for common
stock and preferred stock of FFB-NA, and the Company would hold not more than
15% of the total equity of FFB-NA. Immediately after the Bank Merger, the
Holding Company Merger would be consummated. The ability of the Company and
First Fidelity to effect the Bank Merger Alternative will depend, in part, upon
the application of the BHCA and the Douglas Amendment to the Holding Company
Merger after the Bank Merger, and First Fidelity is in the process of discussing
the foregoing with the Federal Reserve Board. For essentially the same reasons
described above, First Fidelity believes that sections 5-903 and 12-207 of the
Maryland banking law, when applied consistently with the commerce and supremacy
clauses of the U.S. Constitution, should not be applied to prohibit the Bank
Merger Alternative. If First Fidelity proceeds with the Bank Merger Alternative,
First Fidelity will seek appropriate assurances to that effect. Under the
Maryland General Corporation Law, if the Bank Merger were to be deemed to
constitute a transfer of all or substantially all of the Company's assets,
approval of the Merger Agreement and the transactions contemplated thereby by
the Company's stockholders will be deemed to be approval of such transfer of
assets in connection with the consummation of the Bank Merger Alternative
immediately before the consummation of the Holding Company Merger.
Background of the Merger
Since the successful proxy contest against the then-incumbent
Board undertaken in 1991 by a group led by Mr. Hale, the Company has made
significant advancements with respect to its goals of improving its financial
condition and increasing stockholder value. The Company was profitable in the
first and second quarters of 1994 and in each quarter of both 1993 and 1992,
compared with a net loss of $126.5 million in 1991. The Bank's adjusted tier 1
leverage capital ratio increased to 7.88% at June 30, 1994 from 7.08% at
December 31, 1993, from 5.10% at December 31, 1992, and increased by 136% over
the past two and one half years from 3.34% at December 31, 1991. The Bank's
total risk-based capital ratio increased to 12.09% at June 30, 1994 from 10.99%
at December 31, 1993 and from 8.39% at December 31, 1992. Over the same two and
one half year period, the Bank's total risk-based capital ratio increased by
123% from 5.42% at December 31, 1991. The Bank reduced its nonperforming assets
by 74% over the same two and one half year period, while increasing its ratio of
the loan loss allowance to nonperforming loans (coverage ratio) by 212%, to 143%
of nonperforming loans at June 30, 1994 from 46% at December 31, 1991. During
1993, the Company's stock price increased by 107% to $14.25 per share from
$6.875 per share at the end of 1992, and increased by 171% over the past two
years, from $5.25 per share at December 31, 1991.
As a result of the Company's improved financial condition in
1992 and 1993, the Company engaged Alex. Brown on November 1, 1993 to be the
Company's financial advisor and to assist the Company with its strategic
planning, including the possible acquisition of the Company by another financial
institution. In connection with its engagement, Alex. Brown prepared materials
regarding the Company and its financial condition to assist parties that might
be interested in acquiring the Company. Alex. Brown distributed these materials
to 12 financial institutions which had been contacted by Alex. Brown as
potential acquirors of the Company and which following such contact had
expressed a direct interest in the Company. Each such institution was asked to
submit by January 12, 1994 a preliminary, nonbinding indication of value and
other specific and relevant information as a means of ascertaining relative
interest. Five institutions submitted satisfactory levels of interest, three of
which scheduled and completed on-site due diligence examinations of the Company
and its books and records between February 7 and March 4, 1994.
The Board of Directors set a deadline of March 14, 1994 with
respect to the submission of bids to acquire the Company. Management and Alex.
Brown met with the institutions that had completed their due diligence
examinations and encouraged them to submit bids that would be sufficiently
favorable to cause them to be recommended for approval by the Board. After an
extensive review and negotiation of the terms of the proposed Merger Agreement
and Option Agreement, management recommended to the Board acceptance of First
Fidelity's bid of $20.75 per share of Common Stock.
On March 21, 1994, at a special meeting of the Board attended
by Alex. Brown and the Company's legal counsel, the Board of Directors
considered the proposed Merger Agreement and Option Agreement. In advance of the
special meeting, copies of the Merger Agreement and Option Agreement were
provided to the Board. Following discussion of the terms of the proposed Merger
related transaction and of operational, legal and regulatory issues relating to
First Fidelity's proposal, a presentation by Alex. Brown regarding the financial
aspects of the proposed Merger and related transaction and receipt of the
written opinion by Alex. Brown that the consideration to be received by the
Company's stockholders pursuant to the Merger Agreement is fair to the
stockholders of the Company, and an analysis presented by the Company's legal
counsel of the reasoned advice of counsel of the Assistant Attorney General of
the State of Maryland and the reasoned opinion of First Fidelity's Maryland
counsel, the Board of Directors unanimously approved the Merger Agreement and
the Option Agreement and authorized their execution and delivery. The Merger
Agreement and the Option Agreement were executed and delivered by the parties on
March 21 and March 22, 1994, respectively, and the Company and First Fidelity
issued a joint press release on March 21 announcing the proposed Merger. On
September __, 1994, the Merger Agreement was amended to effect certain changes
primarily to permit the Bank Merger Alternative.
Reasons for the Merger
The Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby and has determined that the
Merger is in the best interests of the Company and its stockholders. The Board
of Directors therefore unanimously recommends that holders of Common Stock vote
"FOR" approval and adoption of the Merger Agreement and the transactions
contemplated thereby. See "The Merger -- Background of the Merger" and "--
Opinion of Financial Advisor."
In reaching its determination that the Merger Agreement is in
the best interests of the Company and the holders of Common Stock, the Board
considered a number of factors, including, without limitation, the following:
(i) the presentation by Alex. Brown and the written opinion of
Alex. Brown that the cash consideration of $20.75 per share to be
received by the stockholders of the Company pursuant to the Merger
Agreement is fair to such stockholders from a financial point of view
(see "The Merger -- Opinion of Financial Advisor");
(ii) the relationship of the price to be paid pursuant to the
Merger Agreement to the historical and current market prices for the
Common Stock preceding the announcement of the Merger;
(iii) the fact that the offering price of $20.75 per share
represents a premium of approximately 48% over the $14.00 closing sale
price of the Common Stock on January 12, 1994, the last trading day
before the announcement that the Company was having preliminary
discussions with several major bank holding companies regarding a
possible sale of the Company and approximately 15% over the $18.00
closing sale price of the Common Stock on March 18, 1994, the last
trading day before the announcement of the Merger (see "Market Prices
and Dividends on Common Stock") and represents a substantial multiple
of the earnings per share of the Common Stock for 1993 and those
projected by the Company for 1994, and constitutes a 113% premium of
the proposed price over stated book value at December 31, 1993;
(iv) the presentation of Alex. Brown indicating that the com-
parable acquisition multiples for the Company, based on the price
offered by First Fidelity in the Merger, compare favorably with the
mean of such multiples for the other transactions reviewed by Alex.
Brown;
(v) the business, financial condition and recent results of
operations of the Company (see "Selected Consolidated Financial Data")
and management's best estimates of the prospects of the Company (see
"The Merger -- Opinion of Financial Advisor");
(vi) the current and prospective environment in which the
Company operates, including national and local economic conditions, the
competitive environment for financial institutions generally, the
increased regulatory burden on financial institutions generally, and
the trend toward consolidation in the financial services industry;
(vii) the extensive process followed by Alex. Brown to obtain
acquisition proposals and preliminary bids, and the conclusion that
First Fidelity's bid was more favorable than any other bid indications
from the other participants who also conducted due diligence
examinations of the Company's books and records;
(viii) the Board's review with its legal and financial advisors
of alternatives to the Merger (including the alternatives of remaining
independent and growing internally, remaining independent for a period
of time and then selling the Company and a "merger of equals" type
transaction with a banking organization of similar size), the range of
possible values to holders of the Common Stock obtainable through
implementation of such alternatives and the timing and likelihood of
actually receiving such values;
(ix) the fact that the terms of the Merger Agreement were
determined through arms'-length negotiations;
(x) the terms of the Merger Agreement as reviewed by the Board
with its legal and financial advisors;
(xi) the Board's assessment that First Fidelity has the
financial capability to acquire the Company for the Merger
Consideration and therefore is likely to consummate the Merger;
(xii) the Board's belief, after consultation with its legal
counsel, that the required regulatory approvals could be obtained for
the Merger;
(xiii) the Board's assessment that the Bank would better serve
the convenience and needs of its customers and the communities that it
serves through affiliation with a substantially larger bank holding
company, such as First Fidelity, thereby affording the Bank access to
First Fidelity's financial and managerial resources and the ability to
offer an expanded range of potential products and services; and
(xiv) the compatibility of the respective businesses and
management philosophies of the Company and First Fidelity.
The Board did not quantify or attach any particular weight to
the various factors that it considered in reaching its determination that the
Merger is in the best interests of the Company's stockholders.
Opinion of Financial Advisor
The Company retained Alex. Brown to act as its financial
advisor in connection with the possible acquisition of the Company, including
the Merger and related matters. Alex. Brown has historically provided, and
continues to provide, certain other financial advisory and agency services to
the Company. Alex. Brown was selected to act as the Company's financial advisor
based upon its qualifications, expertise and reputation, as well as Alex.
Brown's prior investment banking relationship and familiarity with the Company.
Alex. Brown regularly publishes research reports regarding the financial
services industry and the businesses and securities of publicly owned companies
in that industry.
On March 21, 1994, at the special meeting at which the Board of
Directors approved and adopted the Merger Agreement and the Option Agreement,
Alex. Brown delivered a written opinion to the Board that, as of such date, the
consideration to be received by the stockholders of the Company, consisting of a
cash payment in the amount of $20.75 per share of Common Stock, was fair to the
stockholders of the Company from a financial point of view. That opinion was
updated as of the date of this Proxy Statement. No limitations were imposed by
the Board of Directors upon Alex. Brown with respect to the investigations made
or procedures followed by it in rendering its written opinion.
The full text of the opinion of Alex. Brown, which sets forth a
description of the procedures followed, assumptions made, matters considered and
limits on the review undertaken, is attached to this Proxy Statement as Appendix
B and is incorporated herein by reference. Stockholders are urged to read the
opinion in its entirety. The following summary of the opinion is qualified in
its entirety by reference to the full text of the opinion.
In rendering its opinion, Alex. Brown (i) reviewed the Merger
Agreement, certain publicly available business and financial information
concerning the Company, and certain internal financial analyses and forecasts
for the Company prepared by the Company's management, (ii) held discussions with
members of senior management of the Company regarding the past and current
business operations, financial condition and future prospects of the Company,
(iii) reviewed the reported price and trading activity for the Common Stock and
compared certain financial and stock market information for the Company with
similar information for certain other publicly traded commercial bank
organizations, (iv) reviewed the financial terms of certain recent business
combinations in the financial institutions industry which Alex. Brown deemed
comparable in whole or in part and (v) performed such other studies and analyses
and considered such other factors as Alex. Brown deemed appropriate.
Alex. Brown relied without independent verification upon the
accuracy and completeness of all of the financial and other information reviewed
by and discussed with it for purposes of its opinion. With respect to the
financial forecasts reviewed by Alex. Brown in rendering its opinion, Alex.
Brown assumed that such financial forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
The Company does not publicly disclose management projections of the type
provided to Alex. Brown in connection with the Merger. Such projections were not
prepared with a view towards public disclosure. The projections were based on
numerous variables and assumptions which are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions. Alex. Brown did not make an independent evaluation or appraisal of
the assets or liabilities of the Company nor was it furnished with any such
appraisal.
The summary set forth below does not purport to be a complete
description of the analyses performed by Alex. Brown. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors discussed below, Alex. Brown believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. No
one of the analyses performed by Alex. Brown was assigned a greater significance
than any other. In performing its analyses, Alex. Brown made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond the Company's control.
The analyses performed by Alex. Brown are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold.
Analysis of Selected Publicly Traded Companies. In preparing
its opinion, Alex. Brown, using publicly available information, compared
selected financial information, including latest twelve months ("LTM") earnings,
1994 estimated earnings, 1995 estimated earnings, stated book value, tangible
book value and total assets, for the Company and a peer group of commercial bank
organizations.
The peer group was comprised of 19 commercial banks
organizations headquartered in the mid-Atlantic region (Delaware, Maryland, New
Jersey, Pennsylvania, Virginia and West Virginia) that possessed an asset base
between $1 billion and $8 billion ("Regional Comparables Group"). The Regional
Comparables Group included Wilmington Trust Corporation headquartered in
Delaware; Mercantile Bankshares Corporation, Provident Bankshares Corporation
and Citizens Bancorp headquartered in Maryland; Commerce Bancorp, Inc., Summit
Bancorporation, Trust Company of New Jersey, United Counties Bancorporation,
Valley National Bancorp, Citizens First Bancorp, Inc. and Central Jersey Bancorp
headquartered in New Jersey; Fulton Financial Corporation, Dauphin Deposit
Corporation, Susquehanna Bancshares, Inc. and Keystone Financial, Inc.
headquartered in Pennsylvania; Jefferson Bankshares, Inc. and First Virginia
Banks, Inc. headquartered in Virginia; and One Valley Bancorp of WV, Inc. and
United Bankshares, Inc. headquartered in West Virginia. As of March 17, 1994,
the relative multiples implied by the market price of the Common Stock of the
Company and the mean market price of the common stock of the Regional
Comparables Group to such selected financial data was: to LTM earnings, 27.5x
for the Company and 12.4x for the Regional Comparables Group; to 1994 estimated
earnings per share, 18.5x for the Company and 11.4x for the Regional Comparables
Group; to 1995 estimated earnings per share, 16.0x for the Company and 10.3x for
the Regional Comparables Group; to stated book value, 186.3% for the Company and
163.0% for the Regional Comparables Group; to tangible book value, 202.3% for
the Company and 167.8% for the Regional Comparables Group; and to total assets,
13.5% for the Company and 14.3% for the Regional Comparables Group. In comparing
the market multiples of the Company to the Regional Comparables Group, it is
important to note the following: (i) the Regional Comparables Group exhibited
strong profitability, possessing an annualized return on average assets of 1.22%
during the fourth quarter of 1993, while the Company achieved an annualized
return on average assets of 0.20% during the same period and (ii) the market
price of the Common Stock increased from $14.00 to $17.375 upon the January 13,
1994 announcement that the Company was soliciting proposals from potential
acquirors.
Analysis of Comparable Acquisition Transactions. In preparing
its opinion, Alex. Brown analyzed certain comparable merger and acquisition
transactions for commercial bank organizations based upon the acquisition price
relative to stated book value, stated tangible book value, LTM earnings, total
assets and the premiums to core deposits and market price. The market price
premium is measured against the market price of the common stock one month prior
to the acquisition announcement (the Company's market premium was measured
against the market price one month prior to the January 13, 1994 announcement
referred to above). The analysis included a review and comparison of the mean
multiples represented by a sample of recently effected or pending commercial
bank organization acquisitions nationwide having a transaction value in excess
of $100 million which were announced since January 1, 1992 (a total of 48
transactions), as segmented into: (i) transactions announced since January 1,
1993 (29 transactions), (ii) transactions in which the selling commercial bank
organization was headquartered in the mid-Atlantic or the southeast region (21
transactions), (iii) transactions in which the selling commercial bank
organization failed to achieve a return on average assets levels in excess of
0.50% in the year of its announced acquisition (13 transactions) and (iv)
transactions in which the selling commercial bank organization possessed
nonperforming assets between 1.00% and 4.00% of its total assets (23
transactions). The Alex. Brown analysis showed that in each commercial banking
organization transaction group as described above for each category being
compared (stated book value, stated tangible book value, LTM earnings, total
assets and the premiums to core deposits and market price), First Fidelity's
proposal generally exceeded or at least approximated the mean multiple.
Discounted Cash Flow Analysis. Using discounted cash flow
analysis, Alex. Brown estimated the present value of the future dividend streams
that the Company could produce over a four year period, under different
assumptions as to required equity levels, if the Company performed in accordance
with management's forecasts and certain variants thereof. Alex. Brown also
estimated the terminal value for the Company's common equity after the four year
period by applying book value (170%-230%) and earnings (13.7-18.6 times)
acquisition multiples currently being received by commercial bank organizations
with similar profitability ratios as the Company is projected to have during its
calendar year ended December 31, 1997. The range of multiples used reflected a
variety of scenarios regarding the growth and profitability prospects of the
Company. The dividend streams and terminal values were then discounted to
present values using discount rates ranging from 12.5% to 17.5%, which reflect
different assumptions regarding the required rates of returns of holders or
prospective buyers of the common equity.
Reference Range. Based in part on the several analyses
discussed above, Alex. Brown developed, for purposes of its opinion, a reference
range for the value of the Company's common equity of $16.00 to $20.00 per share
of Common Stock. The values reflected in the foregoing reference range were
considered along with the other analyses performed by Alex. Brown and were not
intended to represent the price at which 100% of the Common Stock could actually
be sold. The foregoing reference ranges were based in part on the application of
economic and financial models and are not necessarily indicative of actual
values, which may be significantly more or less than such estimates. The
reference ranges do not purport to be appraisals.
Compensation of Financial Advisor. Pursuant to the terms of an
engagement letter dated November 1, 1993, the Company has paid Alex. Brown a fee
of $300,000 for acting as its financial advisor in connection with the Merger,
including rendering the fairness opinion. The engagement letter further provides
that the Company will pay Alex. Brown a fee based on the aggregate consideration
to be paid or issued to the Company's stockholders as follows: 0.60% of the
aggregate consideration if the per share purchase price is less than $19.00;
0.65% of the aggregate consideration if the per share purchase price is $19.00
or more but less than $20.00; 0.70% of the aggregate consideration if the per
share purchase price is $20.00 or more but less than $21.00; 0.75% of the
aggregate consideration if the per share purchase price is $21.00 or more but
less than $22.00; and 0.80% of the aggregate consideration if the per share
purchase price is $22.00 or more. Based on the foregoing and the Merger
Consideration, the Company will pay Alex. Brown a fee of 0.70% of the aggregate
consideration to be received by the Company's stockholders in the Merger, less
the $300,000 in fees already paid to Alex. Brown. This fee is payable to Alex.
Brown upon consummation of the Merger and is estimated to be approximately $2.3
million. Whether or not the Merger is consummated, the Company has agreed to
reimburse Alex. Brown for all reasonable out-of-pocket expenses (which expenses
may not exceed $10,000 annually without the prior consent of the Company) and to
indemnify Alex. Brown and certain related persons against certain liabilities
relating to or arising out of its engagement, including liabilities under
federal securities laws.
Effective Date and Effective Time
It is anticipated that articles of merger will be filed with
the Maryland Department in accordance with the requirements of the Maryland
General Corporation Law on (i) a business day designated by First Fidelity
within 10 days after the date of receipt of all regulatory and stockholder
approvals, expiration of applicable waiting periods and the satisfaction or
waiver of all conditions to the consummation of the Merger or (ii) on such later
date as the parties may agree. The date of such filing with and acceptance by
the Maryland Department of such articles of merger or such date thereafter as is
specified in the articles of merger will be the "Effective Date" of the Merger.
The "Effective Time" of the Merger will be the time of such filing with and
acceptance by the Maryland Department of such articles of merger or as otherwise
specifically set forth therein.
Effect of the Merger
The Merger Agreement provides for the merger of Merger Sub with
and into the Company. The Company will continue as the surviving corporation as
a direct wholly owned subsidiary of First Fidelity. At the Effective Time,
holders of outstanding shares of Common Stock will have no further ownership
interest in the Company and therefore will not participate in future potential
earnings and growth. Instead, such holders of shares of Common Stock (except
shares held directly or indirectly by First Fidelity other than in a fiduciary
capacity or in satisfaction of a debt previously contracted) will be entitled to
receive $20.75 in cash for each of their shares of Common Stock held of record.
In the Merger, each share of common stock of Merger Sub, issued and outstanding
immediately prior to the Effective Time, will be converted into one share of
common stock of the Company as the surviving corporation of the Merger, which
shares will thereafter constitute all of the issued and outstanding shares of
capital stock of the surviving corporation.
Pursuant to the Merger Agreement, at the Effective Time, the
articles of incorporation and bylaws of the Company will be amended in their
entirety to conform to the articles of incorporation and bylaws of Merger Sub in
effect immediately prior to such time. At the Effective Time, the directors and
officers of Merger Sub will become the directors and officers of the Company as
the surviving corporation.
In connection with the Thrift Merger Alternative, First
Fidelity intends to invite the directors of the Bank serving prior to the
Effective Time, who do not become employees of FFB-FSB, to become directors of
FFB-FSB subsequent to the Second Thrift Merger for a period of not less than two
years at a level of compensation not less than that currently paid to
nonemployee directors of the Bank. If the Bank Merger Alternative is selected,
First Fidelity intends to invite such directors of the Bank to become members of
a Maryland regional advisory board of directors of FFB-NA following the Holding
Company Merger for a similar period and compensation. In addition, following the
Holding Company Merger, First Fidelity intends to select from among the
directors of the Bank or other prominent business leaders in the Maryland
community a person to become a director of First Fidelity to serve for not less
than two years. See "The Merger -- Interests of Certain Persons in the Merger."
Exchange of Common Stock for Cash
Promptly after the Effective Time, each stockholder of record
of the Company will be provided with written instructions from First Fidelity
Bank, N.A., as Exchange Agent, with respect to the manner in which the Common
Stock may be surrendered and exchanged for payment of the Merger Consideration.
CERTIFICATES EVIDENCING SHARES OF COMMON STOCK SHOULD NOT BE SURRENDERED FOR
PAYMENT PRIOR TO RECEIPT OF WRITTEN INSTRUCTIONS FROM THE EXCHANGE AGENT. As of
the Effective Time, First Fidelity will deposit with the Exchange Agent an
amount in cash equal to the product of the number of shares of Common Stock
outstanding immediately prior to the Effective Time (other than certain shares
of Common Stock that are held by First Fidelity) and the Merger Consideration.
If payment in respect of the shares of Common Stock is to be
made to a person other than the person in whose name a surrendered certificate
is registered, it will be a condition to such payment that the certificate so
surrendered be properly endorsed or otherwise in proper form for transfer and
that the person requesting such payment will pay any transfer or other taxes
required by reason of such payment to a person other than the registered holder
of the certificate surrendered or will have established to the satisfaction of
First Fidelity that such tax has been paid or is not applicable.
At the Effective Time, the Company's stock transfer books with
respect to shares of Common Stock will be closed and there will be no further
transfers of such shares. If after the Effective Time certificates for shares of
Common Stock are presented to First Fidelity or the Company as the surviving
corporation, they will be canceled and exchanged for cash in the manner set
forth above. One year after the Effective Time, the Exchange Agent will deliver
to First Fidelity any remaining funds (including the proceeds of any investments
thereof) which were made available to the Exchange Agent to be disbursed to
stockholders at the Effective Time. Thereafter, stockholders will be entitled to
look only to First Fidelity with respect to cash payable upon due surrender of
their certificates, subject to applicable law. If any certificates for shares of
Common Stock have not been surrendered prior to such date on which any payment
in respect thereof would otherwise escheat to or become the property of any
governmental unit or agency, the payment in respect of such certificates will,
to the extent permitted by applicable law, become the property of First
Fidelity, free and clear of all claims or interest of any person previously
entitled thereto. First Fidelity, Merger Sub, the Exchange Agent or any other
person shall not be liable to any former holder of Common Stock for any amount
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
No interest will accrue or be paid on any cash payable upon the
surrender of a certificate or certificates which immediately prior to the
Effective Time represent outstanding shares of Common Stock.
If a certificate for Common Stock has been lost, stolen or
destroyed, payment will be made in accordance with the Merger Agreement upon
receipt by the Exchange Agent of appropriate evidence as to such loss, theft or
destruction, appropriate evidence as to the ownership of such certificate by the
claimant, and customary indemnification.
Representations and Warranties
The Company and First Fidelity have made certain
representations and warranties to each other in the Merger Agreement. The
Company represents and warrants to First Fidelity, among other things, as to its
organization, capitalization, corporate authority and approvals, ownership of
subsidiaries, enforceability of the Merger Agreement and the Option Agreement as
to the Company, financial statements and public disclosure materials, absence of
material adverse changes, absence of certain claims and regulatory proceedings,
labor matters and employee benefit plans, title to its assets, environmental
matters and compliance with laws. First Fidelity represents and warrants to the
Company, among other things, as to its organization, corporate authority and
approvals, enforceability of the Merger Agreement as to First Fidelity and
Merger Sub and access to funds necessary to consummate the Merger and pay the
Merger Consideration.
Conditions to Consummation of the Merger
The respective obligations of the Company and First Fidelity to
cause the Merger to be consummated are subject to certain conditions, including,
among other things: (i) the approval and adoption of the Merger Agreement and
the transactions contemplated thereby by the holders of the requisite number of
shares of Common Stock, (ii) the receipt and effectiveness of all regulatory
approvals and waivers required to consummate the Merger without any conditions
that would result in a material adverse effect on First Fidelity or would
materially reduce the benefits of the Merger to First Fidelity such that it
would not have entered into the Merger Agreement had such condition been known
prior to the execution thereof, and the expiration of all applicable statutory
waiting periods, (iii) the absence of any statute, rule, order, decree or
injunction which enjoins, prohibits or restricts the consummation of the Merger
and the absence of litigation against the parties seeking to prevent the
consummation of the transactions contemplated by the Merger Agreement, (iv) the
representations and warranties of the other party in the Merger Agreement (and
the Company in the Option Agreement) being true and correct in all material
respects as of the dates specified therein, and the performance by the other
party in all material respects of all agreements and covenants required by the
Merger Agreement (and the Option Agreement for the Company) to be performed by
such party and (v) the delivery to each of the Company and First Fidelity of
certain certificates, letters and other documents as set forth in the Merger
Agreement. In addition, the obligation of First Fidelity to consummate the
Merger is subject to the redemption by the Company of the entire outstanding
principal amount of certain convertible subordinated debentures of the Company.
See "The Merger -- Conduct of Business Pending the Merger."
The Company and First Fidelity each may waive any condition of
the Merger Agreement, unless such waiver would result in the violation of any
law or applicable regulation.
Regulatory Approvals
The Thrift Merger Alternative would require the prior approval
of (i) the OTS under HOLA for the chartering of BOB-FSB, the acquisition of
BOB-FSB by the Company, the First Thrift Merger, the Holding Company Merger, the
Thrift Contribution and the Second Thrift Merger, (ii) the Federal Reserve under
the BHCA for both the Company and First Fidelity to acquire control of BOB-FSB
as a nonbanking subsidiary and for First Fidelity to acquire control of most of
the Company's existing nonbanking subsidiaries and (iii) the OTS and the FDIC
under the HOLA and the FDIA, for BOB-FSB and FFB-FSB to continue to operate the
Bank's existing subsidiaries as operating subsidiaries or service corporation
subsidiaries after the First Thrift Merger and the Second Thrift Merger,
respectively; and (iv) the OTS under the FDIA for BOB-FSB to acquire, via the
First Thrift Merger, the deposits of the Bank. In addition, Banco Santander, a
Spanish banking organization, which owns approximately 24.8% of First Fidelity's
voting stock, has submitted (i) an application for approval of the OTS of the
Holding Company Merger under HOLA, and (ii) an application for approval of the
Federal Reserve to acquire control, indirectly via First Fidelity, of BOB-FSB as
a nonbanking subsidiary and most of the Company's existing nonbanking
subsidiaries.
The Bank Merger Alternative, if elected by First Fidelity in
lieu of the Thrift Merger Alternative, would require the prior approval of the
OCC for the Main Office Relocation and the Bank Merger under the National Bank
Act and the FDIA.
The Company is not aware of any other governmental approvals or
actions that are required for consummation of the Holding Company Merger and
either the Thrift Merger Alternative or the Bank Merger Alternative, as the case
may be, except as described above. Should any such approval or action be
required, it is presently contemplated that such approval or action would be
sought.
The Merger cannot proceed in the absence of the requisite
regulatory approvals. See "The Merger -- Conditions to Consummation of the
Merger" and "-- Waiver and Amendment; Termination." There can be no assurance
that such regulatory approvals will be obtained, or, if such regulatory
approvals are obtained, as to the date of any such approvals. There also can be
no assurance that any such approvals will not contain a condition or requirement
which causes such approvals to fail to satisfy the conditions set forth in the
Merger Agreement and described under "The Merger -- Conditions to Consummation
of the Merger."
Conduct of Business Pending the Merger
The Merger Agreement contains certain provisions regarding the
conduct of the Company's business pending consummation of the Merger. In
particular, prior to the Effective Time, the Company has agreed to, and to cause
its subsidiaries to, (i) conduct business in the ordinary course consistent with
past practice, (ii) use best efforts to preserve intact the business
organization, employees and advantageous business relationships and retain the
services of officers and key employees, (iii) take no action which would
adversely affect or delay the ability to obtain any necessary approvals,
consents or waivers of any governmental authority required for the transactions
contemplated by the Merger Agreement or to perform the covenants and agreements
on a timely basis under the Merger Agreement and (iv) take no action that is
reasonably likely to have a "Material Adverse Effect" on the Company. Material
Adverse Effect is defined as any event or occurrence that is reasonably likely
to have a material adverse effect upon (i) the financial condition, properties,
business or results of operations of the Company and its subsidiaries, taken as
a whole (other than as a result of (x) changes in laws or regulations or
accounting rules of general applicability or interpretations thereof, (y)
decreases in capital under Financial Accounting Standards No. 115 attributable
to general increases in interest rates or (z) any reclassification of loans,
write downs of real estate owned or loan loss reserves taken pursuant to a
specific written request of First Fidelity) or (ii) the ability of the Company
to perform its obligations under, and to consummate the transactions
contemplated by, the Merger Agreement and the Option Agreement.
The Company has agreed not to engage, or permit any of its
subsidiaries to engage, in certain transactions without the prior written
consent of First Fidelity. In particular, the Company agreed that it and its
subsidiaries will not, among other things: (i) incur any indebtedness for
borrowed money, other than in the ordinary course of business consistent with
past practice, (ii) adjust, split, combine or reclassify any shares of capital
stock; declare or pay any dividend or other distribution on, or redeem, purchase
or acquire any shares of its capital stock or any securities convertible into or
exchangeable for any shares of its capital stock; grant any stock appreciation
rights or any right to acquire any shares of its capital stock; or issue any
shares of capital stock; except with respect to the foregoing, for regular
quarterly cash dividends of not more than $.05 per share of Common Stock, the
issuance of additional shares of capital stock pursuant to the exercise of stock
options outstanding as of the date of the Merger Agreement, the issuance of
additional shares of capital stock in connection with the Company's 401(k) plan
(the "401(k) Plan"), the issuance of additional shares of capital stock pursuant
to the Option Agreement, and the redemption of certain convertible subordinated
debentures of the Company and the repurchase of certain capital notes of the
Company as set forth in the Merger Agreement, (iii) other than in the ordinary
course of business consistent with past practice or pursuant to contracts or
agreements in force on the date of the Merger Agreement, dispose of any of its
material properties or assets or release or assign any indebtedness or claims of
any person, (iv) except to the extent required pursuant to a plan, program,
arrangement or agreement in effect on the date of the Merger Agreement, increase
the compensation or benefits of any of its employees or directors subject to
certain exceptions or voluntarily accelerate the vesting of any stock options or
funding or vesting of other compensation, (v) except as otherwise contemplated
by the Merger Agreement or as required by changes in generally accepted
accounting principles as concurred with by the Company's independent auditors,
change its method of accounting as in effect at December 31, 1993 or (vi) amend
its articles of incorporation or bylaws. In addition, the Company has agreed not
to intentionally take or cause to be taken, or agree or make any commitment to
take, any action that is reasonably likely to cause any of its representations
and warranties not to be true and correct. See "The Merger -- Representations
and Warranties."
The Merger Agreement provides that prior to the Effective Date,
the Company will, on such terms and conditions as First Fidelity deems
acceptable, (i) redeem the $5,229,000 outstanding principal amount of its 6 3/4%
Convertible Subordinated Debentures due April 1, 2011 and (ii) seek to
repurchase the $870,000 outstanding principal amount of its 10 7/8% Subordinated
Capital Notes due December 15, 1999. First Fidelity has agreed to provide the
Company, upon the Company's request, with a loan sufficient to effect such
redemption and repurchase on an unsecured basis for three years at an annual
interest rate of 6 3/4%. See "The Merger -- Conditions to Consummation of the
Merger."
The Merger Agreement further provides that prior to the
Effective Time the Company will modify and change its loan, litigation and real
estate valuation policies and practices (including loan classifications and
levels of reserves) upon the request of First Fidelity so that such policies and
practices are consistent with those of First Fidelity and generally accepted
accounting principles after the later of (i) the date on which all required
approvals are received and all applicable waiting periods in connection with
such approvals have expired and (ii) the date on which the Merger Agreement is
approved by the Company's stockholders. First Fidelity has agreed under certain
circumstances to indemnify the Company for any losses or damages which the
Company may incur as a result of any such changes effected at the request of
First Fidelity in the event the Merger is not consummated.
No Solicitation
The Company has agreed in the Merger Agreement that neither it,
nor any of its subsidiaries, nor any of the respective officers and directors of
the Company or its subsidiaries will, and the Company will direct, and will use
its best efforts to cause its employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its subsidiaries) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to holders of Common Stock) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, the Company or any of its subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or, except to
the extent legally required for the discharge by the Board of Directors of its
fiduciary duties as advised in writing by counsel to the Board, 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, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal. The Company has agreed to notify First Fidelity immediately if any
such inquiries or requests for information are received or if any such
negotiations are sought.
Interests of Certain Persons in the Merger
In considering the recommendation of the Board of Directors
with respect to the Merger, stockholders should be aware that certain members of
the Board of Directors and management may be deemed to have interests in the
Merger in addition to their interest as holders of Common Stock.
Severance Agreements. The Bank has previously entered into
certain severance agreements (each a "Severance Agreement" and collectively, the
"Severance Agreements") with certain members of the Company's and the Bank's
senior management. First Fidelity has agreed in the Merger Agreement to cause
the surviving corporation to honor and perform all Severance Agreements. The
Severance Agreements provide for the payment of a lump sum cash payment to the
employee if during the term of the Severance Agreement, there is a sale of the
Bank, and if the employee's employment is terminated involuntarily, or
voluntarily with "Good Reason", in connection with or within 18 months after the
sale, unless such termination is for cause. "Good Reason" is defined to include
a material reduction in the authority, responsibilities, duties or scope of the
employee's position from those that existed before the sale, a reduction in
salary from the rate that existed before the sale, or requirement that the
employee relocate more than 50 miles from the City of Baltimore. The Severance
Agreements also provide for the continuation for a specified period of time of
health, life and disability insurance coverage.
The Merger, if consummated, will constitute a "sale" of the
Bank as defined in the Severance Agreements and if the conditions requiring
payment as described above with respect to the termination of employment are
satisfied with respect to each individual, the following executive officers and
groups will be entitled to receive lump sum cash payments in the following
amounts (assuming that such payments are not reduced under the terms of the
Severance Agreements in order to avoid being classified as a "parachute payment"
within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986,
as amended):
Name and Position(s) Amount of Payment
- - - - - - -------------------- -----------------
Edwin F. Hale, Sr........................................ $ 1,125,000
Chairman of the Board
and Chief Executive Officer
Alan M. Leberknight...................................... 240,000
President and Director
Joseph A. Cicero......................................... 240,000
Executive Vice President,
Chief Financial Officer
and Director
E. Wayne Edwards......................................... 140,000
Executive Vice President
Larry D. Unger........................................... 150,000
Executive Vice President
Executive Officer Group, including the five
executive officers named above (eight persons)......... 2,145,000
Nonexecutive Officer Employee Group (20 persons)......... 1,116,900
Stock Options. As of September 27, 1994, the directors,
executive officers and other employees of the Company in the aggregate held
options to purchase 1,013,174 shares of Common Stock pursuant to the Company's
1984 Stock Option Plan, 1988 Stock Incentive Plan and 1992 Stock Option Plan
(the "Option Plans"). In accordance with the Merger Agreement and regardless of
whether the options are vested at the Effective Time, each such option held by a
director, officer or other employee will be canceled in exchange for a cash
payment equal to the product of $20.75 minus the option exercise price
multiplied by the number of shares of Common Stock subject to the option. As of
September 27, 1994 and in connection with the consummation of the Merger
Agreement, the executive officers and groups named below will receive the
following amounts upon exchange and cancellation of the stock options:
Name and Position(s) Amount of Payment*
- - - - - - -------------------- ------------------
Edwin F. Hale, Sr.......................................... $ 4,896,800
Chairman of the Board
and Chief Executive Officer
Alan M. Leberknight........................................ 903,770
President and Director
Joseph A. Cicero........................................... 903,770
Executive Vice President,
Chief Financial Officer
and Director
E. Wayne Edwards........................................... 306,873
Executive Vice President
Larry D. Unger............................................. 537,920
Executive Vice President
Executive Officer Group, including the five
executive officers named above (eight persons)........... 8,241,513
Nonemployee Director Group (nine persons).................. 1,191,530
Nonexecutive Officer Employee Group (32 persons)........... 2,682,598
*The amounts reflected for such options include the following number of unvested
option shares for each such person and group: Mr. Hale, 75,000 at a price of
$12.875; Mr. Leberknight, 33,000 at an average exercise price of $9.10; Mr.
Cicero, 33,000 at an average exercise price of $9.10; Mr. Edwards, 22,000 at an
average exercise price of $10.13; Mr. Unger, 13,200 at an average exercise price
of $7.51; executive officer group, including the five executive officers named
above (eight persons), 206,800 at an average exercise price of $10.41;
nonemployee director group (nine persons), none; and nonexecutive officer
employee group (32 persons), 120,360 at an average exercise price of $8.81. See
"The Merger -- Effect on Company Benefit Plans and Related Matters."
Indemnification. Pursuant to the Merger Agreement, First
Fidelity has agreed that First Fidelity and the surviving corporation will (i)
from and after the Effective Time through the sixth anniversary of the Effective
Date, indemnify the present and former directors and officers of the Company and
its subsidiaries (as well as each officer or employee of the Company or its
subsidiaries that is serving or has served as a director or trustee of another
entity expressly at the Company's request) in connection with any claim,
proceeding or investigation arising out of matters existing or occurring at or
prior to the Effective Time to the fullest extent that the Company would have
been permitted to indemnify them under applicable law and the Company' articles
of incorporation and bylaws prior to the Effective Time and (ii) use reasonable
efforts to maintain the current directors' and officers' liability insurance
policies of the Company (or policies providing comparable coverage) for a period
of six years following the Effective Time, provided that First Fidelity shall
not be obligated to expend in excess of 200% of the Company's current annual
cost.
Severance Pay. Pursuant to the Merger Agreement, to the extent
that employees of the Company are involuntarily terminated within six months
after the Effective Time for any reason other than cause, such employees will be
entitled to receive two weeks' severance pay for each year of their service with
the Company and the surviving corporation, up to a maximum of 26 weeks.
Continuing Directors. In connection with the Thrift Merger
Alternative, First Fidelity intends to invite the directors of the Bank serving
prior to the Effective Time, who do not become employees of FFB-FSB, to become
directors of FFB-FSB subsequent to the Second Thrift Merger for a period of not
less than two years at a level of compensation not less than that currently paid
to nonemployee directors of the Bank. If the Bank Merger Alternative is
selected, First Fidelity intends to invite such directors of the Bank to become
members of a Maryland regional advisory board of directors of FFB-NA following
the Holding Company Merger for a similar period and compensation. In addition,
following the Holding Company Merger, First Fidelity intends to select from
among the directors of the Bank or other prominent business leaders in the
Maryland community a person to become a director of First Fidelity to serve for
not less than two years.
In addition to the foregoing, directors and officers of the
Company own shares of Common Stock that will be converted, at the Effective
Time, into the right to receive the Merger Consideration. See "Stock Own by
Management."
Effect on Company Benefit Plans and Related Matters
At the Effective Time, each outstanding option to purchase
shares of Common Stock granted pursuant to the Option Plans, whether or not such
option is then vested and exercisable, will be canceled by the Company in
exchange for the right to receive a cash payment equal to the product of (i) the
difference between (x) the per share amount of the Merger Consideration and (y)
the per share exercise price applicable to such option and (ii) the number of
shares of Common Stock subject to such option. First Fidelity has also agreed to
honor the Severance Agreements of the Bank with certain members of the Company's
and the Bank's senior management. See "The Merger -- Interests of Certain
Persons in the Merger."
Shares of Common Stock of the Company held pursuant to the
Company's 401(k) Plan at the Effective Time will be converted into the Merger
Consideration. For purposes of the Special Meeting, such Common Stock will be
voted by the plan administrator as instructed by each plan participant, or in
the absence of instructions, as determined in the discretion of the plan
administrator.
Each person employed by the Company prior to the Effective Time
who remains an employee of the surviving corporation or its subsidiaries
following the Effective Time (each a "Continued Employee") will be entitled to
participate in whatever employee benefit plans that may be in effect generally
for employees of First Fidelity's subsidiaries ("First Fidelity's Plans") if
such Continued Employee is eligible or selected for participation. Continued
Employees will be eligible to participate on the same basis as similarly
situated employees of First Fidelity or its subsidiaries. All such participation
will be subject to the terms of the plans as may be in effect from time to time.
First Fidelity or its subsidiaries will, for purposes of
vesting and for purposes of eligibility to begin participation with respect to
First Fidelity's Plans, cause each of First Fidelity's Plans to be amended to
recognize credit for each Continued Employee's term of service with the Company
and its subsidiaries. Upon the Effective Time or as soon thereafter as
practicable, no further benefit accruals will be provided under the Company's
defined benefit pension plan, and each Continued Employee will begin to accrue a
benefit under First Fidelity's defined benefit pension plan.
Waiver and Amendment; Termination
Waiver and Amendment. Prior to the Effective Time, any
provision of the Merger Agreement may be (i) waived by the party benefited by
the provision or (ii) amended or modified at any time (including the structure
of the transaction) by an agreement in writing between the parties approved by
their respective boards of directors; provided, however, that, after the vote by
the holders of the Common Stock, no amendment may be made that would contravene
any applicable law or regulation.
Termination. The Merger Agreement may be terminated, and the
Merger abandoned, prior to the Effective Time, either before or after its
approval by the holders of Common Stock as follows: (i) by the mutual consent of
the Company and First Fidelity after the vote of a majority of the members of
each of the applicable boards of directors, (ii) by the Company or First
Fidelity after the vote of a majority of the members of each of the applicable
boards of directors in the event of (a) the failure of the holders of the Common
Stock to approve the Merger Agreement at the Company's meeting called to
consider such approval, or (b) a material breach by the other party of any
representation, warranty, covenant or agreement contained in the Merger
Agreement (or, in the case of the Company, in the Option Agreement) which is not
cured or curable within 30 days after written notice of such breach is given,
(iii) by the Company or First Fidelity if either (a) any approval, consent or
waiver of a governmental authority required to permit consummation of the
transactions contemplated by the Merger Agreement is denied or (b) any
governmental authority of competent jurisdiction shall have issued a final,
unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by the Merger Agreement and (iv) by the Company or
First Fidelity after the vote of a majority of the members of each of the
applicable boards of directors in the event the Merger is not consummated by
March 31, 1995, unless the failure to consummate by such time is due to a
material breach of any representation, warranty or covenant contained in the
Merger Agreement by the party seeking to terminate.
Accounting Treatment
The Merger, if completed as proposed, will be treated as a
purchase for accounting purposes. Accordingly, under generally accepted
accounting principles, the assets and liabilities of the Company will be
recorded on the books of First Fidelity at their respective fair market values
at the time of the consummation of the Merger.
Expenses
The Merger Agreement provides that the Company and First
Fidelity will each pay its own expenses in connection with the Merger Agreement
and the transactions contemplated thereby, except printing expenses which are to
be shared equally by the Company and First Fidelity.
<PAGE>
THE OPTION AGREEMENT
General
As an inducement and a condition to First Fidelity's entering
into the Merger Agreement, First Fidelity and the Company entered into the
Option Agreement pursuant to which the Company granted First Fidelity an option
(the "Option") entitling First Fidelity to purchase up to 3,300,000 fully paid
and nonassessable shares of Common Stock, subject to certain adjustments, or
approximately 19.8% of the shares of Common Stock then outstanding, under the
circumstances described below at a price of $19.31 per share (the average of the
low and high reported sales price per share on the NYSE on the first trading day
after the announcement of the Merger Agreement), subject to adjustment in
certain circumstances.
Effect of Option Agreement
The Option Agreement is intended to increase the likelihood
that the Merger will be consummated in accordance with the terms of the Merger
Agreement, and may discourage persons from proposing a competing offer to
acquire the Company, even if such offer involves a higher price per share for
the Common Stock than the per share consideration to be paid pursuant to the
Merger Agreement. The existence of the Option would significantly increase the
cost to a potential acquiror of acquiring the Company compared to its cost had
the Company not entered into the Option Agreement. The Company believes that the
exercise of the Option would likely prohibit any acquiror from accounting for an
acquisition of, or merger with, the Company using the pooling-of-interests
accounting method for a period of up to two years. This could discourage or
preclude an acquisition by certain acquirors.
Terms of Option Agreement
The following is a brief summary of certain provisions of the
Option Agreement, which is attached hereto as Appendix C. The following summary
is qualified in its entirety by reference to the Option Agreement.
Subject to applicable law and regulatory restrictions, First
Fidelity may exercise the Option, in whole or in part, if, but only if, a
"Purchase Event" (as defined below) occurs prior to the occurrence of an
"Exercise Termination Event" (as defined below). "Purchase Event" means, in
substance, either (i) the acquisition by any person other than First Fidelity or
a subsidiary of First Fidelity of beneficial ownership of 25% or more of the
then outstanding Common Stock or (ii) the entry by the Company or a material
subsidiary of the Company (without First Fidelity's prior written consent) into
an agreement to engage in an Acquisition Transaction (as defined below) with any
person other than First Fidelity, or the recommendation by the Board of
Directors that the stockholders of the Company approve or accept any Acquisition
Transaction with any person other than First Fidelity. For purposes of the
Option Agreement, "Acquisition Transaction" means (x) a merger or consolidation,
or any similar transaction, involving the Company or a material subsidiary of
the Company, (y) a purchase, lease or other acquisition of all or substantially
all of the assets of the Company or a material subsidiary of the Company or (z)
a purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of 25% (10% in the case of a "Preliminary Purchase
Event" described below) or more of the voting securities of the Company or a
material subsidiary of the Company. "Exercise Termination Event" means the
earliest to occur of the following: (i) the time immediately preceding the
Effective Time of the Merger, (ii) 12 months after the first occurrence of a
Purchase Event, (iii) 12 months after the termination of the Merger Agreement
following the occurrence of a Preliminary Purchase Event, (iv) termination of
the Merger Agreement in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event unless such
termination results from a material breach by the Company, (v) 12 months after
the termination of the Merger Agreement by First Fidelity as a result of a
willful and material breach by the Company or (vi) four months after the
termination of the Merger Agreement by First Fidelity as a result of a material
(but not willful) breach by the Company.
"Preliminary Purchase Event", as defined in the Option
Agreement, includes certain events involving the Company or a material
subsidiary of the Company that are inconsistent with the Company's intent to
consummate the transactions contemplated by the Merger Agreement or actions by
third parties evidencing an intent or desire to acquire control of the Company
or a material subsidiary of the Company. Such events include the Company
entering into an agreement to engage in an Acquisition Transaction with any
person other than First Fidelity.
The Option may not be assigned by First Fidelity to any other
person without the express written consent of the Company, except that First
Fidelity may assign its rights under the Option Agreement in whole or in part
after the occurrence of a Preliminary Purchase Event subject to certain
restrictions. The Company has granted First Fidelity certain registration rights
under the Securities Act of 1933, as amended, with respect to the Option
Agreement. Upon the occurrence of a Purchase Event prior to an Exercise
Termination Event, at the request of First Fidelity and upon receipt of
applicable regulatory approvals, the Company will be obligated to repurchase the
Option, and any shares of Common Stock theretofore purchased pursuant to the
Option, at prices determined as set forth in the Option Agreement.
In the event that prior to an Exercise Termination Event, the
Company enters into an agreement (i) to consolidate or merge with any person,
other than First Fidelity, and is not the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than First
Fidelity, to merge into the Company and the Company is the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Common Stock are changed into or exchanged for stock or other
securities of any other person or cash or any other property or the then
outstanding shares of Common Stock will after such merger represent less than
50% of the outstanding shares and share equivalents of the merged company or
(iii) to sell or otherwise transfer all or substantially all of its or a
material subsidiary's assets to any person, other than First Fidelity, then, and
in each such case, the agreement governing such transaction must make proper
provision so that the Option shall, upon the consummation of such transaction,
be converted into, or exchanged for, an option (the "Substitute Option"), at the
election of First Fidelity, of either (x) the acquiring corporation or (y) any
person that controls the acquiring corporation. The Substitute Option will be
exercisable for shares of the issuer's common stock in such number and at such
exercise price as is set forth in the Option Agreement and will otherwise have
the same terms as the Option except that the number of shares subject to the
Substitute Option may not exceed 19.9% of the issuer's outstanding shares of
common stock.
In the event that the Company's stockholders fail to approve
the Merger Agreement, either the Company or First Fidelity may terminate the
Merger Agreement in accordance with its terms. See "The Merger -- Waiver and
Amendment; Termination." If no Purchase Event or Preliminary Purchase Event
occurs prior to such termination and no other Exercise Termination Event has
occurred, the Option Agreement will terminate at such time. If a Purchase Event
or a Preliminary Purchase Event does occur prior to an Exercise Termination
Event, then First Fidelity will be entitled to exercise its rights under the
Option Agreement in accordance with its terms.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion, based on current law, of
certain of the expected federal income tax consequences applicable to
stockholders of the Company who receive cash in exchange for shares of Common
Stock pursuant to the Merger. This summary discusses only certain tax
consequences to United States persons (i.e., citizens or residents of the United
States and domestic corporations) who hold shares of Common Stock as capital
assets. It does not discuss the tax consequences to holders of options issued by
the Company who receive cash in exchange for their options pursuant to the
Merger, nor does it discuss the tax consequences that might be relevant to
stockholders who acquired their shares of Common Stock through the exercise of
employee stock options or otherwise as compensation. In addition, it does not
discuss the tax consequences that might be relevant to stockholders entitled to
special treatment under the federal income tax law (such as Individual
Retirement Accounts and other deferred accounts, life insurance companies and
tax exempt organizations) or to stockholders who hold their shares in special
circumstances (such as stockholders that hold shares as part of a straddle or
conversion transaction).
For federal income tax purposes, the Merger will be treated as
though First Fidelity or a subsidiary of First Fidelity purchased the Common
Stock directly from the Company's stockholders. The receipt of cash by a Company
stockholder pursuant to the Merger will be a taxable transaction to such
stockholder for federal income tax purposes. A Company stockholder who receives
cash in exchange for shares of Common Stock will recognize taxable gain or loss
for federal income tax purposes equal to the difference, if any, between the
amount of cash received pursuant to the Merger and such stockholder's tax basis
in the shares of Common Stock surrendered in exchange therefor. In general, such
gain or loss will be capital gain or loss if such shares are capital assets in
the hands of such stockholder at the time of the exchange and will be long-term
capital gain or loss if, at the time of the exchange, such stockholder's holding
period for the shares is more than one year.
Under current law, net capital gains of individuals are taxed
at a maximum federal income tax rate of 28% and corporations are taxed at the
same federal income tax rates as ordinary income. With certain limited
exceptions for individuals, capital losses are deductible only against capital
gains and are not available to offset ordinary income.
Under federal income tax backup withholding rules, the Exchange
Agent is required to withhold and remit to the United States Treasury 31% of the
gross cash proceeds paid to a stockholder or other payee pursuant to the Merger,
unless an exception applies under the applicable law or regulations, or unless
the stockholder or other payee signs a Substitute Form W-9 that provides his or
her taxpayer identification number (employer identification number or social
security number) and certifies that such number is correct. Therefore, unless
such an exception exists and can be proved in a manner satisfactory to First
Fidelity and the Exchange Agent, each stockholder should complete and sign the
Substitute Form W-9 which will be included as part of the letter of transmittal
from the Exchange Agent to be used to surrender Common Stock for cash. The
exceptions provide that certain stockholders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, however, he or she must submit a statement,
signed under penalties of perjury, attesting to his or her exempt status. Any
amounts withheld will be allowed as a credit against the stockholder's federal
income tax, or, in general, refunded by the Internal Revenue Service ("IRS")
assuming that the appropriate procedures are followed.
No ruling has been requested from the IRS as to any of the tax
effects to the Company's stockholders of the transactions discussed in this
Proxy Statement, and no opinion of counsel has or will be rendered to the
Company's stockholders with respect to any of the tax effects of the Merger.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX AND FINANCIAL
ADVISORS AS TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM, AND
ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES.
---------------------------
<PAGE>
MARKET PRICES AND DIVIDENDS ON COMMON STOCK
Market Prices
The Common Stock is listed on the NYSE under the name Baltimore
Bancorp and traded under the symbol "BBB". The following table sets forth for
the fiscal quarters indicated, the high and low sales price per share of Common
Stock traded on the NYSE:
Year Ended
December 31, 1992 High Low
- - - - - - ----------------- ---- ---
First Quarter $ 8.375 $ 5.25
Second Quarter 8.50 5.00
Third Quarter 9.00 6.125
Fourth Quarter 7.375 6.00
Year Ended
December 31, 1993 High Low
- - - - - - ----------------- ---- ---
First Quarter $ 9.125 $ 6.875
Second Quarter 9.75 7.25
Third Quarter 12.625 8.75
Fourth Quarter 14.25 12.25
Year Ending
December 31, 1994 High Low
- - - - - - ----------------- ---- ---
First Quarter $ 19.50 $ 13.875
Second Quarter 19.875 19.25
Third Quarter*
* Through September __, 1994
On January 12, 1994, the last trading day before the public
announcement that the Company was having preliminary discussions with several
major bank holding companies regarding a possible sale of the Company, the
reported closing sale price per share of Common Stock on the NYSE was $14.00. On
March 18, 1994, the last trading day before the public announcement of the
execution of the Merger Agreement, the reported closing sale price per share of
Common Stock on the NYSE was $18.00. On September __, 1994, the last full
trading day prior to the date of this Proxy Statement, the reported closing sale
price per share of Common Stock on the NYSE was $____. Stockholders are urged to
obtain current information with respect to the price of the Common Stock.
Dividends
In November 1993, the Company reinstated the payment of
quarterly cash dividends following the suspension of dividends by the Company
subsequent to the third quarter of 1991. The Company has paid quarterly cash
dividends of $.05 per share of Common Stock for the fourth quarter of 1993 and
the first three quarters of 1994. Whether the Company will declare a cash
dividend for the fourth quarter of 1994 will depend on whether the Effective
Time precedes the declaration and record dates which the Company customarily
followed prior to the execution of the Merger Agreement. The Merger Agreement
restricts the ability of the Company to make distributions to its stockholders,
except for regular quarterly cash dividends of not more than $.05 per share of
Common Stock. See "The Merger -- Conduct of Business Pending the Merger."
<PAGE>
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of September 27,
1994 with respect to the amount of the Company's Common Stock beneficially owned
by each director of the Company, the Chief Executive Officer and each of the
four most highly compensated executive officers of the Company serving at
December 31, 1993, and by all directors and executive officers of the Company as
a group.@@
<TABLE>
<CAPTION>
Amount and
Nature of Beneficial Percentage of Common Stock
Name and Position(s) Ownership (a) Outstanding
-------------------- ------------- -----------
<S> <C> <C>
Barry B. Bondroff (b)(c)............................... 19,984 *
Director
Rose M. Cernak (d)..................................... 2,500 *
Director
Joseph A. Cicero (e)................................... 48,250 *
Executive Vice President,
Chief Financial Officer and Director
Conrad H.C. Everhard (b)............................... 22,655 *
Director
Edwin F. Hale, Sr. (f)................................. 472,405 2.8%
Chairman of the Board and Chief Executive
Officer
Bruce H. Hoffman (g)................................... 16,629 *
Director
Melvin S. Kabik (b).................................... 14,601 *
Director
R. Andrew Larkin, Jr. (b)(h)........................... 48,050 *
Director
Alan M. Leberknight (i)................................ 50,586 *
President and Director
James P. O'Conor (j)................................... 11,215 *
Director
Robert A. Pascal (b)(k)................................ 56,100 *
Director
Dennis F. Rasmussen (b)................................ 14,979 *
Director
G. Gregory Russell (b)................................. 38,146 *
Director
E. Wayne Edwards (l)................................... 17,622 *
Executive Vice President
Larry D. Unger (m)..................................... 44,816 *
Executive Vice President
All directors and executive officers as a group
(18 persons) (n)(o).................................. 916,686 5.2%
<FN>
(a) All persons shown in the table have sole investment and voting power except as otherwise indicated.
(b) Includes options for 12,500 shares that are currently exercisable.
(c) Includes 3,584 shares held jointly by Mr. Bondroff and his wife and 3,900 shares held in an IRA.
(d) Includes 1,000 shares held by a corporation of which Ms. Cernak is a co-owner. Excludes 12,500 shares owned by Ms.
Cernak's husband, as to which she disclaims beneficial ownership.
(e) Includes 227 shares held under the 401(k) Plan and options for 47,000 shares that are currently exercisable or
exercisable within 60 days.
(f) Includes 224 shares held under the 401(k) Plan and options for 400,000 shares that are currently exercisable or
exercisable within 60 days.
(g) Includes options for 10,000 shares that are currently exercisable. Also includes 1,200 shares held jointly by
Mr. Hoffman and his wife.
(h) Includes 32,550 shares held jointly by Mr. Larkin and his wife and 3,000 shares in a self-directed IRA. Excludes 19,400
shares owned by Mr. Larkin's mother and 500 shares owned by his wife, as to which he disclaims beneficial ownership.
(i) Includes 226 shares held under the 401(k) Plan and options for 47,000 shares that are currently exercisable or
exercisable within 60 days.
(j) Includes options for 10,000 shares that are currently exercisable.
(k) Includes 20,000 shares held by the United Propane, Inc. Profit Sharing Plan and Trust, of which Mr. Pascal is the trustee.
(l) Includes 106 shares held under the 401(k) Plan, options for 15,500 shares that are currently exercisable or exercisable
within 60 days and 2,016 shares held jointly by Mr. Edwards and his wife.
(m) Includes 139 shares held under the 401(k) Plan and options for 36,024 shares that are currently exercisable.
(n) Includes a total of 38,148 shares (including 358 shares held under the 401(k) Plan and options for 32,150 shares that are
currently exercisable or exercisable within 60 days) held by three additional executive officers of the Company.
(o) Includes options currently exercisable or exercisable within 60 days for an aggregate of 685,174 shares; if such options
are not included, all directors and executive officers as a group would beneficially own 231,512 shares, or 1.4% of the
outstanding Common Stock.
* Less than one percent.
</FN>
</TABLE>
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of September ___,
1994 with respect to the ownership of shares of Common Stock of the Company by
each person believed by management to be the beneficial owner of more than five
percent of the Company's outstanding Common Stock. The historical information
set forth below is based on the most recent Schedule 13D or Schedule 13G filed
on behalf of each such person with the SEC.@@
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percentage of Common
of Beneficial Owner of Beneficial Ownership Stock Outstanding
------------------- ------------------------ -----------------
<S> <C> <C>
First Fidelity Bancorporation 3,846,800(a) 19.16%
2673 Main Street
Lawrenceville, New Jersey 08648
T. Rowe Price Associates, Inc. 987,154(b) 5.88
100 East Pratt Street
Baltimore, Maryland 21202
Leon G. Cooperman 838,100(c) 5.0
86 Pine Street
Wall Street Plaza
31st Floor
New York, New York 10005
<FN>
(a) Amendment No. 3 to Schedule 13D dated August 5, 1994 (the "Amendment No. 3") states that First Fidelity directly owns
546,800 shares of Common Stock, which represents 3.26% of the outstanding Common Stock. Amendment No. 3 further states
that First Fidelity was granted an option pursuant to the Option Agreement to acquire 3,300,000 shares of authorized but
unissued shares of Common Stock which option has not become exercisable. In Amendment No. 3, First Fidelity expressly
disclaims beneficial ownership of such option shares. See "The Option Agreement."
(b) A Schedule 13G dated February 14, 1994 states that T. Rowe Price Associates, Inc., an investment adviser registered
under the Investment Advisers Act of 1940, has sole dispositive power over the 987,154 shares and sole voting power
over 48,500 of these shares.
(c) A Schedule 13D dated February 28, 1994 states that Mr. Cooperman has sole voting and dispositive power over 715,800
shares and shared voting and dispositive power over 122,300 shares. The Schedule 13D states that Mr. Cooperman is the
sole general partner of two Delaware limited partnerships engaged in the purchase and sale of securities for investment
for their own accounts: Omega Capital Partners, L.P. and Omega Institutional Partners, L.P., which purchased 242,600
shares and 255,200 shares, respectively. The Schedule 13D further states that Mr. Cooperman is the president and
majority stockholder of Omega Advisors, Inc. and that he further controls Omega Overseas Partners, Ltd. Omega Advisors,
Inc. also serves with discretionary power as investment manager to unrelated third parties (the "Managed Account"). The
Schedule 13D states that 218,000 shares were purchased on behalf of Omega Overseas Partners, Ltd. and 122,300 shares were
purchased on behalf of the Managed Account.
</FN>
</TABLE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC by the Company are
incorporated by reference in this Proxy Statement as of their respective filing
dates:
(1) Annual Report on Form 10-K for the year ended December 31,
1993, filed pursuant to Section 13 of the Exchange Act; provided, however, that
the information referred to in Item 402(a)(8) of Regulation S-K promulgated by
the SEC shall not be deemed to be specifically incorporated by reference herein;
(2) Current Report on Form 8-K, filed on February 18, 1994
pursuant to Section 13 of the Exchange Act;
(3) Current Report on Form 8-K, filed on March 23, 1994
pursuant to Section 13 of the Exchange Act;
(4) Quarterly Report on Form 10-Q for the quarter ended March
31, 1994, filed pursuant to Section 13 of the Exchange Act; and
(5) Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, filed pursuant to Section 13 of the Exchange Act.
All reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c) or 15(d) of the Exchange Act after the date of this Proxy
Statement and prior to the date of the Special Meeting shall be deemed
incorporated by reference into this Proxy Statement and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained herein, or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement.
This Proxy Statement incorporates documents by reference that
are not presented herein or delivered herewith. The Company will provide without
charge to any person to whom this Proxy Statement is delivered, including any
beneficial owner of Common Stock, upon written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to such documents which are not specifically incorporated
therein by reference). Requests for any of these documents should be directed in
writing to or by telephoning David L. Spilman, Treasurer and Director of
Investor Relations, Baltimore Bancorp, 120 East Baltimore Street, Baltimore,
Maryland 21202; (800) 722-8823.
INDEPENDENT AUDITORS
The Company expects to appoint KPMG Peat Marwick, independent
certified public accountants, to act as its independent auditors for the year
ending December 31, 1994. This expected change is being made so that the Company
will be using the same independent certified public accountants as First
Fidelity and is not a result of any disagreements with Coopers & Lybrand on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure. Coopers & Lybrand served as the Company's
independent auditors for 1993, 1992 and 1991. A representative of Coopers &
Lybrand is expected to be present at the Special Meeting and will be given an
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
If the Merger is not consummated prior to the Company's 1995
annual meeting, any stockholder of the Company who intends to present a proposal
for action at such meeting must file a copy thereof with the Corporate Secretary
of the Company not less than 45 days nor more than 90 days prior to the date of
the annual meeting, unless notice or public disclosure of the meeting occurs
less than 60 days prior to the date of the meeting, in which event stockholders
may deliver such notice not later than the 15th day following the day on which
notice of the meeting was mailed or public disclosure thereof was made. If the
proposal or proposals are to be included in the Company's proxy statement and
form of proxy relating to the 1995 annual meeting, they must be received by
December 13, 1994 pursuant to the proxy soliciting rules of the SEC. Nothing in
this paragraph shall be deemed to require the Company to include in its proxy
statement and form of proxy relating to the 1995 annual meeting any stockholder
proposal which may be excluded under SEC regulations in effect at the time such
proposals are received.
OTHER MATTERS
The Board of Directors is not aware of any business to come
before the Special Meeting other than those matters described above in this
Proxy Statement. If, however, any other matters not now known should properly
come before the Special Meeting, the persons named in the accompanying proxy
will vote such proxy on such matters as determined by a majority of the Board of
Directors.
By Order of the Board
Edwin F. Hale, Sr.
Chairman of the Board
Baltimore Maryland
September __, 1994
<PAGE>
Confidential, For Use of the Commission Only.
APPENDIX A
______________________________________________________________________________
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 21st DAY OF MARCH, 1994
BY AND AMONG
FIRST FIDELITY BANCORPORATION,
ANNABEL LEE CORPORATION
AND
BALTIMORE BANCORP
______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
Recitals ....................................................... 1
ARTICLE I. THE MERGERS
Section 1.1. Structure of the Merger................................... 2
Section 1.2. Effect on Outstanding Shares.............................. 3
Section 1.3. Exchange Procedures....................................... 3
Section 1.4. Options ................................................ 5
Section 1.5. Transformation of the Company into a
Savings and Loan Holding Company.......................... 5
Section 1.6. Directors of Company Bank................................. 5
ARTICLE II. CONDUCT PENDING THE MERGER
Section 2.1. Conduct of the Company's Business Prior to
the Effective Time........................................ 6
Section 2.2. Forbearance by the Company................................ 6
Section 2.3. Cooperation............................................... 7
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company............. 8
Section 3.2. Representations and Warranties of Acquiror and
Merger Sub................................................ 18
ARTICLE IV. COVENANTS
Section 4.1. Acquisition Proposals..................................... 20
Section 4.2. Certain Policies of the Company........................... 21
Section 4.3. Employees................................................. 21
Section 4.4. Access and Information.................................... 23
Section 4.5. Certain Filings, Consents and Arrangements................ 23
Section 4.6. Antitakeover Statutes..................................... 24
Section 4.7. Indemnification; Directors' and Officers' Insurance....... 24
Section 4.8. Additional Agreements..................................... 26
Section 4.9. Publicity................................................. 26
Section 4.10. Proxy Statement........................................... 26
Section 4.11. Shareholders' Meeting..................................... 26
Section 4.12. Notification of Certain Matters........................... 27
Section 4.13. Outstanding Debt.......................................... 27
ARTICLE V. CONDITIONS TO CONSUMMATION
Section 5.1. Conditions to All Parties' Obligations.................... 27
Section 5.2. Conditions to Obligations of the Acquiror and
Merger Sub................................................ 28
Section 5.3. Conditions to the Obligation of the Company............... 29
ARTICLE VI. TERMINATION
Section 6.1. Termination............................................... 30
Section 6.2. Effect of Termination..................................... 30
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time......................... 31
ARTICLE VIII. OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation....................... 31
Section 8.2. Survival ................................................ 32
Section 8.3. Waiver ................................................ 32
Section 8.4. Counterparts.............................................. 32
Section 8.5. Governing Law............................................. 32
Section 8.6. Expenses ................................................ 32
Section 8.7. Notices ................................................ 32
Section 8.8. Entire Agreement; Etc..................................... 34
Section 8.9. Assignment................................................ 34
LIST OF ANNEXES
Annex 1 -- Company Rights (Recital D)
Annex 2 -- Form of Option Agreement (Recital E)
Annex 3 -- Subsidiaries of the Company (Section 3.1(d))
Annex 4 -- Company Benefit Plans (Section 3.1(n))
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of the 21st day of
March, 1994 (this "Plan"), by and among First Fidelity Bancorporation (the
"Acquiror"), Annabel Lee Corporation (the "Merger Sub") and Baltimore Bancorp
(the "Company").
RECITALS:
A. The Acquiror. The Acquiror has been duly incorporated and is
an existing corporation in good standing under the laws of the State of New
Jersey, with its principal executive offices located in Lawrenceville, New
Jersey. The Acquiror is a bank holding company duly registered with the Federal
Reserve Board (as defined below) under the Bank Holding Company Act of 1956, as
amended (the "BHC Act").
B. Merger Sub. Merger Sub has been duly incorporated and is an
existing corporation in good standing under the laws of the State of Maryland,
with its principal executive offices located in Baltimore, Maryland. All the
outstanding shares of the capital stock of Merger Sub are owned directly by the
Acquiror.
C. The Company. The Company has been duly incorporated and is
an existing corporation in good standing under the laws of the State of
Maryland, with its principal executive offices located in Baltimore, Maryland.
As of the date hereof, the Company has 50,000,000 authorized shares of common
stock, par value $5.00 per share ("Company Common Stock"), of which no more than
16,683,931 shares were outstanding as of the date hereof. The Company is a bank
holding company duly registered with the Federal Reserve Board under the BHC
Act.
D. Rights, Etc. The Company does not have any shares of its
capital stock reserved for issuance, any outstanding option, call or commitment
relating to shares of its capital stock or any outstanding securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right (including, without limitation, preemptive rights) to subscribe
for or acquire from it, any shares of its capital stock (collectively,
"Rights"), except (i) pursuant to the Option Agreement (as defined below), which
is expected to be entered into after the execution and delivery of this Plan;
(ii) upon conversion of approximately $5,229,000 principal amount of 6 3/4/%
Convertible Subordinated Debentures due April 1, 2011 of the Company (the
"Convertible Subordinated Debentures") (convertible into 200,153 shares of
Company Common Stock); (iii) upon exercise of existing stock options granted to
directors and employees of the Company and its subsidiaries (exercisable for
1,106,033 shares of Company Common Stock at a weighted average exercise price of
$9.00 per share); (iv) pursuant to the $870,000 principal amount of 10 7/8%
Subordinated Capital Notes due December 15, 1999 (the "Capital Notes") (subject
to a commitment to issue at maturity 48,000 shares of Company Common Stock based
on the market price of the Company Common Stock on March 17, 1994); (v) pursuant
to the Company's 401(k) plan, 68,828 shares of Company Common Stock reserved for
issuance; and (vi) as set forth on Annex 1.
E. The Option Agreement. As an inducement to the willingness of
the Acquiror and Merger Sub to enter into this Plan, the Company expects to
enter into a Stock Option Agreement with the Acquiror in the form set forth in
Annex 2 (the "Option Agreement"), pursuant to which the Company will grant to
the Acquiror an option to purchase authorized but unissued shares of Company
Common Stock equal to 19.9% of the outstanding shares of Company Common Stock
upon the terms and conditions therein contained.
F. Intention of the Parties. It is the intention of the parties
to this Plan that immediately prior to the Effective Time (as defined below) the
Company will cease to be a bank holding company under the BHC Act and become a
savings and loan holding company.
G. Board Approvals. The respective Boards of Directors of the
Acquiror, Merger Sub and the Company have duly approved the Plan and have duly
authorized its execution and delivery.
NOW, THEREFORE, in consideration of their mutual promises and
obligations hereunder, the parties hereto adopt and make this Plan and prescribe
the terms and conditions hereof and the manner and basis of carrying it into
effect, which shall be as follows:
ARTICLE I. THE MERGERS
SECTION 1.1. Structure of the Merger. At the Effective Time,
the Merger Sub will merge (the "Merger") with and into the Company, with the
Company being the surviving corporation (the "Surviving Corporation"), pursuant
to the provisions of, and with the effect provided in, the Maryland General
Corporation Law ("MGCL"). The separate existence of Merger Sub shall thereupon
cease. The Surviving Corporation shall continue to be governed by the laws of
the State of Maryland and its separate corporate existence with all of its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. At the Effective Time (as defined in Section 7.1), the articles
of incorporation and by-laws of the Company shall be amended in their entirety
to conform to the articles of incorporation and by-laws of Merger Sub in effect
immediately prior to the Effective Time and shall become the articles of
incorporation and by-laws of the Surviving Corporation. At the Effective Time,
the directors and officers of Merger Sub shall be the directors and officers of
the Surviving Corporation.
SECTION 1.2. Effect on Outstanding Shares. (a) By virtue of the
Merger, automatically and without any action on the part of the holder thereof,
each share of Company Common Stock issued and outstanding at the Effective Time
(except shares held directly or indirectly by the Acquiror other than shares
held by Acquiror in a fiduciary capacity or in satisfaction of a debt previously
contracted) shall be cancelled and become and be converted into the right to
receive $20.75 in cash without interest (the "Merger Consideration"). As of the
Effective Time, each share of Company Common Stock held directly or indirectly
by the Acquiror, other than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted, shall be cancelled and retired and
cease to exist, and no exchange or payment shall be made with respect thereto.
(b) The shares of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall become shares of the
Surviving Corporation after the Merger and shall thereafter constitute all of
the issued and outstanding shares of the capital stock of the Surviving
Corporation.
SECTION 1.3. Exchange Procedures. (a) At and after the
Effective Time, each certificate (each a "Certificate") previously representing
shares of Company Common Stock shall represent only the right to receive the
Merger Consideration in cash without interest.
(b) As of the Effective Time, the Acquiror shall deposit, or
shall cause to be deposited, with such bank or trust company as the Acquiror
shall elect (which may be a subsidiary of the Acquiror) (the "Exchange Agent"),
for the benefit of the holders of shares of Company Common Stock, for exchange
in accordance with this Section 1.3, the Merger Consideration to be paid
pursuant to Section 1.2 and deposited pursuant to this Section 1.3 in exchange
for outstanding shares of Company Common Stock.
(c) As promptly as possible after the Effective Time, the
Acquiror shall cause the Exchange Agent to mail to each holder of record of a
Certificate or Certificates the following: (i) a letter of transmittal
specifying that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent, which shall be in a form and contain any other provisions as the Acquiror
may reasonably determine; and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
proper surrender of a Certificate to the Exchange Agent, together with a
properly completed and duly executed letter of transmittal, the holder of such
Certificate shall thereupon be entitled to receive in exchange therefor a check
representing the Merger Consideration which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the provisions hereof, and
the Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the Merger Consideration payable to holders of Certificates.
In the event of a transfer of ownership of any shares of Company Common Stock
not registered in the transfer records of the Company, a check for the Merger
Consideration may be issued to the transferee if the Certificate representing
such Company Common Stock is presented to the Exchange Agent, accompanied by
documents sufficient, in the discretion of the Acquiror, (i) to evidence and
effect such transfer and (ii) to evidence that all applicable stock transfer
taxes have been paid.
(d) From and after the Effective Time, there shall be no
transfers on the stock transfer records of the Company of any shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to the Acquiror or the
Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this Plan in accordance
with the procedures set forth in this Section 1.3.
(e) Any portion of the aggregate Merger Consideration
(including the proceeds of any investments thereof) that remains unclaimed by
the shareholders of the Company for one year after the Effective Time shall be
repaid by the Exchange Agent to the Acquiror. Any shareholders of the Company
who have not theretofore complied with this Section 1.3 shall thereafter look
only to the Acquiror for payment of their Merger Consideration deliverable in
respect of each share of Company Common Stock such stockholder holds as
determined pursuant to this Plan without any interest thereon. If outstanding
certificates for shares of Company Common Stock are not surrendered or the
payment for them not claimed prior to the date on which such payments would
otherwise escheat to or become the property of any governmental unit or agency,
the unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of the Acquiror (and to the extent not
in its possession shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims. Notwithstanding the
foregoing, none of the Acquiror, Merger Sub, the Exchange Agent or any other
person shall be liable to any former holder of Company Common Stock for any
amount delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Acquiror, the posting by such person of a bond in such amount as the
Acquiror may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration deliverable
in respect thereof pursuant to this Plan.
SECTION 1.4. Options. At the Effective Time, each option
granted by the Company to purchase shares of Company Common Stock, which is
outstanding and unexercised immediately prior to the Effective Time, shall be
converted into the right to receive, in cancellation thereof, an amount in cash
computed by multiplying (i) the difference between (x) the per share amount of
the Merger Consideration and (y) the per share exercise price applicable to such
option by (ii) the number of such shares of Company Common Stock subject to such
option. The Company agrees to take or cause to be taken all action necessary
under its 1984 Stock Option Plan, 1988 Stock Incentive Plan and 1992 Stock
Option Plan, as amended prior to the date hereof (the "Company Stock Option
Plans"), to provide for such adjustment. At the Effective Time (or by the first
business day thereafter), the Acquiror will make the payments required to be
made to grantees of options under this Section 1.4.
SECTION 1.5 Transformation of the Company into a Savings and
Loan Holding Company. Prior to the Effective Time, the Company shall use its
best efforts to take all action necessary and appropriate (a) to charter, on the
Effective Date and prior to the Thrift Merger (as defined below), a federal
savings bank (the "FSB") having its main office in Baltimore, Maryland and
having a charter and by-laws acceptable in form and substance to the Acquiror,
(b) to acquire, on the Effective Date and prior to the Thrift Merger, all issued
and outstanding shares of the FSB, (c) to cause, on the Effective Date and prior
to the Thrift Merger (as defined below), the FSB to obtain deposit insurance
from, and to become a member of, the Savings Association Insurance Fund of the
Federal Deposit Insurance Corporation (the "FDIC") and (d) to cause The Bank of
Baltimore (the "Company Bank") to be merged, following completion of (a), (b)
and (c) and prior to the Effective Time, with and into the FSB, with (i) the FSB
being the surviving entity, (ii) all shares of the Company Bank being cancelled
and (iii) the corporate existence of the Company Bank ceasing, on such
additional terms and conditions as are acceptable in form and substance to the
Acquiror (the "Thrift Merger").
SECTION 1.6. Directors of Company Bank. Acquiror intends to
invite the directors of the Company Bank serving on the Effective Date and prior
to the Thrift Merger, who do not become employees of the FSB, to become
directors of the FSB subsequent to the Thrift Merger for a period of not less
than two years, with such directors to be compensated at not less than the
annual retainer and meeting attendance fees being paid to non-employee directors
of the Company Bank on the date hereof. Acquiror also intends, in consultation
with the board of directors of the Company Bank, to select from among such
directors or other prominent business leaders in the Maryland community a person
to become a director of Acquiror on the Effective Date, to serve for not less
than two years.
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1. Conduct of the Company's Business Prior to the
Effective Time. Except as expressly provided in this Plan, during the period
from the date of this Plan to the Effective Time, the Company shall, and shall
cause its subsidiaries to, (i) conduct its business in the usual, regular and
ordinary course consistent with past practice, (ii) use its best efforts to
maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees, (iii) take no action which would adversely affect or delay the
ability of the Company, the Acquiror, Merger Sub or the FSB to obtain any
necessary approvals, consents or waivers of any governmental authority required
for the transactions contemplated hereby or to perform its covenants and
agreements on a timely basis under this Plan and (iv) take no action that is
reasonably likely to have a Material Adverse Effect (as defined in Section 8.1
hereof) on the Company.
SECTION 2.2. Forbearance by the Company. During the period from
the date of this Plan to the Effective Time, the Company shall not, and shall
not permit any of its subsidiaries, without the prior written consent of the
Acquiror, to:
(a) other than in the ordinary course of business consistent
with past practice, make any advance or incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other
person;
(b) adjust, split, combine or reclassify any capital stock;
make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any
shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock
(except pursuant to Section 4.13 or as provided in the letter pursuant
to Section 3.1 or through the trustee for the 401(k) Plan), or grant
any stock appreciation rights or grant any person any right to acquire
any shares of its capital stock, except for regular quarterly cash
dividends at a rate per share of Company Common Stock not in excess of
$0.05 per share with declaration, record and payment dates coinciding
with the schedule for such dates relating to the two most recently
declared dividends prior to the date hereof; or issue any additional
shares of capital stock (including pursuant to any dividend
reinvestment or other similar type of plan) except pursuant to (i) the
exercise of stock options outstanding as of the date hereof as set
forth in Annex 1 and on the terms in effect on the date hereof, (ii)
the Option Agreement, (iii) the conversion of the Convertible
Subordinated Debentures, or (iv) as provided in the letter pursuant to
Section 3.1;
(c) other than in the ordinary course of business consistent
with past practice, sell, transfer, mortgage, encumber or otherwise
dispose of any of its material properties or assets to any individual,
corporation or other entity other than a direct or indirect wholly
owned subsidiary of the Company, or cancel, release or assign any
indebtedness of any such person or any claims held by any such person,
except pursuant to contracts or agreements in force at the date of this
Plan or as provided in the letter pursuant to Section 3.1;
(d) increase in any manner the compensation or fringe benefits
of any of its employees or directors or pay any pension or retirement
allowance not required by any existing plan or agreement to any such
employees or directors, or become a party to, amend or commit itself to
any pension, retirement, profit-sharing or welfare benefit plan or
agreement or employment agreement with or for the benefit of any
employee or director, other than general increases in compensation in
the ordinary course of business consistent with past practice not in
excess of 4% in any 12-month period, or voluntarily accelerate the
vesting of any stock options or the funding or vesting of other
compensation or benefit; provided, however, that the foregoing shall
not apply to prohibit any increase or acceleration disclosed in writing
by the Company to the Acquiror prior to the execution hereof pursuant
to a plan, program, arrangement or agreement in effect on the date
hereof which results from the execution of this Plan or the
consummation of any transaction contemplated hereby;
(e) except as contemplated by Section 4.2, change its method of
accounting as in effect at December 31, 1993, except as required by
changes in generally accepted accounting principles as concurred in by
the Company's independent auditors; or
(f) amend its articles of incorporation (or equivalent) or its
by-laws.
SECTION 2.3. Cooperation. The Company shall, and shall cause
its subsidiaries to, cooperate with Acquiror and Merger Sub in completing the
transactions contemplated hereby and shall not intentionally take, cause to be
taken or agree or make any commitment to take any action: (i) that is reasonably
likely to cause any of the representations or warranties of it that are set
forth in Article III hereof not to be true and correct, or (ii) that is
inconsistent with or prohibited by Section 2.1 or Section 2.2. The Acquiror and
Merger Sub shall, and shall cause their subsidiaries to, cooperate with the
Company in completing the transactions contemplated hereby and shall not
intentionally take, cause to be taken or agree to make any commitment to take
any action that is reasonably likely to cause any of their representations or
warranties set forth in Article III hereof not to be true and correct.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company. The
Company represents and warrants to the Acquiror and Merger Sub, that, except as
specifically disclosed in a letter of the Company delivered to the Acquiror
prior to the execution hereof (and making specific reference to the Section of
this Plan for which an exception is taken) or as disclosed herein or in any
Annex hereto:
(a) Recitals True. The facts set forth in the Recitals of this
Plan with respect to the Company are true and correct.
(b) Capital Stock. All outstanding shares of capital stock of
the Company and its subsidiaries, are duly authorized, validly issued
and outstanding, fully paid and non-assessable, and subject to no
preemptive rights.
(c) Authority. Each of the Company and its subsidiaries, has
the power and authority, and is duly qualified in all jurisdictions
(except for such qualifications the absence of which, individually or
in the aggregate, would not have a Material Adverse Effect (as defined
in Section 8.1)) where such qualification is required, to carry on its
business as it is now being conducted and to own all its material
properties and assets, and it has all federal, state, local, and
foreign governmental authorizations necessary for it to own or lease
its properties and assets and to carry on its business as it is now
being conducted, except for such powers and authorizations the absence
of which, either individually or in the aggregate, would not have a
Material Adverse Effect.
(d) Subsidiaries. A list of the Company's subsidiaries is
contained in Annex 3. The shares of capital stock of each of the
Company's subsidiaries are owned by it free and clear of all liens,
claims, encumbrances and restrictions on transfer and there are no
Rights with respect to such capital stock.
(e) Shareholder Approvals. (i) Subject to the receipt of the
required shareholder approval of this Plan, each of this Plan and the
Option Agreement has been authorized by all necessary corporate action
of the Company. The Company has received the written opinion of Alex.
Brown & Sons Incorporated to the effect that the consideration to be
received by the shareholders of the Company pursuant to this Plan is
fair to such shareholders from a financial point of view. Subject to
receipt of (A) such shareholder approval and (B) the required
approvals, consents or waivers of governmental authorities referred to
in Section 5.1(b), this Plan is, and upon its execution and delivery
the Option Agreement will be, a valid and binding agreement of the
Company 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.
(ii) The affirmative vote of two-thirds (2/3) of the
outstanding stock of the Company entitled to vote on the Plan is the
only shareholder vote of the Company's shareholders required for
approval of this Plan and consummation of the Merger and the other
transactions contemplated hereby.
(f) No Violations. The execution, delivery and performance of
this Plan by the Company do not, the execution, delivery and
performance of the Option Agreement by the Company will not, and the
consummation of the transactions contemplated hereby or thereby by the
Company will not, constitute (i) a breach or violation of, or a default
under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument
of the Company or its subsidiaries or to which the Company or its
subsidiaries (or any of their respective properties) is subject, except
for any of the foregoing that would not have a Material Adverse Effect
on the Company or enable any person to enjoin the Merger, (ii) a breach
or violation of, or a default under, the articles of incorporation or
by-laws of the Company or any of its subsidiaries or (iii) a breach or
violation of, or a default under (or an event which with due notice or
lapse of time or both would constitute a default under), or result in
the termination of, accelerate the performance required by, or result
in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the properties or assets of the Company or any
of its subsidiaries under, any of the terms, conditions or provisions
of any note, bond, indenture, deed of trust, loan agreement or other
agreement, instrument or obligation to which the Company or any of its
subsidiaries is a party, or to which any of their respective properties
or assets may be bound or affected, except for any of the foregoing
that, individually or in the aggregate, would not have a Material
Adverse Effect. The consummation of the transactions contemplated
hereby or, upon its execution and delivery, by the Option Agreement
will not require any approval, consent or waiver under any such law,
rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any
such agreement, indenture or instrument, other than (i) the required
approvals, consents and waivers of governmental authorities referred to
in Section 5.1(b), (ii) the approval of the shareholders of the Company
referred to in Section 3.1(e), (iii) such approvals, consents or
waivers as are required under the federal and state securities or "Blue
Sky" laws in connection with the transactions contemplated by the
Option Agreement, and (iv) any other approvals, consents or waivers the
absence of which, individually or in the aggregate, would not result in
a Material Adverse Effect or enable any person to enjoin the Merger.
(g) Reports. (i) As of their respective dates or, if amended,
as of the respective dates of the latest amendments thereto, neither
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, nor any other document filed by the Company
subsequent to December 31, 1992 under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act"), each in the form (including exhibits) filed with the
Securities and Exchange Commission (the "SEC") (collectively, the
"Reports"), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Each of the
balance sheets or statements of condition contained or incorporated by
reference in the Company's Reports (including in each case any related
notes and schedules) fairly presented the financial position of the
entity or entities to which it relates as of its date and each of the
statements of operations and retained earnings and of cash flows and
changes in financial position or equivalent statements contained or
incorporated by reference in the Company's Reports (including in each
case any related notes and schedules), fairly presented the results of
operations, retained earnings and cash flows and changes in financial
position, as the case may be, of the entity or entities to which it
relates for the periods set forth therein (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments that
are not material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during
the periods involved, except as may be noted therein.
(ii) The Company and each of its subsidiaries have timely filed
all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to
file since December 31, 1992 with (i) the SEC, (ii) the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"),
(iii) the FDIC, (iv) any state banking commission or other regulatory
authority ("State Regulator") (collectively, "Regulatory Agencies"),
and (v) the National Association of Securities Dealers, Inc. and any
other self-regulatory organization ("SRO"), and all other reports and
statements required to be filed by them since December 31, 1992,
including, without limitation, any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States,
the SEC, the Federal Reserve Board, the FDIC, any State Regulator or
any SRO, and have paid all fees and assessments due and payable in
connection therewith, except where the failure to make any such filing
or to pay any such fees or assessments or the timing of such filing
would not have a Material Adverse Effect.
(h) Absence of Certain Changes or Events. Since December 31,
1993, the Company and its subsidiaries have not incurred any material
liability, except in the ordinary course of their business consistent
with past practice, nor has there been any change, or any event
involving a prospective change, which, individually or in the
aggregate, has had, or is reasonably likely to have, a Material Adverse
Effect on the Company
(i) Taxes. Except as otherwise would not have a Material
Adverse Effect, all federal, state, local, and foreign tax returns
required to be filed by or on behalf of the Company or any of its
subsidiaries have been timely filed or requests for extensions have
been timely filed and any such extension shall have been granted and
not have expired, and all such filed returns are complete and accurate
in all material respects. All taxes shown on such returns, and all
taxes required to be shown on returns for which extensions have been
granted, have been paid in full or adequate provision has been made for
any such taxes on the Company's statement of financial condition (in
accordance with generally accepted accounting principles). As of the
date of this Plan, there is no audit examination, deficiency, or refund
litigation with respect to any taxes of the Company that could result
in a determination that would have a Material Adverse Effect on the
Company. All taxes, interest, additions, and penalties due with respect
to completed and settled examinations or concluded litigation relating
to the Company have been paid in full or adequate provision has been
made for any such taxes on the Company's balance sheet (in accordance
with generally accepted accounting principles). Except as otherwise
would not have a Material Adverse Effect, the Company and its
subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due
that is currently in effect.
(j) Absence of Claims. No litigation, proceeding or controversy
before any court or governmental agency is pending, and there is no
pending claim, action or proceeding against the Company or any of its
subsidiaries, which is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect or to materially hinder or
delay consummation of the transactions contemplated hereby, and, to the
Company's knowledge, no such litigation, proceeding, controversy, claim
or action has been threatened or is contemplated.
(k) Absence of Regulatory Actions. Except with respect to the
Order to Cease and Desist, dated July 21, 1992, between the Company,
the FDIC and the Bank Commissioner for the State of Maryland (the
"Commissioner") and the Agreement, dated July 21, 1992, between the
Company, the Federal Reserve Bank of Richmond and the Commissioner,
neither the Company nor any of its subsidiaries is a party to any cease
and desist order, written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or
is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, or has adopted any board
resolutions at the request of, federal or state governmental
authorities charged with the supervision or regulation of banks,
savings banks or bank holding companies or engaged in the insurance of
bank and/or savings and loan deposits ("Government Regulators") nor has
the Company been advised by any Government Regulator that it is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, directive,
written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar
undertaking.
(l) Agreements. Except for the Option Agreement and
arrangements made in the ordinary course of business, the Company and
its subsidiaries are not bound by any material contract (as defined in
Item 601(b)(10) of Regulation S-K) to be performed after the date
hereof that has not been filed with or incorporated by reference in the
Company's Reports filed prior to the date hereof or as disclosed in the
Company's audited consolidated financial statements as of December 31,
1993 (as furnished to the Acquiror prior to the date hereof). Except as
disclosed in the Company's Reports filed prior to the date of this Plan
or as disclosed in such financial statements as of December 31, 1993,
as of the date of this Plan, neither the Company nor any of its
subsidiaries is a party to a (i) consulting agreement (other than data
processing, software programming and licensing contracts entered into
in the ordinary course of business) not terminable on 90 days' or less
notice involving the payment of more than $100,000 per annum, in the
case of any such agreement with an individual, or $100,000 per annum,
in the case of any other such agreement, (ii) agreement with any
executive officer or other key employee of the Company or any of its
subsidiaries the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction
involving the Company or any of its subsidiaries of the nature
contemplated by this Plan or the Option Agreement and which provides
for the payment of in excess of $100,000, (iii) agreement with respect
to any executive officer of the Company or any of its subsidiaries
providing any term of employment or compensation guarantee extending
for a period longer than one year and for the payment of in excess of
$100,000 per annum, (iv) agreement or plan (other than the Company
Stock Option Plans), including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Plan or the Option Agreement or the
value of any of the benefits of which will be calculated on the basis
of any of the transactions contemplated by this Plan or the Option
Agreement or (v) agreement containing covenants that limit the ability
of the Company or any of its subsidiaries to compete in any line of
business or with any person, or that involve any restriction on the
geographic area in which, or method by which, the Company or any of its
subsidiaries may carry on its business (other than as may be required
by law or any regulatory agency).
(m) Labor Matters. Neither the Company nor any of its
subsidiaries is a party to, or is bound by, any collective bargaining
agreement, contract, or other agreement or understanding with a labor
union or labor organization, nor is the Company or any of its
subsidiaries the subject of any proceeding asserting that the Company
or any such subsidiary has committed an unfair labor practice or
seeking to compel the Company or such subsidiary to bargain with any
labor organization as to wages and conditions of employment, nor is
there any strike, other labor dispute or organizational effort
involving the Company or any of its subsidiaries pending or threatened.
(n) Employee Benefit Plans. All benefit plans, contracts,
agreements, arrangements, including, but not limited to, "employee
benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and employment
contracts and deferred compensation plans and agreements (as set forth
in Annex 4 hereto), that cover any of the Company's or its
subsidiaries' employees or directors (hereinafter referred to
collectively as the "Employee Plans"), comply in all material respects
with all applicable requirements of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), and other applicable laws; neither the
Company nor any of its subsidiaries nor any Employee Plan subject to
ERISA, nor any trust thereunder, nor, to the best of the Company's
knowledge, any trustee or fiduciary thereof, has engaged in a
"prohibited transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) with respect to any Employee Plan which is likely to
result in any material penalties or taxes under Section 502(i) of ERISA
or Section 4975 of the Code; no liability to the Pension Benefit
Guaranty Corporation has been or is expected by the Company or any of
its subsidiaries to be incurred with respect to any Employee Plan which
is subject to Title IV of ERISA ("Pension Plan"), or with respect to
any "single-employer plan" (as defined in Section 4001(a)(15) of ERISA)
currently or formerly maintained by the Company or any of its
subsidiaries or any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"); no Pension Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA (whether or not
waived)) as of the last day of the end of the most recent plan year
ending prior to the date hereof; the fair market value of the assets of
each Pension Plan exceeds the accumulated benefit obligation (as
determined under Statement of Financial Accounting Standards No. 87)
under such Pension Plan as of the end of the most recent plan year with
respect to the respective Pension Plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the most
recent actuarial valuation for such Pension Plan as of the date hereof;
no notice of a "reportable event" (as defined in Section 4043 of ERISA)
for which the 30-day reporting requirement has not been waived has been
required to be filed for any Pension Plan within the 12-month period
ending on the date hereof; and neither the Company nor any of its
subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code; and the Company and its
subsidiaries have not contributed to any "multiemployer plan", as
defined in Section 3(37) of ERISA, on or after September 26, 1980. Each
Employee Plan which is an "employee pension benefit plan" (as defined
in Section 3(2) of ERISA) and which is intended to be qualified under
Section 401(a) of the Code (a "Qualified Plan") has received a
favorable determination letter from the Internal Revenue Service
("IRS") (other than the Company's 401(k) plan; provided that the
Company's 401(k) plan was established after 1987, and provided further
that the Company is not aware of any circumstances that would prevent
the issuance of a favorable determination letter or that would cause
the IRS to determine that the Company's 401(k) plan in operation was
not tax qualified) and the Company and its subsidiaries are not aware
of any circumstances likely to result in revocation of any such
favorable determination letter; each Qualified Plan which is an
"employee stock ownership plan" (as defined in Section 4975(e)(7) of
the Code) has satisfied all of the applicable requirements of Sections
409 and 4975(e)(7) of the Code and the regulations thereunder; there is
no pending or threatened litigation relating to any Employee Plan;
there has been no announcement or legally binding commitment by the
Company or its subsidiaries to create an additional Employee Plan, or
to amend an Employee Plan except for amendments required by applicable
law which do not materially increase the cost of such Employee Plan;
and the Company and its subsidiaries do not have any obligations for
retiree health and life benefits under any Employee Plan that cannot be
amended or terminated without incurring any liability thereunder,
except continuation coverage required under Sections 601 through 608 of
ERISA. Except as specifically identified on Annex 4 and subject to the
conditions, limitations and assumptions specified therein, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment or
series of payments by the Company or its subsidiaries to any person
which is an "excess parachute payment" (as defined in Section 280G of
the Code) under any Employee Plan, increase any benefits payable under
any Employee Plan, or accelerate the time of payment or vesting of any
such benefit. With respect to each Employee Plan, the Company has
supplied to the Acquiror and Merger Sub a true and correct copy of (i)
the most recent annual report on the applicable form of the Form 5500
series filed with the "IRS", (ii) such Employee Plan, including
amendments thereto, (iii) each trust agreement and insurance contract
relating to such Plan, including amendments thereto, (iv) the most
recent summary plan description for such Employee Plan, including
amendments thereto, if the Employee Plan is subject to Title I of
ERISA, (v) the most recent actuarial report or valuation if such
Employee Plan is a Pension Plan and (vi) the most recent determination
letter issued by the IRS if such Company Benefit Plan is a Qualified
Plan. Annex 4 contains a complete list of the Employee Plans.
(o) Title to Assets. Each of the Company and its subsidiaries
has good and marketable title to its properties and assets (other than
(i) property as to which it is lessee and (ii) real estate owned as a
result of foreclosure, transfer in lieu of foreclosure or other
transfer in satisfaction of a debtor's obligation previously
contracted), except for such defects in title which would not,
individually or in the aggregate, have a Material Adverse Effect.
(p) Knowledge as to Conditions. The Company knows of no reason
why the approvals, consents and waivers of governmental authorities
referred to in Section 5.1(b) should not be obtained without the
imposition of any condition of the type referred to in the proviso
thereto.
(q) Compliance with Laws. The Company and each of its
subsidiaries has all permits, licenses, certificates of authority,
orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on
its business as it is presently conducted and the absence of which
could, individually or in the aggregate, have a Material Adverse Effect
on the Company; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the best
knowledge of the Company, no suspension or cancellation of any of them
is threatened.
(r) Fees. Other than financial advisory services performed for
the Company by Alex. Brown & Sons Incorporated (in an amount and
pursuant to an agreement both previously disclosed to the Acquiror),
neither the Company nor any of its subsidiaries, nor any of their
respective officers, directors, employees or agents, has employed any
broker or finder or incurred any liability for any financial advisory
fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for the Company or any of its
subsidiaries, in connection with the Plan or the transactions
contemplated hereby.
(s) Environmental Matters. (i) Except to the extent that the
following, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect:
(A) Each of the Company and its subsidiaries, the Participation
Facilities, and the Loan Properties (each as defined below) are in
compliance with all Environmental Laws (as defined below);
(B) To the knowledge of any employee of the Company or any of
its subsidiaries, there is no suit, claim, action, demand, order,
directive, investigation or proceeding pending or threatened, before
any court, governmental agency or board or other forum against the
Company or any of its subsidiaries, any Participation Facility or any
Loan Property with respect to any Environmental Law or relating to the
release or threatened release into the environment of any Hazardous
Substance (as defined below);
(C) To the knowledge of any employee of the Company or any of
its subsidiaries, there is no reasonable basis for any suit, claim,
action, demand, directive or proceeding of a type described in Section
3.1(s)(i)(B);
(D) To the knowledge of any employee of the Company or any of
its subsidiaries, the properties currently or formerly owned or
operated by the Company are not contaminated with Hazardous Substances
(as defined below); provided, however, that with respect to properties
formerly owned or operated by the Company, such representation is
limited to the period the Company owned or operated such properties;
and
(E) To the knowledge of any employee of the Company or any of
its subsidiaries, neither the Company nor any of its subsidiaries has
received any notice, demand letter, order, directive or request for
information from any governmental entity or any third party indicating
that it may be in violation of, or liable under, any Environmental Law
and there are no circumstances involving the Company, any of its
subsidiaries, any Loan Property or any Participation Facility which
will result in liability to the Company or its subsidiaries under any
Environmental Law.
(ii) The following definitions apply for purposes of this
Section 3.1(s): (w) "Loan Property" means any property in which the
Company (or a subsidiary of the Company) holds a security interest or
is an owner or operator of such property; (x) "Participation Facility"
means any facility in which the Company (or a subsidiary of the
Company) participates in the management (including all property held as
trustee or in any other fiduciary or agency capacity) and, where
required by the context, includes the owner or operator of such
property, but only with respect to such property; (y) "Environmental
Law" means any law, regulation, agency requirement, government
interpretation, policy, order, decree, judgment, or judicial opinion as
presently in effect relating to (A) the manufacture, transport, use,
treatment, storage, recycling, disposal, release, threatened release or
presence of Hazardous Substances or (B) relating to the preservation,
restoration, or protection of the environment, natural resources or
human health; and (z) "Hazardous Substances" means substances which are
either: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum products or by-products, asbestos
containing material, polychlorinated biphenyls, radioactive materials
or radon gas; or (C) any other matter to which exposure is prohibited,
limited or regulated by any Environmental Law.
(t) Allowance. The allowance for possible loan losses shown on
the Company's audited statement of financial condition as of December
31, 1993 was, and the allowance for possible loan losses shown on the
statements of financial condition in the Company's Reports for periods
ending after the date of this Plan will be, adequate, as of the date
thereof, under generally accepted accounting principles applicable to
banks and bank holding companies. The Company has disclosed to the
Acquiror in writing prior to the date hereof the amounts of all loans,
leases, advances, credit enhancements, other extensions of credit,
commitments and interest-bearing assets of the Company and its
subsidiaries that have been classified by any bank examiner (whether
regulatory or internal) as "Other Loans Specially Mentioned", "Special
Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans" or words of
similar import, and the Company shall promptly after the end of any
month inform the Acquiror of any such classification arrived at any
time after the date hereof. The Other Real Estate Owned ("OREO")
included in any non-performing assets of the Company or any of its
subsidiaries is carried net of reserves at the lower of cost or fair
value based on current independent appraisals or current management
appraisals provided however that "current" shall mean within the past
24 months, except, where the Company was not the lead participant,
"current" shall mean appraisals provided as of the date selected by the
lead participant.
(u) Antitakeover Provisions Inapplicable. (i) The Board of
Directors of the Company has duly adopted an irrevocable and binding
resolution as follows:
"RESOLVED, that pursuant to Section 3-603(c)(1)(ii)
of the Maryland General Corporation Law ("MGCL"), the Board of
Directors of the Corporation for the specific purpose of
establishing an irrevocable exemption from Section 3-602 of the
MGCL hereby irrevocably exempts therefrom, and hereby approves
thereunder, the entering into, and all of the transactions
relating to and contemplated by, the agreement and plan of
merger and the stock option agreement in substantially the form
presented to this meeting of the Board of Directors of the
Corporation to be entered into between First Fidelity
Bancorporation, Annabel Lee Corporation and the Corporation."
(ii) The resolution referred to in subsection (i) is effective
to exempt the Plan, the Option Agreement, the Merger and the
transactions contemplated hereby and thereby from the provisions of the
MGCL referred to therein and the Company has taken all action required
to exempt each of the foregoing from any other Maryland antitakeover
laws.
(v) Insurance. The Company and its subsidiaries are presently
insured, and since December 31, 1992, have been insured, for reasonable
amounts with financially sound and reputable insurance companies,
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. All of
the insurance policies and bonds maintained by the Company and its
subsidiaries are in full force and effect, the Company and its
subsidiaries are not in default thereunder and all material claims
thereunder have been filed in due and timely fashion. In the best
judgment of the Company's management, such insurance coverage is
adequate.
(w) Books and Records. The books and records of the Company and
each of its subsidiaries are maintained in accordance with applicable
legal and accounting requirements and reflect in all material respects
the substance of events and transactions that should be included
therein.
(x) Corporate Documents. The Company has delivered to the
Acquiror true and complete copies of (i) its articles of incorporation
and by-laws and (ii) the articles and by-laws of the Company Bank.
(y) Liquidation Account. Neither the Thrift Merger nor the
Merger will result in any payment or distribution payable out of the
Liquidation Account of the Company Bank.
SECTION 3.2. Representations and Warranties of Acquiror and
Merger Sub. Acquiror represents and warrants to the Company that, except as
specifically disclosed in a letter of the Acquiror delivered to the Company
prior to the execution hereof (and making specific reference to the Section of
this Plan for which an exception is taken) or as disclosed herein or in any
Annex hereto:
(a) Recitals True. The facts set forth in the Recitals of this
Plan with respect to the Acquiror and the Merger Sub are true and
correct.
(b) Corporate Organization and Qualification. Each of Acquiror
and Merger Sub is a corporation duly incorporated, validly existing and
in good standing under the laws of the States of New Jersey and
Maryland, respectively, and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it requires such qualification,
except for such failure to qualify or be in such good standing which,
when taken together with all other such failures, would not have a
Material Adverse Effect (as defined in Section 8.1). Acquiror and
Merger Sub each has the requisite corporate and other power and
authority (including all federal, state, local and foreign governmental
authorizations) to carry on its respective businesses as they are now
being conducted and to own their respective properties and assets,
except for such powers and authorizations the absence of which, either
individually or in the aggregate, would not have a Material Adverse
Effect.
(c) Corporate Authority. Each of Acquiror and Merger Sub has
the requisite corporate power and authority and has taken all corporate
action necessary in order to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement is a
valid and binding agreement of Acquiror and Merger Sub enforceable
against Acquiror and Merger Sub in accordance with its terms.
(d) No Violations. The execution, delivery and performance of
this Agreement by Acquiror and Merger Sub do not, and the consummation
of the transactions contemplated hereby will not, constitute (i) a
breach or violation of, or a default under, any law, rule or regulation
or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of Acquiror and Merger Sub or to
which Acquiror and Merger Sub (or any of their respective properties)
is subject, which breach, violation or default would have a Material
Adverse Effect on Acquiror, or enable any person to enjoin the Merger
or the Thrift Merger, (ii) a breach or violation of, or a default
under, the certificate or articles of incorporation or by-laws of
Acquiror or Merger Sub or (iii) a breach or violation of, or a default
under (or an event which with due notice or lapse of time or both would
constitute a default under), or result in the termination of,
accelerate the performance required by, or result in the creation of
any lien, pledge, security interest, charge or other encumbrance upon
any of the properties or assets of Acquiror or Merger Sub under, any of
the terms, conditions or provisions of any note, bond, indenture, deed
of trust, loan agreement or other agreement, instrument or obligation
to which Acquiror or Merger Sub is a party, or to which any of their
respective properties or assets may be bound or affected, except for
any of the foregoing that, individually or in the aggregate, would not
have a Material Adverse Effect on Acquiror; and the consummation of the
transactions contemplated hereby will not require any approval, consent
or waiver under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the approval, consent or
waiver of any other party to any such agreement, indenture or
instrument, other than (i) the required approvals, consents and waivers
of governmental authorities referred to in Section 5.1(b), (ii) any
such approval, consent or waiver that already has been obtained, and
(iii) any other approvals, consents or waivers the absence of which,
individually or in the aggregate, would not result in a Material
Adverse Effect on Acquiror or enable any person to enjoin the Merger or
the Thrift Merger.
(e) Access to Funds. Acquiror has, or on the Closing Date will
have, all funds necessary to consummate the Merger and pay the
aggregate Merger Consideration.
(f) Knowledge as to Conditions. Acquiror knows of no reason why
the approvals, consents and waivers of governmental authorities
referred to in Section 5.1(b) should not be obtained without the
imposition of any condition of the type referred to in the provisos
thereto.
(g) Banco Santander S.A. As of the date hereof, Banco
Santander, S.A. is a bank holding company under the BHC Act and,
immediately prior to the Effective Time, Banco Santander, S.A. will be
a bank holding company under the BHC Act. As of the date hereof, Banco
Santander, S.A. is not a savings and loan holding company under HOLA
(as herein defined) and, immediately prior to the Effective Time, Banco
Santander, S.A. will not be a savings and loan holding company under
HOLA.
ARTICLE IV. COVENANTS
SECTION 4.1. Acquisition Proposals. The Company agrees that
neither it nor any of its subsidiaries nor any of the respective officers and
directors of the Company or its subsidiaries shall, and the Company shall direct
and use its best efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, initiate, solicit or
encourage, directly or indirectly, any enquiries or the making of any proposal
or offer (including, without limitation, any proposal or offer to stockholders
of the Company) with respect to a merger, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
or, except to the extent legally required for the discharge by the board of
directors of its fiduciary duties as advised in writing by such board's counsel,
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, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. The Company will immediately cease and cause to be
terminated any existing discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company will take the
necessary steps to inform the appropriate individuals or entities referred to in
the first sentence hereof of the obligations undertaken in this Section 4.1. The
Company will notify the Acquiror immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Company and will enforce the terms of any confidentiality agreement with any
other party.
SECTION 4.2. Certain Policies of the Company. At the request of
the Acquiror prior to the Effective Time, the Company shall modify and change
its loan, litigation and real estate valuation policies and practices (including
loan classifications and levels of reserves) after the later of (i) the date on
which all required approvals referred to in Section 5.1(b) are received and all
applicable waiting periods in connection with such approvals expire and (ii) the
date on which the Company receives the approval of its shareholders on the
Merger and this Plan, so that such policies and practices will be consistent on
a mutually satisfactory basis with those of the Acquiror and generally accepted
accounting principles. The Company's representations, warranties and covenants
contained in this Plan shall not be deemed to be untrue or breached in any
respect for any purpose as a consequence of any modifications or changes
undertaken solely on account of this Section 4.2. Acquiror agrees promptly to
indemnify the Company for any losses or damages which it may incur as a result
of the actions taken by the Company pursuant to this Section 4.2 in the event
the Merger is not consummated, unless the failure to so consummate is primarily
due to a material breach of any representation, warranty or covenant contained
in this Plan by the Company.
SECTION 4.3. Employees. (a) Acquiror or any of its affiliates
(including, without limitation, the Surviving Corporation) shall have the right
(but not the obligation) to offer employment, as officers and employees of
Acquiror, the Surviving Corporation or other affiliates of Acquiror immediately
following the Effective Time, to any persons who are officers and employees of
the Company immediately before the Effective Time. Acquiror or its affiliates,
as the case may be, shall use their best efforts to identify, and offer
employment opportunities to qualified, satisfactorily performing employees of
the Company in positions for which such employees are qualified. Acquiror shall
give, and shall cause its affiliates to give, priority consideration to all such
employees vis-a-vis all individuals other than current employees of Acquiror and
Acquiror's affiliates; provided, however, that employees of the Company and its
subsidiaries shall rank on an equal footing with the current employees of
Acquiror and its affiliates and any other entities that may in the future be
acquired by Acquiror or its affiliates. To the extent that the employment of any
employee of the Company is involuntarily terminated within six months after the
Effective Time for any reason other than cause, such employee shall be entitled
to receive outplacement services in accordance with Acquiror's normal practices
and a severance payment equal to two weeks' pay for each full year of service
with the Company and the Surviving Corporation, provided, however, that except
as may be specifically provided in (d), below, under no circumstances shall any
employee be entitled to more than a total of 26 weeks' pay in respect of such
severance payment. For purposes for this Section 4.3, the determination of
whether the employment of any employee is terminated for cause shall be made in
accordance with Acquiror's or Acquiror's affiliates' normal employment
practices.
(b) Each person employed by the Company prior to the Effective
Time who remains an employee of the Surviving Corporation or its subsidiaries
following the Effective Time (each a "Continued Employee") shall be entitled, as
an employee of a subsidiary of Acquiror, to participate in whatever employee
benefit plans, as defined in Section 3(3) of ERISA, or whatever nonqualified
employee benefit plans or deferred compensation, stock option, bonus or
incentive plans or other employee benefit or fringe benefit programs that may be
in effect generally for employees of Acquiror's subsidiaries from time to time
("Acquiror's Plans"), if such Continued Employee shall be eligible or selected
or selected for participation therein and otherwise shall not be participating
in a similar plan which continues to be maintained by the Surviving Corporation
and its subsidiaries. Continued Employees will be eligible to participate on the
same basis as similarly situated employees of Acquiror or Acquiror's
subsidiaries. All such participation shall be subject to such terms of such
plans as may be in effect from time to time.
(c) Acquiror or Acquiror's subsidiaries shall, for purposes of
vesting and for purposes of eligibility to begin participation with respect to
Acquiror's Plans, cause each of Acquiror's Plans to be amended to recognize
credit for each Continued Employee's terms of service with the Company and the
Company's subsidiaries. Upon the Effective Time, or as soon as practicable
thereafter, no further benefit accruals shall be provided under the Company's
defined benefit pension plan, and each Continued Employee shall begin to accrue
a benefit under Acquiror's defined benefit pension plan according to its terms.
The Company agrees to assist with whatever action (not involving the payment of
money) that is reasonably required (including issuance of a timely notice to
employees under Section 204(h) of ERISA) to effectuate the foregoing.
(d) Acquiror agrees to cause Surviving Corporation to honor and
continue to perform, without modification, all severance contracts for senior
management employees of Company authorized and entered into by Company prior to
the date of this Agreement and which have been provided by Company to Acquiror
prior to the date of this Agreement and listed on Annex 4.
SECTION 4.4. Access and Information. Upon reasonable notice,
the Company shall (and shall cause its subsidiaries to) afford to the Acquiror
and its representatives (including, without limitation, directors, officers and
employees of the Acquiror and its affiliates, and counsel, accountants and other
professionals retained) such access during normal business hours throughout the
period prior to the Effective Time to the books, records (including, without
limitation, tax returns and work papers of independent auditors), properties and
personnel and to such other information as the Acquiror may reasonably request;
provided, however, that no investigation pursuant to this Section 4.4 shall
affect or be deemed to modify any representation or warranty made herein. The
Acquiror will not, and will cause its representatives not to, use any
information obtained pursuant to this Section 4.4 for any purpose unrelated to
the consummation of the transactions contemplated by this Plan. Subject to the
requirements of law, the Acquiror will keep confidential, and will cause its
representatives to keep confidential, all information and documents obtained
pursuant to this Section 4.4 unless such information (i) was already known to
the Acquiror, (ii) becomes available to the Acquiror from other sources not
known by the Acquiror to be bound by a confidentiality obligation, (iii) is
disclosed with the prior written approval of the Company 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, each party shall promptly cause all copies of
documents or extracts thereof containing information and data as to another
party hereto to be returned to the party which furnished the same.
SECTION 4.5. Certain Filings, Consents and Arrangements. The
Acquiror, Merger Sub and the Company shall, and the Company shall cause the Bank
and the FSB to, (a) as soon as practicable make any filings and applications
required to be filed in order to obtain all approvals, consents and waivers of
governmental authorities necessary or appropriate for the consummation of the
transactions contemplated hereby or by the Option Agreement, (b) cooperate with
one another (i) in promptly determining what filings are required to be made or
approvals, consents or waivers are required to be obtained under any relevant
federal, state or foreign law or regulation and (ii) in promptly preparing any
such filings, furnishing information required in connection therewith and
seeking timely to obtain any such approvals, consents or waivers and (c) deliver
to the other copies of the publicly available portions of all such filings and
applications in preliminary form for comment prior to their filing and in final
form promptly after they are filed. The Acquiror shall use its best efforts to
cause Banco Santander, S.A. to comply with the provisions of Section 6.05 of the
Investment Agreement, dated as of March 18, 1991, between the Acquiror and Banco
Santander, S.A. to participate and join with Acquiror in taking the action
required thereunder, and Acquiror will seek specific performance thereof
pursuant to Section 12.08 thereof, and in the event that the Merger is not
consummated primarily as a result of a failure by Banco Santander, S.A. to join
with Acquiror in any action required under Section 6.05 thereof, Acquiror shall
seek to be compensated for the amount of Acquiror's damages resulting from such
failure and shall pay over to the Company the amount of any payment for such
damages actually received by the Acquiror from Banco Santander, S.A.
SECTION 4.6. Antitakeover Statutes. The Company shall take all
reasonable steps requested by the Acquiror (i) to exempt the Company and the
Plan from the requirements of any state antitakeover law by action of its board
of directors or otherwise and (ii) to assist at the Acquiror's expense in any
challenge by the Acquiror to the applicability to the Merger of any state
antitakeover law.
SECTION 4.7. Indemnification; Directors' and Officers'
Insurance. (a) From and after the Effective Time through the sixth anniversary
of the Effective Date, the Acquiror and the Surviving Corporation agree to
indemnify and hold harmless each present and former director and officer of the
Company or its subsidiaries and each officer or employee of the Company or its
subsidiaries who is serving or has served as a director or trustee of another
entity expressly at the Company's request or direction, determined as of the
Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company would have been
permitted under Maryland law and its articles of incorporation or by-laws in
effect on the date hereof to indemnify such person (and the Acquiror or the
Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law and its articles of incorporation and
by-laws provided the person to whom expenses are advanced provides a written
affirmation of the person's good faith belief that the standard of conduct
necessary for indemnification by the Company pursuant to the MGCL has been met
and the person's undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification
under Section 4.7(a), upon learning of any such claim, action, suit, proceeding
or investigation, shall promptly notify the Acquiror and the Surviving
Corporation thereof, but the failure to so notify shall not relieve the Acquiror
or the Surviving Corporation of any liability it may have to such Indemnified
Party if such failure does not materially prejudice the indemnifying party. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Acquiror or the Surviving
Corporation shall have the right to assume the defense thereof and neither the
Acquiror nor the Surviving Corporation shall be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if neither the Acquiror nor the Surviving Corporation
elects to assume such defense or counsel for the Indemnified Parties advises
that there are issues which raise conflicts of interest between the Acquiror or
the Surviving Corporation and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and the Acquiror or the Surviving
Corporation shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the Acquiror and the Surviving Corporation shall be obligated
pursuant to this paragraph (b) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest (ii)
the Indemnified Parties will cooperate in the defense of any such matter and
(iii) neither the Acquiror nor the Surviving Corporation shall be liable for any
settlement effected without its prior written consent; and provided further that
neither the Acquiror nor the Surviving Corporation shall have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
nonappealable, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(c) For a period of six years after the Effective Time, the
Acquiror shall use all reasonable efforts to cause to be maintained in effect
the current policies of directors' and officers' liability insurance maintained
by the Company (provided that the Acquiror may substitute therefor policies of
comparable coverage with respect to claims arising from facts or events which
occurred before the Effective Time); provided, however, that in no event shall
the Acquiror be obligated to expend, in order to maintain or provide insurance
coverage pursuant to this Subsection 4.7(c), any amount per annum in excess of
200% of the amount of the annual premiums paid as of the date hereof by the
Company for such insurance (the "Maximum Amount"). If the amount of the annual
premiums necessary to maintain or procure such insurance coverage exceeds the
Maximum Amount, the Acquiror shall use all reasonable efforts to maintain the
most advantageous policies of directors' and officers' insurance obtainable for
an annual premium equal to the Maximum Amount.
SECTION 4.8. Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Plan as promptly as practicable,
including using efforts to obtain all necessary actions or non-actions,
extensions, waivers, consents and approvals from all applicable governmental
entities, effecting all necessary registrations, applications and filings
(including, without limitation, filings under any applicable state securities
laws) and obtaining any required contractual consents and regulatory approvals.
SECTION 4.9. Publicity. The initial press release announcing
this Plan shall be a joint press release and thereafter the Company and the
Acquiror shall consult with each other in issuing any press releases with
respect to the other or the transactions contemplated hereby and in making any
filings with any governmental entity or with any national securities exchange
with respect thereto.
SECTION 4.10. Proxy Statement. As soon as practicable after the
date hereof, the Company shall prepare a proxy statement to take shareholder
action on the Merger and this Agreement (the "Proxy Statement"), file it with
the SEC, respond to comments of the Staff of the SEC, clear the Proxy Statement
with the Staff of the SEC and promptly thereafter mail the Proxy Statement to
all holders of record (as of the applicable record date) of shares of Company
Common Stock. The Company represents and covenants that the Proxy Statement and
any amendment or supplement thereto (other than as to information furnished by
the Acquiror for inclusion therein), at the date of mailing to shareholders of
the Company and the date of the meeting of the Company's shareholders to be held
in connection with the Merger, will be in compliance with all relevant rules and
regulations of the SEC and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Acquiror and the Company shall cooperate
with each other in the preparation of the Proxy Statement.
SECTION 4.11. Shareholders' Meeting. The Company shall take all
action necessary, in accordance with applicable law and its articles of
incorporation and by-laws, to convene a meeting of the holders of Company Common
Stock (the "Company Meeting") as promptly as practicable after June 15, 1994 for
the purpose of considering and taking action required by this Plan. Except to
the extent legally required for the discharge by the board of directors of its
fiduciary duties as advised in writing by such board's counsel, the board of
directors of the Company shall recommend that the holders of the Company Common
Stock vote in favor of and approve the Merger and adopt this Plan at the Company
Meeting.
SECTION 4.12. Notification of Certain Matters. Each party shall
give prompt notice to the others of: (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Plan and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses or results of
operations of the Company and its subsidiaries taken as a whole to which the
Company or any of its subsidiaries is a party or is subject; and (b) any change
which has a Material Adverse Effect. Each of the Company, the Acquiror and
Merger Sub shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
SECTION 4.13. Outstanding Debt. Prior to the Effective Date,
the Company shall (i) effect the redemption of the entire outstanding principal
amount of the Convertible Subordinated Debentures pursuant to the terms of the
related indenture and (ii) seek to repurchase the entire outstanding principal
amount of Capital Notes of the Company on such terms and conditions as shall be
acceptable to the Acquiror. Prior to the Company effecting such redemption or
making such repurchase, Acquiror, upon request of the Company, shall extend a
loan to the Company in an amount sufficient to cover such redemption and
repurchase, for three years at a 6 3/4% annual interest rate on an unsecured
basis and with and upon such other commercially reasonable terms to be
determined by the Acquiror and the Company at the time of the borrowing.
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1. Conditions to All Parties' Obligations. The
respective obligations of the Acquiror, Merger Sub and the Company to effect the
transactions referred to in Section 1.5 and the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the following conditions:
(a) The Plan and the transactions contemplated hereby shall
have been approved by the requisite vote of the shareholders of the
Company in accordance with applicable law.
(b) Banco Santander, S.A., the Acquiror, Merger Sub, the
Company, the Bank and the FSB shall have procured the required
approvals, consents or waivers for the transactions contemplated hereby
(i) by the Office of Thrift Supervision (the "OTS"), (ii) by the FDIC,
(iii) by the Federal Reserve Board and (iv) by the Commissioner, and
all applicable statutory waiting periods shall have expired; and the
parties and other participants in the transactions contemplated hereby
shall have procured all other regulatory approvals, consents or waivers
of governmental authorities or other persons that are necessary or
appropriate to the consummation of the transactions contemplated by the
Plan; provided, however, that no approval, consent or waiver referred
to in this Section 5.1(b) shall be deemed to have been received if it
shall include any condition or requirement that, individually or in the
aggregate, would (i) result in a Material Adverse Effect on the
Acquiror or (ii) would reduce the benefits of the transactions
contemplated by the Plan to the Acquiror in so significant and material
a manner that the Acquiror, in its good faith reasonable judgment,
would not have entered into this Plan had such condition or requirement
been known at the date hereof.
(c) All other requirements prescribed by law which are
necessary to the consummation of the transactions contemplated by this
Plan shall have been satisfied.
(d) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins
or prohibits the consummation of the Merger or any other transaction
contemplated by this Plan, and no litigation or proceeding shall be
pending against the Acquiror or the Company or any of their
subsidiaries brought by any governmental agency seeking to prevent
consummation of the transactions contemplated hereby.
(e) No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated, interpreted or enforced
by any governmental authority or court which prohibits, restricts or
makes illegal consummation of the Merger or any other transaction
contemplated by this Plan.
SECTION 5.2. Conditions to Obligations of the Acquiror and
Merger Sub. The obligations of the Acquiror and Merger Sub to effect the Merger
shall be subject to the satisfaction or waiver prior to the Effective Time of
the following additional conditions:
(a) The Acquiror shall have received from the Company's
independent certified public accountants "cold comfort" letters, dated
(i) within five business days prior to the date of the mailing of the
Proxy Statement to the Company's shareholders and (ii) shortly prior to
the Effective Date, with respect to certain financial information
regarding the Company in the form customarily issued by such
accountants at such time in transactions of this type.
(b) Each of the representations and warranties of the Company
contained in this Plan and the Option Agreement shall have been true
and correct on the date hereof and shall be true and correct on the
Effective Date (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier
date or period); provided, however, that for purposes of this Section
5.2(b) a representation or warranty shall only fail to be true and
correct on the Effective Date if it has not been waived and if the
failure of any such representation or warranty to be true and correct
has or constitutes, or is likely to have or constitute, either
individually or in the aggregate with other representations or
warranties, a Material Adverse Effect; the Company shall have
performed, in all material respects, each of its covenants and
agreements contained in this Plan and the Option Agreement; and the
Acquiror shall have received a certificate signed by the Chief
Executive Officer and the Chief Financial Officer of the Company, dated
the Effective Date, to the foregoing effect.
(c) The Company shall have effected the redemption of the
entire outstanding principal amount of its Convertible Subordinated
Debentures.
(d) The Thrift Merger shall have occurred, the Company shall no
longer be a bank holding company for purposes of the BHC Act and the
Company shall have become a savings and loan holding company under the
Home Owners' Loan Act of 1933, as amended ("HOLA").
SECTION 5.3. Conditions to the Obligation of the Company. The
obligation of the Company to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the following additional
conditions:
(a) Each of the representations, warranties and covenants of
the Acquiror and Merger Sub contained in this Plan shall have been true
and correct on the date hereof and shall be true and correct on the
Effective Date (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier
date); provided, however, that for purposes of this Section 5.3(a) a
representation or warranty shall only fail to be true and correct on
the Effective Date if the failure of any such representation or
warranty to be true and correct has or constitutes, or is likely to
have or constitute, either individually or in the aggregate with other
representations or warranties, a Material Adverse Effect; the Acquiror
and Merger Sub shall have performed, in all material respects, each of
its covenants and agreements contained in this Plan; and the Company
shall have received certificates signed by the Vice Chairman and Chief
Financial Officer of the Acquiror, dated the Effective Date, to the
foregoing effect.
ARTICLE VI. TERMINATION
SECTION 6.1. Termination. This Plan may be terminated, and
the Merger abandoned, prior to the Effective Date, either before or after its
approval by the shareholders of the Company and the Acquiror:
(a) by the mutual consent of the Acquiror and the Company, if
the board of directors of each so determines by vote of a majority of
the members of its entire board;
(b) by the Acquiror or the Company, if its board of directors
so determines by vote of a majority of the members of its entire board,
in the event of (i) the failure of the shareholders of the Company to
approve the Plan at its meeting called to consider such approval, or
(ii) a material breach by the other party hereto of any representation,
warranty, covenant or agreement contained herein (or, in the case of
the Company, in the Option Agreement) which is not cured or not curable
within 30 days after written notice of such breach is given to the
party committing such breach by the other party, if such breach would
have a Material Adverse Effect;
(c) by the Acquiror or the Company by written notice to the
other party if either (i) any approval, consent or waiver of a
governmental authority required to permit consummation of the
transactions contemplated hereby shall have been denied or (ii) any
governmental authority of competent jurisdiction shall have issued a
final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Plan;
(d) by the Acquiror or the Company, if its board of directors
so determines by vote of a majority of the members of its entire board,
in the event that the Merger is not consummated by March 31, 1995,
unless the failure to so consummate by such time is primarily due to a
material breach of any representation, warranty or covenant contained
in this Plan by the party seeking to terminate; or
(e) by the Acquiror by written notice to the Company before the
close of business on the day immediately following the date hereof, if
the Option Agreement shall not yet have been entered into.
SECTION 6.2. Effect of Termination. In the event of the
termination of this Plan by either the Acquiror or the Company, as provided
above, this Plan shall thereafter become void and, subject to the provisions of
Section 8.2, 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 any
willful and material breach by any other party of any covenant or any willful
and material misrepresentation contained in this Plan.
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.1. Effective Date and Effective Time. On the later of
(i) October 31, 1994, (ii) a business day designated by the Acquiror within ten
business days after the receipt of all required regulatory approvals and the
expiration of all applicable waiting periods in connection with such approvals
occurs and all conditions to the consummation of this Plan are satisfied or
waived, or (iii) on such later date as may be agreed by the parties, articles of
merger shall be executed in accordance with all appropriate legal requirements
and shall be filed as required by law, and the Merger provided for herein shall
become effective upon such filing or on such date as may be specified in such
articles of merger. The date of such filing or such later effective date is
herein called the "Effective Date". The "Effective Time" of the Merger shall be
as set forth in or provided by such articles of merger.
ARTICLE VIII. OTHER MATTERS
SECTION 8.1. Certain Definitions; Interpretation. As used in
this Plan, the following terms shall have the meanings indicated:
"material" means material to the Acquiror or the Company (as
the case may be) and its respective subsidiaries, taken as a whole.
"Material Adverse Effect", with respect to a person, means any
condition, event, change or occurrence that is reasonably likely to
have a material adverse effect upon (A) the financial condition,
properties, business or results of operations of such person and its
subsidiaries, taken as a whole (other than as a result of (i) changes
in laws or regulations or accounting rules of general applicability or
interpretations thereof, (ii) decreases in capital under Financial
Accounting Standards No. 115 attributable to general increases in
interest rates or (iii) any reclassification of loans, write downs of
real estate owned or loan loss reserves taken pursuant to a specific
written request of Acquiror (which Company agrees to comply with) or
(B) the ability of such person to perform its obligations under, and to
consummate the transactions contemplated by, this Plan and, in the case
of the Company, the Option Agreement.
"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
"Subsidiary", with respect to a person, means any other person
controlled by such person.
When a reference is made in this Plan to Sections or Annexes, such reference
shall be to a Section of, or Annex to, this Plan unless otherwise indicated. The
table of contents, tie sheet and headings contained in this Plan are for ease of
reference only and shall not affect the meaning or interpretation of this Plan.
Whenever the words "include", "includes", or "including" are used in this Plan,
they shall be deemed followed by the words "without limitation". Any singular
term in this Plan shall be deemed to include the plural, and any plural term the
singular.
SECTION 8.2. Survival. Only those agreements and covenants of
the parties that are by their terms applicable in whole or in part after the
Effective Time shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall be deemed to be conditions of the
Plan and shall not survive the Effective Time. If the Plan shall be terminated,
the agreements of the parties in the last three sentences of Section 4.4, the
last sentence of Section 4.5, Section 6.2 and Section 8.6 shall survive such
termination.
SECTION 8.3. Waiver. Prior to the Effective Time, any provision
of this Plan may be: (i) waived by the party benefitted by the provision; or
(ii) amended or modified at any time (including the structure of the
transaction) by an agreement in writing between the parties hereto authorized by
their respective boards of directors, except that, after the vote by the
shareholders of the Company, no amendment may be made that would contravene any
applicable law.
SECTION 8.4. Counterparts. This Plan may be executed in
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
SECTION 8.5. Governing Law. This Plan shall be governed by,
and interpreted in accordance with, the laws of the State of Maryland.
SECTION 8.6. Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Plan and the transactions contemplated
hereby, except printing expenses which shall be shared equally.
SECTION 8.7. Notices. All notices, requests, acknowledgements
and other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, telecopy, telegram or
telex (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
If to the Company, to:
Baltimore Bancorp
120 E. Baltimore Street
(25th Floor)
Baltimore, Maryland 21203
Telecopy: (410) 576-0695
Attention: James A. Gast, Esq.
Vice President and Corporate Counsel
With copies to:
Charles E. Allen, Esq.
Hogan & Hartson L.L.P.
Columbia Square
555 13th Street, N.W.
Washington D.C. 20004
Telecopy: (202) 637-5910
If to the Acquiror or Merger Sub, to:
First Fidelity Bancorporation
550 Broad Street
Newark, New Jersey 07102
Telecopy: (201) 565-2985
Attention: Wolfgang Schoellkopf
Vice-Chairman and Chief
Financial Officer
With copies to:
James L. Mitchell, Esq.
First Fidelity Bancorporation
550 Broad Street
Newark, New Jersey 07102
Telecopy: (201) 565-2985
and
H. Rodgin Cohen, Esq.
Mark J. Menting, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopy: (212) 558-3588
SECTION 8.8. Entire Agreement; Etc. This Plan, together with
the Option Agreement, represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made. All terms and provisions
of the Plan shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Except as to Section 4.7,
nothing in this Plan is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Plan.
SECTION 8.9. Assignment. This Plan may not be assigned by any
party hereto without the written consent of the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Plan to
be executed by their duly authorized officers as of the day and year first above
written.
FIRST FIDELITY BANCORPORATION
By: /s/ James L. Mitchell
-----------------------
James L. Mitchell
Executive Vice President, General
Counsel and Secretary
ANNABEL LEE CORPORATION
By: /s/ James L. Mitchell
-----------------------
James L. Mitchell
President
BALTIMORE BANCORP
By: /s/ Edwin F. Hale, Sr.
-----------------------
Edwin F. Hale, Sr.
Chairman and Chief Executive
Officer
<PAGE>
Confidental, For Use of the Commission Only.
APPENDIX B
FORM OF LETTER OF
ALEX. BROWN & SONS INCORPORATED
September ___, 1994
The Board of Directors
Baltimore Bancorp
The Bank of Baltimore Building
120 East Baltimore Street
Baltimore, MD 21202
Dear Madame and Sirs:
You have requested our opinion as to the fairness from a
financial point of view to the holders of the outstanding shares of common
stock, having a par value of $5.00 per share (the "Common Stock") of Baltimore
Bancorp (the "Company") of the consideration to be received by the Company's
shareholders pursuant to the Agreement and Plan of Merger dated as of March 21,
1994, as amended September __, 1994, between First Fidelity Bancorporation
("First Fidelity") and the Company (the "Merger"). Pursuant to the Merger, each
of the shares of Common Stock will receive $20.75 in cash (the "Merger
Consideration").
Alex. Brown & Sons Incorporated, as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of the
Company in connection with the transaction described above and will receive a
fee for our services, a significant portion of which is contingent upon the
consummation of the transaction contemplated by the Merger. Alex. Brown & Sons
Incorporated maintains a market in the Common Stock and regularly publishes
research reports regarding the financial services industry and the businesses
and securities of publicly owned companies in that industry, including the
Company.
In connection with this opinion, we have reviewed certain
publicly available financial information concerning the Company and First
Fidelity and certain internal financial analyses and other information furnished
to us by the Company. We have also held discussions with members of the
Company's senior management regarding the business and prospects of the Company.
In addition, we have (i) reviewed the reported price and trading activity for
the shares of Common Stock, (ii) compared certain financial and stock market
information for the Company with similar information for certain comparable
companies whose securities are publicly traded, (iii) reviewed the Merger and
compared the financial terms of the Merger with those of certain recent business
combinations in the commercial banking industry which we deemed comparable in
whole or in part and (iv) performed such other studies and analyses and
considered such other factors as we deemed appropriate.
We have not independently verified the information described
above and for purposes of this opinion have assumed the accuracy, completeness
and fairness thereof. With respect to information relating to the prospects of
the Company, we have assumed that such information reflects the best currently
available estimates and judgments of the management of the Company as to the
likely future financial performance of the Company. In addition, we have not
made an independent evaluation or appraisal of the assets or liabilities of the
Company, nor have we been furnished with any such evaluation or appraisal. Our
opinion is based on market, economic and other conditions as they exist and can
be evaluated as of the date of this letter.
Based upon and subject to the foregoing, it is our opinion
that, as of the date of this letter, the Merger Consideration is fair, from a
financial point of view, to the holders of shares of Common Stock.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
By: ___________________________
<PAGE>
Confidential, For Use of the Commission Only.
APPENDIX C
CONFORMED COPY
THE TRANSFER OF THE OPTION GRANTED BY THIS AGREEMENT IS SUBJECT TO
RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of the 22nd day of March, 1994
(this "Agreement"), between First Fidelity Bancorporation, a New Jersey
corporation ("Grantee"), and Baltimore Bancorp, a Maryland corporation
("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger, dated as of the 21st day of March, 1994 (the "Plan"), which was
executed by the parties hereto prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering
into the Plan and in consideration therefor, Issuer has agreed to grant Grantee
the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Plan, the parties
hereto agree as follows:
SECTION 1. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 3,300,000 fully paid and nonassessable shares of Common Stock, par value
$5.00 per share ("Common Stock"), of Issuer at a price per share equal to the
average of the low and high reported sale prices per share on the New York Stock
Exchange Composite Transactions Tape (the "Tape") on the first full trading day
after the announcement of the Plan (the "Initial Price"); provided, however,
that in the event Issuer issues or agrees to issue (other than pursuant to
options or other agreements to issue Common Stock in effect as of the date
hereof and employee and director stock options issued in the ordinary course of
business) any shares of Common Stock at a price less than the Initial Price (as
adjusted pursuant to Section 5(b)), such price shall be equal to such lesser
price (such price, as adjusted as hereinafter provided, the "Option Price"). The
number of shares of Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment as herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or
part, at any time and from time to time following the occurrence of a Purchase
Event (as defined below); provided that the Option shall terminate and be of no
further force and effect upon the earliest to occur of (i) the time immediately
prior to the Effective Time, (ii) 12 months after the first occurrence of a
Purchase Event, (iii) 12 months after the termination of the Plan following the
occurrence of a Preliminary Purchase Event (as defined below), (iv) termination
of the Plan in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event (other than a termination of the
Plan by Grantee pursuant to Section 6.1(b)(ii) thereof), (v) 12 months after the
termination of the Plan by Grantee pursuant to Section 6.1(b)(ii) thereof as a
result of any willful and material breach of the Plan or (vi) 4 months after the
termination of the Plan by Grantee otherwise pursuant to Section 6.1(b)(ii)
thereof other than as a result of a willful and intentional breach. The events
described in clauses (i) - (vi) in the preceding sentence are hereinafter
collectively referred to as an "Exercise Termination Event."
(b) The term "Preliminary Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its subsidiaries (each an "Issuer
Subsidiary") without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as defined below) with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934
(the "Securities Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its subsidiaries (each a
"Grantee Subsidiary") or the Board of Directors of Issuer shall have
recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction with any person other than Grantee or any
Grantee Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any of Issuer's material subsidiaries
("Material Subsidiaries"), (y) a purchase, lease or other acquisition
of all or substantially all of the assets of Issuer or any Material
Subsidiary or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer or a Material
Subsidiary; provided that the term "Acquisition Transaction" does not
include any internal merger or consolidation involving only Issuer
and/or Issuer Subsidiaries;
(ii) Any person (other than Grantee or any Grantee Subsidiary)
shall have acquired ownership or control of, or the right to vote, 10%
or more of the outstanding shares of Common Stock;
(iii) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its shareholders, by
public announcement or written communication that is or becomes the
subject of public disclosure, to engage in an Acquisition Transaction
(including, without limitation, any situation in which any person other
than Grantee or any subsidiary of Grantee shall have commenced (as such
term is defined in Rule 14d-2 under the Exchange Act), or shall have
filed a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a tender offer or
exchange offer to purchase any shares of Issuer Common Stock such that,
upon consummation of such offer, such person would own or control 10%
or more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange
Offer", respectively));
(iv) After a bona fide proposal is made by a third party to
Issuer or publicly to its shareholders to engage in an Acquisition
Transaction, Issuer shall have materially breached any covenant or
obligation contained in the Plan and such breach would entitle Grantee
to terminate the Plan or the holders of Issuer Common Stock shall not
have approved the Plan at the meeting of such stockholders held for the
purpose of voting on the Plan, such meeting shall not have been held or
shall have been canceled prior to termination of the Plan or Issuer's
Board of Directors shall have withdrawn or modified in a manner adverse
to Grantee the recommendation of Issuer's Board of Directors with
respect to the Plan; or
(v) Any person other than Grantee or any Grantee Subsidiary,
other than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed an application or notice
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") or other governmental authority or regulatory or
administrative agency or commission (each, a "Governmental Authority")
for approval to engage in an Acquisition Transaction.
(c) The term "Purchase Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person other than Grantee or any
Grantee Subsidiary of ownership or control of, or the right to vote
(other than on behalf of the Issuer), 25% or more of the then
outstanding Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described
in Section 2(b)(i) except that the percentage referred to in clause (z)
shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the "Option
Notice" and the date of which being hereinafter referred to as the "Notice
Date") specifying (i) the total number of shares of Common Stock it will
purchase pursuant to such exercise and (ii) the time (which shall be on a
business day that is not less than three nor more than ten business days from
the Notice Date) on which the closing of such purchase shall take place (the
"Closing Date"); such closing to take place at the principal office of the
Issuer; provided, that, if prior notification to or approval of the Federal
Reserve Board or any other Governmental Authority is required in connection with
such purchase (each, a "Notification" or an "Approval," as the case may be), (a)
Grantee shall promptly file the required notice or application for approval
("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a), any exercise
of the Option shall be deemed to occur on the Notice Date relating thereto. On
or prior to the Closing Date, Grantee shall have the right to revoke its
exercise of the Option in the event that the transaction constituting a Purchase
Event that gives rise to such right to exercise shall not have been consummated.
(f) At the closing referred to in Section 2(e), Grantee shall
pay to Issuer the aggregate purchase price for the number of shares of Common
Stock specified in the Option Notice in immediately available funds by wire
transfer to a bank account designated by Issuer; provided, however, that failure
or refusal of Issuer to designate such a bank account shall not preclude Grantee
from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(f), Issuer shall deliver to
Grantee a certificate or certificates representing the number of shares of
Common Stock specified in the Option Notice and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares of Common Stock purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing
hereunder shall be endorsed with a restrictive legend substantially as follows:
The transfer of the shares represented by this certificate is
subject to resale restrictions arising under the Securities Act of
1933, as amended, and applicable state securities laws and to certain
provisions of an agreement between First Fidelity Bancorporation and
Baltimore Bancorp ("Issuer") dated as of the 22nd day of March, 1994. A
copy of such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission (the "SEC") or Governmental Authority responsible for administering
any applicable state securities laws or an opinion of counsel, in form and
substance satisfactory to Issuer, to the effect that such legend is not required
for purposes of the Securities Act or applicable state securities laws; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by Grantee to Issuer of an Option Notice
and the tender of the applicable purchase price in immediately available funds
on the Closing Date, Grantee shall be deemed to be the holder of record of the
number of shares of Common Stock specified in the Option Notice, notwithstanding
that the stock transfer books of Issuer shall then be closed or that
certificates representing such shares of Common Stock shall not then actually be
delivered to Grantee. Issuer shall pay all expenses and other charges that may
be payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until
the termination of this Agreement have reserved for issuance upon the exercise
of the Option that number of authorized and reserved shares of Common Stock
equal to the maximum number of shares of Common Stock at any time and from time
to time issuable hereunder, all of which shares will, upon issuance pursuant
hereto, be duly authorized, validly issued, fully paid, nonassessable, and
delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all reasonable action as may from time to time be
requested by the Grantee, at Grantee's expense (including (x) complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. ss. 18a and regulations promulgated thereunder and (y) in the event,
under the Bank Holding Company Act of 1956, as amended ("BHC Act"), or the
Change in Bank Control Act of 1978, as amended, or any state banking law, prior
approval of or notice to the Federal Reserve Board or to any other Governmental
Authority is necessary before the Option may be exercised, cooperating with
Grantee in preparing such applications or notices and providing such information
to each such Governmental Authority as it may require) in order to permit
Grantee to exercise the Option and Issuer duly and effectively to issue shares
of Common Stock pursuant hereto; and (iv) to take all action provided herein to
protect the rights of Grantee against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any agreements and related options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
SECTION 5. The number of shares of Common Stock purchasable
upon the exercise of the Option shall be subject to adjustment from time to time
as follows:
(a) In the event of any change in the Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type
and number of shares of Common Stock purchasable upon exercise hereof
shall be appropriately adjusted and proper provision shall be made so
that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option), the number of
shares of Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of
Common Stock previously issued pursuant to the exercise of the Option
(as adjusted on account of any of the foregoing changes in the Common
Stock), it equals 19.9% of the number of shares of Common Stock then
issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the
Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which shall be equal to the number of shares
of Common Stock purchasable prior to the adjustment and the denominator
of which shall be equal to the number of shares of Common Stock
purchasable after the adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee (whether on its own behalf or on behalf of any subsequent holder of the
Option (or part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf registration statement
under the Securities Act covering any shares issued and issuable pursuant to the
Option and shall use its best efforts to cause such registration statement to
become effective, and to remain current and effective for a period not in excess
of 180 days from the day such registration statement first becomes effective, in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of the Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee; provided, however,
that Issuer may postpone filing a registration statement relating to a
registration request by Grantee under this Section 6 for a period of time (not
in excess of 30 days) if in its judgment such filing would require the
disclosure of material information that Issuer has a bona fide business purpose
for preserving as confidential. Grantee shall have the right to demand two such
registrations. The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in the
process of registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering the offering or inclusion of the Option Shares
would interfere materially with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced; provided,
however, that after any such required reduction the number of Option Shares to
be included in such offering for the account of Grantee shall constitute at
least 20% of the total number of shares of Grantee and Issuer covered in such
registration statement; provided further, however, that if such reduction
occurs, then Issuer shall file a registration statement for the balance as
promptly as practicable thereafter as to which no reduction pursuant to this
Section 6(a) shall be permitted or occur and the Grantee shall thereafter be
entitled to one additional registration statement. Grantee shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. In connection with any such registration,
Issuer and Grantee shall provide each other with representations, warranties,
indemnities and other agreements customarily given in connection with such
registrations. If requested by Grantee in connection with such registration,
Issuer and Grantee shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating themselves in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements. Notwithstanding the
foregoing, if Grantee revokes any exercise notice or fails to exercise any
Option with respect to any exercise notice pursuant to Section 2(e), Issuer
shall not be obligated to continue any registration process with respect to the
sale of Option Shares issuable upon the exercise of such Option and Grantee
shall not be deemed to have demanded registration of Option Shares.
(b) In the event that Grantee requests Issuer to file a
registration statement following the failure to obtain any approval required to
exercise the Option as described in Section 9, the closing of the sale or other
disposition of the Common Stock or other securities pursuant to such
registration statement shall occur substantially simultaneously with the
exercise of the Option.
SECTION 7. (a) Upon the occurrence of a Purchase Event that
occurs prior to an Exercise Termination Event, (i) at the request (the date of
such request being the "Option Repurchase Request Date") of Grantee, Issuer
shall repurchase the Option from Grantee at a price (the "Option Repurchase
Price") equal to the amount by which (A) the market/offer price (as defined
below) exceeds (B) the Option Price, multiplied by the number of shares for
which the Option may then be exercised and (ii) at the request (the date of such
request being the "Option Share Repurchase Request Date") of the owner of Option
Shares from time to time (the "Owner"), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the market/offer price multiplied by
the number of Option Shares so designated. The term "market/offer price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made after the date hereof and on or
prior to the Option Repurchase Request Date or the Option Share Repurchase
Request Date, as the case may be, (ii) the price per share of Common Stock paid
or to be paid by any third party pursuant to an agreement with Issuer (whether
by way of a merger, consolidation or otherwise), (iii) the average of the 20
highest last sale prices for shares of Common Stock within the 90-day period
ending on the Option Repurchase Request Date or the Option Share Repurchase
Request Date, as the case may be, quoted on the Tape (as reported by The Wall
Street Journal, or, if not reported thereby, another authoritative source), (iv)
in the event of a sale of all or substantially all of Issuer's assets, the sum
of the price paid in such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a nationally-recognized
independent investment banking firm selected by Grantee or the Owner, as the
case may be, divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the market/offer price, the
value of consideration other than cash shall be the value determined by a
nationally-recognized independent investment banking firm selected by Grantee or
the Owner, as the case may be, and reasonably acceptable to the Issuer, which
investment banking firm's determination shall be conclusive and binding on all
parties.
(b) Grantee or the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and/or any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 15 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price or the portion thereof that Issuer is not then
prohibited from so delivering under applicable law and regulation or as a
consequence of administrative policy (including policies relating to the
maintenance of capital levels and a sound financial condition).
(c) Issuer hereby undertakes to use its best efforts to obtain
all required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish any repurchase contemplated by
this Section 7. Nonetheless, to the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy
(including policies relating to the maintenance of capital levels and a sound
financial condition), from repurchasing any Option and/or any Option Shares in
full, Issuer shall promptly so notify Grantee and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to Grantee and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to Section 7(b) is prohibited under
applicable law or regulation, or as a consequence of administrative policy
(including policies relating to the maintenance of capital levels and a sound
financial condition), from delivering to Grantee and/or the Owner, as
appropriate, the Option Repurchase Price or the Option Share Repurchase Price,
respectively, in full, Grantee or the Owner, as appropriate, may revoke its
notice of repurchase of the Option or the Option Shares either in whole or in
part whereupon, in the case of a revocation in part, Issuer shall promptly (i)
deliver to Grantee and/or the Owner, as appropriate, that portion of the Option
Purchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, either (A) to Grantee, a new Agreement evidencing
the right of Grantee to purchase that number of shares of Common Stock equal to
the number of shares of Common Stock purchasable immediately prior to the
delivery of the notice of repurchase less the number of shares of Common Stock
covered by the portion of the Option repurchased or (B) to the Owner, a
certificate for the number of Option Shares covered by the revocation.
(d) Issuer shall not enter into any agreement with any party
(other than Grantee or a Grantee Subsidiary) for an Acquisition Transaction
unless the other party thereto assumes all the obligations of Issuer pursuant to
this Section 7 in the event that Grantee or the Owner elects, in its sole
discretion, to require such other party to perform such obligations.
SECTION 8. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to consolidate or
merge with any person, other than Grantee or a Grantee Subsidiary, and shall not
be the continuing or surviving corporation of such consolidation or merger, (ii)
to permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its or any Material Subsidiary's assets to any
person, other than Grantee or a Grantee Subsidiary, then, and in each such case,
the agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below) or (y) any person that controls the Acquiring
Corporation (the Acquiring Corporation and any such controlling person being
hereinafter referred to as the "Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number
of shares of the Substitute Common Stock (as is hereinafter defined) as is equal
to the market/offer price (as defined in Section 7) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as is hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common Stock
(the "Substitute Purchase Price") shall then be equal to the Option Price
multiplied by a fraction in which the numerator is the number of shares of the
Issuer Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares for which the Substitute Option is
exercisable.
(c) The Substitute Option shall otherwise have the same terms
as the Option, provided that if the terms of the Substitute Option cannot, for
legal reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee, provided further that the
terms of the Substitute Option shall include (by way of example and not
limitation) provisions for the repurchase of the Substitute Option and
Substitute Common Stock by the Substitute Option Issuer on the same terms and
conditions as provided in Section 7.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving person, and (iii) the transferee of all or any
substantial part of the Issuer's assets (or the assets of Issuer's
Material Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the Substitute
Option.
(iii) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger or sale;
provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common stock
issued by Issuer, the person merging into Issuer or by any company
which controls or is controlled by such merging person, as Grantee may
elect.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of the Substitute Common Stock outstanding immediately prior to
the issuance of the Substitute Option. In the event that the Substitute Option
would be exercisable for more than 19.9% of the aggregate of the shares of
Substitute Common Stock but for this clause (e), the Substitute Option Issuer
shall make a cash payment to Grantee equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in the clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by Grantee and the
Substitute Option Issuer. In addition, the provisions of Section 5(a) shall not
apply to the issuance of any Substitute Option and for purposes of applying
Section 5(a) thereafter to any Substitute Option the percentage referred to in
Section 5(a) shall thereafter equal the percentage that the percentage of the
shares of Substitute Common Stock subject to the Substitute Option bears to the
number of shares of Substitute Common Stock outstanding.
SECTION 9. Notwithstanding Sections 2, 6 and 7, if Grantee has
given the notice referred to in one or more of such Sections, the exercise of
the rights specified in any such Section shall be extended (a) if the exercise
of such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Securities Exchange Act by reason of such exercise;
provided that in no event shall any closing date occur more than 18 months after
the related Notice Date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the Federal
Reserve Board or any other Governmental Authority despite the best efforts of
Issuer or the Substitute Option Issuer, as the case may be, to obtain such
approvals, the exercise of the Option shall be deemed to have been rescinded as
of the related Notice Date. In the event (a) Grantee receives official notice
that an approval of the Federal Reserve Board or any other Governmental
Authority required for the purchase and sale of the Option Shares will not be
issued or granted or (b) a closing date has not occurred within 18 months after
the related Notice Date due to the failure to obtain any such required approval,
Grantee shall be entitled to exercise the Option in connection with the resale
of the Option Shares pursuant to a registration statement as provided in Section
6. Nothing contained in this Agreement shall restrict Grantee from specifying
alternative means of exercising rights pursuant to Sections 2, 6 or 7 hereof in
the event that the exercising of any such rights shall not have occurred due to
the failure to obtain any required approval referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee
as follows:
(a) Issuer has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved by
the Board of Directors of Issuer and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Issuer,
enforceable against Issuer in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
non-assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
SECTION 11. (a) Neither of the parties hereto may assign any of
its rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other person without the express written consent of the
other party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event; provided, however,
that until the date at which the Federal Reserve Board has approved an
application by Grantee under the BHC Act to acquire the shares of Common Stock
subject to the Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board. The term "Grantee" as used in this Agreement shall also be deemed to
refer to Grantee's permitted assigns.
(b) Any assignment of rights of Grantee to any permitted
assignee of Grantee hereunder shall bear the restrictive legend at the beginning
thereof substantially as follows:
The transfer of the option represented by this assignment and
the related option agreement is subject to resale restrictions arising
under the Securities Act of 1933, as amended, and applicable state
securities laws and to certain provisions of an agreement between First
Fidelity Bancorporation and Baltimore Bancorp, ("Issuer") dated as of
the 22nd day of March, 1994. A copy of such agreement is on file at the
principal office of Issuer and will be provided to any permitted
assignee of the Option without change upon receipt by Issuer of a
written request therefor.
It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act in the above legend shall be removed by delivery of
substitute assignments without such reference if Grantee shall have delivered to
Issuer a copy of a letter from the staff of the SEC or Governmental Authority
responsible for administering any applicable state securities laws, or an
opinion of counsel, in form and substance satisfactory to Issuer, to the effect
that such legend is not required for purposes of the Securities Act or
applicable state securities laws; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
assignments without such reference if the Option has been sold or transferred in
compliance with the provisions of this Agreement and under circumstances that do
not require the retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such assignments shall bear any other legend as
may be required by law.
SECTION 12. Each of Grantee and Issuer will use its reasonable
efforts to make all filings with, and to obtain consents of, all third parties
and Governmental Authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, making
application, if necessary, for quotation of the shares of Common Stock issuable
hereunder on the Tape and applying to the Federal Reserve Board under the BHC
Act and to state banking authorities for approval to acquire the shares issuable
hereunder.
SECTION 13. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties shall hereto be enforceable by either
party hereto through injunctive or other equitable relief. Both parties further
agree to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
SECTION 14. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that Grantee is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) (as adjusted pursuant hereto), it is the
express intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
SECTION 15. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Plan.
SECTION 16. This Agreement shall be governed by and construed
in accordance with the laws of the State of Maryland.
SECTION 17. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement and shall be effective at the time
of execution and delivery.
SECTION 18. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
SECTION 19. Except as otherwise expressly provided herein or in
the Plan, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
SECTION 20. Capitalized terms used in this Agreement and not
defined herein but defined in the Plan shall have the meanings assigned thereto
in the Plan.
SECTION 21. Nothing contained in this Agreement shall be deemed
to authorize or require Issuer or Grantee to breach any provision of the Plan or
any provision of law applicable to the Grantee or Issuer or their subsidiaries.
SECTION 22. In the event that any selection or determination is
to be made by Grantee or the Owner hereunder and at the time of such selection
or determination there is more than one Grantee or Owner, such selection shall
be made by a majority in interest of such Grantees or Owners.
SECTION 23. In the event of any exercise of the option by
Grantee, Issuer and such Grantee shall execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Common Stock covered hereby.
IN WITNESS WHEREOF, each of the parties has caused this Stock
Option Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
FIRST FIDELITY BANCORPORATION
By: /s/ James L. Mitchell
-----------------------------
James L. Mitchell
Executive Vice President,
General Counsel and Secretary
BALTIMORE BANCORP
By: /s/ Edwin F. Hale, Sr.
-----------------------------
Edwin F. Hale, Sr.
Chairman and Chief Executive Officer
<PAGE>
Confidential, For Use of the Commission Only.
Preliminary Copy
REVOCABLE PROXY
BALTIMORE BANCORP
SPECIAL MEETING OF STOCKHOLDERS
FRIDAY, NOVEMBER 4, 1994
This Proxy Is Solicited by the Board
The undersigned stockholder of Baltimore Bancorp (the "Company") hereby
authorizes Barry B. Bondroff, Bruce H. Hoffman and Dennis F. Rasmussen, and each
of them, with full power of substitution, to vote and otherwise represent all
the shares of Common Stock of the Company held of record by the undersigned at
the Special Meeting of Stockholders of the Company (the "Special Meeting") to be
held at The Bank of Baltimore, 4th Floor, 7 East Baltimore Street, Baltimore,
Maryland 21202, on November 4, 1994 at 10:00 a.m., and any at adjournments or
postponements thereof.
This proxy, when properly completed, will be voted in the manner
directed herein by the undersigned stockholder. UNLESS CONTRARY DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND IN ACCORDANCE WITH THE
DETERMINATION OF A MAJORITY OF THE BOARD AS TO OTHER MATTERS.
1. The Agreement and Plan of Merger, dated as of March 21, 1994,
as amended, among First Fidelity Bancorporation, Annabel Lee
Corporation and the Company and the transactions contemplated
thereby.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Upon such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof, as
determined by a majority of the Company's Board of Directors.
The Board unanimously recommends that you vote "FOR" approval and adoption
of the Merger Agreement and the transactions contemplated thereby.
The undersigned stockholder may revoke this Proxy at any time before it
is voted by filing with the Corporate Secretary of the Company a written notice
of revocation, by delivering to the Company a duly executed proxy bearing a
later date, or by attending the Special Meeting and voting in person. The
undersigned stockholder hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement and hereby revokes any proxy or
proxies heretofore given.
____________________________________________
Signature(s) of Stockholder or
Authorized Representative
Date: ______________________________________
Please date and sign exactly as name appears
hereon. Each executor, administrator, trustee,
guardian, attorney-in-fact and other fiduciary
should sign and indicate his or her full
title. When stock has been issued in the name
of two or more persons, all should sign.
Please sign and return all proxy cards in the accompanying envelope.
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