SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
April 2, 1996
(Date of earliest event reported)
Home Federal Corporation
(Exact name of registrant as specified in its charter)
Maryland 0-16463 52-1636831
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
122-128 West Washington Street, Hagerstown, Maryland 21740
(Address of principal executive offices) (Zip Code)
(301) 733-6300
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
Item 5. Other Events.
On April 2, 1996, Home Federal Corporation, Hagerstown, Maryland, a
Maryland corporation and savings and loan holding company ("HFC") announced
that it entered into a Plan and Agreement to Merge ("Acquisition Agreement")
with F&M Bancorp, Frederick, Maryland, a Maryland corporation and bank holding
company ("F&M"), which provides for the acquisition of HFC by F&M.
Under the terms of the Acquisition Agreement, HFC will merge with and into
F&M (the "Merger"), with F&M to be the surviving corporation. Pursuant to the
Acquisition Agreement, upon the effective date of the Merger ("Effective Date"),
each outstanding share of common stock of HFC, par value $1.00 per share ("HFC
Stock"), will be converted into the right to receive shares of common stock,
par value $5.00 per share, of F&M ("F&M Stock"), in an amount equal to 165% of
HFC's book value (calculated as specified in the Acquisition Agreement) as
determined as of the end of the month immediately prior to the Effective Date
(the "Calculation Date"). The number of shares of F&M Stock to be received will
be based on the arithmetic average of F&M Stock closing prices reported for the
twenty (20) consecutive days preceding the Calculation Date (the "Average Market
Value"), subject to certain adjustments. If the Average Market Value of F&M
Stock is greater than 1.9 times the book value per share of F&M as of the
Calculation Date, the number of shares of F&M Stock to be received by HFC
stockholders shall be based on a F&M Stock price equal to 1.9 times the book
value per share of F&M as of such Calculation Date.
In connection with the execution of the Acquisition Agreement, HFC entered
into a Stock Option Agreement with F&M pursuant to which it granted F&M an
option to acquire, upon the occurrence of certain events defined in the Stock
Option Agreement ("Purchase Events"), up to an aggregate of 501,282 authorized
but unissued shares of HFC Stock (the "Option") (or 19.9% of the shares
outstanding) at a price of $8.25 per share. The provisions of the Stock Option
Agreement concerning the Option will terminate upon consummation of the Merger
or upon termination of the Acquisition Agreement; however, if such termination
occurs as a result of a willful breach by HFC of the Acquisition Agreement or
failure of HFC's stockholders to approve the Acquisition Agreement, then the
Option shall terminate 12 months after termination of the Acquisition Agreement.
The Option is intended to increase the likelihood that the Merger will be
consummated by making it more difficult and expensive for a third party to
acquire control of HFC.
The Merger is subject to the satisfaction of various conditions, including,
among other conditions: the receipt of the requisite vote of stockholders of
each of HFC and F&M approving the Acquisition Agreement and the transactions
contemplated thereby; the receipt of all necessary Acquisition Agreement and
the transactions contemplated thereby; that a registration statement with
respect to the F&M Stock to be issued in the Merger shall have been declared
effective by the Securities and Exchange Commission; that HFC shall have
received a written opinion from Charles Webb & Company, dated the date of HFC's
proxy statement to the effect that the consideration to be received by HFC
stockholders in the acquisition is fair to the stockholders of HFC from a
financial point of view; that all representations, warranties and covenants
of each of the parties shall remain true in all material respects as of the
Effective Date; that there shall not have been any materially adverse change in
the financial condition, results of operations, assets, liabilities or business
of HFC and its subsidiaries, taken as a whole, from December 31, 1995 to the
Effective Date; that no materially adverse action, proceeding, court order or
regulatory requirement imposed on either party with respect to the transactions
contemplated by the Acquisition Agreement; that no more than 8% of HFC's
stockholders shall have taken steps to perfect their dissenter's rights under
Maryland law; that F&M's accountants provide a letter at the Effective Date that
the transaction qualifies for pooling-of-interests accounting treatment; that
F&M Bank shall have received an opinion of its counsel to the effect that the
transaction shall constitute a tax-free reorganization, resulting in no tax
consequences to the parties to the Acquisition Agreement nor to HFC
stockholders; and standard opinions from each company's counsel.
In the event the Merger is not effected on or before December 31, 1996, the
Acquisition Agreement may be terminated by HFC or F&M unless extended by mutual
agreement of the parties. In addition, the Acquisition Agreement may be
terminated by either party in the event of: (i) failure of either party to
obtain the approval of its stockholders; (ii) a material breach of any
representation, warranty or covenant which is not cured following a notice
period; or (iii) the Average Market Value of F&M Stock calculated as of the
Calculation Date being less than 1.6 times the book value of F&M Stock as of
such date; provided that if F&M elects and HFC agrees, the parties could agree
to proceed with the transactions contemplated by the Acquisition Agreement
using an Average Market Value of F&M Stock equal to 1.6 times its book value per
share as of such date. The Acquisition Agreement may also be terminated by F&M
if the transaction is approved with any conditions or requirements which
materially and adversely affect either party or, in F&M's opinion, materially
and adversely affect the economic or business benefits anticipated by F&M such
that they would not have entered into the transaction had such conditions or
requirements been known at the start of the transaction.
Following consummation of the Merger, HFC's wholly-owned subsidiary, Home
Federal Savings Bank ("Home Federal") will be operated as a separate
wholly-owned subsidiary of F&M and the operations of Home Federal will continue
in substantially the same manner as presently conducted, with such changes as
may be deemed appropriate by management following the Merger. As of the
Effective Date, two persons will be elected to the F&M Board of Directors to
serve until the next annual meeting of stockholders and F&M will appoint two
persons to Home Federal's Board of Directors. In addition, F&M will enter into
employment contracts with the four senior executive officers of Home Federal.
The Acquisition Agreement is attached hereto as an exhibit and incorporated
herein by reference and made a part hereof to the same extent as if set forth
herein in full. The above summary does not purport to be complete and is subject
to and qualified in its entirety by reference to the Acquisition Agreement.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) No financial statements are required.
(b) No pro forma financial information is required.
(c) Exhibits.
99.1 Plan and Agreement to Merge, dated April 2, 1996
99.2 Stock Option Agreement, dated April 2, 1996
99.3 Press Release, dated April 2, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOME FEDERAL CORPORATION
Date: April 9, 1996 By: /s/ Richard W. Phoebus, Sr.
Richard W. Phoebus, Sr.
President and Chief Executive Officer
Exhibit 99.1
Plan and Agreement to Merge
PLAN AND AGREEMENT TO MERGE
TABLE OF CONTENTS
1. Effective Date 5
2. Events Preceding Effectiveness 6
3. Representations and Warranties of Home Corporation 7
3.1. Organization, Standing, and Capitalization of Home
Corporation and Home Bank 7
3.2. Financial Statements 8
3.3. Taxes 9
3.4. No Undisclosed Liabilities 9
3.5. Absence of Certain Changes or Events 9
3.6. Complete and Accurate Disclosure 10
3.7. Title to Properties; Absence of Liens and Encumbrances;
Compliance with Laws 10
3.8. Contracts 11
3.9. Litigation, Etc. 12
3.10. Environmental Matters 12
3.11. Labor Matters 14
3.12. Pension and Welfare Matters 14
3.13. Related Party Transactions 16
3.14. No Conflict with Other Documents 16
3.15. Compliance with Laws; Governmental Authorizations 17
3.16. Authority; Enforceability 17
3.17. Insurance 17
3.18. Financial Institutions Bond 18
3.19. Brokers; Financial Advisors 18
4. Representations and Warranties of F&M Bancorp 18
4.1. Organization and Standing of F&M Bancorp 18
4.2. Financial Statements 20
4.3. No Undisclosed Liabilities 20
4.4. Absence of Certain Changes or Events 20
4.5. Complete and Accurate Disclosure 20
4.6. Litigation, Etc. 21
4.7. No Conflict with Other Documents 21
4.8. Compliance with Laws; Governmental Authorizations 21
4.9. Authority; Enforceability 22
4.10. Brokers 22
4.11. Beneficial Ownership of Home Corporation Common Stock 22
5. Covenants of Home Corporation 22
5.1. Information 22
5.2. Conduct of Business 23
5.3. Consents 24
5.4. Meeting of Stockholders of Home Corporation;
Document Preparation 24
5.5. Events Preceding Effectiveness 25
5.6. No Solicitation of Other Offers 25
5.7. Reservation of Shares 26
5.8. Affiliate Agreements 26
5.9. Regulatory Approvals 26
5.10. Current Information; Advice of Changes 26
5.11. Public Announcements 27
5.12. Taxes 27
5.13. Pooling-of-Interests 28
5.14. Directors' Agreement 28
6. Covenants of F&M Bancorp 28
6.1. Applications to Governmental Regulatory Authorities 28
6.2. Registration of Shares 28
6.3. Information 29
6.4. Events Preceding Effectiveness 30
6.5. Consents 30
6.6. Current Information; Advice of Changes 30
6.7. Meeting of Stockholders of F&M Bancorp; Document Preparation 31
6.8. Employment Agreements 31
6.9. F&M Bancorp Common Stock 31
6.10. Maintenance of Separate Existence 32
7. Conditions Precedent to F&M Bancorp's Obligations 32
7.1. Representations, Warranties, and Covenants 32
7.2. No Adverse Changes 32
7.3. Events Preceding the Effective Date 33
7.4. Other Evidence 33
7.5. No Adverse Proceedings, Events or Regulatory Requirements 33
7.6. Consents, Etc. 33
7.7. Opinion of Tax Counsel 33
7.8. Opinion of Counsel 33
7.9 Pooling-of-Interests Accounting 33
7.10. Directors' Agreement 34
8. Conditions Precedent to Home Corporation's Obligations 34
8.1. Representations, Warranties, and Covenants 34
8.2. No Adverse Changes 34
8.3. Events Preceding the Effective Date 34
8.4. Other Evidence 34
8.5. Consents, Etc 34
8.6. Opinion of Tax Counsel 34
8.7. Fairness Opinion 35
8.8. Employment Agreements 35
8.9. Opinion of Counsel 35
9. Terms of the Merger 35
9.1. Structure of the Merger 35
9.2. Conversion of Stock; Conversion Ratio 35
9.3. Exchange Procedure 36
9.4. Stock Options 37
9.5. Articles of Incorporation of the Successor Corporation 37
9.6. By-Laws of the Successor Corporation 37
9.7. Calculation of Home Corporation's Book Value 37
9.8. Anti-Dilution Provision 39
9.9. Rights of Dissenting Stockholders 39
9.10. Restriction on Issuance or Repurchase of Securities 40
10.Boards of Directors and Employment Matters 40
11.Opinion of Tax Counsel 42
12.Amendment of the Plan 43
13.Abandonment of the Plan; Effect Thereof 43
14.Expenses 45
15.Notices 45
16.Entire Agreement; Effect 46
17.Representations, Warranties and Agreements 46
18.Governing Law 46
19.General 46
APPENDIX I 48
APPENDIX II 52
APPENDIX III 56
APPENDIX IV 63
APPENDIX V 67
APPENDIX VI 72
APPENDIX VII 80
APPENDIX VIII 87
APPENDIX IX 90
APPENDIX X 94
PLAN AND AGREEMENT TO MERGE
PLAN AND AGREEMENT TO MERGE (this "Plan"), dated as of April
2, 1996 by and among F&M Bancorp ("F&M Bancorp"), a Maryland
corporation, and Home Federal Corporation ("Home Corporation"), a
Maryland corporation.
W I T N E S S E T H:
WHEREAS, F&M Bancorp is a bank holding company and the
holder of all of the issued and outstanding capital stock of
Farmers and Mechanics National Bank ("F&M Bank"), a national
banking association; and Home Corporation is a thrift holding
company and the holder of all of the issued and outstanding
capital stock of Home Federal Savings Bank ("Home Bank"), a
federally-chartered savings bank; and
WHEREAS, F&M Bancorp desires to have Home Corporation merge
with F&M Bancorp in such a manner that, upon the merger becoming
effective, F&M Bancorp will be the surviving Maryland corporation
and all of the issued and outstanding shares of the Common Stock
of Home Corporation will be converted into shares of the Common
Stock of F&M Bancorp, subject to the terms and conditions and
based upon Home Corporation's representations, warranties and
covenants hereinafter set forth, such merger hereinafter referred
to as the "Merger;" and
WHEREAS, Home Corporation desires that it be merged with F&M
Bancorp in the manner set forth above, and that the issued and
outstanding shares of the Common Stock of Home Corporation be
converted into shares of the Common Stock of F&M Bancorp, subject
to the terms and conditions and based upon F&M Bancorp's
representations, warranties and covenants hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and the mutual benefits to be derived
herefrom, the parties agree as follows:
1. Effective Date. Pursuant to Md. Corps. & Ass'ns Code Section
3-113(a), the effective date of this Plan and the Merger (the
"Effective Date") shall be either (a) the 15th day of the month
following the month in which the Calculation Date (defined in
Section 9.2(a) hereof) occurs; or (b) such other date as F&M
Bancorp and Home Corporation may agree upon. F&M Bancorp and
Home Corporation will prepare and execute Articles of Merger in
substantially the form attached hereto as Appendix II which will
set forth the Effective Date, and will file the Articles of
Merger with the Maryland State Department of Assessments and
Taxation.
2. Events Preceding Effectiveness. On or before the
Effective Date the following shall have occurred:
(a) A majority of the Boards of Directors of
each of Home Corporation and F&M Bancorp shall have
approved and agreed to this Plan and the Merger;
(b) A majority of the Boards of Directors of
each of Home Corporation and F&M Bancorp shall have
approved and agreed to the Stock Option Agreement in
the form attached hereto as Appendix III; and Home
Corporation shall have authorized and reserved an
adequate number of shares of its Common Stock for
issuance upon exercise of the option granted by such
Stock Option Agreement, and taken all actions necessary
to fulfill its obligations thereunder;
(c) the Board of Directors of Home
Corporation shall call a meeting of the stockholders of
Home Corporation. Notice of the time and place of the
meeting shall be provided in accordance with Md. Corps.
& Ass'ns Code Section 2-504, and this Plan and the Merger
shall have been ratified and confirmed by the
affirmative vote of not less than two-thirds of the
issued and outstanding voting stock of Home Corporation
at the meeting, in accordance with Md. Corps. & Ass'ns
Code Section 3-105(d);
(d) the Board of Directors of F&M Bancorp
shall call a meeting of the stockholders of F&M
Bancorp. Notice of the time and place of the meeting
shall be provided in accordance with Md. Corps. &
Ass'ns Code Section 2-504, and this Plan and the Merger
shall have been ratified and confirmed by the affirmative
vote of not less than two-thirds of the issued and
outstanding voting stock of F&M Bank at the meeting, in
accordance with Md. Corps. & Ass'ns Code Section 3-105(d);
(e) F&M Bancorp shall have procured the
required approval, consent, waiver or other
administrative action with respect to this Plan and the
transactions contemplated hereby (i) by the Office of
Thrift Supervision under the Savings and Loan Holding
Company Act and (ii) by the Board of Governors of the
Federal Reserve System under the Bank Holding Company
Act of 1956;
(f) the parties shall have procured all
other regulatory approvals, consents, waivers or
administrative actions of governmental entities or
other persons or agencies that are necessary or
appropriate to the consummation of the transactions
contemplated by this Plan, and no approval, consent,
waiver or administrative action referred to in this
Section 2(f) shall have included any condition or
requirement that would (i) result in a materially
adverse effect on F&M Bancorp or Home Corporation or
(ii) so materially and adversely affect the economic or
business benefits of the Merger that F&M Bancorp, in
the sole judgment of F&M Bancorp, would not have
entered into this Plan had such conditions or
requirements been known at the date hereof;
(g) F&M Bancorp shall have filed a
Registration Statement with the Securities and Exchange
Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act"), pertaining to
the shares of Common Stock of F&M Bancorp to be issued
to the stockholders of Home Corporation pursuant to
this Plan and the Merger, and such Registration
Statement shall have become effective and there shall
not be in effect a stop order with respect thereto;
(h) F&M Bancorp shall have made such filings
and obtained such approvals as are necessary under the
state securities or "blue sky" laws pertaining to the
shares of Common Stock of F&M Bancorp to be issued to
the stockholders of Home Corporation pursuant to this
Plan and the Merger; and
(i) In accordance with Section 10(c) of this
Plan, F&M Bancorp shall have offered to enter into an
employment agreement with Richard W. Phoebus, Sr.
substantially in the form attached hereto as Appendix
VI, and with each of Celia S. Ausherman, Steven G. Hull
and Salvatore M. Savino substantially in the form
attached hereto as Appendix VII.
3. Representations and Warranties of Home Corporation. Home
Corporation represents and warrants to F&M Bancorp as follows:
3.1. Organization, Standing, and Capitalization of Home
Corporation and Home Bank.
(a) Home Corporation is a duly organized and
validly existing corporation and is in good standing
under the laws of the State of Maryland. Home
Corporation has the corporate power and authority to
own and hold its material properties and to carry on
its business as it is now being conducted. Home
Corporation is a registered thrift holding company
under the Savings and Loan Holding Company Act. Home
Corporation has no subsidiaries or affiliated companies
and is not a party to any joint venture or partnership
other than as listed on Schedule 3.1(a) hereto
(collectively, the "Home Subsidiaries").
(b) Home Bank is a duly organized and
validly existing federally-chartered savings bank and
is in good standing under the federal laws of the
United States. Home Bank's deposits are insured under
the provisions of the Federal Deposit Insurance Act, as
amended. Each of the other Home Subsidiaries is a duly
organized and validly existing corporation and is in
good standing under the laws of the jurisdiction of its
incorporation as set forth on Schedule 3.1(a). Each of
the Home Subsidiaries has the corporate power and
authority to own and hold its material properties and
to carry on its business as it is now being conducted.
All shares of capital stock of all of the Home
Subsidiaries are validly issued and outstanding, fully
paid, and non-assessable. Except as disclosed in
Schedule 3.1(b), each of the Home Subsidiaries is
wholly owned by its parent corporation. There are no
outstanding options, warrants, rights, or obligations
of any kind entitling the holder thereof to acquire
shares of the capital stock of any of the Home
Subsidiaries, and there are no outstanding securities
or instruments of any kind that are convertible into
shares of the capital stock of any of the Home
Subsidiaries. Except as disclosed in Schedule 3.1(b),
none of the Home Subsidiaries is a party to any joint
venture or partnership.
(c) Copies of all charter documents and by-
laws of Home Corporation and each of the Home
Subsidiaries are attached as Schedule 3.1(c) hereto,
and all such copies are true and correct as of the date
hereof. The minute books of Home Corporation and each
of the Home Subsidiaries, which have been made
available to F&M Bancorp for inspection, are complete
in all material respects and accurately record the
actions taken by the stockholders and directors of Home
Corporation and each of the Home Subsidiaries.
(d) The authorized capital stock of Home
Corporation consists exclusively of 10,000,000 shares
of Common Stock, par value $1.00 per share, 2,519,010
shares of which are validly issued and outstanding,
fully paid, and non-assessable, and 5,000,000 shares of
Preferred Stock, par value $0.10 per shares, none of
which are issued or outstanding. Except for the option
to be granted to F&M Bancorp pursuant to the Stock
Option Agreement attached hereto as Appendix III and as
disclosed in Schedule 3.1(d), there are no outstanding
options, warrants, rights, or obligations of any kind
entitling the holder thereof to acquire shares of the
Common Stock of Home Corporation, and there are no
outstanding securities or instruments of any kind that
are convertible into shares of the Common Stock of Home
Corporation.
3.2. Financial Statements. Home Corporation has
provided in Schedule 3.2 hereto copies of the following
consolidated financial statements of Home Corporation and the
Home Subsidiaries, all of which are true and complete in all
material respects, have been prepared in accordance with
generally accepted accounting principles consistently followed
throughout the periods covered by such consolidated financial
statements, and present fairly the consolidated financial
position, results of operations, cash flows, and changes in
stockholders' equity of Home Corporation and the Home
Subsidiaries at the dates of and for the periods covered by such
financial statements:
Consolidated Financial Statements of Home Corporation
and the Home Subsidiaries at December 31, 1991, 1992,
1993, 1994 and 1995 and for each of the years then
ended, as reported upon by Smith Elliott Kearns &
Company.
3.3. Taxes. Schedule 3.3 hereto sets forth the tax
returns to federal, state, county, municipal or foreign taxing
authorities for the taxable year 1991 and all taxable years
through and including 1994 for Home Corporation and the Home
Subsidiaries. Home Corporation and the Home Subsidiaries have
filed with appropriate federal, state, county, municipal or
foreign taxing authorities all tax returns required to be filed
(taking any applicable extensions into consideration) and have
paid or reserved for all taxes shown to be due on such returns
and all penalties and interest payable in respect thereof.
Except as disclosed in Schedule 3.3, neither Home Corporation nor
any of the Home Subsidiaries have received from any taxing
authority any notice of deficiency or assessment of additional
taxes not paid or any notice of an intention to commence an
examination or audit of its tax returns, and no tax audits by any
taxing authority are in process. Except as disclosed on Schedule
3.3, neither Home Corporation nor any of the Home Subsidiaries
have granted any waiver of any statute of limitations or
otherwise agreed to any extension of a period for the assessment
of any federal, state, county, municipal or foreign income tax.
The accruals and reserves reflected in the consolidated financial
statements which Home Corporation has provided to F&M Bancorp as
described in Section 3.2 are adequate to cover all taxes
(including interest and penalties, if any, thereon) that are
payable or accrued as a result of the operations of Home
Corporation and the Home Subsidiaries for all periods prior to
the date of such consolidated financial statements. For purposes
of this Section 3.3, any reference to the Home Subsidiaries shall
be deemed to include any entity listed on Schedules 3.1(a) and
3.1 (b).
3.4. No Undisclosed Liabilities. Except as and to the
extent reflected or reserved against in the consolidated
financial statements referred to in Section 3.2, neither Home
Corporation nor any of the Home Subsidiaries at the dates of such
consolidated financial statements had any material liabilities or
obligations (whether accrued, absolute, or contingent) required
under generally accepted accounting principles to be reflected
thereon which would materially and adversely affect the fair
presentation of such financial statements. Neither Home
Corporation nor any of the Home Subsidiaries have incurred any
liability since the date of the consolidated financial statements
referred to in Section 3.2 which would materially and adversely
affect the condition (financial or otherwise), assets,
liabilities, business or operations of Home Corporation and the
Home Subsidiaries, taken as a whole, other than liabilities which
have been incurred in the ordinary course of business.
3.5. Absence of Certain Changes or Events. Since
December 31, 1995, there has not been:
(a) Any materially adverse change in the
financial position, results of operations, assets,
liabilities, or business of Home Corporation or the
Home Subsidiaries, other than changes in the ordinary
course of business;
(b) any increase in salaries or wages of
directors, officers, or employees of Home Corporation
or the Home Subsidiaries other than in the ordinary
course of business; or any establishment or increase of
any employment, compensation, bonus, pension, option,
incentive or deferred compensation, retirement
payments, profit sharing, or similar agreement or
benefit, authorized, granted, or accrued to any
directors, officers or employees of Home Corporation or
the Home Subsidiaries other than in the ordinary course
of business, except as set forth in Schedule 3.5; or
(c) except with respect to the dividend
payment of $0.04 per share of Common Stock declared on
February 15, 1996, to be paid on March 29, 1996, any
declaration, payment, or set aside by Home Corporation
of any dividend or distribution in respect of its
Common Stock, or any purchase, issuance or sale of any
of its Common Stock.
3.6. Complete and Accurate Disclosure. Neither this
Plan (insofar as it relates to Home Corporation and the Home
Subsidiaries, the Common Stock of Home Corporation, and the
involvement of Home Corporation in the transactions contemplated
hereby) nor any financial statement, schedule, certificate, or
other statement or document set forth on a schedule by Home
Corporation to F&M Bancorp in connection with this Plan, when
considered in the aggregate, contains any statement which, at the
time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact or omits to
state any material fact necessary to make the statements
contained herein or therein not false or misleading.
3.7. Title to Properties; Absence of Liens and
Encumbrances; Compliance with Laws. Except as disclosed on
Schedule 3.7, Home Corporation and each of the Home Subsidiaries
has good and marketable title to all of their respective
properties and assets, including those reflected in the
consolidated financial statements referred to in Section 3.2,
except as sold or otherwise disposed of for fair value and only
in the ordinary course of business, free and clear of all liens
and encumbrances, except (i) with respect to property as to which
they are lessees, (ii) with respect to real estate owned by Home
Corporation or the Home Subsidiaries, for use, occupancy and
similar restrictions of public record that may be observed by an
inspection of the property, and such other utility and other
easements and encumbrances as do not materially adversely affect
the fair market value of such real property, and (iii) liens to
secure borrowings, liens to secure governmental deposits, and
liens for current taxes not yet due and payable. Neither Home
Corporation nor any of the Home Subsidiaries owns or leases real
property except as disclosed on Schedule 3.7, and is not in
default under any material lease of real or personal property to
which it is a party. As of the date hereof, except as disclosed
on Schedule 3.7, the real properties, structures, buildings,
equipment, and the tangible personal property owned, operated or
leased by Home Corporation or any of the Home Subsidiaries are
(x) in good repair, order and condition, except for depletion,
depreciation and ordinary wear and tear, (y) suitable for the
uses for which they were intended and (z) free from any known
structural defects. As of the date hereof, there are no laws,
conditions of record or other impediments which materially
interfere with the intended uses by Home Corporation or any of
the Home Subsidiaries of the real property or tangible personal
property owned or leased by it, except as set forth in Schedule
3.7. Neither Home Corporation nor any of the Home Subsidiaries
have received any notice of any violation of any applicable law,
building code, zoning ordinance or other similar law. Home
Corporation and the Home Subsidiaries own or have the rights to
use all real and personal properties and assets that are material
to the conduct of the business as presently conducted of Home
Corporation and the Home Subsidiaries, taken as a whole.
3.8. Contracts. Except for the plans, contracts and
agreements of Home Corporation and the Home Subsidiaries
disclosed on Schedule 3.8, neither Home Corporation nor any of
the Home Subsidiaries is a party to or subject to:
(a) Any employment, consultation, or
compensation contract or arrangement (other than those
terminable at will) with any officer, consultant,
director, or employee;
(b) any plan, contract, program,
understanding, or agreement providing for bonuses,
pensions, severance pay, options, stock purchases or
any other form of retirement, incentive or deferred
compensation, retirement payments, death benefits,
profit sharing, or any health, accident or other
welfare benefit, or any other employee or retired
employee benefit in which any employee, former
employee, retired employee (or beneficiary of any of
them) of Home Corporation or any of the Home
Subsidiaries is entitled to participate except as
disclosed on Schedule 3.8;
(c) any contract or agreement with any labor
union;
(d) any lease of real or personal property
with annual rentals in excess of $5,000;
(e) any agreement for services in excess of
$5,000 per year or for the purchase or disposition of
any equipment or supplies except individual purchase
orders for office supplies incurred in the ordinary
course of business of $5,000 or less;
(f) any instrument evidencing or relating to
indebtedness for borrowed money except for customer
accounts, deposits, certificates of deposit, federal
funds purchased, and the like which may be construed as
borrowings and except for loans made by Home Bank as
lender in the ordinary course of its business;
(g) any lease or other contract containing
covenants not to enter into or consummate the
transactions contemplated hereby or which provides for
payments in excess of $2,000 and will be terminated or
violated by the Merger or in respect of which the
Merger would cause a default or acceleration of
obligations; or
(h) any other contract or agreement not of
the type covered by any of the other specific terms of
this Section 3.8 obligating Home Corporation or any
Home Subsidiary to expenditures in excess of $25,000.
Each of the instruments disclosed on Section 3.8 is valid and in
full force and effect. Neither Home Corporation nor any of the
Home Subsidiaries are in default nor have any of them received
any notice that they are in default, nor to their actual
knowledge is any other party in default, under any material
agreements, instruments, or obligations to which Home Corporation
or any of the Home Subsidiaries is a party or by which they are
bound.
3.9. Litigation, Etc. Except as disclosed on Schedule
3.9, (a) there is no litigation, proceeding, or investigation
pending or, to the knowledge of Home Corporation, threatened
against Home Corporation or any of the Home Subsidiaries which
would result in any materially adverse change in the condition
(financial or otherwise), assets, liabilities, business,
operations, or future prospects of Home Corporation and the Home
Subsidiaries, taken as a whole; (b) there are no outstanding
orders, writs, injunctions, judgments, decrees, directives,
consent agreements or memoranda of understanding issued by any
federal, state or local court or governmental authority or
arbitration tribunal issued against or with the consent of Home
Corporation or any of the Home Subsidiaries that materially and
adversely affect the condition (financial or otherwise), assets,
liabilities, business, operations, or future prospects or that in
any manner restrict Home Corporation's right to carry on its
business or that of the Home Subsidiaries as presently conducted;
and (c) Home Corporation is aware of no fact or condition
presently existing that might give rise to any litigation,
investigation or proceeding which, if determined adversely to
Home Corporation or any of the Home Subsidiaries, would
materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations, or future
prospects of Home Corporation and the Home Subsidiaries, taken as
a whole, or would restrict in any manner Home Corporation's right
to carry on its business or that of the Home Subsidiaries as
presently conducted. Home Corporation has disclosed on Schedule
3.9 all litigation in which Home Corporation or any of the Home
Subsidiaries is involved as a party (other than bankruptcy
proceedings in which Home Corporation or any of the Home
Subsidiaries has filed proofs of claim or routine collection and
foreclosure suits initiated in the ordinary course of business).
3.10. Environmental Matters. (a) For purposes of
this Section 3.10, the following terms shall have the indicated
meaning:
"Property" or "Properties" means all branch properties
presently or formerly owned or operated by Home Corporation and
each of the Home Subsidiaries, all other real property presently
owned or operated by Home Corporation and each of the Home
Subsidiaries, and any real properties formerly owned or operated
by Home Corporation and each of the Home Subsidiaries on or after
January 1, 1994 and subsequently disposed of.
"Environmental Law" means (i) any applicable federal,
state or local statute, law, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order,
judgment, decree, directive, requirement or agreement with any
court, governmental authority or other regulatory or
administrative agency or commission, domestic or foreign
("Governmental Entity") now existing, relating to the use,
storage, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances, each as amended, or (ii) any common law that may
impose liability or obligations for injuries or damages due to
the presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance, whether
liquid, solid or gas, listed, defined, designated or classified
as hazardous, toxic, radioactive or dangerous, under any
applicable Environmental Law, whether by type or by quantity.
Hazardous Substance includes, without limitation, (i) any
"hazardous substance" as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended, and (ii) any substance regulated by the Resource
Conservation and Recovery Act, as amended.
(b) Except as disclosed on Schedule 3.10 or as would
not individually or in the aggregate have a materially adverse
effect on the condition (financial or otherwise), assets,
liabilities, business or operations of Home Corporation and the
Home Subsidiaries, taken as a whole:
(i) neither Home Corporation nor any of the
Home Subsidiaries has received any written notices,
demand letters or written requests for information from
any Governmental Entity or any third party indicating
that Home Corporation or any Home Subsidiary may be in
violation of, or liable under, any Environmental Law;
(ii) there are no civil, criminal or
administrative actions, suits, demands, claims,
hearings, investigations or proceedings pending or
threatened against Home Corporation or any Home
Subsidiary alleging that they may be in violation of,
or liable under, any Environmental Law;
(iii) no reports have been filed with any
Governmental Entity, nor to the knowledge of Home
Corporation are any reports required to be filed with
any Governmental Entity, by Home Corporation or any of
the Home Subsidiaries concerning the release of any
Hazardous Substance or the violation of any
Environmental Law on or at any of the Properties;
(iv) to the knowledge of Home Corporation or
except as disclosed on Schedule 3.10, there are no
underground storage tanks on, in or under any of the
Properties and no underground storage tanks have been
closed or removed from any Property while such Property
was owned or operated by Home Corporation or any of the
Home Subsidiaries;
(v) to the knowledge of Home Corporation or
except as disclosed on Schedule 3.10, no environmental
contaminant, pollutant, toxic or hazardous substance or
other similar substance has been generated, used,
stored, processed, disposed of or discharged on or into
any of the Properties, except for such hazardous
substances as may be used in the everyday business of a
bank office; and
(vi) to the knowledge of Home Corporation or
except as disclosed on Schedule 3.10, no materials
containing asbestos have been used or incorporated in
any building or other structure or improvement located
on any of the Properties.
(c) There are no permits or licenses required under any
Environmental Law in respect of any of the Properties presently
or formerly owned or operated by Home Corporation or any of the
Home Subsidiaries that the absence of which could, individually
or in the aggregate, have a materially adverse effect on the
condition (financial or otherwise), assets, liabilities, business
or operations of Home Corporation and the Home Subsidiaries,
taken as a whole.
(d) Home Corporation has disclosed on Schedule 3.10 a
copy of its current policy regarding compliance with
Environmental Laws.
3.11. Labor Matters. To Home Corporation's
knowledge, no organization effort with respect to any of the
employees of Home Corporation or any of the Home Subsidiaries is
pending or threatened, and no labor dispute, strike, work
stoppage, employee action or labor relation problem which may
materially affect Home Corporation or any of the Home
Subsidiaries currently is pending or threatened.
3.12. Pension and Welfare Matters. Home
Corporation has disclosed on Schedule 3.12 in respect of the
plans, contracts, programs, understandings or agreements
delivered under Section 3.8(b) copies of the latest summary plan
descriptions, Forms 5500, tax determination letters from the
Internal Revenue Service (the "IRS"), and actuarial reports, as
applicable, for Home Corporation and each of the Home
Subsidiaries. With respect to the plans, contracts, or
agreements delivered to F&M Bancorp under Section 3.8(b) (for
purposes of this Section 3.12, the "plans"), (a) each such plan
has been operated in all material respects in accordance with its
terms in all material respects and in accordance with all
applicable laws including, but not limited to, the Employee
Retirement Income Security Act of 1974 ("ERISA"), the Internal
Revenue Code of 1986, as amended (the "Code"), the Consolidated
Omnibus Budget Reconciliation Act of 1985 and state health care
continuation laws; (b) all reporting and disclosure requirements
of ERISA imposed upon each such plan have been complied with in
all material respects, and all required governmental filings have
been made with respect to the plans; (c) neither any plan nor
Home Corporation, nor any of the Home Subsidiaries, nor, to Home
Corporation's knowledge, any director, officer, employee, agent
or representative of Home Corporation or any of the Home
Subsidiaries, nor, to Home Corporation's knowledge, any fiduciary
of any plan has engaged in any transaction in connection with any
of the plans which would be subject to a civil penalty assessed
pursuant to Section 502(i) of ERISA, or a tax imposed by Section
4975 of the Code that could reasonably be expected to have a
material adverse effect on the condition (financial or
otherwise), assets, liabilities, business or operations of Home
Corporation and the Home Subsidiaries, taken as a whole, or on
such plan, any parties in interest, or fiduciaries; (d) no such
plan has any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not
waived, with respect to the latest five plan years, nor any
liability to the Pension Benefit Guaranty Corporation (the
"PBGC") (other than normal premium payments); (e) if applicable,
the assets of each such funded plan equal or exceed the liability
for accrued benefits of all participants in such plan when such
liabilities are valued (i) on a termination basis using PBGC
interest and other assumptions and (ii) on a minimum funding
basis using the appropriate actuarial methods, tables, and
assumptions; (f) no contributions to any such plan from Home
Corporation or any of the Home Subsidiaries are currently past
due and, if applicable, all past service and other liabilities
currently existing but payable in the future, if any, are
reflected in the latest actuarial report in accordance with sound
actuarial principles; (g) no proceedings, investigations,
filings, or other matters (excluding any determination letter
application that has been or may be filed prior to the Effective
Date) are pending before the IRS, the Department of Labor, the
PBGC, or other public or quasi-public body in connection with any
such plan; (h) with respect to plans intended to qualify under
Section 401(a) of the Code, (i) either Home Corporation or any of
the Home Subsidiaries have received a favorable determination
letter from the IRS with respect to the plan documents or the
remedial amendment period (within the meaning of regulation under
Section 401(b) of the Code) has not ended with respect to an
application for a determination letter, and (ii) nothing has
occurred with respect to the operation or administration of any
such plans which would cause the loss of such qualifications or
exemptions or the imposition of any liability, penalty or tax
under ERISA or the Code that could reasonably be expected to have
a material adverse effect on the condition (financial or
otherwise), assets, liabilities, business or operations of Home
Corporation and the Home Subsidiaries, taken as a whole, or on
such plan; (i) except as disclosed in Schedule 3.12, through the
Effective Date, there will be no changes in the operation of the
plans or in the documents constituting or affecting the plans
except for amendments and operational changes required by
applicable law which do not materially increase the cost of such
plans; (j) no employees, former employees, or retired employees
of Home Corporation or any of the Home Subsidiaries, as a result
of their employment with Home Corporation or any of the Home
Subsidiaries, are participants in any "multiemployer plan" which
is a "pension plan," as such terms are defined in Sections 3(2)
and 3(37) of ERISA and neither Home Corporation nor any of the
Home Subsidiaries has any current, contingent or potential
liability with respect to any such plan; (k) no "reportable
event," as such term is defined in Section 4043(c) of ERISA, has
occurred with respect to any plan since the effective date of
ERISA; (l) there are no pending or threatened claims by or
disputes with any participants or beneficiaries of the plans,
except plan benefit claims arising in the normal course of the
operations of the plans (other than terminated plans) and as to
which no dispute exists; (m) Home Corporation has no knowledge of
any facts which could give rise to any claims against any plan or
the fiduciaries of any plan, except for plan benefit claims
arising in the normal course of the operations of the plans
(other than terminated plans); (n) neither Home Corporation nor
any of the Home Subsidiaries nor any fiduciary of any plan has
given notice to any fiduciary liability insurer of any claims or
potential claims in connection with any of the plans; (o) except
as disclosed in Schedule 3.12, each of the plans which benefits
retired employees of Home Corporation or any of the Home
Subsidiaries may effectively be terminated or amended, in any
manner and at any time, without further liability to its
participants, by its sponsoring employer; (p) Home Corporation
and each of the Home Subsidiaries have at all times in all
material respects complied with all applicable employee
termination notice and similar laws; (q) Home Corporation and
each of the Home Subsidiaries have at all times complied in all
material respects with all applicable family leave and similar
laws; (r) if applicable, Home Corporation and each of the Home
Subsidiaries have at all times complied in all material respects
with all applicable requirements of the Worker Adjustment and
Retraining Notification Act and all similar state laws; (s)
neither Home Corporation nor any of the Home Subsidiaries has
provided, nor is required to provide, security to any pension
plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code; (t) there has been no
announcement or legally binding commitment by Home Corporation or
any of the Home Subsidiaries to create an additional plan, or to
amend a plan except for amendments required by applicable law
which do not materially increase the cost of such plan, and
neither Home Corporation nor any of the Home Subsidiaries has any
obligation for retiree health and life benefits under any plan
that cannot be terminated without incurring any liability
thereunder; and (u) as to any terminated plans, all obligations
for plan benefits or other liabilities have been satisfied in
full.
3.13. Related Party Transactions. Except as
disclosed on Schedule 3.13, neither Home Corporation nor any of
the Home Subsidiaries has any contract, extension of credit,
business arrangement or other relationship of any kind with any
of the following persons: (a) any executive officer or director
of Home Corporation or any of the Home Subsidiaries; (b) any
stockholder owning five percent or more of the outstanding Common
Stock of Home Corporation; or (c) any "affiliate" (as defined in
the SEC Rule 405) of the foregoing persons or any business in
which any of the foregoing persons is an officer, director,
employee or five percent or greater equity owner.
3.14. No Conflict with Other Documents. Except as
disclosed on Schedule 3.14, neither the execution and delivery of
this Plan nor the carrying out of the transactions contemplated
hereunder will result in any violation, termination, or default
or acceleration of, or be in conflict with, any terms of any
contract or other instrument to which Home Corporation or any of
the Home Subsidiaries is a party, or of any judgment, decree, or
order applicable to Home Corporation or any of the Home
Subsidiaries, or result in the creation of any lien, charge, or
encumbrance upon any of its properties or assets, except for any
of the foregoing which would not have a material adverse effect
upon the financial condition, assets, liabilities, business or
operations of Home Corporation and the Home Subsidiaries, taken
as a whole.
3.15. Compliance with Laws; Governmental
Authorizations. (a) Except where noncompliance would not have a
material and adverse effect upon the condition (financial or
otherwise), assets, liabilities, business or operations of Home
Corporation and the Home Subsidiaries, taken as a whole, (i) Home
Corporation and each of the Home Subsidiaries is in compliance
with all statutes, laws, ordinances, rules, regulations,
judgments, orders, decrees, directives, consent agreements,
memoranda of understanding, permits, concessions, grants
franchises, licenses, and other governmental authorizations or
approvals applicable to Home Corporation, the Home Subsidiaries,
or any of their properties; and (ii) all permits, concessions,
grants, franchises, licenses and other governmental
authorizations and approvals necessary for the conduct of the
business of Home Corporation and the Home Subsidiaries as
presently conducted have been duly obtained and are in full force
and effect, and there are no proceedings pending or, to Home
Corporation's knowledge, threatened which may result in the
revocation, cancellation, suspension or materially adverse
modification of any thereof.
(b) Home Corporation has filed all reports that it was
required to file with the SEC under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), all of which complied
in all material respects with all applicable requirements of the
Exchange Act and the rules and regulations adopted thereunder.
As of their respective dates, each such report, statement, form
or other document, including without limitation, any financial
statements or schedules included therein, did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, provided that information as of a
later date shall be deemed to modify information as of an earlier
date.
3.16. Authority; Enforceability. The execution,
delivery, and performance of this Plan by Home Corporation have
been duly and validly authorized by its Board of Directors,
subject only to requisite approval by appropriate governmental
regulatory authorities and stockholders. This Plan is a valid
and binding agreement of Home Corporation, enforceable against it
in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
3.17. Insurance. All insurance policies held by
Home Corporation and the Home Subsidiaries relating to their
operations (except for title insurance policies), including
without limitation all financial institutions bonds, are set
forth on Schedule 3.17. All such policies are in full force and
effect. Neither Home Corporation nor any of the Home
Subsidiaries has received any notice of cancellation with respect
to any such policies and has no reason to expect that it will
receive a notice of cancellation from any of its present
insurance carriers; provided, however, that Home Corporation
makes no representation as to the effect of this Plan or the
Merger on its present financial institutions bond or bonds.
3.18. Financial Institutions Bond. Since January
1, 1989, Home Corporation and the Home Subsidiaries have
continuously maintained in full force and effect one or more
financial institutions bonds insuring Home Corporation and the
Home Subsidiaries against acts of dishonesty by each of their
employees. No claim has been made under any such bond since such
date and Home Corporation is not aware of any fact or condition
presently existing which forms the basis of a claim under any
such bond. Home Corporation and the Home Subsidiaries have no
reason to expect that their present financial institutions bond
or bonds will not be renewed by their carrier on substantially
the same terms as those now in effect; provided, however, that
Home Corporation makes no representation as to the effect of this
Plan or the Merger on its present financial institutions bond or
bonds.
3.19. Brokers; Financial Advisors. All
negotiations relating to this Plan and the transactions
contemplated hereunder have been carried on by Home Corporation
directly or through its counsel and there has been no
intervention of any person as the result of any action of Home
Corporation (and, so far as known to Home Corporation, no
intervention of any other person) in such manner as to give rise
to any valid claim against any of the parties hereto for a
brokerage commission, finder's fee, or other like payment. Home
Corporation has provided F&M Bancorp with a copy of its agreement
with Charles Webb & Company, which has been engaged to deliver an
opinion as to the fairness of the transactions contemplated by
this Plan to Home Corporation.
4. Representations and Warranties of F&M Bancorp. F&M
Bancorp represents and warrants to Home Corporation as follows:
4.1. Organization and Standing of F&M Bancorp.
(a) F&M Bancorp is a duly organized and
validly existing corporation in good standing under the
laws of the State of Maryland. F&M Bancorp has the
corporate power and lawful authority to own and hold
its properties and to carry on its business as it is
now being conducted. F&M Bancorp is a registered bank
holding company under the Bank Holding Company Act of
1956, as amended.
(b) The authorized capital stock of F&M
Bancorp consists exclusively of 10,000,000 shares of
Common Stock, par value $5.00 per share, 4,421,337 of
which are validly issued and outstanding on March 19,
1996, fully paid, and non-assessable. F&M Bancorp has
reserved 50,000 shares of its Common Stock for issuance
under its Dividend Reinvestment and Stock Purchase
Plan, 50,000 shares of its Common Stock for issuance
under its Employee Stock Purchase Plan, and 346,480
shares of its Common Stock for issuance under its Stock
Option Plans. On March 19, 1996, there were
outstanding options to purchase 211,209 shares of F&M
Bancorp's Common Stock at prices ranging from $11.75 to
$29.125 pursuant to these Stock Option Plans. There
are no other outstanding options, warrants, rights, or
obligations of any kind entitling the holder thereof to
acquire shares of the Common Stock of F&M Bancorp, and
there are no outstanding securities or instruments of
any kind that are convertible into shares of the Common
Stock of F&M Bancorp. The Common Stock of F&M Bancorp
deliverable pursuant to this Plan will be, prior to its
issuance, duly authorized for issuance and will, when
issued and delivered in accordance with this Plan, be
duly and validly issued, fully paid and nonassessable.
(c) F&M Bancorp has no subsidiaries other
than as listed on Schedule 4.1(c) hereto (collectively,
the "F&M Subsidiaries"), and is not a party to any
joint ventures or partnerships. Each of the F&M
Subsidiaries is a duly organized and validly existing
corporation and is in good standing under the laws of
the jurisdiction of its incorporation. Each of the F&M
Subsidiaries has the corporate power and authority to
own and hold its material properties and to carry on
its business as it is now being conducted. All shares
of capital stock of all of the F&M Subsidiaries are
validly issued and outstanding, fully paid, and non-
assessable. Except as disclosed on Schedule 4.1(c),
each of the F&M Subsidiaries is wholly owned by its
parent corporation. There are no outstanding options,
warrants, rights, or obligations of any kind entitling
the holder thereof to acquire shares of the capital
stock of any of the F&M Subsidiaries, and there are no
outstanding securities or instruments of any kind that
are convertible into shares of the capital stock of any
of the F&M Subsidiaries. Except as disclosed on
Schedule 4.1(c) hereto, none of the F&M Subsidiaries is
a party to any joint venture or partnership.
(d) F&M Bancorp's sole direct subsidiary is
F&M Bank. F&M Bank is duly organized and validly
existing as a national banking association and is in
good standing under the federal laws of the United
States. F&M Bank has the corporate power and lawful
authority to own and hold its properties and to carry
on its business as it is now being conducted. F&M Bank
is an insured bank under the provisions of the Federal
Deposit Insurance Act, as amended, and is a member of
the Federal Reserve System.
(e) Copies of all charter documents and by-
laws of F&M Bancorp and each of the F&M Subsidiaries
are attached hereto as Schedule 4.1(e), and all such
copies are true and correct as of the date hereof. The
minute books of F&M Bancorp and each of the F&M
Subsidiaries, which have been made available to Home
Corporation for inspection, are complete in all
material respects and accurately record the actions
taken by the stockholders and directors of F&M Bancorp
and each of the F&M Subsidiaries.
4.2. Financial Statements. F&M Bancorp has provided in
Schedule 4.2 hereto copies of the Consolidated Financial
Statements of F&M Bancorp and the F&M Subsidiaries at December
31, 1991, 1992, 1993, 1994 and 1995 and for each of the years
then ended, as reported upon by Keller Bruner & Company, L.L.C.,
all of which are true and complete in all material respects, have
been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods covered
by such consolidated financial statements and present fairly the
financial position, results of operations, cash flows, and
changes in shareholders' equity of F&M Bancorp and the F&M
Subsidiaries at the dates of and for the periods covered by such
financial statements.
4.3. No Undisclosed Liabilities. Except as and to the
extent reflected or reserved against in the consolidated
financial statements referred to in Section 4.2, neither F&M
Bancorp nor any of the F&M Subsidiaries at the dates of such
consolidated financial statements had any material liabilities or
obligations (whether accrued, absolute, or contingent) required
under generally accepted accounting principles to be reflected
thereon which would materially and adversely affect the fair
presentation of such financial statements. Neither F&M Bancorp
nor any of the F&M Subsidiaries has incurred any liability since
the date of the financial statements referred to in Section 4.2
which would materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business or
operations of F&M Bancorp and the F&M Subsidiaries, taken as a
whole, other than liabilities which have been reasonably incurred
in the ordinary course of business.
4.4. Absence of Certain Changes or Events. Since
December 31, 1995, there has not been any materially adverse
change in the financial position, results of operations, assets,
liabilities, or business of F&M Bancorp or any of the F&M
Subsidiaries, other than changes in the ordinary course of
business.
4.5. Complete and Accurate Disclosure. Neither this
Plan (insofar as it relates to F&M Bancorp, the Common Stock of
F&M Bancorp, and the involvement of F&M Bancorp in the
transactions contemplated hereby) nor any financial statement,
certificate, or other statement or document set forth on a
schedule delivered by F&M Bancorp to Home Corporation in
connection with this Plan, contains any statement which, at the
time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact or omits to
state any material fact necessary to make the statements
contained herein or therein not false or misleading.
4.6. Litigation, Etc. Except as disclosed on Schedule
4.6, (a) there is no litigation, proceeding, or investigation
pending or, to the knowledge of F&M Bancorp, threatened against
F&M Bancorp or any of the F&M Subsidiaries which would result in
any materially adverse change in the condition (financial or
otherwise), assets, liabilities, business, operations, or future
prospects of F&M Bancorp and the F&M Subsidiaries, taken as a
whole; (b) there are no outstanding orders, writs, injunctions,
judgments, decrees, directives, consent agreements or memoranda
of understanding issued by any federal, state or local court or
governmental authority or arbitration tribunal issued against or
with the consent of F&M Bancorp or any of the F&M Subsidiaries
that materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations or future
prospects or that in any manner restrict F&M Bancorp's right to
carry on its business or that of the F&M Subsidiaries as
presently conducted; and (c) F&M Bancorp is aware of no fact or
condition presently existing that might give rise to any
litigation, investigation or proceeding which, if determined
adversely to F&M Bancorp or any of the F&M Subsidiaries, would
materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations, or future
prospects of F&M Bancorp and the F&M Subsidiaries, taken as a
whole, or would restrict in any manner F&M Bancorp's right to
carry on its business or that of the F&M Subsidiaries as
presently conducted. F&M Bancorp has disclosed on Schedule 4.6
all litigation in which F&M Bancorp or any of the F&M
Subsidiaries is involved as a party (other than bankruptcy
proceedings in which F&M Bancorp or any of the F&M Subsidiaries
has filed proofs of claim or routine collection and foreclosure
suits initiated in the ordinary course of business).
4.7. No Conflict with Other Documents. Neither the
execution and delivery of this Plan nor the carrying out of the
transactions contemplated hereunder will result in any violation,
termination, or modification of, or be in conflict with, any
terms of any contract or other instrument to which F&M Bancorp or
any of the F&M Subsidiaries are a party, or of any judgment,
decree, or order applicable to F&M Bancorp or any of the F&M
Subsidiaries, or result in the creation of any lien, charge, or
encumbrance upon any of their properties or assets, except for
any of the foregoing which would not have a material adverse
effect upon the financial condition, assets, liabilities,
business or operations of F&M Bancorp and the F&M Subsidiaries,
taken as a whole.
4.8. Compliance with Laws; Governmental
Authorizations. (a) Except where noncompliance would not have a
material and adverse effect upon the condition (financial or
otherwise), assets, liabilities, business or operations of F&M
Bancorp and the F&M Subsidiaries, taken as a whole, (i) F&M
Bancorp and the F&M Subsidiaries are in compliance with all
statutes, laws, ordinances, rules, regulations, judgments,
orders, decrees, directives, consent agreements, memoranda of
understanding, permits, concessions, grants franchises, licenses,
and other governmental authorizations or approvals applicable to
F&M Bancorp and the F&M Subsidiaries or to any of their
properties; and (ii) all permits, concessions, grants,
franchises, licenses and other governmental authorizations and
approvals necessary for the conduct of the business of F&M
Bancorp and the F&M Subsidiaries as presently conducted have been
duly obtained and are in full force and effect, and there are no
proceedings pending or threatened which may result in the
revocation, cancellation, suspension or materially adverse
modification of any thereof.
(b) F&M Bancorp has filed all reports that it was
required to file with the SEC under the Exchange Act, all of
which complied in all material respects with all applicable
requirements of the Exchange Act and the rules and regulations
adopted thereunder. As of their respective dates, each such
report, statement, form or other document, including without
limitation, any financial statements or schedules included
therein, did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to
modify information as of an earlier date.
4.9. Authority; Enforceability. The execution,
delivery, and performance of this Plan by F&M Bancorp has been
duly and validly authorized by its Board of Directors, subject
only to requisite approval by the stockholders of F&M Bancorp and
appropriate governmental regulatory authorities. This Plan is a
valid and binding agreement of F&M Bancorp, enforceable against
it in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
4.10. Brokers. All negotiations relating to this
Plan and the transactions contemplated hereunder have been
carried on by F&M Bancorp directly or through its counsel and
there has been no intervention of any person as the result of any
action of F&M Bancorp (and, so far as known to F&M Bancorp, no
intervention of any other person) in such manner as to give rise
to any valid claim against any of the parties hereto for a
brokerage commission, finder's fee, or other like payment.
4.11.
Beneficial Ownership of Home Corporation Common Stock. As of the
date hereof, F&M Bancorp does not beneficially own any shares of
Home Corporation Common Stock or have any option, warrant or
right of any kind to acquire the beneficial ownership of any Home
Corporation Common Stock, except pursuant to the terms of this
Plan, the terms of the Stock Option Agreement, attached hereto as
Appendix III, or in a fiduciary capacity.
5. Covenants of Home Corporation. Except as otherwise
consented to in writing by F&M Bancorp after the date of this
Plan, Home Corporation covenants to and agrees with F&M Bancorp
as follows:
5.1. Information. (a) Home Corporation shall, upon
reasonable notice, give to F&M Bancorp and to its officers,
accountants, counsel, financial advisers, and other
representatives reasonable access during Home Corporation's and
the Home Subsidiaries' normal business hours throughout the
period prior to the Effective Date to all of their properties,
books, contracts, commitments, reports of examination (consistent
with applicable law), depositor and stockholder lists, and
records. Home Corporation and the Home Subsidiaries will, at
their own expense, furnish F&M Bancorp during such period with
all such information concerning their affairs as F&M Bancorp may
reasonably request, including information for use in determining
if the conditions of Section 7.3 have been satisfied, necessary
to prepare the regulatory filings or applications to be filed
with governmental regulatory authorities to obtain the approvals
referred to in Section 2, and for use in any other necessary
filings to be made with appropriate governmental regulatory
authorities.
(b) Home Corporation will not, and will cause its
representatives not to, use any information obtained pursuant to
Section 6.3 for any purpose unrelated to the consummation of the
transactions contemplated by this Plan. Subject to the
requirements of law, Home Corporation will keep confidential, and
will cause its representatives to keep confidential, all
information and documents obtained pursuant to Section 6.3 unless
such information (i) was already known to Home Corporation, (ii)
becomes available to Home Corporation from other sources not
known by Home Corporation to be bound by a confidentiality
obligation, (iii) is disclosed with prior written approval of F&M
Bancorp and the F&M Subsidiaries, or (iv) is or becomes readily
ascertainable from published information or trade sources. In
the event that this Plan is terminated or the transactions
contemplated by this Plan shall otherwise fail to be consummated,
Home Corporation shall promptly cause all copies of documents or
extracts thereof containing information and data as to F&M
Bancorp and the F&M Subsidiaries to be returned.
5.2. Conduct of Business. After the date of this Plan
and pending the Effective Date, (a) Home Corporation and the Home
Subsidiaries will conduct their business only in the ordinary
course; (b) Home Corporation and the Home Subsidiaries shall not
effect any change or amendment in their respective Charters or By-
Laws; (c) except with respect to Home Corporation stock options
outstanding on the date of this Plan which are or may become
subject to exercise, Home Corporation and the Home Subsidiaries
shall not change their authorized, issued or outstanding capital
stock; (d) Home Corporation shall not declare any dividends in
respect of its Common Stock; (e) except as disclosed in Schedule
5.2(d), Home Corporation and the Home Subsidiaries shall not
increase employee compensation or benefit levels (except for
annual increases not in excess of amounts established by its
regular past practices), shall not establish or make any increase
in any employment, compensation, bonus, pension, option,
incentive or deferred compensation, retirement, death, profit
sharing, or similar agreements or benefits of any of its past,
present or future officers or employees, other than additional
premiums to obtain an extension of directors' and officers'
liability coverage for six years (which Home Corporation is
authorized to obtain), and shall not modify the existing
employment agreements with Richard W. Phoebus, Sr., Celia S.
Ausherman, Steven G. Hull and Salvatore M. Savino; (f) Home
Corporation and the Home Subsidiaries shall not make any change
in any of their accounting policies or practices unless required
by generally accepted accounting principles or take any action
which would cause the Merger not to be accounted for as a pooling-
of-interests; (g) Home Corporation and the Home Subsidiaries
shall not incur any liability for borrowed money except
extensions of credit from the Federal Home Loan Bank of Atlanta
(in which no single transaction shall exceed $5,000,000) and
otherwise in the ordinary course of their banking business or
place upon or permit any lien or encumbrance upon any of their
properties or assets except liens of the type permitted in the
exceptions to Section 3.7; and (h) Home Bank shall accept no
further applications from its directors for participation in, and
shall not designate any of its directors as additional
participants in, its Amended and Restated Executive Compensation
Plan for Directors. Pending the Effective Date, Home Corporation
and the Home Subsidiaries shall (x) use commercially reasonable
efforts to preserve their business organization and assets and to
keep available the services of their full-time officers and
employees, (y) continue in effect the present method of
conducting their business, and (z) consult with F&M Bancorp as to
making decisions or actions in matters (i) other than those in
the ordinary course of business or (ii) except as disclosed in
Schedule 5.2(z)(ii), involving any capital expenditures in excess
of $25,000.
5.3. Consents. Home Corporation and the Home
Subsidiaries will use commercially reasonable efforts to obtain
any consents, approvals, or waivers from third parties necessary
to the assignments and transfers contemplated hereby with respect
to leases or other contracts, if any, delivered to F&M Bancorp
pursuant to Section 3.8 or any other agreements requiring the
same.
5.4.
Meeting of Stockholders of Home Corporation; Document Preparation.
(a) Home Corporation will duly call and will convene a meeting
of its stockholders to act upon the transactions contemplated
hereby as soon as practicable. Except to the extent legally
required for the discharge by the board of directors of its
fiduciary duties, Home Corporation will recommend approval of
this Plan and the Merger to its stockholders, and will use
commercially reasonable efforts to obtain a favorable vote
thereon. The calling and holding of such meeting and all
notices, transactions, documents, and information related thereto
will be in compliance with all applicable laws.
(b) Home Corporation shall furnish F&M Bancorp with
such information concerning Home Corporation and the Home
Subsidiaries as is necessary in order to cause the Proxy
Statement/Prospectus (as defined in Section 6.2 hereof), insofar
as it relates to such corporations, to comply with Section 6.2
hereof. Home Corporation agrees promptly to advise F&M Bancorp
if at any time prior to the Home Corporation stockholder's
meeting, any information provided by Home Corporation in the
Proxy Statement/Prospectus becomes incorrect or incomplete in any
material respect and to provide F&M Bancorp with the information
needed to correct such inaccuracy or omission. Home Corporation
shall furnish F&M Bancorp with such supplemental information as
may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to Home Corporation
and the Home Subsidiaries, to comply with Section 6.2 after the
mailing thereof to Home Corporation stockholders. The
information provided and the representations made by Home
Corporation and Home Bank to F&M Bancorp in connection with the
Registration Statement described in Section 6.2, both at the time
such information and representations are provided and made and at
the Effective Date, will be true and accurate in all material
respects and will not contain any false or misleading statement
with respect to any material fact or omit to state any material
fact required to be stated therein or necessary in order (a) to
make the statements made therein not false or misleading, or (b)
to correct any statement contained in an earlier communication
with respect to such information or representations which has
become false or misleading. Home Corporation may rely upon all
information provided to it by F&M Bancorp and its representatives
in the preparation of the Proxy Statement/Prospectus and shall
not be liable for any untrue statement of a material fact or any
omission to state a material fact in the Proxy
Statement/Prospectus, if such statement is made in reliance upon
any information provided to it by F&M Bancorp or by any of its
officers or authorized representatives.
(c) Home Corporation shall promptly furnish F&M Bancorp
with such information regarding the Home Corporation stockholders
as F&M Bancorp requires to enable it to determine what filings
are required under applicable state securities laws. Home
Corporation authorizes F&M Bancorp to utilize in such filings the
information concerning Home Corporation and the Home Subsidiaries
provided to F&M Bancorp in connection with, or contained in, the
Proxy Statement/Prospectus. Home Corporation shall promptly
notify F&M Bancorp of all communications, oral or written, with
the SEC concerning the Registration Statement and the Proxy
Statement/Prospectus.
5.5. Events Preceding Effectiveness. Home Corporation
and the Home Subsidiaries will use commercially reasonable
efforts to assure that each of the events specified in Section 2
which require action on its part shall occur on or before the
Effective Date.
5.6. No Solicitation of Other Offers. Home Corporation
agrees that neither it nor any of the Home Subsidiaries nor any
of their respective officers, directors and employees shall, and
Home Corporation shall direct and use its best efforts to cause
its and the Home Subsidiaries' agents and representatives
(including, without limitation, any investment banker, attorney
or accountant retained by it or any of the Home Subsidiaries) not
to, directly or indirectly, take any action to solicit or
initiate any inquiries or the making of any offer or proposal
(including without limitation any proposal to stockholders of
Home Corporation) with respect to a merger, consolidation,
business combination, liquidation, reorganization, sale or other
disposition of any significant portion of assets (except Problem
Assets, as defined in Section 9.7(a)), sale of shares of capital
stock, or similar transactions involving Home Corporation or any
of the Home Subsidiaries (any such inquiry, offer or proposal, an
"Acquisition Proposal"), or, except as may be legally required
for the discharge by the board of directors of its fiduciary
duties, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions
with, any person relating to an Acquisition Proposal. As of the
time hereof, Home Corporation is not engaged in any negotiations
or discussions relating to an Acquisition Proposal. Home
Corporation shall promptly notify F&M Bancorp orally and in
writing of any Acquisition Proposal or any inquiries with respect
thereto, such written notification to include the identity of the
Person making such inquiry or Acquisition Proposal and such other
information with respect thereto as is reasonably necessary to
apprise F&M Bancorp of the material terms of such Acquisition
Proposal. Home Corporation shall give F&M Bancorp
contemporaneous written notice upon engaging in discussions or
negotiations with, or providing any information regarding Home
Corporation or any of the Home Subsidiaries to, any such person
regarding an Acquisition Proposal.
5.7. Reservation of Shares. Home Corporation shall
have reserved a sufficient number of shares of its Common Stock
for issuance upon exercise of the option granted pursuant to the
Stock Option Agreement, attached hereto as Appendix III, which is
to be executed by F&M Bancorp and Home Corporation, and shall
have taken all other actions necessary to fulfill its obligations
thereunder.
5.8. Affiliate Agreements. Within 10 days of the date
of this Plan, Home Corporation shall deliver or cause to be
delivered to F&M Bancorp memoranda substantially in the form
attached hereto as Appendix IV (the "Affiliates' Memoranda") and
agreements substantially in the form attached hereto as Appendix
V (the "Support Agreements") from each of its executive officers
and directors (and shall use commercially reasonable efforts to
obtain and deliver such memoranda and agreements from each
stockholder of Home Corporation who (a) may be deemed to be an
"affiliate" of Home Corporation, as that term is defined for
purposes of the SEC Rules 145 and 405 or (b) may be restricted
under the accounting rules applicable to a pooling-of-interests).
Under the terms of the Affiliates' Memoranda, each such officer,
director or stockholder shall acknowledge and agree (i) to abide
by all limitations imposed by the Securities Act and by all
rules, regulations and releases promulgated thereunder by the SEC
with respect to the sale or other disposition of the shares of
the Common Stock of F&M Bancorp to be received by such person
pursuant to the Merger, and (ii) to abide by all limitations
imposed by the accounting rules for the Merger to be accounted
for as a pooling-of-interests. Under the terms of the Support
Agreements, each such officer, director or stockholder shall
agree to support and vote the shares of Common Stock of Home
Corporation owned or controlled by him or her to ratify and
confirm this Plan and the Merger.
5.9. Regulatory Approvals. Home Corporation and the
Home Subsidiaries will, where necessary, cooperate with F&M
Bancorp's efforts to obtain all necessary regulatory approvals of
the transactions contemplated by this Plan.
5.10. Current Information; Advice of Changes. (a)
During the period from the date of this Plan to the Effective
Date, Home Corporation will cause one or more of its designated
representatives to confer on a monthly or more frequent basis
with representatives of F&M Bancorp regarding its business,
operations, properties, assets and financial condition and
matters relating to the completion of the transactions
contemplated herein. As soon as reasonably available, but in no
event more than 45 days after the end of each fiscal quarter
(other than the last fiscal quarter of each fiscal year) ending
after the date of this Plan, Home Corporation will deliver to F&M
Bancorp its quarterly reports on Form 10-Q, as filed with the SEC
under the Exchange Act. As soon as reasonably available, but in
no event more than 90 days after the calendar year, Home
Corporation will deliver to F&M Bancorp its Annual Report on Form
10-K as filed with the SEC under the Exchange Act.
(b) Between the date of this Plan and the Effective
Date, Home Corporation shall promptly advise F&M Bancorp in
writing of any fact which, if existing or known at the date
hereof, would have been required to be set forth or disclosed in
or pursuant to this Plan or of any fact which, if existing or
known as of the date hereof, would have made any of the
representations contained herein untrue in any material respect.
5.11. Public Announcements. Between the date of
this Plan and the Effective Date, Home Corporation and the Home
Subsidiaries will consult with F&M Bancorp before issuing any
press release or otherwise making any public statements with
respect to this Plan and the transactions contemplated hereby and
shall not issue any such press release or make any such public
statement prior to such consultation, except as counsel may
advise is required by law.
5.12. Taxes. Home Corporation shall have filed
with appropriate federal, state, county, municipal or foreign
taxing authorities all tax returns required to be filed (taking
any applicable extensions into consideration) on or before the
Effective Date and shall have paid (or shall have made adequate
provision or set up an adequate actual reserve on the financial
statements referred to in Section 3.2 for the payment of) all
taxes imposed by any taxing authority with respect to any Pre-
Closing Tax Period (as hereinafter defined), together with any
interest, additions or penalties related to any such taxes. For
purposes of this Section 5.12, any reference to Home Corporation
shall be deemed to include any corporation more than 50% of the
outstanding capital stock (by vote or value) of which is owned by
Home Corporation. "Pre-Closing Tax Period" shall mean (i) each
taxable period that ends on or before the Effective Date and (ii)
any taxable period that includes (but does not end on) the
Effective Date (the period described in this clause (ii) being
hereafter referred to as a "Straddle Period"). In the case of
any tax for a Straddle Period, the covenant in the first sentence
of this Section 5.12 shall be limited to the Pre-Closing Tax
Amount determined as follows:
(a) In the case of a periodic tax that is
not based on income or receipts (e.g., an ad valorem
property tax), the "Pre-Closing Tax Amount" shall be an
amount equal to the amount of such tax for the entire
Straddle Period multiplied by a fraction the numerator
of which is the number of days elapsed between the
beginning of the Straddle Period and the Effective Date
and the denominator of which is the total number of
days in the Straddle Period; and
(b) in the case of any other tax, the "Pre-
Closing Tax Amount" shall be the amount of such tax for
which Home Corporation would have been liable if the
Straddle Period had ended as of the close of business
on the day of the Effective Date.
5.13. Pooling-of-Interests. Home Corporation shall
use its best efforts not to permit any of the directors,
officers, employees, stockholders, agents, consultants or other
representatives of Home Corporation or any of the Home
Subsidiaries to take any action that would preclude F&M Bancorp
from treating the Merger as a "pooling-of-interests" for
financial reporting purposes.
5.14. Directors' Agreement. Home Corporation shall
present the Directors' Agreement, in substantially the form
attached hereto as Appendix X, to each of Howard B. Bowen and
John J. McElwee, Jr., both of whom are directors of Home Bank and
participants in its Amended and Restated Executive Compensation
Plan for Directors, and shall cause each of them to enter into
such Directors' Agreement with F&M Bancorp.
6. Covenants of F&M Bancorp. Except as otherwise consented
to in writing by Home Corporation after the date of this Plan,
F&M Bancorp covenants to and agrees with Home Corporation as
follows:
6.1.
Applications to Governmental Regulatory Authorities. F&M Bancorp
will promptly prepare and file with the appropriate governmental
regulatory authorities an application requesting the regulatory
approvals referred to in Section 2(e) and 2(f) and will use
commercially reasonable efforts to secure favorable action on
such applications, including without limitation commercially
reasonable efforts to pursue an appeal of a denial of a
regulatory approval.
6.2. Registration of Shares. F&M Bancorp, with the
assistance of Home Corporation and its representatives, will
promptly file a Registration Statement with the SEC which shall
include a joint proxy statement for F&M Bancorp and Home
Corporation and a prospectus which shall satisfy all applicable
requirements of applicable state and federal laws, including the
Securities Act, the Exchange Act and applicable state securities
laws and the rules and regulations thereunder (such joint proxy
statement and prospectus, together with any and all amendments or
supplements thereto, being herein referred to as the "Proxy
Statement/Prospectus," and the various documents to be filed by
F&M Bancorp under the Securities Act with the SEC to register the
F&M Bancorp Common Stock into which shares of the Common Stock of
Home Corporation held by non-dissenting stockholders will be
converted, including the Proxy Statement/Prospectus, are referred
to herein as the "Registration Statement"). The number of shares
to be registered will be an amount sufficient to allow all of the
shares of the Common Stock of F&M Bancorp issued to holders of
the Common Stock of Home Corporation pursuant to this Plan to be
registered under the Securities Act. F&M Bancorp will use
commercially reasonable efforts to secure the effectiveness of
the Registration Statement and, after the Registration Statement
has been declared effective, will issue the shares so registered
to the non-dissenting holders of the Common Stock of Home
Corporation on the Effective Date. F&M Bancorp may rely upon all
information provided to it by Home Corporation and its
representatives in the preparation of the Registration Statement,
any post-effective amendment thereto and the Proxy Statement and
shall not be liable for any untrue statement of a material fact
or any omission to state a material fact in the Registration
Statement, the post-effective amendment or the Proxy Statement,
if such statement is made in reliance upon any information
provided to it by Home Corporation or by any of its officers or
authorized representatives. F&M Bancorp shall promptly take all
such actions as may be necessary or appropriate in order to
comply in all material respects with all applicable securities
laws of any state having jurisdiction over the transactions
contemplated by this Plan and the Merger. F&M Bancorp shall
furnish Home Corporation with copies of all such filings and keep
Home Corporation advised of the status thereof. F&M Bancorp
shall promptly notify Home Corporation of all communications,
oral or written, with the SEC concerning the Registration
Statement and the Proxy Statement/Prospectus. Prior to the
Effective Date, F&M Bancorp will cause the listing of the Common
Stock of F&M Bancorp deliverable pursuant to this Plan on The
National Market of The National Association of Securities
Dealers, Inc. ("Nasdaq").
6.3. Information.
(a) F&M Bancorp shall, upon reasonable notice, give to
Home Corporation and to its officers, accountants, counsel,
financial advisors, and other representatives, reasonable access
during F&M Bancorp's normal business hours throughout the period
prior to the Effective Date to all of their properties, books,
contracts, commitments, reports of examination (consistent with
applicable law), depositor and stockholder lists, and records.
F&M Bancorp and the F&M Subsidiaries will, at their own expense,
furnish Home Corporation during such period with all such
information concerning their affairs as Home Corporation may
reasonably request.
(b) F&M Bancorp acknowledges that information received
by it concerning Home Corporation and the Home Subsidiaries and
their operations is subject to the Confidentiality Agreement
dated July 3, 1995 between F&M Bancorp and Home Corporation.
Without limiting the foregoing, F&M Bancorp will not, and will
cause its representatives not to, use any information obtained
pursuant to Section 5.1 for any purpose unrelated to the
consummation of the transactions contemplated by this Plan.
Subject to the requirements of law, F&M Bancorp will keep
confidential, and will cause its representatives to keep
confidential, all information and documents obtained pursuant to
Section 5.1 unless such information (i) was already known to F&M
Bancorp, (ii) becomes available to F&M Bancorp from other sources
not known by F&M Bancorp to be bound by a confidentiality
obligation, (iii) is disclosed with prior written approval of
Home Corporation and the Home Subsidiaries, or (iv) is or becomes
readily ascertainable from published information or trade
sources. In the event that this Plan is terminated or the
transactions contemplated by this Plan shall otherwise fail to be
consummated, F&M Bancorp shall promptly cause all copies of
documents or extracts thereof containing information and data as
to Home Corporation and the Home Subsidiaries to be returned;
provided that the legal department of F&M Bancorp may retain one
copy of such documents and materials. In the event that this
Plan has been terminated or the transactions contemplated hereby
shall have failed to be consummated and F&M Bancorp or any of its
agents or representatives are requested or required (by oral
questions, interrogatories, requests for information or documents
in legal proceedings, subpoena, civil investigative demand or
other similar process) to disclose any of the materials delivered
or obtained pursuant to the Plan (the "Home Corporation
Documentation"), F&M Bancorp shall provide Home Corporation with
prompt written notice of any such request or requirement so that
Home Corporation may seek a protective order or other appropriate
remedy. If, in the absence of a protective order or other
remedy, F&M Bancorp or any of its agents or representatives are
compelled to disclose any of such Home Corporation Documentation
to any tribunal or else stand liable for contempt or suffer other
censure or penalty, F&M Bancorp or its agents or representatives
may, without liability hereunder, disclose to such tribunal only
that portion of the Home Corporation Documentation which F&M
Bancorp's counsel advises F&M Bancorp is legally required to be
disclosed, provided that F&M Bancorp shall exercise its best
efforts to preserve the confidentiality of the Home Corporation
Documentation, including, without limitation, by cooperating with
Home Corporation to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be
accorded the Home Corporation Documentation by such tribunal.
6.4. Events Preceding Effectiveness. F&M Bancorp will
use commercially reasonable efforts to assure that each of the
events specified in Section 2 shall occur on or before the
Effective Date.
6.5. Consents. F&M Bancorp will use commercially
reasonable efforts to obtain any consents, approvals or waivers
from third parties required in connection with the transactions
contemplated hereunder.
6.6. Current Information; Advice of Changes. (a)
During the period from the date of this Plan to the Effective
Date, F&M Bancorp will cause one or more of its designated
representatives to confer on a monthly or more frequent basis
with representatives of Home Corporation regarding its business,
operations, properties, assets and financial condition and
matters relating to the completion of the transactions
contemplated herein. As soon as reasonably available, but in no
event more than 45 days after the end of each fiscal quarter
(other than the last fiscal quarter of each fiscal year) ending
after the date of this Plan, F&M Bancorp will deliver to Home
Corporation its quarterly reports on Form 10-Q, as filed with the
SEC under the Exchange Act. As soon as reasonably available, but
in no event more than 90 days after the calendar year, F&M
Bancorp will deliver to Home Corporation its Annual Report on
Form 10-K as filed with the SEC under the Exchange Act.
(b) Between the date of this Plan and the Effective
Date, F&M Bancorp shall promptly advise Home Corporation in
writing of any fact which, if existing or known at the date
hereof, would have been required to be set forth or disclosed in
or pursuant to this Plan or of any fact which, if existing or
known as of the date hereof, would have made any of the
representations contained herein untrue in any material respect.
6.7. Meeting of Stockholders of F&M Bancorp; Document
Preparation.
(a) F&M Bancorp shall duly call and convene a stockholders'
meeting to act upon the transactions contemplated hereby as soon as
practicable, will recommend approval of this Plan and the Merger
to its stockholders, and will use commercially reasonable efforts
to obtain a favorable vote thereon. The calling and holding of
such meeting and all notices, transactions, documents, and
information related thereto will be in compliance with all
applicable laws.
(b) F&M Bancorp shall furnish such information
concerning F&M Bancorp and the F&M Subsidiaries as is necessary
in order to cause the Proxy Statement/Prospectus, insofar as it
relates to such corporations, to comply with Section 6.2 hereof.
F&M Bancorp agrees promptly to advise Home Corporation if at any
time prior to the F&M Bancorp stockholders' meeting, any
information provided by F&M Bancorp in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any
material respect and to provide Home Corporation with the
information needed to correct such inaccuracy or omission. F&M
Bancorp shall furnish Home Corporation with such supplemental
information as may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to F&M Bancorp and
the F&M Subsidiaries, to comply with Section 6.2 after the
mailing thereof to F&M Bancorp stockholders. The information
provided and the representations made by F&M Bancorp in
connection with the Proxy Statement/Prospectus, both at the time
such information and representations are provided and made and at
the Effective Date, will be true and accurate in all material
respects and will not contain any false or misleading statement
with respect to any material fact or omit to state any material
fact required to be stated therein or necessary in order (a) to
make the statements made therein not false or misleading, or (b)
to correct any statement contained in an earlier communication
with respect to such information or representations which has
become false or misleading.
6.8. Employment Agreements. Pursuant to Section 10(c)
of this Plan, between the date of this Plan and the Effective
Date, F&M Bancorp shall offer to enter into an employment
agreement with Richard W. Phoebus, Sr. substantially in the form
attached hereto as Appendix VI, and with each of Celia S.
Ausherman, Steven G. Hull and Salvatore M. Savino substantially
in the form attached hereto as Appendix VII.
6.9. F&M Bancorp Common Stock. At the Effective Date,
the F&M Bancorp Common Stock to be issued in exchange for the
Home Corporation Common Stock pursuant to the terms of this Plan
shall be duly authorized, validly issued, fully paid, and non-
assessable, free of preemptive rights and free and clear of all
liens, encumbrances or restrictions created by or through F&M
Bancorp, with no personal liability attaching to the ownership
thereof. The F&M Bancorp Common Stock to be issued upon exchange
for the Home Corporation Common Stock pursuant to the terms of
this Plan will be issued in all material respects in accordance
with applicable state and federal laws, rules and regulations.
6.10. Maintenance of Separate Existence. For a
period of three (3) years after the Effective Date, F&M Bancorp
shall (i) preserve the separate corporate existence of Home Bank;
and (ii) continue in office the directors of Home Bank who are
serving in such capacity on the Effective Date for the remainder
of their current terms and until their successors are elected and
have qualified (subject to the addition of two directors pursuant
to Section 10(b) of this Plan); provided, however, that during
the three-year period following the Effective Date, F&M Bancorp
may terminate the separate corporate existence of Home Bank if
Maryland or federal laws or regulations governing financial
institutions are amended in such a way as to have a materially
adverse effect on the business, operations or future prospects of
F&M Bancorp if it were to continue to operate Home Bank as a
separate corporate entity.
7. Conditions Precedent to F&M
Bancorp's Obligations. Unless waived in writing by F&M Bancorp
in its sole discretion, all obligations of F&M Bancorp hereunder
shall be subject to the fulfillment prior to or at the Effective
Date of the following conditions:
7.1. Representations, Warranties, and Covenants. The
representations and warranties of Home Corporation herein
contained shall be true in all material respects as of the date
hereof, shall be deemed made again at and as of the Effective
Date, and shall be true in all material respects as so made
again; Home Corporation and the Home Subsidiaries shall have
performed in all material respects all obligations and
agreements, and complied in all material respects with all
covenants and conditions required by this Plan to be performed or
complied with by them on or prior to the Effective Date; and F&M
Bancorp shall have received from Home Corporation an officers'
certificate to their knowledge, information and belief in such
detail as F&M Bancorp may reasonably request, dated the Effective
Date and signed by its Chairman and Chief Executive Officer and
Secretary, to the foregoing effect.
7.2. No Adverse Changes. There shall not have been any
materially adverse change in the financial condition, results of
operations, assets, liabilities, or business of Home Corporation
and the Home Subsidiaries, taken as a whole, from December 31,
1995 to the Effective Date. For purposes of this Section 7.2, a
"materially adverse change" shall include, without limitation,
(a) a reduction of the stockholders' equity of Home Corporation
to less than $18,382,000, (b) a decrease in the net income of
Home Corporation for fiscal year 1996 to less than $1,000,000 on
an annualized basis, (c) the reduction of core deposits (i.e.,
all deposits excepting certificates of deposit in excess of
$100,000) of Home Bank to less than 95% of core deposits of Home
Bank on December 31, 1995, or (d) an increase in Home
Corporation's ratio of non-performing assets to total assets from
that reported as of December 31, 1995 to greater than 7.5% at
any time before the Effective Date (in the case of (a) and (b),
the expenses of the transaction under this Plan shall not be
taken into account).
7.3. Events Preceding the Effective Date. Each of the
events set forth in Section 2 shall have occurred and any other
required regulatory approvals shall have been obtained.
7.4. Other Evidence. Home Corporation shall have
delivered to F&M Bancorp such further certificates and documents
evidencing due action in accordance with this Plan, including
certified copies of all applicable proceedings of stockholders or
directors of Home Corporation pertaining to the transactions
under this Plan, as F&M Bancorp shall reasonably request.
7.5. No Adverse Proceedings, Events or Regulatory
Requirements. No action or proceeding against F&M Bancorp or any
of the F&M Subsidiaries or against Home Corporation or any of the
Home Subsidiaries shall be pending which seeks to prevent
consummation of the transactions contemplated by this Plan; and
no order of any court shall have been entered which prohibits
consummation of the Merger and the transactions contemplated by
this Plan. No approval, consent, waiver or administrative action
shall have included any condition or requirement that would (i)
result in a materially adverse effect on F&M Bancorp or Home
Corporation or (ii) so materially and adversely affect the
economic or business benefits of the Merger that F&M Bancorp, in
the sole judgment of F&M Bancorp, would not have entered into
this Plan had such conditions or requirements been known at the
date hereof.
7.6. Consents, Etc. All requisite consents,
undertakings, memoranda, agreements, exercises, and terminations
by third parties which Home Corporation and the Home Subsidiaries
have covenanted to use commercially reasonable efforts to obtain
under Sections 5.3 and 5.8 shall have been obtained or waived by
F&M Bancorp.
7.7. Opinion of Tax Counsel. F&M Bancorp shall have
received the opinion from its tax counsel required by Section 11.
7.8. Opinion of Counsel. F&M Bancorp shall have
received an opinion of counsel to Home Corporation, dated the
Effective Date, in form and substance reasonably satisfactory to
F&M Bancorp, covering the matters set forth in Appendix VIII
hereto.
7.9 Pooling-of-Interests Accounting. The holders of no
more than 8% of the outstanding Common Stock of Home Corporation
shall have taken all appropriate steps required by Md. Corps. &
Ass'ns Code Section 3-203(a)(1) and (2) to dissent to this Plan,
and F&M Bancorp shall have received a letter from an independent
accounting firm chosen by F&M Bancorp to the effect that the
Merger qualifies for pooling-of-interests accounting treatment if
consummated in accordance with this Plan; provided, that such
condition shall be void and of no further force and effect if F&M
Bancorp has not received such letter because of any action or
inaction of F&M Bancorp.
7.10. Directors' Agreement. Each of Howard B.
Bowen and John J. McElwee, Jr. shall have entered into a
Directors' Agreement with F&M Bancorp in the form attached hereto
as Appendix X.
8. Conditions Precedent to Home Corporation's Obligations.
Unless waived in writing by Home Corporation in its sole discretion,
all obligations of Home Corporation hereunder shall be subject to the
fulfillment prior to or at the Effective Date of the following
conditions:
8.1. Representations, Warranties, and Covenants. The
representations and warranties of F&M Bancorp herein contained
shall be true in all material respects as of the date hereof,
shall be deemed made again at and as of the Effective Date, and
shall be true in all material respects as so made again; F&M
Bancorp shall have performed in all material respects all
obligations and agreements, and complied in all material respects
with all covenants and conditions required by this Plan to be
performed or complied with by it on or prior to the Effective
Date; and Home Corporation shall have received from F&M Bancorp
an officers' certificate to their knowledge, information and
belief in such detail as Home Corporation may reasonably request,
dated the Effective Date and signed by its President and
Secretary or Cashier, to the foregoing effect.
8.2. No Adverse Changes. There shall not have been any
materially adverse change in the financial condition, results of
operations, assets, liabilities, or business of F&M Bancorp from
December 31, 1995 to the Effective Date.
8.3. Events Preceding the Effective Date. Each of the
events set forth in Section 2 shall have occurred and any other
required regulatory approvals shall have been obtained.
8.4. Other Evidence. F&M Bancorp shall have delivered
to Home Corporation such further certificates and documents
evidencing due action in accordance with this Plan, including
certified copies of all applicable proceedings of directors of
F&M Bancorp pertaining to the transactions under this Plan, as
Home Corporation shall reasonably request.
8.5. Consents, Etc. All requisite consents, approvals
or waivers which F&M Bancorp has covenanted to use commercially
reasonable efforts to obtain under Section 6.5 shall have been
obtained or waived by Home Corporation.
8.6. Opinion of Tax Counsel. Home Corporation shall
have received the opinion from tax counsel to F&M Bancorp
required by Section 11.
8.7. Fairness Opinion. Home Corporation shall have
received a written opinion from Charles Webb & Company (or such
other recognized investment firm as Home Corporation may select),
dated contemporaneously with the date of the Proxy Statement, to
the effect that the consideration to be received in the Merger is
fair to the stockholders of Home Corporation from a financial
point of view.
8.8. Employment Agreements. Pursuant to Section 10(c)
of this Plan, F&M Bancorp shall have offered to enter into an
employment agreement with Richard W. Phoebus, Sr. substantially
in the form attached hereto as Appendix VI, and shall have
offered to enter into an employment agreement with each of Celia
S. Ausherman, Steven G. Hull and Salvatore M. Savino
substantially in the form attached hereto as Appendix VII.
8.9. Opinion of Counsel. Home Corporation shall have
received an opinion of counsel to F&M Bancorp, dated the
Effective Date, in form and substance reasonably satisfactory to
Home Corporation, covering the matters set forth in Appendix IX
hereto.
9. Terms of the Merger.
9.1. Structure of the Merger. At the Effective Date,
subject to the terms and conditions of this Plan, Home
Corporation will merge (the "Merger") with and into F&M Bancorp,
the separate corporate existence of Home Corporation shall cease,
and F&M Bancorp shall continue as the successor corporation (the
"Successor Corporation"). Home Bank shall become a wholly-owned
direct subsidiary of the Successor Corporation. From and after
the Effective Date, the Merger shall have the effects set forth
in Md. Corps. & Ass'ns Code Section 3-114.
9.2. Conversion of Stock; Conversion Ratio.
(a) On the Effective Date, each share of the
Home Corporation Common Stock outstanding immediately
prior to the Effective Date (other than shares held by
persons who perfect their dissenters' rights under
Maryland law), shall, without any action on the part of
the holder thereof, be canceled and converted into the
number of shares of F&M Bancorp Common Stock (rounded
to the nearest 0.01 share) which results after
multiplication by the Conversion Ratio. The Conversion
Ratio shall be a fraction, the numerator of which is
the product of (i) 1.65 multiplied by (ii) the book
value (calculated in accordance with Section 9.7) per
share of Home Corporation Common Stock on the
Calculation Date, and the denominator of which is the
Average Market Value of a share of F&M Bancorp Common
Stock. The Calculation Date shall be the last day of
the month during which (i) all events listed in Section
2 shall have occurred and (ii) all conditions precedent
listed in Sections 7 and 8 shall have been fulfilled or
waived.
(b) For purposes of the computation of the
Conversion Ratio, if, at the Calculation Date, the
Average Market Value of F&M Bancorp Common Stock is
greater than 1.9 times the book value per share of F&M
Bancorp Common Stock determined in accordance with
generally accepted accounting principles, then in lieu
of the Average Market Value, F&M Bancorp shall use a
per share price for its Common Stock equal to 1.9 times
the book value per share of its Common Stock as of the
Calculation Date, determined in accordance with
generally accepted accounting principles.
(c) The Average Market Value of each share
of the F&M Bancorp Common Stock shall be the arithmetic
average of closing prices of F&M Bancorp Common Stock
in the Composite Transaction Summary to the extent
reported in The Wall Street Journal for the twenty (20)
consecutive trading days preceding the Calculation
Date.
(d) No certificates for fractional shares of
F&M Bancorp Common Stock shall be issued; in lieu
thereof, each holder otherwise entitled to a fractional
interest shall receive an amount in cash based on the
Average Market Value of F&M Bancorp Common Stock on the
Calculation Date. Each such holder shall have no other
rights with respect to such fractional interest.
9.3. Exchange Procedure.
(a) After the Effective Date, certificates
representing such shares of Common Stock of Home
Corporation shall represent the right to receive
certificates representing shares of Common Stock of F&M
Bancorp determined in accordance with Section 9.2
hereof; such Home Corporation certificates at any time
after the Effective Date may be exchanged by the
holders thereof for new certificates for the
appropriate number of shares of Common Stock of F&M
Bancorp by forwarding such Home Corporation Common
Stock certificates and the letter of transmittal
provided by F&M Bancorp to the transfer agent for F&M
Bancorp Common Stock, and the payment of cash in lieu
of fractions, dividends, and other distributions on
said stock may be withheld until the Home Corporation
certificates are surrendered for exchange to the
transfer agent for F&M Bancorp Common Stock; when such
new certificates are issued, the holders thereof shall
be entitled to be paid the amount (without any interest
thereon) of all such withheld cash in lieu of
fractions, dividends, or other distributions which have
theretofore become payable with respect to such shares
of Common Stock of F&M Bancorp.
(b) As soon as possible after the Effective
Date, the transfer agent for F&M Bancorp Common Stock
shall send or cause to be sent a notice and transmittal
form to each recordholder of a certificate theretofore
evidencing shares of the Home Corporation Common Stock
(other than to holders who have perfected their
dissenters' rights under Maryland law).
(c) All shares of F&M Bancorp Common Stock
into which shares of Home Corporation Common Stock
shall have been converted shall be deemed to have been
issued in full satisfaction of all rights pertaining to
such shares of Home Corporation Common Stock.
9.4. Stock Options.
(a) At the Effective Date, all options
granted by Home Corporation which are outstanding under
all Stock Option Plans previously adopted by Home
Corporation to purchase shares of Home Corporation
Common Stock, which are outstanding and unexercised
immediately prior thereto (each, an "Outstanding
Option"), shall be converted as to each whole share
subject to such Outstanding Option into an option
(each, an "Exchange Option") to purchase a number of
shares of the Common Stock of F&M Bancorp equal to the
number of shares of Home Corporation Common Stock which
could have been purchased under the Outstanding Option
multiplied by the Conversion Ratio.
(b) The per share exercise price of each
Exchange Option shall be equal to the price per share
set forth in the Outstanding Option divided by the
Conversion Ratio, rounded up to the nearest whole cent.
(c) The Exchange Option shall otherwise have
the same duration and other terms as the Outstanding
Option.
(d) The adjustments provided herein with
respect to any options which are "incentive stock
options" (as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) shall be
effected in a manner consistent with Section 424(a) of
the Code.
9.5.
Articles of Incorporation of the Successor Corporation. The
Articles of Incorporation of F&M Bancorp, as in effect
immediately prior to the Effective Date, shall be the Articles of
Incorporation of the Successor Corporation until thereafter
amended as provided by law.
9.6. By-Laws of the Successor Corporation. The By-Laws
of F&M Bancorp, as in effect immediately prior to the Effective
Date, shall be the By-Laws of the Successor Corporation until
thereafter amended as provided by law.
9.7. Calculation of Home Corporation's Book Value. For
purposes of Section 9.2 hereof, the book value of Home
Corporation shall mean, subject to addition or subtraction for
the items set forth in paragraphs (a) through (c) below, the
calculation as of the Calculation Date of Home Corporation's
total assets minus its total liabilities, calculated in
conformity with generally accepted accounting principles applied
on a basis consistent with past practices of Home Corporation:
(a) Home Corporation's Allowance for
Possible Losses (as shown on Schedule 9.7(a) hereof)
(its "Total Allowance") as of the close of business on
the Calculation Date shall be 35.12% of its Problem
Assets on the Calculation Date, with any adjustments to
the Total Allowance and other accounts necessary to
achieve this percentage being accounted for in a manner
that reflects the principles of Financial Accounting
Standards Board Statement 109 ("FAS 109") and any other
generally accepted accounting principles applicable to
income taxes. For purposes of this calculation,
Problem Assets consist of (i) loans classified as
substandard, doubtful or loss and (ii) other real
estate owned at the Calculation Date, based upon loan
classification standards in effect as of December 31,
1995. No Problem Assets at December 31, 1995 (except
for consumer loans and one-to-four family residential
loans) shall be reduced or eliminated at the
Calculation Date except to the extent payment is
received by Home Bank or written off. Home Corporation
has scheduled its Problem Assets at December 31, 1995
on Schedule 9.7(a).
(b) If a special recapitalization assessment
for the Savings Association Insurance Fund is imposed
on Home Bank on or before the Calculation Date, the
amount of the special recapitalization assessment shall
be added back to Home Corporation's book value as of
the close of business on the Calculation Date and the
income tax accounts of Home Corporation shall be
adjusted to reflect the treatment that would have been
required under FAS 109 and any other generally accepted
accounting principles applicable to income taxes as if
the amount added back had never been imposed; provided
that such calculation shall not increase book value by
more than $925,000.
(c) For purposes of determining book value,
only normal and recurring items of income and expense
(including any additional premiums to obtain extended
directors' and officers' liability coverage) shall be
considered; provided, that transactional expenses
hereunder (other than such additional premiums) shall
not be deducted as an expense.
(d) Home Corporation shall prepare and
provide to F&M Bancorp a schedule reflecting the
calculation of its book value as of the Calculation
Date, determined in accordance with the terms of this
Section 9.7 within 10 days of the Calculation Date.
Such schedule shall be submitted along with a report of
Home Corporation's independent auditors which shall
indicate that they have reviewed (i) each of the
reports filed by Home Corporation with the SEC since
the date of the 1995 audited consolidated financial
statements, and specifying that they are not aware of
any material modifications that should be made to such
financial statements in order for them to be calculated
in conformity with generally accepted accounting
principles applied on a basis consistent with past
practice of Home Corporation, and (ii) the schedule
reflecting the calculation of the book value as of the
Calculation Date in accordance with the terms of this
Section 9.7 and specifying that nothing came to their
attention that caused them to believe that the
calculation of book value is not in accordance with the
terms of this Section 9.7. Such schedule and
supporting documentation are referred to as the Book
Value Documentation. F&M Bancorp's certified public
accountants shall, within 5 days of the receipt of the
Book Value Documentation, either confirm in writing to
Home Corporation that it finds the determination of
book value to be acceptable or, if such is not the
case, F&M Bancorp's independent certified public
accountants shall set forth specifically and with
particularity the basis for its disagreement. In the
event that F&M Bancorp believes that an adjustment to
book value is required, representatives of F&M Bancorp,
Home Corporation and each of their independent
certified public accountants shall meet within 5 days
to discuss any areas of disagreement. In the event
that the parties hereto determine to adjust Home
Corporation's book value from that previously
determined, Home Corporation shall promptly make the
appropriate adjustments. If the parties hereto cannot
reach agreement within 5 days of first meeting on this
matter, they shall submit the matter for determination
to a mutually acceptable independent third party
independent accounting firm, whose determination shall
be required within 10 days thereafter and shall be
binding upon the parties.
9.8. Anti-Dilution Provision. If F&M Bancorp takes any
action which establishes, prior to the Effective Date, a record
date or effective date for a stock dividend on its Common Stock,
a split or reverse split of its Common Stock or any distribution
on all shares of its Common Stock other than cash dividends, F&M
Bancorp will take such action as shall be necessary in order that
each share of Common Stock of Home Corporation will be converted
into the same number of shares of the Common Stock of F&M Bancorp
(whether such number is greater or less than the number otherwise
provided for herein) that the owner of such shares would have
owned immediately after the record date or effective date of such
event had the Effective Date occurred immediately before such
record date or effective date, and the Conversion Ratio set forth
in Section 9.2 shall be adjusted accordingly. Home Corporation
hereby agrees to any revision in the exchange ratio pursuant to
this Section 9.8.
9.9. Rights of Dissenting Stockholders. Each holder of
shares of the Common Stock of Home Corporation which are voted
against the approval of the Merger who perfects his appraisal
rights pursuant to the provisions of Md. Corps. & Ass'ns Code
Section 3-201 et seq. (a "dissenting stockholder") shall be entitled
to receive from F&M Bancorp in cash the value of such shares of the
Common Stock of Home Corporation determined in accordance with
the provisions of Md. Corps. & Ass'ns Code Section 3-201 et seq.
9.10.
Restriction on Issuance or Repurchase of Securities. Nothing in
this Plan shall limit the right of F&M Bancorp to issue or
repurchase any of its stock or other securities in any manner and
for any consideration permitted by law either in connection with
acquisitions of new affiliates or otherwise, prior to or after
the Effective Date.
10. Boards of Directors and Employment Matters. Upon the
Effective Date:
(a) Promptly after the Effective Date of the
Merger, F&M Bancorp will cause its Board of Directors
to be expanded to include two additional members. Two
of the directors of Home Corporation will then be
elected to fill the two newly created vacancies until
the next annual meeting of the stockholders of F&M
Bancorp and until their successors are elected and have
qualified. Prior to the Effective Date of the Merger,
the Board of Directors of Home Corporation will
designate the directors to be so elected, subject to
the approval of the Nominating Committee of the Board
of Directors of F&M Bancorp.
(b) The members of the Board of Directors of
Home Bank on the Effective Date will serve for the
remainder of their current terms and until their
successors are elected and have qualified. However,
after the Effective Date, F&M Bancorp, as the sole
stockholder of Home Bank, will cause the Board of
Directors of Home Bank to be expanded to include two
additional members, and shall appoint two individuals
designated by the Nominating Committee of the Board of
Directors of F&M Bancorp to fill the two newly created
vacancies.
(c) F&M Bancorp will offer to enter into an
employment agreement substantially in the form attached
hereto as Appendix VI with Richard W. Phoebus, Sr., the
President and Chief Executive Officer of Home
Corporation and Home Bank. F&M Bancorp will also offer
to enter into employment agreements substantially in
the form attached hereto as Appendix VII with each of
Celia S. Ausherman, Steven G. Hull and Salvatore M.
Savino (collectively and together with Mr. Phoebus, the
"Contract Employees"). F&M Bancorp will offer to enter
into each of these employment agreements before the
Effective Date, but the effectiveness of each is to be
conditioned upon the completion of the Merger. All
such employment agreements shall constitute the entire
understanding with respect to employment arrangements
between F&M Bancorp and each of the Contract Employees,
and shall supersede any and all prior understandings,
written or oral, including any prior employment
agreements between the Contract Employees and Home
Corporation or Home Bank. The Contract Employees shall
not be subject to the employment, compensation,
severance, or benefit plan eligibility and
participation arrangements set forth in Sections 10(e),
(f), (g) and (h) of this Plan.
(d) The employment of all officers and
employees of Home Corporation will terminate on the
Effective Date. One officer of Home Corporation will
be appointed to serve as an officer of F&M Bancorp.
Such officer will be designated by Home Corporation,
subject to the approval of the Board of Directors of
F&M Bancorp. Such officer may also continue to hold
responsibilities he or she held at Home Bank prior to
the Effective Date, and shall only be compensated in
his or her capacity as an officer of Home Bank.
(e) The officers and employees of Home Bank,
other than the Contract Employees, will continue in
their employment with Home Bank as at-will employees at
the same compensation level they received with Home
Bank before the Effective Date.
(f) Payments of $1,000, $500, or $250 will
be made to each of those officers, full-time employees,
or part-time employees, respectively, of Home Bank,
other than the Contract Employees, who either (i)
remain employed by Home Bank for six months
continuously thereafter or (ii) leave such employment
at the request of Home Bank within six months after the
Effective Date. Such payments shall be made six months
after the Effective Date, in the case of those who
remain in the employment of Home Bank, or within 15
business days after the date of termination, in the
case of those who are requested to leave employment.
(g) In addition to any payments required
under Section 10(f), a severance payment will be made
to those employees of Home Bank, other than the
Contract Employees, who remain employed by Home Bank on
the Effective Date, but leave such employment at the
request of Home Bank within six months after the
Effective Date for other than just cause. The amount
of the severance payment for each such employee will be
two weeks' pay at the most recent compensation level of
that employee. The severance payment shall be made
within 15 business days after the date of termination
of the employee.
(h) F&M Bancorp will review the benefits
provided to employees of Home Bank under the employee
benefit plans maintained by Home Bank and disclosed
pursuant to Section 3.8(b). F&M Bancorp will provide
the employees of Home Bank who continue as at-will
employees of F&M Bancorp after the Effective Date
either with benefits under F&M Bancorp's employee
benefit plans or with benefits under Home Bank's
employee benefit plans, whichever F&M Bancorp in its
sole discretion deems to be more advantageous taken as
a whole (and not on a plan-by-plan basis) to the
employees of Home Bank. In that connection, F&M
Bancorp may, in its sole discretion, freeze or
terminate the employee benefit plans of Home Bank,
merge them with one or more employee benefit plans of
F&M Bancorp, or continue to maintain them. If F&M
Bancorp decides to freeze, terminate or merge the
employee benefit plans of Home Bank, after the
Effective Date all full-time officers and employees of
Home Bank who continue as at-will employees of Home
Bank may participate in the equivalent employee benefit
plans of F&M Bancorp to the extent they are eligible to
do so under the terms of such plans or programs as are
in force on the Effective Date, with credit given for
their prior service with Home Bank for purposes of
allocation, eligibility and vesting.
(i) Except as disclosed on Schedule 3.8, F&M
Bancorp will discontinue health and life insurance
benefits to retired officers and employees of Home
Corporation except to the extent that coverage may
continue after, and Home Corporation may have paid for
the coverage prior to, the Effective Date.
(j) For such period of time as is covered by
any extension of the directors' and officers' liability
coverage of Home Corporation and the Home Subsidiaries,
but in no event longer than 6 years from the Effective
Date, after the Effective Date F&M Bancorp agrees to
cause Home Bank, or if such entity is no longer in
existence, F&M Bancorp shall continue to indemnify all
persons who, as of the Effective Date, are directors,
officers, employees and agents of Home Corporation or
the Home Subsidiaries to the same extent that such
persons are indemnified pursuant to the Articles of
Incorporation or By-Laws of Home Corporation and/or the
Home Subsidiaries on the date hereof, with respect to
matters occurring prior to the Effective Date.
11. Opinion of Tax Counsel. F&M Bancorp and Home
Corporation shall have received an opinion from tax counsel to
F&M Bancorp to the effect that:
(a) The transfer of all of the assets of
Home Corporation to F&M Bancorp, and the assumption by
F&M Bancorp of the liabilities of Home Corporation
pursuant to the terms of this Plan, will constitute a
reorganization within the meaning of Section
368(a)(1)(A) of the Code. Home Corporation and F&M
Bancorp will each be a "party to the reorganization"
within the meaning of Section 368(b) of the Code.
(b) No gain or loss will be recognized to a
stockholder of Home Corporation on the conversion of
Common Stock of Home Corporation solely into shares of
the Common Stock of F&M Bancorp. No gain or loss will
be recognized by Home Corporation upon the transfer of
all of its assets to F&M Bancorp in exchange for shares
of the Common Stock of F&M Bancorp and the assumption
by F&M Bancorp of the liabilities of Home Corporation.
No gain or loss will be recognized to F&M Bancorp upon
the receipt by F&M Bancorp of all of the assets of Home
Corporation in exchange for shares of the Common Stock
of F&M Bancorp and the assumption by F&M Bancorp of the
liabilities of Home Corporation.
(c) The basis of the shares of the Common
Stock of F&M Bancorp received by a stockholder of Home
Corporation will be the same as the basis of the shares
of the Common Stock of Home Corporation which were
converted into F&M Bancorp shares pursuant to the
Merger. The holding period of shares of the Common
Stock of F&M Bancorp received by a stockholder of Home
Corporation will include the period during which he
held the shares of the Common Stock of Home Corporation
which were converted into F&M Bancorp shares pursuant
to the Merger, provided that the shares of Common Stock
of Home Corporation is held as a capital asset by the
stockholder of Home Corporation on the Effective Date.
(d) The basis of each asset of Home
Corporation in the hands of F&M Bancorp will be the
same as the basis of such asset in the hands of Home
Corporation immediately prior to the Merger; the
holding period of each such asset in the hands of F&M
Bancorp will include the periods during which such
asset was held by Home Corporation.
(e) No gain or loss will be recognized to
the stockholders of F&M Bancorp as a result of the
transactions contemplated by this Plan.
(f) Where cash is received by a stockholder
of Home Corporation in lieu of a fractional share of
the Common Stock of F&M Bancorp to which the
stockholder may be entitled, such cash will be treated
as received by the stockholder as a distribution in
redemption of his fractional share interest.
(g) The accumulated earnings and profits of
Home Corporation on the Effective Date will be added to
the accumulated earnings and profits of F&M Bancorp and
will be available for subsequent distributions of
dividends within the meaning of Section 316 of the
Code.
12. Amendment of the Plan. This Plan may be amended at any
time prior to the Effective Date in response to comments of
governmental regulatory authorities or otherwise; provided that
any such amendment is in writing and is approved by the Board of
Directors of each of the parties hereto.
13. Abandonment of the Plan; Effect Thereof. Anything
herein to the contrary notwithstanding, and notwithstanding any
stockholder vote or approval, this Plan may be terminated and
abandoned:
(a) by mutual consent of the Boards of
Directors of Home Corporation and F&M Bancorp, or
(b) by F&M Bancorp or Home Corporation, if
its Board of Directors so determines, in the event of
the failure of the stockholders of F&M Bancorp or Home
Corporation to approve this Plan at the meetings of
stockholders called to consider such approval, unless
in each case the failure of such occurrence shall be
due to the failure of the party seeking to terminate
this Plan to perform or observe its agreement set forth
herein to be performed or observed by such party at or
before the Effective Date; or
(c) by F&M Bancorp or Home Corporation, if
its Board of Directors so determines, in the event of a
material breach by the other party hereto of any
representation, warranty, covenant or agreement
contained herein which is not cured or not curable
within 60 days after written notice of such breach is
given to the party committing such breach by the other
party; or
(d) by F&M Bancorp by written notice to Home
Corporation if prior to December 31, 1996 (i) any
approval, consent or waiver of any governmental entity
required to permit consummation of the transactions
contemplated hereby shall have been denied, (ii) any
approval, consent or waiver of any governmental entity
required to permit consummation of the transactions
contemplated hereby shall include any condition or
requirement that would (i) result in a materially
adverse effect on F&M Bancorp or Home Corporation or
(ii) so materially and adversely affect the economic or
business benefits of the Merger that F&M Bancorp, in
the sole judgment of F&M Bancorp, would not have
entered into this Plan had such conditions or
requirements been known at the date hereof, (iii) any
action or proceeding against F&M Bancorp or any of the
F&M Subsidiaries or against Home Corporation or any of
the Home Subsidiaries shall be pending which seeks to
prevent consummation of the transactions contemplated
by this Plan, or (iv) any court shall have entered an
order which prohibits consummation of the Merger and
the transactions contemplated by this Plan, or
(e) by F&M Bancorp or Home Corporation, by
action of the Board of Directors of either party and
the delivery of written notice by either party to the
other, in the event that the Merger is not consummated
by December 31, 1996, unless the failure to so
consummate by such time is due to the breach of any
representation, warranty, agreement or covenant
contained in this Plan by the party seeking to
terminate, or if prior to December 31, 1996, any
governmental entity of competent jurisdiction shall
have issued a final, unappealable order or ruling
enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Plan, or
(f) by action of the Board of Directors of
Home Corporation in their sole discretion in accordance
with Section 5.6, or
(g) By either F&M Bancorp or Home Corporation
if, at the Calculation Date, the Average Market Value
(as defined in Section 9.2(c)) of F&M Bancorp Common
Stock is less than 1.6 times the book value per share
of F&M Bancorp Common Stock determined in accordance
with generally accepted accounting principles;
provided, however, that if F&M Bancorp elects (and Home
Corporation agrees), for purposes of the computation of
the Conversion Ratio (as defined in Section 9.2(a)),
F&M Bancorp may use a per share price for the F&M
Bancorp Common Stock of 1.6 times the book value per
share of its Common Stock on the Calculation Date,
determined in accordance with generally accepted
accounting principles, in lieu of the Average Market
Value. In either such case, F&M Bancorp or Home
Corporation, as the case may be, shall give prompt
written notice to Home Corporation or F&M Bancorp of
such election and Home Corporation or F&M Bancorp, as
the case may be, shall then provide prompt written
notice to F&M Bancorp or Home Corporation of its
willingness to proceed with such modification; and,
under such circumstances, no abandonment or termination
shall be deemed to have occurred pursuant to this
Section 13(e), and this Plan shall remain in full force
and effect in accordance with its terms, except as the
per share price for the Common Stock of F&M Bancorp
shall have been so modified; or
(h) in the event of the termination of this
Plan by either F&M Bancorp or Home Corporation, as
provided above, this Plan shall thereafter become void
and there shall be no liability on the part of any
party hereto or their respective officers or directors,
except that any such termination shall be without
prejudice to the rights of any party hereto arising out
of the willful breach of any other party of any
covenant or willful misrepresentation contained in this
Plan.
14. Expenses. Whether or not the transactions hereunder
are consummated, each party to the Plan shall pay its own
expenses relating hereto, including fees and disbursements of its
counsel and accountants; provided, however, that F&M Bancorp
shall pay (a) filing fees in respect of regulatory approvals
required in order to consummate the Merger, including the
registration fee of the SEC, filing fees in respect of state
"blue sky" laws, the fee payable to The National Association of
Securities Dealers, Inc. in respect of the listing on Nasdaq of
the shares of F&M Bancorp Common Stock to be issued pursuant to
this Plan and (b) the costs of printing and mailing the Proxy
Statement/Prospectus. The foregoing shall not be construed as a
limitation of damages in the event of breach.
15. Notices. All notices, requests, demands, and other
communications under or connected with this Plan shall be in
writing, and (a) if to F&M Bancorp, shall be addressed to F&M
Bancorp, 110 Thomas Johnson Drive, Post Office Box 518,
Frederick, Maryland 21705, attention of Gordon M. Cooley,
Secretary and Legal Officer, with a copy to its counsel, Piper &
Marbury l.l.p., 36 South Charles Street, Baltimore, Maryland
21201-3010, attention of James J. Winn, Jr., Esquire; or (b) if
to Home Corporation, shall be addressed to Home Federal
Corporation, 122-128 West Washington Street, Hagerstown, Maryland
21740, attention of Richard W. Phoebus, Sr., President and Chief
Executive Officer, with a copy to its counsel, Elias, Matz,
Tiernan & Herrick L.L.P., 12th floor, The Walker Building, 734
15th Street, N.W., Washington, D.C., 20005, attention of Norman
B. Antin, Esquire. Any such notices, requests, demands, and
other communications shall be mailed, postage prepaid, first
class mail, or delivered personally and shall be sufficient and
effective when delivered to or received at the address as
specified. Each of the parties may change the address at which
it is to receive communications by like written notice to the
other.
16. Entire Agreement; Effect. This Plan (including the
financial statements, lists, schedules, and documents delivered
pursuant hereto, which are made a part hereof) is intended by the
parties to and does constitute the entire agreement of the
parties with respect to the transaction contemplated hereunder.
This Plan supersedes any and all prior understandings, including
prior letters of intent, and it may not be changed, waived,
discharged, or terminated orally, but only in writing by a party
against which enforcement of the change, waiver, discharge, or
termination is sought.
17. Representations, Warranties and Agreements. Except as
set forth in this Section 17, all representations, warranties and
agreements of F&M Bancorp and Home Corporation made in this Plan,
or in any instrument delivered by F&M Bancorp or Home Corporation
pursuant to this Plan, shall expire at the Effective Date. In
the event of the consummation of the transactions contemplated
hereby, the agreements contained in or referred to in Sections 9
and 10 shall survive the Effective Date. In the event of the
termination of this Plan in accordance with its terms, the
agreements contained in or referred to in Sections 5.1, 5.6, 6.3
and 14 shall survive such termination. Except as provided in the
first sentence of this Section 17, nothing contained herein shall
be construed to limit the liability of a party to another party
for damages caused by a breach of this Plan.
18. Governing Law. This Plan shall be governed by, and
shall be interpreted in accordance with, the laws of the State of
Maryland or, to the extent applicable, the federal laws of the
United States of America.
19. General. The section headings contained in this Plan
are for reference purposes only and shall not affect in any way
the meaning or interpretations of this Plan. This Plan may be
executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument. This Plan shall
inure to the benefit of and be binding upon the parties hereto
and their respective successors but shall not be assigned to and
shall not create any rights in favor of any other party. Any
purported assignment in violation of this Section 19 shall be
void.
IN WITNESS WHEREOF, F&M Bancorp and Home Corporation have
caused this Plan to be duly executed by their respective chairmen
or presidents, and their respective seals to be hereunto affixed
and attested by their respective secretaries, thereunto duly
authorized as of the date first above written.
ATTEST: [SEAL] F&M BANCORP
/s/ Gordon M. Cooley By:/s/ Charles W. Hoff, III
Gordon M. Cooley Charles W. Hoff, III
Secretary Chairman of the Board and
Chief Executive Officer
ATTEST: [SEAL] HOME FEDERAL CORPORATION
/s/ Celia S. Ausherman By:/s/ Richard W. Phoebus, Sr.
Celia S. Ausherman Richard W. Phoebus, Sr.
Secretary President and Chief Executive Officer
APPENDIX I
LIST OF SCHEDULES
A. Schedules to be Provided by Home Corporation to F&M Bancorp.
Schedule 3.1(a). List of subsidiaries of Home Corporation and
their places of incorporation.
Schedule 3.1(b). Ownership of Home Subsidiaries; Joint Ventures
and Partnerships.
Schedule 3.1(c). Charters and by-laws of Home Corporation and
each of the Home Subsidiaries.
Schedule 3.1(d). List of outstanding options, warrants, rights,
or obligations of any kind entitling the holder
thereof to acquire shares of the Common Stock of
Home Corporation or outstanding securities or
instruments that are convertible into shares of the
Common Stock of Home Corporation.
Schedule 3.2.Consolidated Financial Statements of Home
Corporation at December 31, 1991, 1992, 1993, 1994
and 1995 and for each of the years then ended, as
reported upon by Smith, Elliott, Kearns & Company.
Schedule 3.3.Tax Returns of Home Corporation to Federal, State,
County, Municipal or Foreign Taxing Authorities for
the taxable years 1990, 1991, 1992, 1993 and 1994.
Schedule 3.7.1. List of Liens and Encumbrances on Property.
Schedule 3.7.2. List of Leases.
Schedule 3.8.Plans, Contracts and Agreements.
Schedule 3.9.Litigation, Etc.
Schedule 3.10. Environmental Matters.
Schedule 3.12. Pension and Welfare Matters.
Schedule 3.13. Related Party Transactions.
Schedule 3.14. No Conflicts with Other Documents.
Schedule 3.17. Insurance Policies, including Financial
Institutions Bonds.
Schedule 3.19. Agreement between Home Corporation and Charles
Webb & Company.
Schedule 5.2(e) Increases in Employee Compensation or Benefit
Levels.
Schedule 5.2(z)(ii) Capital Expenditures In Excess of
$25,000.
Schedule 9.7(a). Schedule of Home Corporation's (i) loans
classified as substandard, doubtful or loss; and
(ii) real estate owned; Home Corporation's
Allowance for Possible Losses.
B. Schedules to be Provided by F&M Bancorp to Home Corporation.
Schedule 4.1(c). List of subsidiaries of F&M Bancorp.
1. Farmers and Mechanics National Bank, a federally chartered
commercial bank.
The following are subsidiaries of Farmers and Mechanics National
Bank:
1. Key Holdings, Inc., a Maryland corporation.
2. Key Management, Inc., a Delaware corporation.
3. Key Holdings, Inc. owns a 60% limited partnership interest
in Monocacy Center Associates Limited Partnership, a
Virginia Limited Partnership.
Schedule 4.1(e). Charters and by-laws of F&M Bancorp and each
of the F&M Subsidiaries.
Also provided is a copy of the Limited Partnership Agreement of
Monocacy Center Associates Limited Partnership.
Schedule 4.2.Consolidated Financial Statements of F&M Bancorp
and its subsidiary at December 31, 1990, 1991,
1992, 1993, 1994 and 1995 and for each of the years
then ended, as reported upon by Keller Bruner &
Company, L.L.C.
These have been provided as part of F&M Bancorp's Annual Reports
for the corresponding years.
Schedule 4.4.List of Certain Changes or Events.
None.
Schedule 4.6.Litigation, Etc.
The Bank has been named as defendant in two actions. Our
insurance carrier has been notified in both instances and is
providing a defense. The amounts claimed in each suit are within
the limits of coverage of our insurance policies.
1. F&M ats Garry
On June 15 the Bank was served with a complaint filed by
Rachel Suzanne Garry alleging that, as a result of our negligence
in reporting information to the Frederick City Police Department,
she had been libeled. The specifics are that during the Bank's
investigation of a customer complaint that the customer's ATM
card had been used, without her authorization, to withdraw funds
from her account, the Bank developed information including a
photograph of an unidentified person which the Bank believed to
be the person using the customer's ATM card without
authorization. The Bank turned the photograph and other relevant
records over to the Frederick City Police. The police turned the
photograph and other information over to the Frederick News Post
which ran a story asking its readers to contact the local police
about the identity of the woman depicted indicting that she was a
suspect in ATM thefts. Ms. Garry's suit alleged that she is the
person in the photograph and that she has been libeled by its
publication. The Frederick News Post has been dismissed from the
case. The remaining defendants are Frederick City, the Frederick
City Police Department, the investigating officer, and Chevy
Chase Savings Bank, at whose ATM the photograph was taken. The
Police, in deposition, confirmed that our Bank had provided them
with photographs, when available, numerous times in the past but
that the Police had never caused them to be printed in the
newspaper previously and did not advise us that the photographs
would be used for that purpose in the Garry instance.
The Bank has just filed a Motion for Summary Judgment.
2. F&M ats McClellan
On November 2, 1995 the Bank was served with a complaint by
Bonita McClellan alleging personal injury as a result of a slip
and fall due to an icy sidewalk condition in front of the Bank's
Emmitsburg office. The nature of the Plaintiff's injuries are
not detailed in the Complaint. The Branch Manager was familiar
with Ms. McClellan's claim, having made the standard report of
the incident at the time of the alleged incident.
The Bank has answered the suit generally denying liability
and has requested an itemized settlement demand which has not
been forthcoming.
APPENDIX II
ARTICLES OF MERGER
BETWEEN
F&M BANCORP
(a Maryland Corporation)
AND
HOME FEDERAL CORPORATION
(a Maryland Corporation)
F&M BANCORP, a corporation duly organized and existing under
the laws of the State of Maryland ("F&M Bancorp") and HOME
FEDERAL CORPORATION, a corporation duly organized and existing
under the laws of the State of Maryland ("Home Federal"), do
hereby certify that:
FIRST: F&M Bancorp and Home Federal agree to merge.
SECOND: The name and place of incorporation of each party
to these Articles are F&M Bancorp, a Maryland corporation, and
Home Federal Corporation, a Maryland corporation. F&M Bancorp
shall survive the merger and shall continue under the name "F&M
Bancorp" as a corporation of the State of Maryland.
THIRD: F&M Bancorp has its principal office in Frederick
County. Home Federal has its principal office in Washington
County and owns an interest in land in Baltimore City, Washington
County, County, and _________ County.
FOURTH: The terms and conditions of the transaction set
forth in these Articles were advised, authorized, and approved by
each corporation party to these Articles in the manner and by the
vote required by its Charter and the laws of the state of its
incorporation. The manner of approval was as follows:
(a) The Boards of Directors of F&M Bancorp and Home Federal
at meetings duly held on , 1996, and
, 1996, respectively, adopted a resolution which declared that
the proposed merger was advisable on substantially the terms and
conditions set forth or referred to in the resolution and
directed that the proposed merger be submitted for consideration
at special meetings of the stockholders of the respective
parties.
(b) Notice which stated that a purpose of the meeting was
to act on the proposed merger was given by F&M Bancorp and Home
Federal as required by law.
(c) The proposed merger was approved by the stockholders of
each corporation at a special meeting of stockholders held
, 1996 and , 1996, respectively, by the affirmative
vote of two-thirds of all the votes entitled to be cast on the
matter.
FIFTH: No amendment to the Charter of F&M Bancorp is to be
effected as a part of the merger.
SIXTH: The total number of shares of stock of all classes
which F&M Bancorp has authority to issue is 10,000,000 shares of
Common Stock (par value $5.00 per share). The aggregate par
value of all the shares of stock of all classes of F&M Bancorp is
$50,000,000. The total number of shares of stock of all classes
which Home Federal has authority to issue is 15,000,000 shares,
of which 5,000,000 shares are Preferred Stock (par value $0.10
per share) and 10,000,000 shares are Common Stock (par value
$1.00 per share). The aggregate par value of all the shares of
stock of all classes of Home Federal is $10,500,000.
SEVENTH: The merger does not increase the authorized stock
of F&M Bancorp.
EIGHTH: The manner and basis of converting or exchanging
shares of Common Stock of Home Federal into shares of Common
Stock of F&M Bancorp are as follows:
(a) Each issued and outstanding share of Common Stock of
F&M Bancorp on the effective date shall continue, without change,
to be an issued and outstanding share of Common Stock of F&M
Bancorp.
(b) [Except with respect to Home Federal stockholders who
have perfected their dissenters' rights pursuant to Md. Corps. &
Ass'ns Code Section 3-201 et seq.,] each issued and outstanding share
of Common Stock of Home Federal on the effective date of the
merger, shall upon effectiveness and without further act, be
converted into, and become shares of Common Stock of
F&M Bancorp. Cash will be paid in lieu of fractional shares at
the rate of $_________ per share.
(c) After the effective date of the merger, certificates
representing shares of Common Stock of Home Corporation shall
represent the right to receive certificates representing shares
of Common Stock of F&M Bancorp; such Home Corporation
certificates at any time after the effective date of the merger
may be exchanged by the holders thereof for new certificates for
the appropriate number of shares of Common Stock of F&M Bancorp
by forwarding such Home Corporation Common Stock certificates and
the letter of transmittal provided by F&M Bancorp to the transfer
agent for F&M Bancorp Common Stock, and the payment of cash in
lieu of fractions, dividends, and other distributions on said
stock may be withheld until the Home Corporation certificates are
surrendered for exchange to the transfer agent for F&M Bancorp
Common Stock; and when such new certificates are issued, the
holders thereof shall be entitled to be paid the amount (without
any interest thereon) of all such withheld cash in lieu of
fractions, dividends, or other distributions which have
theretofore become payable with respect to such shares of Common
Stock of F&M Bancorp.
NINTH: The merger shall become effective [upon acceptance
for record by the Maryland State Department of Assessments and
Taxation] [on , 1996].
IN WITNESS WHEREOF, F&M BANCORP and HOME FEDERAL CORPORATION
have caused these Articles to be signed in their respective names
and on their respective behalves by their respective presidents
and witnessed by their respective secretaries on
, 1996.
WITNESS: F&M BANCORP
(a Maryland corporation)
By
Secretary President
WITNESS: HOME FEDERAL CORPORATION
(a Maryland corporation)
By
Secretary President
THE UNDERSIGNED, President of F&M BANCORP, who executed on
behalf of the Corporation the foregoing Articles of Merger of
which this certificate is made a part, hereby acknowledges in the
name and on behalf of said Corporation the foregoing Articles of
Merger to be the corporate act of said Corporation and hereby
certifies that to the best of his knowledge, information and
belief the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material
respects under the penalties of perjury.
President
THE UNDERSIGNED, President of HOME FEDERAL CORPORATION, who
executed on behalf of the Corporation the foregoing Articles of
Merger of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the
foregoing Articles of Merger to be the corporate act of said
Corporation and hereby certifies that to the best of his
knowledge, information and belief the matters and facts set forth
therein with respect to the authorization and approval thereof
are true in all material respects under the penalties of perjury.
President
APPENDIX III
FORM OF STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Option Agreement") dated
as of April 2, 1996, between HOME FEDERAL CORPORATION ("Home
Corporation"), a Maryland corporation, and F&M BANCORP ("F&M
Bancorp"), a Maryland corporation, recites and provides:
A. The Board of Directors of Home Corporation and F&M
Bancorp have approved a Plan and Agreement to Merge dated April
2, 1996 (the "Plan") providing for the merger (the "Merger") of
Home Corporation with and into F&M Bancorp.
B. As a condition to and as consideration for F&M
Bancorp's entry into the Plan and to induce such entry, Home
Corporation has agreed to grant to F&M Bancorp the option set
forth herein to purchase authorized but unissued shares of Home
Corporation Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
Capitalized terms defined in the Plan and used herein shall
have the same meanings as in the Plan.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Home
Corporation hereby grants to F&M Bancorp an option (the "Option")
to purchase up to 501,282 shares of Home Corporation Common Stock
at an exercise price of $__________ per share payable in cash as
provided in Section 4; provided, however, that in the event Home
Corporation issues or agrees to issue any shares of Home
Corporation Common Stock (other than as permitted under the Plan)
at a price less than $__________ per share (as adjusted pursuant
to Section 6), the exercise price shall be such lesser price.
3. Exercise of Option.
(a) Unless F&M Bancorp shall have breached in any
material respect any covenant or representation contained in the
Plan and such breach has not been cured, F&M Bancorp may exercise
the Option, in whole or part, at any time or from time to time if
a Purchase Event (as defined below) shall have occurred and be
continuing; provided that to the extent the Option shall not have
been exercised, it shall terminate and be of no further force and
effect upon the earliest to occur of (i) the Effective Date of
the Merger, or (ii) the termination of the Plan in accordance
with the provisions thereof prior to the occurrence of a Purchase
Event (other than as a result of a willful breach by Home
Corporation of any Specified Covenant or as a result of failure
of Home Corporation's stockholders to approve the Plan by the
vote required under applicable law or under Home Corporation's
Charter), or (iii) 12 months after termination of the Plan due to
a willful breach by Home Corporation of any Specified Covenant or
failure of Home Corporation's stockholders to approve the Plan by
the vote required under applicable law or under Home
Corporation's Charter; provided, however, that any purchase of
shares upon exercise of the Option shall be subject to compliance
with applicable law, including, without limitation, the Bank
Holding Company Act of 1956, as amended. Any exercise of the
Option shall be subject to compliance with applicable provisions
of law.
(b) As used herein, a "Purchase Event" shall mean any
of the following events or transactions occurring after the date
hereof:
(i) Home Corporation or Home Federal Savings Bank
("Home Bank"), without having received F&M Bancorp's prior
written consent, shall have entered into an agreement with
any person (x) to merge or consolidate, or enter into any
similar transaction, except as contemplated in the Plan, (y)
to purchase, lease or otherwise acquire all or substantially
all of the assets of Home Corporation or Home Bank, or (z)
to purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or any similar
transaction) securities representing 15% or more of the
voting power of Home Corporation or Home Bank;
(ii) any person (other than Home Corporation or
Home Bank in a fiduciary capacity, or F&M Bancorp or Farmers
and Mechanics National Bank in a fiduciary capacity) shall
have acquired beneficial ownership or the right to acquire
beneficial ownership of 15% or more of the outstanding
shares of Home Corporation Common Stock after the date
hereof (the term "beneficial ownership" for purposes of this
Option Agreement having the meaning assigned thereto in
Section 13(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the regulations promulgated thereunder);
(iii) any person shall have made a bona fide
proposal to Home Corporation by public announcement or
written communication that is or becomes the subject of
public disclosure to acquire Home Corporation or Home Bank
by merger, consolidation, purchase of all or substantially
all of its assets or any other similar transaction, and
following such bona fide proposal the stockholders of Home
Corporation vote not to adopt the Plan; or
(iv) Home Corporation shall have willfully
breached any Specified Covenant following a bona fide
proposal to Home Corporation or Home Bank to acquire Home
Corporation or Home Bank by merger, consolidation, purchase
of all or substantially all of its assets or any other
similar transaction, which breach would entitle F&M Bancorp
to terminate the Plan (without regard to the cure periods
provided for therein) and such breach shall not have been
cured prior to the Notice Date (as defined below).
If more than one of the transactions giving rise
to a Purchase Event under this Section 3(b) is undertaken or
effected, then all such transactions shall give rise only to
one Purchase Event, which Purchase Event shall be deemed
continuing for all purposes hereunder until all such
transactions are abandoned. As used in this Option
Agreement, "person" shall have the meanings specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event F&M Bancorp wishes to exercise the
Option, it shall send to Home Corporation a written notice (the
date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier
than three business days nor later than 60 business days after
the Notice Date for the closing of such purchase ("Closing
Date"); provided that if prior notification to or approval of any
federal or state regulatory agency is required in connection with
such purchase, F&M Bancorp shall promptly file the required
notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on
which any required notification period has expired or been
terminated or such approval has been obtained and any requisite
waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any
covenant made by Home Corporation or Home Bank and contained in
Section 5 of the Plan.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3, F&M
Bancorp shall pay to Home Corporation the aggregate purchase
price for the shares of Home Corporation Common Stock purchased
pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by Home
Corporation.
(b) At such closing, simultaneously with the delivery
of funds as provided in subsection (a), Home Corporation shall
deliver to F&M Bancorp a certificate or certificates representing
the number of shares of Home Corporation Common Stock purchased
by F&M Bancorp, and F&M Bancorp shall deliver to Home Corporation
a letter agreeing that F&M Bancorp will not offer to sell or
otherwise dispose of such shares in violation of applicable law
or the provisions of this Option Agreement.
(c) Certificates for Home Corporation Common Stock
delivered at a closing hereunder shall be endorsed with a
restrictive legend which shall read substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO CERTAIN PROVISIONS OF A STOCK
OPTION AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF
AND HOME FEDERAL CORPORATION AND TO RESALE RESTRICTIONS
ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF HOME FEDERAL CORPORATION. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY HOME FEDERAL CORPORATION OF A
WRITTEN REQUEST."
It is understood and agreed that the above legend shall
be removed by delivery of substitute certificate(s) without such
legend if F&M Bancorp shall have delivered to Home Corporation a
copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance
satisfactory to Home Corporation, to the effect that such legend
is not required for purposes of the Securities Act of 1933, as
amended (the "Securities Act").
5. Representations.
Home Corporation represents, warrants and covenants to F&M
Bancorp as follows:
(a) Home Corporation shall at all times maintain
sufficient authorized but unissued shares of Home Corporation
Common Stock so that the Option may be exercised without
authorization of additional shares of Home Corporation Common
Stock.
(b) The shares to be issued upon due exercise, in
whole or in part, of the Option, when paid for as provided
herein, will be duly authorized, validly issued, fully paid and
nonassessable.
6. Adjustment Upon Changes in Capitalization.
In the event of any change in Home Corporation Common Stock
by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like,
the type and number of shares subject to the Option, and the
purchase price per share, as the case may be, shall be adjusted
appropriately. In the event that any additional shares of Home
Corporation Common Stock are issued or otherwise become
outstanding after the date of this Option Agreement (other than
pursuant to this Option Agreement), the number of shares of Home
Corporation Common Stock subject to the Option shall be adjusted
so that, after such issuance, it equals 19.9% of the number of
shares of Home Corporation Common Stock then issued and
outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 6
shall be deemed to authorize Home Corporation to breach any
provision of the Plan.
7. Registration Rights.
If requested by F&M Bancorp, Home Corporation shall as
expeditiously as possible file a registration statement on a form
of general use under the Securities Act if necessary in order to
permit the sale or other disposition of the shares of Home
Corporation Common Stock that have been acquired upon exercise of
the Option in accordance with the intended method of sale or
other disposition requested by F&M Bancorp. F&M Bancorp shall
provide all information reasonably requested by Home Corporation
for inclusion in any registration statement to be filed
hereunder. Home Corporation will use its best efforts to cause
such registration statement first to become effective and then to
remain effective for such period not in excess of 270 days from
the day such registration statement first becomes effective as
may be reasonably necessary to effect such sales or other
dispositions. Only one registration may be effected under this
Section 7 at Home Corporation's expense, and which shall not
include underwriting commissions and the fees and disbursements
of F&M Bancorp's counsel attributable to the registration of such
Home Corporation Common Stock. The filing of any registration
statement hereunder may be delayed for such period of time as may
reasonably be required to facilitate any public distribution by
Home Corporation of Home Corporation Common Stock. If requested
by F&M Bancorp, in connection with any such registration, Home
Corporation will become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such
underwriting agreements. Upon receiving any request from F&M
Bancorp or assignee thereof under this Section 7, Home
Corporation agrees to send a copy thereof to F&M Bancorp and to
any assignee thereof known to Home Corporation, in each case by
promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
8. Severability.
If any term, provision, covenant or restriction contained in
this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Option Agreement
shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court
or regulatory agency determines that the Option will not permit
the holder to acquire the full number of shares of Home
Corporation Common Stock provided in Section 2 (as adjusted
pursuant to Section 6), it is the express intention of Home
Corporation to allow the holder to acquire such lesser number of
shares as may be permissible, without any amendment or
modification hereof.
9. Miscellaneous.
(a) Expenses. Except as otherwise provided herein,
each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
(b) Entire Agreement. Except as otherwise expressly
provided herein, this Option Agreement contains the entire
agreement between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns. Nothing in this Option
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Option Agreement, except
as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign
any of its rights or obligations under this Option Agreement or
the Option created hereunder to any other person, without the
express written consent of the other party, except that in the
event a Purchase Event shall have occurred and be continuing F&M
Bancorp may assign in whole or in part its rights and obligations
hereunder; provided, however, that to the extent required by
applicable regulatory authorities, F&M Bancorp may not assign its
rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting
shares of Home Corporation, (iii) an assignment to a single party
(e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on F&M
Bancorp's behalf, or (iv) any other manner approved by applicable
regulatory authorities.
(d) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and
sufficient if delivered in the manner and to the address provided
for in or pursuant to Section 15 of the Plan.
(e) Counterparts. This Option Agreement may be
executed in any number of counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
(f) Specific Performance. The parties agree that
damages would be an inadequate remedy for a breach of the
provisions of this Option Agreement by either party hereto and
that this Option Agreement may be enforced by either party hereto
through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed
by and construed in accordance with the laws of the State of
Maryland applicable to agreements made and entirely to be
performed within such state and such federal laws as may be
applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Option Agreement as of the day and year first written above.
HOME FEDERAL CORPORATION
By:
Richard W. Phoebus, Sr.
President and Chief Executive
Officer
F&M BANCORP
By:
Charles W. Hoff, III
Chairman of the Board and
Chief Executive Officer
APPENDIX IV
MEMORANDUM TO PERSONS DEEMED TO BE
AFFILIATED PERSONS
April 2, 1996
This memorandum summarizes certain technical requirements of
the federal securities laws and of the accounting rules relating
to treatment as a pooling-of-interests which will apply following
completion of the acquisition of Home Federal Corporation ("Home
Corporation") by F&M Bancorp ("F&M Bancorp") by effecting the
merger of Home Corporation with and into F&M Bancorp (the
"Merger").
Pursuant to the Plan and Agreement to Merge dated as of
April 2, 1996 (the "Plan"), shares of the Common Stock of F&M
Bancorp will be issued to the stockholders of Home Corporation
for each issued and outstanding share of Common Stock of Home
Corporation. F&M Bancorp will file a Registration Statement
under the Securities Act of 1933, as amended (the "Securities
Act") with the Securities and Exchange Commission (the "SEC") to
register shares of its Common Stock to be issued in connection
with the Merger.
Under Section 5.8 of the Plan, Home Corporation has agreed
to deliver to F&M Bancorp written letter agreements (the
"Affiliate Agreements") from each of the officers and directors
of Home Corporation (and has agreed to use its best efforts to
obtain and deliver an Affiliate Agreement from each stockholder
of Home Corporation who may be deemed to be an "affiliate" under
the rules of the SEC). Under the terms of the Affiliate
Agreements, each such officer, director or stockholder is to
acknowledge and agree to abide by all limitations imposed by the
Securities Act and by all rules, regulations and releases
promulgated thereunder by the SEC with respect to the sale or
other disposition of the shares of the Common Stock of F&M
Bancorp to be received by such person pursuant to the Plan.
Under Section 5.13 of the Plan, Home Corporation has agreed to
use its best efforts not to permit any of the directors,
officers, employees, stockholders, agents, consultants or other
representatives of Home Corporation, Home Federal Savings Bank,
or any of Home Corporation's other subsidiaries to take any
action that would preclude F&M Bancorp from treating the Merger
as a "pooling-of-interests" for financial reporting purposes.
The purpose of this memorandum is to more fully describe the
resale restrictions imposed by the Securities Act and by all
rules, regulations and releases promulgated thereunder and the
accounting rules relating to the treatment of the Merger as a
pooling-of-interests.
Resale Restrictions Imposed by Subparagraph (d) of SEC Rule 145.
For the two-year period following the effective date of the
Merger, a person who is an affiliate of Home Corporation at the
time of the Merger may dispose of his shares of the Common Stock
of F&M Bancorp only pursuant to SEC Rule 145. The limitations
are as follows:
1. Such sale must be effected (a) in transactions
directly with a market maker or (b) in unsolicited
brokerage transactions (i.e., neither you nor the
broker handling the sale of your shares may solicit a
purchaser for the shares being sold). As there are
usually a number of market makers for the Common Stock
of F&M Bancorp, this requirement should not impair your
ability to find a purchaser. In each case it is quite
important to let your broker know that the sale is to
be made under SEC Rule 145; otherwise, compliance with
the restrictions will not be assured.
2. The rule also restricts the number of shares
which may be sold during any three-month period. The
rule would permit up to 1% of the outstanding shares of
the Common Stock of F&M Bancorp to be sold by each
affiliate during any three-month period.
3. The rule requires current public information on
F&M Bancorp to be available at the time of your sales.
F&M Bancorp is required by law to file with the SEC
reports which are designed to present on a current
basis the affairs of F&M Bancorp. The filing of these
reports will satisfy the current public information
requirements. Since it is possible, however, that a
required filing may be late, at the time of any sale
you should check with the General Counsel of F&M
Bancorp to ascertain whether public information on F&M
Bancorp is then available. The General Counsel of F&M
Bancorp is Gordon M. Cooley, whose telephone number is
(301) 694-4171.
After the two-year period has run, so long as (a) you are
not an affiliate of F&M Bancorp (that is, not a major
stockholder, director, or principal officer of F&M Bancorp) at
the time of the sale, (b) F&M Bancorp continues to be required to
file certain periodic reports with the SEC, and (c) all such
reports required to be filed in the 12 months prior to your sale
have been filed, there will be no restriction on the sale of the
shares of the Common Stock of F&M Bancorp. Prior to a
contemplated sale you should check with the General Counsel of
F&M Bancorp to determine if requirements (b) and (c) have been
met. In the unlikely event that the three requirements are not
met at the time of your sale, the procedures for sales before the
end of the two-year period would still apply.
After three years from the Effective Date of the Merger, so
long as you are not, at the time of sale, and have not been
during the preceding three months, an affiliate of F&M Bancorp,
you may sell your shares of the Common Stock of F&M Bancorp with
no restrictions.
Restrictions Imposed by Accounting Rules Regarding Treatment as a
Pooling-of-Interests.
In order for the Merger to be treated as a pooling-of-
interests for accounting purposes, affiliates of F&M Bancorp and
affiliates of Home Corporation are required to observe certain
restrictions on disposition of their shares of the Common Stock
of F&M Bancorp and of the Common Stock of Home Corporation.
Specifically, such affiliates must agree not to sell, pledge,
transfer or otherwise dispose of any shares of the Common Stock
of F&M Bancorp or any shares of the Common Stock of Home
Corporation during the 30-day period prior to the effective date
of the Merger and until after such time as results covering at
least 30 days of combined operations of F&M Bancorp and Home
Corporation after the effective date of the Merger have been
published by F&M Bancorp in the form of a quarterly earnings
report, an effective registration statement filed with the SEC, a
report to the SEC on Forms 10-K, 10-Q or 8-K, or any other public
issuance which includes such combined results or operations.
To signify your consent to these restrictions a copy of an
Undertaking and Agreement is attached hereto and is to be
executed by you (and where any such shares are owned jointly, by
the joint owner or owners) and returned to Home Federal
Corporation, 122-128 West Washington Street, Hagerstown, Maryland
21740, attention: Richard W. Phoebus, Sr., President.
UNDERTAKING AND AGREEMENT
The undersigned has received a copy of a memorandum dated
April 2, 1996 concerning the provisions of the federal securities
laws and certain accounting rules which relate to the Common
Stock of Home Federal Corporation and to resales of shares of the
Common Stock of F&M Bancorp to be received by the undersigned in
connection with the Merger of Home Federal Corporation into F&M
Bancorp. The undersigned hereby undertakes to comply fully with
the provisions of the federal securities laws as outlined in the
memorandum and hereby agrees to the additional restrictions on
sales of the Common Stock of Home Federal Corporation and resale
of shares of the Common Stock of F&M Bancorp outlined in the
paragraph entitled "Restrictions Imposed by Accounting Rules
Regarding Treatment as a Pooling-of-Interests."
In Witness Whereof, I have hereunto signed my name on April
_____, 1996.
________________________, as joint owner
________________________, as joint owner
________________________, as joint owner
APPENDIX V
FORM OF SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (this "Agreement") dated as of April
2, 1996, between F&M Bancorp, a Maryland corporation and
registered bank holding company ("F&M Bancorp"), and each of the
individuals listed on Schedule A attached hereto (collectively,
the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Stockholders (i) collectively possess the sole
or joint right to vote, or direct the voting of, an aggregate of
___________ shares of common stock, par value $1.00 per share
(the "Shares"), of Home Federal Corporation, a Maryland
corporation and registered thrift holding company ("Home
Corporation"), which constitute approximately _____ % of the
outstanding capital stock of Home Corporation, and (ii)
individually possess the right to vote, or to direct the voting
of, the number of Shares set forth opposite such Stockholder's
name on Schedule A hereto; and
WHEREAS, the Stockholders (i) collectively possess the sole
or joint power to dispose of, or to direct the disposition of, an
aggregate of ___________ Shares, which constitute approximately
_____ % of the outstanding capital stock of Home Corporation, and
(ii) individually possess the power to dispose of, or direct the
disposition of, the number of Shares set forth opposite such
Stockholder's name on Schedule A hereto; and
WHEREAS, F&M Bancorp has entered into a Plan and Agreement
to Merge with Home Corporation, dated as of the business day
immediately prior to the date hereof (the "Plan"), pursuant to
which F&M Bancorp would acquire Home Corporation through the
merger of Home Corporation with and into F&M Bancorp (the
"Merger"), with shares of the Common Stock of F&M Bancorp to be
issued to the stockholders of Home Corporation; and
WHEREAS, pursuant to Section 5.8 of the Plan, Home
Corporation has covenanted to obtain agreements from each of its
officers and directors (and to use commercially reasonable
efforts to obtain agreements from any such other person
identified herein as a Stockholder) in which the officers,
directors, and Stockholders of Home Corporation would agree to
support the Merger; and the Stockholders have in accordance with
such covenant agreed to support the Merger.
NOW, THEREFORE, to induce F&M Bancorp to enter into the Plan
and in consideration of the mutual covenants and agreements set
forth herein and in the Plan and the mutual benefits to be
derived herefrom and therefrom, the parties agree as follows:
1. Representations of Stockholders. Each of the
Stockholders, severally, and not jointly, represents that:
(a)(1) such Stockholder possesses the sole or
joint right to vote, or direct the voting of, all of
the Shares set forth on Schedule A opposite the
Stockholder's name, (2) such number of Shares
constitutes all of the Shares with respect to which the
Stockholder possesses the sole or joint right to vote,
or direct the voting of, as the case may be, and (3)
except as to Shares held only under a power of attorney
or as guardian or custodian, such Stockholder has good
and merchantable title to all of the Shares indicated
on said list opposite the Stockholder's name, free of
all restrictions and encumbrances of every kind and
character, except as indicated on Schedule A.
(b)(1) such Stockholder possesses the sole or
joint power to dispose of, or direct the disposition
of, the Shares set forth on Schedule A opposite the
Stockholder's name, (2) such number of Shares
constitutes all of the Shares with respect to which the
Stockholder possesses or will possess the sole or joint
power to dispose of or direct the disposition of, and
(3) except as to Shares held only under a power of
attorney, such Stockholder has good and merchantable
title to all of the Shares indicated on said list
opposite the Stockholder's name free of all
restrictions and encumbrances of any kind or character
except as indicated on Schedule A.
(c) such Stockholder does not own, of record or
beneficially, any Shares that are not reflected on
Schedule A. For the purposes of this Agreement,
beneficial ownership has the meaning set forth in Rule
13d-3 of the Securities Exchange Act of 1934, as
amended.
(d) such Stockholder has full right, power, and
authority to enter into, deliver and perform this
Agreement; this Agreement has been duly executed and
delivered by such Stockholder; and this Agreement
constitutes the legal, valid, and binding obligation of
the Stockholder, and is enforceable in accordance with
its terms.
2. Covenants of Stockholders. Each of the Stockholders,
severally and not jointly, covenants as follows:
(a) Restrictions on Transfer. With respect to
Shares listed on Schedule A, during the term of this
Agreement, such Stockholder shall not voluntarily
pledge, hypothecate, grant a security interest in,
sell, transfer, or otherwise dispose of or encumber any
of such Shares and will not enter into any agreement,
arrangement, or understanding (other than a proxy for
the purpose of voting his or her Shares in accordance
with Subparagraph 2(c) hereof) which would, during that
term (i) restrict, (ii) establish a right of first
refusal to, or (iii) otherwise relate to the transfer
or voting of such Shares; provided, however, this
restriction shall not apply to a transfer of any of the
Shares by the Stockholder to his or her spouse,
children, or grandchildren, subject to the conditions
that any transferee, recipient, or custodian of any
such transferee or recipient must execute an agreement
substantially in the form of this Agreement in a form
satisfactory to F&M Bancorp, and Schedule A hereto may
be revised by F&M Bancorp to reflect such transfer.
(b) Other Restrictions. During the term of this
Agreement, such Stockholder, as a Stockholder, shall
not, directly or indirectly, solicit, initiate, or
encourage inquiries or proposals from, or participate
in any discussions or negotiations with, or provide any
information to, any individual, corporation,
partnership, or other person, entity, or group (other
than F&M Bancorp, any of its subsidiaries, and their
respective officers, employees, representatives, and
agents) concerning any sale of assets, sale of shares
of capital stock, merger, consolidation, share
exchange, or similar transactions involving Home
Corporation. Such Stockholder shall promptly advise
F&M Bancorp of, and communicate to F&M Bancorp the
terms of, any such inquiry or proposal addressed either
to such Stockholder or to Home Corporation that such
Stockholder receives or of which such Stockholder has
knowledge.
(c) Merger. With respect to the Shares listed on
Schedule A pursuant to Subparagraph 1(a) hereof, each
of the Stockholders shall vote such Shares to ratify
and confirm the Plan and the Merger and the
transactions contemplated thereby. Each of the
Stockholders, as a Stockholder, further agrees to use
all commercially reasonable efforts to cause the Merger
to be effected.
(d) Additional Shares. The provisions of
subparagraphs (a) and (c) above shall apply to all
Shares currently owned and hereafter acquired, of
record or beneficially, by each of the Stockholders.
3. Termination. This Agreement shall terminate upon the
termination of the Plan.
4. Governing Law. This Agreement shall in all respects be
governed by and construed under the laws of Maryland, all rights
and remedies being governed by such laws.
5. Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of, and shall be enforceable by,
the parties hereto and their respective personal representatives,
successors, and assigns, except that neither party may transfer
or assign any of its respective rights or obligations hereunder
without the prior written consent of the other party or, if by
F&M Bancorp, in accordance with the Plan.
6. Counterparts. For convenience of the parties hereto,
this Agreement may be executed in several counterparts, each of
which shall be deemed an original, all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, F&M Bancorp and the Stockholders have
caused this Agreement to be duly executed as of the day and year
first above written.
F&M BANCORP
By:
Charles W. Hoff, III
Chairman and Chief Executive Officer
STOCKHOLDERS:
SCHEDULE A
Name Number of Number of Number of Number of Encumbrance
Shares as Shares as Shares as Shares as
to which to which to which to which
Holder has Holder has Holder has Holder has
sole power joint power direct or sole or
to vote to vote indirect shares power
control of power to
power to dispose or
vote direct
disposition
Celia S.
Ausherman and
Russell C.
Ausherman
(Joint tenants) 1,992 1,992 None
Howard B. Bowen 15,080 15,080 None
Doris H.Gelbach 872 872 None
William H.
Gelbach, Jr. 1,091 1,091 None
Lois S.
Harrison 17,529 17,529 None
Richard L.
Harrison 38,181 38,181 None
Richard L.
Harrison, ttee
u/a dtd 1-1-84
Richard L.
Harrison dds
dbp & tr 19,500 19,500 None
Richard L.
Harrison, ttee
u/a dtd 1-1-84
Richard L.
Harrison Frozen
psp 94,565 94,565 None
Steven G. Hull
and Arlene B.
Hull (Tenants
by entirety) 2,000 2,000 None
Benjamin F.
Kunkleman and
June M.
Kunkleman
(Joint tenants) 7,734 7,734 Note 1
John J.
McElwee, Jr. 1,750 1,750 None
Dale M. Phoebus 1,000 1,000 None
Dale Paige
Phoebus and
Richard W.
Phoebus, Sr.
(Joint tenants) 59 59 None
Richard W.
Phoebus, Jr. and
Richard W.
Phoebus, Sr.
(Joint tenants) 59 59 None
Richard W.
Phoebus, Sr. 17,376 17,376 Note 2
Salvatore
Savino and
Rosary Savino
(Tenants in
common) 1,855 1,855 None
J. Franklin
Shank and
Elaine W.
Shank (Joint
tenants) 1,130 1,130 None
Ronald Z.
Sulchek and
Leura K.
Sulchek
(Joint
tenants) 1,000 1,000 None
Ronald Z.
Sulchek cust
Ryan T.
Sulchek
ugma md 500 500 None
Note 1: An aggregate of 6,000 shares are pledged to NationsBank (formerly
Sovran Bank) to secure the guarantee of a $39,000 loan pursuant to a
pledge agreement.
Note 2: An aggregate of 17,376 shares are pledged to First National Bank of
Maryland to secure a $25,000 loan pursuant to a pledge agreement.
Mr. Phoebus has the right to take all action required by this
agreement.
APPENDIX VI
FORM OF EMPLOYMENT AGREEMENT BETWEEN
F&M BANCORP AND RICHARD W. PHOEBUS, SR.
EMPLOYMENT AGREEMENT (this "Agreement") dated as of April
2nd, 1996, between F&M Bancorp, a Maryland corporation and
thrift holding company, Home Federal Savings Bank (the "Bank"), a
federally-chartered savings bank which is the wholly-owned
subsidiary of F&M Bancorp, and Richard W. Phoebus, Sr. (the
"Executive").
In consideration of the mutual covenants herein contained
and of the mutual benefits herein provided, F&M Bancorp, the Bank
and the Executive agree as follows:
1. Employment. (a) F&M Bancorp and the Bank will employ
the Executive, and the Executive accepts employment by F&M
Bancorp and the Bank, on the terms and conditions herein
contained.
(b) The period during which F&M Bancorp and the
Bank will employ the Executive (the "Employment Period") shall
commence on the Effective Date of the merger of Home Federal
Corporation with and into F&M Bancorp (the "Merger") as defined
in Section 1 of the Plan and Agreement to Merge dated as of April
2, 1996 by and among F&M Bancorp and Home Federal Corporation
(the "Plan"). The effectiveness of this Agreement is conditioned
upon the completion of the Merger pursuant to the Plan.
(c) The Employment Period shall continue until and
shall cease and terminate upon the earlier of (i) the close of
business on the day which is three years after the Effective Date
of the Merger or (ii) the death or substantially total disability
of the Executive; provided, however, that the Executive may
terminate this Agreement at any time without liability except
pursuant to paragraphs 4, 12 and 13 hereof, and without
relinquishing or forfeiting executive's rights under paragraphs 7
and 13.
2. Duties and Functions. (a) During the Employment
Period, the Executive shall exercise authority and perform
executive duties as the __________________________ of F&M Bancorp
and as the __________________________ of the Bank, and shall
perform such additional duties, as may be assigned or delegated
to him from time to time, by the Boards of Directors of F&M
Bancorp and the Bank.
(b) During the Employment Period, the Executive
will (i) devote his full time and efforts to the businesses of
F&M Bancorp and the Bank and will not engage in consulting work
or any trade or business for his own account or for or on behalf
of any other person, firm or corporation which competes,
conflicts or interferes with the performance of his duties
hereunder in any way and (ii) accept such office or offices to
which he may be elected by the Boards of Directors of F&M Bancorp
and the Bank; provided that the performance of the duties of such
office or offices shall be consistent with the scope of the
duties provided for in subparagraph (a) of this paragraph 2.
3. Compensation. (a) As compensation for his services
hereunder, the Bank agrees to pay the Executive a salary at the
rate of at least $ per annum, payable in equal monthly
installments, or on such other periodic basis as may be mutually
agreed upon, subject to normal policies of the Bank as to salary
payments or suspensions thereof during periods of disability.
Such salary shall be subject to normal periodic review at least
annually for increases, based on corporate policy and
contributions to the enterprise. The Executive shall only
receive compensation from the Bank for performance of executive
duties as an officer of both F&M Bancorp and the Bank.
(b) In addition to his salary provided by the
foregoing, the Executive shall be entitled to receive benefits
under any bonus, profit-sharing, retirement, group life,
disability, sickness, accident or health insurance programs of
the Bank (or under any such programs in which employees of the
Bank are eligible to participate) which may now or, if not
terminated, shall hereafter be in effect, or in any other or
additional such programs which may be established by the Bank (or
any program in which employees of the Bank are eligible to
participate), as and to the extent any such programs are or may
from time to time be in effect. The Executive shall be entitled
to reasonable vacations and sick leave, as may be established by
Bank policy.
(c) The Bank will reimburse the Executive for all
authorized expenses properly incurred by him in the performance
of his duties hereunder.
4. Competition; Confidential Information. The Executive,
F&M Bancorp and the Bank recognize that due to the nature of his
employment, and his relationship with F&M Bancorp and the Bank,
the Executive has had and will have access to, and has acquired
and will acquire, and has assisted and will assist in developing,
confidential and proprietary information relating to the business
and operations of F&M Bancorp and the Bank and their affiliates,
including, without limiting the generality of the foregoing,
information with respect to their present and prospective
services, systems, clients, customers, agents, and sales and
marketing methods. The Executive acknowledges that such
information has been and will be of central importance to F&M
Bancorp's and the Bank's business and that disclosure of it to or
its use by others could cause substantial loss to F&M Bancorp and
the Bank. The Executive, F&M Bancorp and the Bank also recognize
that an important part of the Executive's duties will be to
develop good will for F&M Bancorp and the Bank through his
personal contact with clients of F&M Bancorp and the Bank, and
that there is a danger that this good will, a proprietary asset
of F&M Bancorp and the Bank, may follow the Executive if and when
his relationship with F&M Bancorp and the Bank is terminated.
The Executive accordingly agrees as follows:
(a) The Executive agrees that, upon termination of
his employment hereunder prior to the expiration of the stated
Employment Period provided in paragraphs 1(b) and (c), for any
reason other than (i) for termination by F&M Bancorp and the Bank
without cause or (ii) for termination after a Change in Control,
as provided for in paragraph 6:
(i) The Executive will not directly or indirectly
accept employment in Frederick or Washington County,
Maryland with any other banking institution or
affiliate thereof for a period of two years from the
date of such termination, or in connection with any
subsequent employment outside of Frederick or
Washington County, Maryland solicit any of the banking
business of clients or customers of the Bank or any of
its affiliates in Frederick or Washington County,
Maryland, at the time of said termination for a period
of two years from the date of such termination.
(ii) The Executive will not in connection with any
subsequent employment outside of Frederick or
Washington County, Maryland directly or indirectly
solicit the banking business of any potential client
who had been identified and discussed as such within
the Bank by the time of such termination for a period
of two years from such termination. In the event that
the Executive violates the provisions of this
subparagraph without knowledge of such violation, upon
notice from the Bank informing him of the nature of
such violation, the Executive shall immediately
terminate any actions which constitute such violation.
(b) After the end of the Employment Period, the
Executive shall not retain copies of any documents (including
without limitation customer lists) containing any such trade
secrets or confidential or proprietary information of the Bank or
its affiliates.
(c) It is understood and agreed by the parties
hereto that nothing herein shall restrict or limit in any way the
Executive from any of the following activities at any time
following a termination of Executive's employment hereunder: (i)
the practice of law or accounting, including the representation
of banking institutions and their affiliates, without restriction
as to their location; (ii) provision of professional services
relating to real estate brokerage, real estate consultation or
problem asset consultation, including the representation of
banking institutions and their affiliates, without restriction as
to their location; (iii) provision of professional services as a
consultant or adviser for any banking institution or affiliate,
including relating to the development and implementation of
policies and procedures dealing with or related to problem
assets, asset classification, asset review, real estate lending,
and legal and accounting matters, without restriction as to their
location.
(d) It is recognized that damages in the event of
breach of any provision of this paragraph 4 by the Executive
would be difficult, if not impossible, to ascertain, and it is
therefore agreed that the Bank, in addition to and without
limiting any other remedy or right it may have, shall have the
right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach; and the
Executive hereby waives any and all defenses he may have on the
ground of the lack of jurisdiction or competence of the court to
grant such an injunction or other equitable relief. The
existence of this right shall not preclude any other rights and
remedies at law or in equity which the Bank may have.
5. Termination for Cause. Nothing in this Agreement shall
be construed to prevent the Bank from terminating the Executive's
employment hereunder and the Employment Period at any time, for
cause. As used in this Agreement: (i) a termination for cause
shall mean a termination for gross negligence, dishonesty or
incompetence, after notice and an opportunity to cure the alleged
breach, or any other breach by the Executive of any agreement on
his part made herein; and any such termination shall not be
construed a breach of this Agreement by the Bank; and (ii) a
termination by the Bank without cause shall mean any termination
by the Bank prior to the end of the Employment Period for reasons
other than as specified in clause (i).
6. Termination upon a Change in Control.
(a) This Agreement shall terminate, and the Bank or
any successor corporation to the Bank shall pay the Executive the
amount provided in paragraph 7(a), if:
(i) After a Change in Control, the Bank or any
successor corporation of the Bank breaches any
provision of this Agreement, including without
limitation a reduction in the Executive's total
compensation from that provided in paragraph 3, or a
significant reduction in the nature or scope of the
duties and functions of the Executive from those
contemplated in paragraph 2; or
(ii) After a Change in Control, the Executive is
relocated by the Bank without his express written
consent to perform the services and duties required by
this Agreement at any place other than the principal
office of the Bank in Hagerstown, Maryland or the
principal office of F&M Bancorp in Frederick, Maryland;
or
(iii) After a Change in Control, any successor
corporation of the Bank does not agree to assume the
obligations of the Bank under this Agreement.
(b) A "Change in Control," as used in this
Agreement, shall be deemed to have occurred when:
(i) Acquisition by a person, or by persons acting in
a group, of securities of the Bank, or of F&M Bancorp,
representing 25% or more of the combined voting power
of the then outstanding voting securities of the Bank
or of F&M Bancorp; or
(ii) A change in the membership of the Board of
Directors of the Bank, or of F&M Bancorp, such that
during any period of two consecutive years, individuals
who at the beginning of such period constituted such
Board of Directors ceased for any reason to constitute
at least a majority thereof unless the election of each
director who was not a director at the beginning of the
period was approved by a vote of at least two-thirds of
the directors then still in office who were directors
at the beginning of the period.
(iii) The consummation of the Merger in accordance with
the terms of the Plan shall not constitute a "Change of
Control" for purposes of this Agreement.
7. Severance Payments.
(a) If the Executive terminates his employment, or
is terminated by F&M Bancorp or the Bank, during the Employment
Period after a Change in Control pursuant to paragraph 6, the
Bank will pay the Executive, in lieu of any amounts payable under
paragraph 3, an amount equal to three times the sum of (i) the
Executive's average annual base salary for the five years
immediately before the Change in Control and (ii) the average of
the bonuses paid to the Executive over the five years immediately
before the Change in Control (including years in which no bonus
was awarded). Such payment shall be made in 36 equal monthly
installments, beginning on the first day of the month following
the month during which this Agreement is terminated.
(b) If this Agreement is terminated within one year
after the Effective Date of the Merger by the Executive, or by
F&M Bancorp or the Bank for any reason other than for cause (as
defined in paragraph 5) , the Bank will pay the Executive, in
lieu of any amounts payable under paragraph 3, an amount equal to
three times the sum of (i) the Executive's average annual base
salary for the five years immediately before such termination and
(ii) the average of the bonuses paid to the Executive over the
five years immediately before such termination (including years
in which no bonus was awarded). Such payment shall be made in
equal monthly installments for the remainder of the Employment
Period, beginning on the first day of the month following the
month during which this Agreement is terminated.
(c) If the Executive terminates his employment, or
is terminated by F&M Bancorp or the Bank for any reason other
than for cause (as defined in paragraph 5) more than one year
after the Effective Date of the Merger but before the expiration
of the Employment Period, the Bank will pay the Executive, in
lieu of any amounts payable under paragraph 3, an amount equal to
(i) two times the sum of (x) the Executive's average annual base
salary for the five years immediately before such termination and
(y) the average of the bonuses paid to the Executive over the
five years immediately before such termination (including years
in which no bonus was awarded) multiplied by (ii) a fraction, the
numerator of which shall be the number of months remaining in the
Employment Period, rounded down to the nearest whole month, and
the denominator of which shall be 24; provided, however, that
notwithstanding the foregoing, the Executive shall be entitled to
receive 1.5 times the sum of (x) the Executive's average annual
base salary for the five years immediately before such
termination and (y) the average of the bonuses paid to the
Executive over the five years immediately before such termination
(including years in which no bonus was awarded). Such payment
shall be made in equal monthly installments for the remainder of
the Employment Period, beginning on the first day of the month
following the month during which this Agreement is terminated.
(d) If the Executive remains employed by F&M
Bancorp and the Bank and exercises authority and performs
executive duties as the __________________________ of F&M Bancorp
and as the __________________________ of the Bank for the
remainder of the Employment Period and is terminated after the
expiration of the Employment Period, the Bank will pay the
Executive an amount equal to 1.5 times the sum of (x) the
Executive's average annual base salary for the five years
immediately before such termination and (y) the average of the
bonuses paid to the Executive over the five years immediately
before such termination (including years in which no bonus was
awarded). Such payment shall be made in 18 equal monthly
installments, beginning on the first day of the month following
the month during which the Executive's employment is terminated.
8. Binding Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their heirs,
personal representatives, successors and assigns.
9. Entire Agreement. This Agreement contains the entire
understanding of the Executive, the Bank and any affiliate of the
Bank, including Home Federal Corporation, with respect to
employment of the Executive and supersedes any and all prior
understandings, written or oral between the Executive, the Bank
and any affiliate of the Bank, including Home Federal
Corporation. This Agreement may not be amended, waived,
discharged or terminated orally, but only by an instrument in
writing; and shall be governed by the laws of Maryland.
10. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be deemed severable from the remainder of this
Agreement, and the remaining provisions contained in this
Agreement shall be construed to preserve to the maximum
permissible extent the intent and purposes of this Agreement.
Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in
any other jurisdiction.
11. Regulatory Actions. The following provisions shall be
applicable to the parties to the extent that they are required to
be included in employment agreements between a savings
association and its employees pursuant to Section 563.39(b) of
the Regulations Applicable to all Savings Associations, 12 C.F.R.
Section 563.39(b), or any successor thereto, and shall be
controlling in the event of a conflict with any other provision
of this Agreement.
(a) If the Executive is suspended from office
and/or temporarily prohibited from participating in the conduct
of the affairs of F&M Bancorp or the Bank pursuant to notice
served under Section 8(e)(3) or Section 8(g)(1) of the Federal
Deposit Insurance Act ("FDIA")(12 U.S.C. Section1818(e)(3) and
1818(g)(1)), the obligations of F&M Bancorp and the Bank under
this Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, F&M Bancorp and the Bank may, in their
discretion: (i) pay the Executive all or part of the compensation
withheld while their obligations under this Agreement were
suspended, and (ii) reinstate (in whole or in part) any of their
obligations which were suspended.
(b) If the Executive is removed from office and/or
permanently prohibited from participating in the conduct of the
affairs of F&M Bancorp or the Bank by an order issued under
Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C.
Section 1818(e)(4) and (g)(1)), all obligations of F&M Bancorp and
the Bank under this Agreement shall terminate as of the effective
date of the order, but vested rights of the Executive and F&M
Bancorp and the Bank as of the date of termination shall not be
affected.
(c) If F&M Bancorp or the Bank is in default, as
defined in Section 3(x)(1) of the FDIA (12 U.S.C. Section1813(x)(1)),
all obligations under this Agreement shall terminate as of the
date of default, but vested rights of the Executive and F&M
Bancorp or the Bank as of the date of termination shall not be
affected.
(d) All obligations under this Agreement shall be
terminated pursuant to 12 C.F.R. Section 563.39(b)(5)(except to the
extent that it is determined that continuation of the Agreement
for the continued operation of the Bank is necessary): (i) by the
Director of the OTS, or his/her designee, at the time the Federal
Deposit Insurance Corporation ("FDIC") enters into an agreement
to provide assistance to or on behalf of the Bank under the
authority contained in Section 13(c) of the FDIA (12 U.S.C.
Section 1823(c)); or (ii) by the Director of the OTS, or his/her
designee, at the time the Director or his/her designee approves a
supervisory merger to resolve problems related to operation of
the Bank or when the Bank is determined by the Director of the
OTS to be in an unsafe or unsound condition, but vested rights of
the Executive and the Employers as of the date of termination
shall not be affected.
12. Regulatory Prohibition. Notwithstanding any other
provision of this Agreement to the contrary, any payments made to
the Executive pursuant to this Agreement, or otherwise, are
subject to and conditioned upon their compliance with Section
18(k) of the FDIA (12 U.S.C. Section 1828(k) g of the Executive's
rights under his employment agreements dated March 21, 1996 with
Home Federal Savings Bank and Home Federal Corporation, F&M Bancorp
hereby guarantees the Executive that if any benefit or payment to
which the Executive is otherwise entitled under this Agreement is
disallowed or otherwise denied by any regulatory action or
prohibition, F&M Bancorp shall pay the Executive any sums
contemplated by this Agreement that the Bank shall be unable to
pay or shall be prohibited from paying.
14. Governing Law and Submission to Jurisdiction. This
Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Maryland, without
giving effect to the principles of conflicts of law thereof.
Each of the parties hereby irrevocably submits to the
jurisdiction of the Circuit Court of Washington County or any
Federal court sitting in the State of Maryland for purposes of
any controversy, claim or dispute arising out of or related to
this Agreement and hereby waives any defense of an inconvenient
forum and any right of jurisdiction on account of the place of
residence or domicile. For the purpose of expediting the
resolution of any such claim or dispute, the parties hereby waive
trial by jury.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be duly executed and delivered under seal, by
its authorized officers or individually, on the date first above
written.
ATTEST/WITNESS: F&M BANCORP
By
(SEAL)
Name: Charles W. Hoff, III
Title: Chairman and Chief Executive Officer
ATTEST/WITNESS: HOME FEDERAL SAVINGS BANK
By
(SEAL)
Name:
Title:
(SEAL)
Richard W. Phoebus, Sr. (the "Executive")
APPENDIX VII
FORM OF EMPLOYMENT AGREEMENT BETWEEN
HOME BANK AND CERTAIN OFFICERS OF HOME CORPORATION
EMPLOYMENT AGREEMENT (this "Agreement") dated as of April
2nd, 1996, between F&M Bancorp, a Maryland corporation and bank
holding company, Home Federal Savings Bank, a federally-chartered
savings bank (the "Bank"), and (the "Executive").
In consideration of the mutual covenants herein contained
and of the mutual benefits herein provided, the Bank and the
Executive agree as follows:
1. Employment. (a) The Bank will employ the Executive
and the Executive accepts employment by the Bank on the terms and
conditions herein contained.
(b) The period during which the Bank will employ
the Executive (the "Employment Period") shall commence on the
Effective Date of the merger of Home Federal Corporation with and
into F&M Bancorp (the "Merger") as defined in Section 1 of the
Plan and Agreement to Merge dated as of April 2, 1996 by and
among F&M Bancorp and Home Federal Corporation (the "Plan"). The
effectiveness of this Agreement is conditioned upon the
completion of the Merger pursuant to the Plan.
(c) The Employment Period shall continue until and
shall cease and terminate upon the earlier of (i) the close of
business on the day which is three years after the Effective Date
of the Merger or (ii) the death or substantially total disability
of the Executive; provided, however, that the Executive may
terminate this Agreement at any time without liability except
pursuant to paragraphs 4, 12 and 13 hereof, and without
relinquishing or forfeiting executive's rights under paragraphs 7
and 13.
2. Duties and Functions. (a) During the Employment
Period, the Executive shall exercise authority and perform
executive duties as the __________________________ of the Bank,
and shall perform such additional duties, as may be assigned or
delegated to him from time to time, by the Board of Directors of
the Bank.
(b) During the Employment Period, the Executive
will (i) devote his full time and efforts to the business of the
Bank and will not engage in consulting work or any trade or
business for his own account or for or on behalf of any other
person, firm or corporation which competes, conflicts or
interferes with the performance of his duties hereunder in any
way and (ii) accept such office or offices to which he may be
elected by the Board of Directors of the Bank; provided that the
performance of the duties of such office or offices shall be
consistent with the scope of the duties provided for in
subparagraph (a) of this paragraph 2.
3. Compensation. (a) As compensation for his services
hereunder, the Bank agrees to pay the Executive a salary at the
rate of at least $ per annum, payable in equal
monthly installments, or on such other periodic basis as may be
mutually agreed upon, subject to normal policies of the Bank as
to salary payments or suspensions thereof during periods of
disability. Such salary shall be subject to normal periodic
review at least annually for increases, based on corporate policy
and contributions to the enterprise.
(b) In addition to his salary provided by the
foregoing, the Executive shall be entitled to receive benefits
under any bonus, profit-sharing, retirement, group life,
disability, sickness, accident or health insurance programs of
the Bank (or under any such programs in which employees of the
Bank are eligible to participate) which may now or, if not
terminated, shall hereafter be in effect, or in any other or
additional such programs which may be established by the Bank (or
any program in which employees of the Bank are eligible to
participate), as and to the extent any such programs are or may
from time to time be in effect. The Executive shall be entitled
to reasonable vacations and sick leave, as may be established by
Bank policy.
(c) The Bank will reimburse the Executive for all
authorized expenses properly incurred by him in the performance
of his duties hereunder.
4. Competition; Confidential Information. The Executive
and the Bank recognize that due to the nature of his employment,
and his relationship with the Bank, the Executive has had and
will have access to, and has acquired and will acquire, and has
assisted and will assist in developing, confidential and
proprietary information relating to the business and operations
of the Bank and its affiliates, including, without limiting the
generality of the foregoing, information with respect to their
present and prospective services, systems, clients, customers,
agents, and sales and marketing methods. The Executive
acknowledges that such information has been and will be of
central importance to the Bank's business and that disclosure of
it to or its use by others could cause substantial loss to the
Bank. The Executive and the Bank also recognize that an
important part of the Executive's duties will be to develop good
will for the Bank through his personal contact with the Bank's
clients, and that there is a danger that this good will, a
proprietary asset of the Bank, may follow the Executive if and
when his relationship with the Bank is terminated. The Executive
accordingly agrees as follows:
(a) The Executive agrees that, upon termination of
his employment hereunder prior to the expiration of the stated
Employment Period provided in paragraphs 1(b) and (c), for any
reason other than (i) for termination by the Bank without cause
or (ii) for termination after a Change in Control, as provided
for in paragraph 6:
(i) The Executive will not directly or indirectly
accept employment in Frederick or Washington County,
Maryland with any other banking institution or
affiliate thereof for a period of two years from the
date of such termination, or in connection with any
subsequent employment outside of Frederick or
Washington County, Maryland solicit any of the banking
business of clients or customers of the Bank or any of
its affiliates in Frederick or Washington County,
Maryland, at the time of said termination for a period
of two years from the date of such termination.
(ii) The Executive will not in connection with any
subsequent employment outside of Frederick or
Washington County, Maryland directly or indirectly
solicit the banking business of any potential client
who had been identified and discussed as such within
the Bank by the time of such termination for a period
of two years from such termination. In the event that
the Executive violates the provisions of this
subparagraph without knowledge of such violation, upon
notice from the Bank informing him of the nature of
such violation, the Executive shall immediately
terminate any actions which constitute such violation.
(b) After the end of the Employment Period, the
Executive shall not retain copies of any documents (including
without limitation customer lists) containing any such trade
secrets or confidential or proprietary information of the Bank or
its affiliates.
(c) It is understood and agreed by the parties
hereto that nothing herein shall restrict or limit in any way the
Executive from any of the following activities at any time
following a termination of Executive's employment hereunder: (i)
the practice of law or accounting, including the representation
of banking institutions and their affiliates, without restriction
as to their location; (ii) provision of professional services
relating to real estate brokerage, real estate consultation or
problem asset consultation, including the representation of
banking institutions and their affiliates, without restriction as
to their location; (iii) provision of professional services as a
consultant or adviser for any banking institution or affiliate,
including relating to the development and implementation of
policies and procedures dealing with or related to problem
assets, asset classification, asset review, real estate lending,
and legal and accounting matters, without restriction as to their
location.
(d) It is recognized that damages in the event of
breach of any provision of this paragraph 4 by the Executive
would be difficult, if not impossible, to ascertain, and it is
therefore agreed that the Bank, in addition to and without
limiting any other remedy or right it may have, shall have the
right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach; and the
Executive hereby waives any and all defenses he may have on the
ground of the lack of jurisdiction or competence of the court to
grant such an injunction or other equitable relief. The
existence of this right shall not preclude any other rights and
remedies at law or in equity which the Bank may have.
5. Termination for Cause. Nothing in this Agreement shall
be construed to prevent the Bank from terminating the Executive's
employment hereunder and the Employment Period at any time, for
cause. As used in this Agreement: (i) a termination for cause
shall mean a termination for gross negligence, dishonesty or
incompetence, after notice and an opportunity to cure the alleged
breach, or any other breach by the Executive of any agreement on
his part made herein; and any such termination shall not be
construed a breach of this Agreement by the Bank; and (ii) a
termination by the Bank without cause shall mean any termination
by the Bank prior to the end of the Employment Period for reasons
other than as specified in clause (i).
6. Termination upon a Change in Control.
(a) This Agreement shall terminate, and the Bank or
any successor corporation to the Bank shall pay the Executive the
amount provided in paragraph 7(a), if:
(i) After a Change in Control, the Bank or any
successor corporation of the Bank breaches any
provision of this Agreement, including, without
limitation, a reduction in the Executive's total
compensation from that provided in paragraph 3, or a
significant reduction in the nature or scope of the
duties and functions of the Executive from those
contemplated in paragraph 2; or
(ii) After a Change in Control, the Executive is
relocated by the Bank without his express written
consent to perform the services and duties required by
this Agreement at any place other than the principal
office of the Bank in Hagerstown, Maryland; or
(iii) After a Change in Control, any successor
corporation of the Bank does not agree to assume the
obligations of the Bank under this Agreement.
(b) A "Change in Control," as used in this
Agreement, shall be deemed to have occurred when:
(i) Acquisition by a person, or by persons acting in
a group, of securities of the Bank, or of F&M Bancorp,
representing 25% or more of the combined voting power
of the then outstanding voting securities of the Bank
or of F&M Bancorp; or
(ii) A change in the membership of the Board of
Directors of the Bank, or of F&M Bancorp, such that
during any period of two consecutive years, individuals
who at the beginning of such period constituted such
Board of Directors ceased for any reason to constitute
at least a majority thereof unless the election of each
director who was not a director at the beginning of the
period was approved by a vote of at least two-thirds of
the directors then still in office who were directors
at the beginning of the period.
(iii) The consummation of the Merger in accordance with
the terms of the Plan shall not constitute a "Change of
Control" for purposes of this Agreement.
7. Severance Payments.
(a) If the Executive terminates his employment, or
is terminated by the Bank, during the Employment Period after a
Change in Control pursuant to paragraph 6, the Bank will pay the
Executive, in lieu of any amounts payable under paragraph 3, an
amount equal to three times the sum of (i) the Executive's
average annual base salary for the five years immediately before
the Change in Control and (ii) the average of the bonuses paid to
the Executive over the five years immediately before the Change
in Control (including years in which no bonus was awarded). Such
payment shall be made in 36 equal monthly installments, beginning
on the first day of the month following the month during which
this Agreement is terminated.
(b) If this Agreement is terminated within one year
after the Effective Date of the Merger by the Executive, or by
the Bank for any reason other than for cause (as defined in
paragraph 5), the Bank will pay the Executive, in lieu of any
amounts payable under paragraph 3, an amount equal to three times
the sum of (i) the Executive's average annual base salary for the
five years immediately before such termination and (ii) the
average of the bonuses paid to the Executive over the five years
immediately before such termination (including years in which no
bonus was awarded). Such payment shall be made in equal monthly
installments for the remainder of the Employment Period,
beginning on the first day of the month following the month
during which this Agreement is terminated.
(c) If the Executive terminates his employment, or
is terminated by the Bank without cause (as defined in paragraph
5), more than one year after the Effective Date of the Merger but
before the expiration of the Employment Period, the Bank will pay
the Executive, in lieu of any amounts payable under paragraph 3,
an amount equal to (i) two times the sum of (x) the Executive's
average annual base salary for the five years immediately before
such termination and (y) the average of the bonuses paid to the
Executive over the five years immediately before such termination
(including years in which no bonus was awarded) multiplied by
(ii) a fraction, the numerator of which shall be the number of
months remaining in the Employment Period, rounded down to the
nearest whole month, and the denominator of which shall be 24.
Such payment shall be made in equal monthly installments for the
remainder of the Employment Period, beginning on the first day of
the month following the month during which this Agreement is
terminated.
(d) If the Executive remains employed by the Bank
and exercises authority and performs executive duties as its
__________________________ for the remainder of the Employment
Period and is terminated after the expiration of the Employment
Period, the Executive will be entitled to such severance payments
and post-employment benefits as may be available to the Executive
under such employment policies of the Bank as may then be in
effect.
8. Binding Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their heirs,
personal representatives, successors and assigns.
9. Entire Agreement. This Agreement contains the entire
understanding of the Executive, the Bank and any affiliate of the
Bank, including Home Federal Corporation, with respect to
employment of the Executive and supersedes any and all prior
understandings, written or oral between the Executive, the Bank
and any affiliate of the Bank, including Home Federal
Corporation. This Agreement may not be amended, waived,
discharged or terminated orally, but only by an instrument in
writing; and shall be governed by the laws of Maryland.
10. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be deemed severable from the remainder of this
Agreement, and the remaining provisions contained in this
Agreement shall be construed to preserve to the maximum
permissible extent the intent and purposes of this Agreement.
Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in
any other jurisdiction.
11. Regulatory Actions. The following provisions shall be
applicable to the parties to the extent that they are required to
be included in employment agreements between a savings
association and its employees pursuant to Section 563.39(b) of
the Regulations Applicable to all Savings Associations, 12 C.F.R.
Section 563.39(b), or any successor thereto, and shall be controlling
in the event of a conflict with any other provision of this
Agreement.
(a) If the Executive is suspended from office
and/or temporarily prohibited from participating in the conduct
of the Bank's affairs pursuant to notice served under Section
8(e)(3) or Section 8(g)(1) of the Federal Deposit Insurance Act
("FDIA")(12 U.S.C. Section 1818(e)(3) and 1818(g)(1)), the Bank's
obligations under this Agreement shall be suspended as of the
date of service, unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Bank may, in its
discretion: (i) pay the Executive all or part of the compensation
withheld while its obligations under this Agreement were
suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.
(b) If the Executive is removed from office and/or
permanently prohibited from participating in the conduct of the
Bank's affairs by an order issued under Section 8(e)(4) or
Section 8(g)(1) of the FDIA (12 U.S.C. Section 1818(e)(4) and (g)(1)),
all obligations of the Bank under this Agreement shall terminate
as of the effective date of the order, but vested rights of the
Executive and the Bank as of the date of termination shall not be
affected.
(c) If the Bank is in default, as defined in
Section 3(x)(1) of the FDIA (12 U.S.C. Section1813(x)(1)), all
obligations under this Agreement shall terminate as of the date
of default, but vested rights of the Executive and the Bank as of
the date of termination shall not be affected.
(d) All obligations under this Agreement shall be
terminated pursuant to 12 C.F.R. Section 563.39(b)(5)(except to the
extent that it is determined that continuation of the Agreement
for the continued operation of the Bank is necessary): (i) by the
Director of the OTS, or his/her designee, at the time the Federal
Deposit Insurance Corporation ("FDIC") enters into an agreement
to provide assistance to or on behalf of the Bank under the
authority contained in Section 13(c) of the FDIA (12 U.S.C.
Section 1823(c)); or (ii) by the Director of the OTS, or his/her
designee, at the time the Director or his/her designee approves a
supervisory merger to resolve problems related to operation of
the Bank or when the Bank is determined by the Director of the
OTS to be in an unsafe or unsound condition, but vested rights of
the Executive and the Employers as of the date of termination
shall not be affected.
12. Regulatory Prohibition. Notwithstanding any other
provision of this Agreement to the contrary, any payments made to
the Executive pursuant to this Agreement, or otherwise, are
subject to and conditioned upon their compliance with Section
18(k) of the FDIA (12 U.S.C. Section 1828(k) and any regulations
promulgated thereunder.
13. Obligation in Event of Regulatory Prohibition. In
consideration for the Executive's execution of this Agreement and
the relinquishing of the Executive's rights under his employment
agreements dated March 21, 1996 with Home Federal Savings Bank
and Home Federal Corporation, F&M Bancorp hereby guarantees the
Executive that if any benefit or payment to which the Executive
is otherwise entitled under this Agreement is disallowed or
otherwise denied by any regulatory action or prohibition, F&M
Bancorp shall pay the Executive any sums contemplated by this
Agreement that the Bank shall be unable to pay or shall be
prohibited from paying.
14. Governing Law and Submission to Jurisdiction. This
Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Maryland, without
giving effect to the principles of conflicts of law thereof.
Each of the parties hereby irrevocably submits to the
jurisdiction of the Circuit Court of Washington County or any
Federal court sitting in the State of Maryland for purposes of
any controversy, claim or dispute arising out of or related to
this Agreement and hereby waives any defense of an inconvenient
forum and any right of jurisdiction on account of the place of
residence or domicile. For the purpose of expediting the
resolution of any such claim or dispute, the parties hereby waive
trial by jury.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be duly executed and delivered under seal, by
its authorized officers or individually, on the date first above
written.
ATTEST/WITNESS: F&M BANCORP
By
(SEAL)
Name: Charles W. Hoff, III
Title: Chairman and Chief Executive Officer
ATTEST/WITNESS: HOME FEDERAL SAVINGS BANK (the "Bank")
By
(SEAL)
Name:
Title:
(SEAL)
(the "Executive")
APPENDIX VIII
FORM OF OPINION OF COUNSEL TO HOME CORPORATION
(a) Home Corporation has been duly organized and is
validly existing as a corporation under the laws of the
State of Maryland.
(b) The execution and delivery of the Plan and the
Stock Option Agreement by Home Corporation and the
consummation of Home Corporation of the transactions
provided for therein have been duly authorized by all
requisite corporate and stockholder action on the part of
Home Corporation. Home Corporation has the corporate power
and corporate authority to execute and deliver the Plan and
the Stock Option Agreement and to consummate the
transactions contemplated thereby.
(c) The Plan and the Stock Option Agreement have been
executed and delivered by Home Corporation and are valid and
binding obligations of Home Corporation, enforceable against
Home Corporation in accordance with their terms, except to
the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization,
receivership, conservatorship or other similar laws now or
hereinafter in effect relating to or affecting the
enforcement of creditors' rights generally or the rights of
creditors of insured depository institutions or their
holding companies and (ii) general principles of equity,
regardless of whether such enforceability is considered in a
proceeding at law or in equity.
(d) The execution and delivery and performance by Home
Corporation of the Plan and the Stock Option Agreement will
not violate the Articles of Incorporation or Bylaws of Home
Corporation.
(e) No consent or approval of, or other action by or
filing with, any court or administrative or governmental
body which has not been obtained, taken or made is required
under the Subject Laws (as defined below), or any court
order or judgment specifically applicable to Home
Corporation and actually known to such counsel, for Home
Corporation to execute and deliver the Plan and the Stock
Option Agreement and to consummate the transactions provided
for therein. Such counsel need express no opinion, however,
as to any such consent, approval, action or filing which may
be required as the result of F&M Bancorp's involvement in
the transactions contemplated by the Plan and the Stock
Option Agreement because of such entities' legal or
regulatory status or because of other facts specifically
pertaining to F&M Bancorp.
(f) Assuming due authorization of the Merger by F&M
Bancorp and the F&M Bancorp stockholders, upon the filing of
Articles of Merger with the Secretary of State of the State
of Maryland in accordance with the Plan, the Merger will be
effective in accordance with the laws of the State of
Maryland.
(g) The Proxy Statement/Prospectus, insofar as it
constituted a proxy statement for the special meeting (the
"Special Meeting") of Home Corporation's stockholders held
on __________________, 1996, as of the date thereof,
complied as to form in all material respects to the
requirements of the Exchange Act, and the rules and
regulations promulgated thereunder, except that such counsel
need express no opinion as to (i) the financial statements,
schedules and other financial, statistical and tabular data
included in or incorporated into the Proxy
Statement/Prospectus, (ii) any document incorporated by
reference into the Proxy Statement/Prospectus, (iii) the
exhibits to any document incorporated by reference into the
Proxy Statement/Prospectus, (iv) the description of the
analyses performed by the investment banker in rendering its
fairness opinion, or (v) information relating to F&M Bancorp
or the F&M Subsidiaries which was included in the Proxy
Statement/Prospectus. Such counsel need not assume any
responsibility for the accuracy, completeness of fairness of
the statements contained in the Proxy Statement/Prospectus
or any documents incorporated by reference therein except as
set forth in the paragraph immediately following this one.
In connection with the Merger, such counsel shall state that
it participated in conferences with certain officers and other
representatives of Home Corporation and Home Bank at which the
contents of the Proxy Statement/Prospectus and related matters
were discussed and, although such counsel is not passing upon and
does not assume any responsibility for the accuracy, fairness or
completeness of the statements contained in the Proxy
Statement/Prospectus and made no independent check or
verification of the existence or absence of any matter set forth
therein, on the basis of the foregoing, such counsel shall state
that no facts have come to its attention that leads it to believe
that the Proxy Statement/Prospectus as of the date it was mailed
to Home Corporation's stockholders and on the date of the Special
Meeting contemplated thereby, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, except that such counsel need not express any belief
with respect to (i) the financial statements, schedules and other
financial, statistical and tabular data included in or
incorporated into the Proxy Statement/Prospectus, (ii) the
exhibits thereto and the exhibits to any document incorporated by
reference into the Proxy Statement/Prospectus, (iii) the
documents incorporated by reference therein, (iv) the description
of the analyses performed by the investment banker in rendering
its fairness opinion, or (v) any information relating to F&M
Bancorp or the F&M Subsidiaries contained therein. In rendering
such statement, such counsel may state that it has served only as
special counsel to Home Corporation and Home Bank, that such
representation of such entities has been limited to acting as
their special counsel with respect to the Merger and on certain
other unrelated matters on which such counsel has been consulted
by the management of Home Corporation or Home Bank, and that such
counsel has relied solely upon the examination and inquiries
stated therein.
In rendering such opinion, such counsel may, without
independent verification, assume: (i) the genuineness of all
signatures and the authenticity of all documents submitted to
such counsel as originals, the conformity to original documents
of all documents submitted to such counsel as certified,
conformed or reproduction copies, and the authenticity of such
originals of such latter documents; (ii) the execution of such
documents, acknowledgment as indicated thereon and receipt of the
consideration recited therein by F&M Bancorp, (iii) that F&M
Bancorp has the full power, authority and legal right under its
articles of incorporation and other governing documents and
applicable laws, as the case may be, to execute and to perform
its obligations under all documents executed by it in connection
with the transactions contemplated by the Plan and the Stock
Option Agreement; (iv) that the foregoing documents, in the forms
submitted to such counsel for review, have not been altered or
amended in any respect material to such counsel's opinion as
stated herein; (v) that there are no other agreements or
understandings among the parties that would modify the terms of
the proposed transactions or the respective rights or obligations
of the parties thereunder; (vi) the accuracy of the
representations and warranties of Home Corporation and Home Bank
as set forth in the Plan; (vii) the accuracy of all
certifications made available to such counsel from public
officials and officers of Home Corporation and Home Bank on which
such counsel is relying in rendering the opinions set forth
above; and (viii) the validity of all laws and regulations
applicable to the transactions contemplated by the Plan and the
Stock Option Agreement.
Furthermore, to the extent not inconsistent with the other
assumptions, qualifications and limitations set forth in such
counsel's opinion, such counsel's opinion shall be governed by,
and shall be interpreted in accordance with, the Legal Opinion
Accord (the "Accord") of the American Bar Association Section of
Business Law (1991). As a consequence, such opinion shall be
subject to a number of qualifications, exceptions, definitions,
limitations on coverage and other limitations, all as more
particularly described in the Accord, and such counsel's opinion
should be read in conjunction therewith. The term "actual
knowledge" when used in such counsel's opinion shall have the
meaning set forth in the Accord. For purposes of the opinion in
(e) above, Subject Laws shall mean the Home Owners' Loan Act and
12 C.F.R. Part 574, the General Corporation Law of Maryland, and
the Exchange Act, and the rules and regulations promulgated
thereunder.
APPENDIX IX
FORM OF OPINION OF COUNSEL TO F&M BANCORP
(a) F&M Bancorp has been duly organized and is validly
existing as a corporation under the laws of the State of
Maryland.
(b) The execution and delivery of the Plan and the
Stock Option Agreement by F&M Bancorp and the consummation
by F&M Bancorp of the transactions provided for therein have
been duly authorized by all requisite corporate and
stockholder action on the part of F&M Bancorp. F&M Bancorp
has the corporate power and corporate authority to execute
and deliver the Plan and the Stock Option Agreement and to
consummate the transactions contemplated thereby.
(c) The Plan and the Stock Option Agreement have been
executed and delivered by F&M Bancorp and are valid and
binding obligations of F&M Bancorp, enforceable against F&M
Bancorp in accordance with their terms, except to the extent
that enforcement thereof may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization, receivership,
conservatorship or other similar laws now or hereinafter in
effect relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of
insured depository institutions or their holding companies
and (ii) general principles of equity, regardless of whether
such enforceability is considered in a proceeding at law or
in equity.
(d) The execution and delivery and performance by F&M
Bancorp of the Plan and the Stock Option Agreement will not
violate the Articles of Incorporation or Bylaws of F&M
Bancorp.
(e) No consent or approval of, or other action by or
filing with, any court or administrative or governmental
body which has not been obtained, taken or made is required
under the Subject Laws (as defined below), or any court
order or judgment specifically applicable to F&M Bancorp and
actually known to such counsel, for F&M Bancorp to execute
and deliver the Plan and the Stock Option Agreement and to
consummate the transactions provided for therein. Such
counsel need express no opinion, however, as to any such
consent, approval, action or filing which may be required as
the result of Home Corporation's involvement in the
transactions contemplated by the Plan and the Stock Option
Agreement because of such entities' legal or regulatory
status or because of other facts specifically pertaining to
Home Corporation.
(f) Assuming due authorization of the Merger by Home
Corporation and the Home Corporation stockholders, upon the
filing of Articles of Merger with the Secretary of State of
the State of Maryland in accordance with the Plan, the
Merger will be effective in accordance with the laws of the
State of Maryland.
(g) The F&M Bancorp Common Stock to be issued in
connection with the Merger in accordance with Section 9.2 of
the Plan is duly reserved for issuance, and when so issued,
will be duly authorized and validly issued, fully paid and
non-assessable, free of preemptive rights, and free and
clear of all liens, encumbrances or restrictions created by
or through F&M Bancorp.
(h) The Registration Statement of F&M Bancorp has been
declared effective by the SEC under the Securities Act and,
to our knowledge, no stop order suspending the effectiveness
has been issued under the Securities Act or proceedings
therefor initiated or threatened by the SEC.
(i) The terms and provisions of the F&M Bancorp Common
Stock conforms to the description thereof contained in the
Proxy Statement/Prospectus. The forms of certificate used
to evidence the F&M Bancorp Common Stock are in due and
proper form.
(j) The Proxy Statement/Prospectus, insofar as it
constituted a Registration Statement under the Securities
Act and a proxy statement under the Exchange Act for the
special meeting (the "Special Meeting") of F&M Bancorp's
stockholders held on ________________, 1996, as of the date
thereof, complied as to form in all material respects to the
requirements of the Securities Act and the Exchange Act, and
the rules and regulations promulgated thereunder, except
that such counsel need express no opinion as to (i) the
financial statements, schedules and other financial,
statistical and tabular data included in or incorporated
into the Registration Statement and the Proxy
Statement/Prospectus, (ii) any document incorporated by
reference into the Registration Statement and the Proxy
Statement/Prospectus, (iii) the exhibits to any document
incorporated by reference into the Registration Statement
and the Proxy Statement/Prospectus, or (iv) information
relating to Home Corporation or the Home Subsidiaries which
was included in the Registration Statement and the Proxy
Statement/Prospectus. Such counsel need not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and
the Proxy Statement/Prospectus or any documents incorporated
by reference therein except as set forth in the paragraph
immediately following this one.
In connection with the Merger, such counsel shall state that
it participated in conferences with certain officers and other
representatives of F&M Bancorp and the F&M Subsidiaries at which
the contents of the Registration Statement and the Proxy
Statement/Prospectus and related matters were discussed and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, fairness or completeness of the
statements contained in the Registration Statement and the Proxy
Statement/Prospectus and made no independent check or
verification of the existence or absence of any matter set forth
therein, on the basis of the foregoing, such counsel shall state
that no facts have come to its attention that leads it to believe
that the Registration Statement and the Proxy
Statement/Prospectus as of the date of the effectiveness of the
Registration Statement and through the Effective Date contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, except that such counsel need not
express any belief with respect to (i) the financial statements,
schedules and other financial, statistical and tabular data
included in or incorporated into the Registration Statement and
the Proxy Statement/Prospectus, (ii) the exhibits thereto and the
exhibits to any document incorporated by reference into the
Registration Statement and the Proxy Statement/Prospectus, (iii)
the documents incorporated by reference therein, or (iv) any
information relating to Home Corporation or the Home Subsidiaries
contained therein. In rendering such statement, such counsel may
state that it has served only as special counsel to F&M Bancorp
and the F&M Subsidiaries, that such representation of such
entities has been limited to acting as their special counsel with
respect to the Merger and on certain other unrelated matters on
which such counsel has been consulted by the management of F&M
Bancorp or the F&M Subsidiaries, and that such counsel has relied
solely upon the examination and inquiries stated therein.
In rendering such opinion, such counsel may, without
independent verification, assume: (i) the genuineness of all
signatures and the authenticity of all documents submitted to
such counsel as originals, the conformity to original documents
of all documents submitted to such counsel as certified,
conformed or reproduction copies, and the authenticity of such
originals of such latter documents; (ii) the execution of such
documents, acknowledgment as indicated thereon and receipt of the
consideration recited therein by Home Corporation, (iii) that
Home Corporation has the full power, authority and legal right
under its articles of incorporation and other governing documents
and applicable laws, as the case may be, to execute and to
perform its obligations under all documents executed by it in
connection with the transactions contemplated by the Plan and the
Stock Option Agreement; (iv) that the foregoing documents, in the
forms submitted to such counsel for review, have not been altered
or amended in any respect material to such counsel's opinion as
stated herein; (v) that there are no other agreements or
understandings among the parties that would modify the terms of
the proposed transactions or the respective rights or obligations
of the parties thereunder; (vi) the accuracy of the
representations and warranties of F&M Bancorp and the F&M
Subsidiaries as set forth in the Plan; (vii) the accuracy of all
certifications made available to such counsel from public
officials and officers of F&M Bancorp and the F&M Subsidiaries on
which such counsel is relying in rendering the opinions set forth
above; and (viii) the validity of all laws and regulations
applicable to the transactions contemplated by the Plan and the
Stock Option Agreement.
Furthermore, to the extent not inconsistent with the other
assumptions, qualifications and limitations set forth in such
counsel's opinion, such counsel's opinion shall be governed by,
and shall be interpreted in accordance with, the Legal Opinion
Accord (the "Accord") of the American Bar Association Section of
Business Law (1991). As a consequence, such opinion shall be
subject to a number of qualifications, exceptions, definitions,
limitations on coverage and other limitations, all as more
particularly described in the Accord, and such counsel's opinion
should be read in conjunction therewith. The term "actual
knowledge" when used in such counsel's opinion shall have the
meaning set forth in the Accord. For purposes of the opinion in
(e) above, Subject Laws shall mean the Home Owners' Loan Act and
12 C.F.R. Part 574, the Bank Holding Company Act of 1956, the
General Corporation Law of Maryland, and the Exchange Act, and
the rules and regulations promulgated thereunder.
APPENDIX X
FORM OF DIRECTORS' AGREEMENT
AGREEMENT (this "Agreement") dated as of April 2nd, 1996,
between F&M Bancorp, a Maryland corporation and thrift holding
company, and [Howard B. Bowen][John J. McElwee, Jr.] (the
"Director"), who is currently serving as a director of Home
Federal Savings Bank (the "Bank"), a federally-chartered savings
bank, and is a participant in the Bank's Amended and Restated
Executive Compensation Plan for Directors (the "Plan").
Whereas, Section 2.4 of the Plan provides that all benefits
outlined on Schedule A thereof will be provided to the Director
in the event of the merger or acquisition of the Bank; and
Whereas, adequate funding for the level of benefits so
outlined on Schedule A of the Plan could normally be attained
only if the Director served on the Bank's Board of Directors
until normal retirement age and deferred all director's fees into
an escrow arrangement in which they earned a 10% annual return;
Now, therefore, in consideration of the mutual covenants
herein contained and of the mutual benefits herein provided, F&M
Bancorp, the Bank and the Executive agree as follows:
1. Lump Sum Payment. In lieu of any benefits which may be
provided to the Director pursuant to Section 2.4 of the Plan, the
Director shall be entitled to receive a lump sum payment of the
present value on the Effective Date of the Merger of the benefits
provided on Schedule A of the Plan (a ten-year annuity of
[$81,832][$32,363] per year, payable monthly and commencing upon
attainment of the normal retirement age of 65 years), using a
discount rate of 6.5 %. F&M Bancorp shall pay this lump sum
amount to the Director within 60 days after the Effective Date of
the merger of Home Federal Corporation with and into F&M Bancorp
(the "Merger") as defined in Section 1 of the Plan and Agreement
to Merge dated as of April 2, 1996 by and among F&M Bancorp and
Home Federal Corporation (the "Plan and Agreement to Merge").
2. Effectiveness and Termination. This Agreement will
become effective on the Effective Date of the Merger. The
effectiveness of this Agreement is conditioned upon the
completion of such Merger. The obligations of F&M Bancorp and of
the Director will terminate upon termination of the Plan and
Agreement to Merge pursuant to the provisions of Section 13
thereof.
3. Termination of Deferrals and Accruals under Plan. Upon
the effectiveness of this Agreement and after the Director's
receipt of the lump sum pursuant to paragraph 1 hereof, the
Director may defer no directors fees or accrue any further
interest on any deferred directors fees pursuant to the Plan, and
will otherwise receive no further benefits pursuant to the Plan.
The Director understands that the Plan may be terminated in the
discretion of F&M Bancorp after the Effective Date of the Merger.
4. Governing Law and Submission to Jurisdiction. This
Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Maryland, without
giving effect to the principles of conflicts of law thereof.
Each of the parties hereby irrevocably submits to the
jurisdiction of the Circuit Court of Washington County or any
Federal court sitting in the State of Maryland for purposes of
any controversy, claim or dispute arising out of or related to
this Agreement and hereby waives any defense of an inconvenient
forum and any right of jurisdiction on account of the place of
residence or domicile. For the purpose of expediting the
resolution of any such claim or dispute, the parties hereby waive
trial by jury.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be duly executed and delivered under seal, by
its authorized officers or individually, on the date first above
written.
ATTEST/WITNESS: F&M BANCORP
By
(SEAL)
Name: Charles W. Hoff, III
Title: Chairman and Chief Executive Officer
(SEAL)
[Howard B. Bowen (the "Director")]
[John J. McElwee, Jr. (the "Director")]
Exhibit 99.2
Stock Option Agreement
FORM OF STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Option Agreement") dated as of April 2,
1996, between HOME FEDERAL CORPORATION ("Home Corporation"), a Maryland
corporation, and F&M BANCORP ("F&M Bancorp"), a Maryland corporation, recites
and provides:
A. The Board of Directors of Home Corporation and F&M Bancorp have
approved a Plan and Agreement to Merge dated April 2, 1996 (the "Plan")
providing for the merger (the "Merger") of Home Corporation with and into F&M
Bancorp.
B. As a condition to and as consideration for F&M Bancorp's entry into
the Plan and to induce such entry, Home Corporation has agreed to grant to F&M
Bancorp the option set forth herein to purchase authorized but unissued shares
of Home Corporation Common Stock.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
Capitalized terms defined in the Plan and used herein shall have the same
meanings as in the Plan.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Home Corporation
hereby grants to F&M Bancorp an option (the "Option") to purchase up to 501,282
shares of Home Corporation Common Stock at an exercise price of $8.25 per share
payable in cash as provided in Section 4; provided, however, that in the event
Home Corporation issues or agrees to issue any shares of Home Corporation Common
Stock (other than as permitted under the Plan) at a price less than $8.25 per
share (as adjusted pursuant to Section 6), the exercise price shall be such
lesser price.
3. Exercise of Option.
(a) Unless F&M Bancorp shall have breached in any material respect
any covenant or representation contained in the Plan and such breach has not
been cured, F&M Bancorp may exercise the Option, in whole or part, at any time
or from time to time if a Purchase Event (as defined below) shall have occurred
and be continuing; provided that to the extent the Option shall not have been
exercised, it shall terminate and be of no further force and effect upon the
earliest to occur of (i) the Effective Date of the Merger, or (ii) the
termination of the Plan in accordance with the provisions thereof prior to the
occurrence of a Purchase Event (other than as a result of a willful breach by
Home Corporation of any Specified Covenant or as a result of failure of Home
Corporation's stockholders to approve the Plan by the vote required under
applicable law or under Home Corporation's Charter), or (iii) 12 months after
termination of the Plan due to a willful breach by Home Corporation of any
Specified Covenant or failure of Home Corporation's stockholders to approve the
Plan by the vote required under applicable law or under Home Corporation's
Charter; provided, however, that any purchase of shares upon exercise of the
Option shall be subject to compliance with applicable law, including, without
limitation, the Bank Holding Company Act of 1956, as amended. Any exercise of
the Option shall be subject to compliance with applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Home Corporation or Home Federal Savings Bank ("Home
Bank"), without having received F&M Bancorp's prior written consent, shall
have entered into an agreement with any person (x) to merge or consolidate,
or enter into any similar transaction, except as contemplated in the Plan,
(y) to purchase, lease or otherwise acquire all or substantially all of the
assets of Home Corporation or Home Bank, or (z) to purchase or otherwise
acquire (including by way of merger, consolidation, share exchange or any
similar transaction) securities representing 15% or more of the voting
power of Home Corporation or Home Bank;
(ii) any person (other than Home Corporation or Home Bank in
a fiduciary capacity, or F&M Bancorp or Farmers and Mechanics National Bank
in a fiduciary capacity) shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 15% or more of the outstanding
shares of Home Corporation Common Stock after the date hereof (the term
"beneficial ownership" for purposes of this Option Agreement having the
meaning assigned thereto in Section 13(d) of the Securities Exchange Act of
1934 (the "Exchange Act") and the regulations promulgated thereunder);
(iii) any person shall have made a bona fide proposal to
Home Corporation by public announcement or written communication that is or
becomes the subject of public disclosure to acquire Home Corporation or
Home Bank by merger, consolidation, purchase of all or substantially all of
its assets or any other similar transaction, and following such bona fide
proposal the stockholders of Home Corporation vote not to adopt the Plan;
or
(iv) Home Corporation shall have willfully breached any
Specified Covenant following a bona fide proposal to Home Corporation or
Home Bank to acquire Home Corporation or Home Bank by merger,
consolidation, purchase of all or substantially all of its assets or any
other similar transaction, which breach would entitle F&M Bancorp to
terminate the Plan (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the Notice
Date (as defined below).
If more than one of the transactions giving rise to a
Purchase Event under this Section 3(b) is undertaken or effected, then all
such transactions shall give rise only to one Purchase Event, which
Purchase Event shall be deemed continuing for all purposes hereunder until
all such transactions are abandoned. As used in this Option Agreement,
"person" shall have the meanings specified in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act.
(c) In the event F&M Bancorp wishes to exercise the Option, it
shall send to Home Corporation a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise, and (ii) a place and date not earlier
than three business days nor later than 60 business days after the Notice Date
for the closing of such purchase ("Closing Date"); provided that if prior
notification to or approval of any federal or state regulatory agency is
required in connection with such purchase, F&M Bancorp shall promptly file the
required notice or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification period has
expired or been terminated or such approval has been obtained and any requisite
waiting period shall have passed.
(d) As used herein, "Specified Covenant" means any covenant made by
Home Corporation or Home Bank and contained in Section 5 of the Plan.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3, F&M Bancorp shall pay
to Home Corporation the aggregate purchase price for the shares of Home
Corporation Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a bank account designated by
Home Corporation.
(b) At such closing, simultaneously with the delivery of funds as
provided in subsection (a), Home Corporation shall deliver to F&M Bancorp a
certificate or certificates representing the number of shares of Home
Corporation Common Stock purchased by F&M Bancorp, and F&M Bancorp shall deliver
to Home Corporation a letter agreeing that F&M Bancorp will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement.
(c) Certificates for Home Corporation Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN PROVISIONS OF A STOCK OPTION AGREEMENT BETWEEN THE REGISTERED HOLDER
HEREOF AND HOME DERAL CORPORATION AND TO RESALE RESTRICTIONS ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF HOME FEDERAL CORPORATION. A COPY OF SUCH AGREEMENT WILL BE
PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY HOME FEDERAL
CORPORATION OF A WRITTEN and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if F&M Bancorp
shall have delivered to Home Corporation a copy of a letter from the staff of
the Securities and Exchange Commission, or an opinion of counsel, in form and
substance satisfactory to Home Corporation, to the effect that such legend is
not required for purposes of the Securities Act of 1933, as amended (the
"Securities Act").
5. Representations.
Home Corporation represents, warrants and covenants to F&M Bancorp as
follows:
(a) Home Corporation shall at all times maintain sufficient
authorized but unissued shares of Home Corporation Common Stock so that the
Option may be exercised without authorization of additional shares of Home
Corporation Common Stock.
(b) The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly authorized,
validly issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization.
In the event of any change in Home Corporation Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations, exchanges
of shares or the like, the type and number of shares subject to the Option, and
the purchase price per share, as the case may be, shall be adjusted
appropriately. In the event that any additional shares of Home Corporation
Common Stock are issued or otherwise become outstanding after the date of this
Option Agreement (other than pursuant to this Option Agreement), the number of
shares of Home Corporation Common Stock subject to the Option shall be adjusted
so that, after such issuance, it equals 19.9% of the number of shares of Home
Corporation Common Stock then issued and outstanding without giving effect to
any shares subject or issued pursuant to the Option. Nothing contained in this
Section 6 shall be deemed to authorize Home Corporation to breach any provision
of the Plan.
7. Registration Rights.
If requested by F&M Bancorp, Home Corporation shall as expeditiously as
possible file a registration statement on a form of general use under the
Securities Act if necessary in order to permit the sale or other disposition
of the shares of Home Corporation Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method of sale or other
disposition requested by F&M Bancorp. F&M Bancorp shall provide all information
reasonably requested by Home Corporation for inclusion in any registration
statement to be filed hereunder. Home Corporation will use its best efforts
to cause such registration statement first to become effective and then to
remain effective for such period not in excess of 270 days from the day such
registration statement first becomes effective as may be reasonably necessary
to effect such sales or other dispositions. Only one registration may be
effected under this Section 7 at Home Corporation's expense, and which shall
not include underwriting commissions and the fees and disbursements of F&M
Bancorp's counsel attributable to the registration of such Home Corporation
Common Stock. The filing of any registration statement hereunder may be delayed
for such period of time as may reasonably be required to facilitate any public
distribution by Home Corporation of Home Corporation Common Stock. If requested
by F&M Bancorp, in connection with any such registration, Home Corporation will
become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements. Upon receiving any request from F&M
Bancorp or assignee thereof under this Section 7, Home Corporation agrees to
send a copy thereof to F&M Bancorp and to any assignee thereof known to Home
Corporation, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
8. Severability.
If any term, provision, covenant or restriction contained in this Option
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option will not permit the holder to acquire the full
number of shares of Home Corporation Common Stock provided in Section 2 (as
adjusted pursuant to Section 6), it is the express intention of Home
Corporation to allow the holder to acquire such lesser number of shares as may
be permissible, without any amendment or modification hereof.
9. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided
herein, this Option Agreement contains the entire agreement between the parties
with respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Option Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or by reason
of this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of
its rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred and be
continuing F&M Bancorp may assign in whole or in part its rights and obligations
hereunder; provided, however, that to the extent required by applicable
regulatory authorities, F&M Bancorp may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Home Corporation, (iii) an assignment to a single party (e.g.,
a broker or investment banker) for the purpose of conducting a widely
dispersedpublic distribution on F&M Bancorp's behalf, or (iv) any other manner
approved by applicable regulatory authorities.
(d) Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the address provided for in or pursuant to Section 15 of the Plan.
(e) Counterparts. This Option Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
HOME FEDERAL CORPORATION
By: /s/ Richard W. Phoebus, Sr.
Richard W. Phoebus, Sr.
President and Chief Executive Officer
F&M BANCORP
By: /s/ Charles W. Hoff, III
Charles W. Hoff, III
Chairman of the Board and Chief Executive Officer
Exhibit 99.3
Press Release
April 2, 1996
Acquisition of Home Federal Corporation and Subsidiaries
Faye E. Cannon, President of F&M Bancorp
Charles W. Hoff, III, Chairman of the Board and Chief Executive Officer of
F&M Bancorp headquartered in Frederick, Maryland, and Richard W. Phoebus, Sr.,
President and Chief Executive Officer of Home Federal Corporation and Home
Federal Savings Bank, located in Hagerstown, Maryland, announced today that F&M
Bancorp has entered into a definitive agreement to acquire Home Federal
Corporation and its subsidiaries.
Under the terms of the agreement, Home Federal Corporation will merge into
F&M Bancorp, which will continue to operate Home Federal Savings Bank following
consummation of the transaction. Each outstanding share of common stock of Home
Federal Corporation will be exchanged for newly issued shares of F&M Bancorp at
a conversion ratio equal to 1.65 times the per share book value of Home Federal
Corporation common stock which shall be determined at the end of the month
immediately preceding the closing. The value of F&M Bancorp common stock to be
exchanged will be based on the average Nasdaq closing price for the 20
business days preceding that date. The transaction is expected to be completed
during the fourth quarter of 1996. If the merger consideration had been based on
Home Federal Corporation's December 31, 1995 book value of $7.30 per share, each
Home Federal Corporation share would have been exchanged in the merger
transaction for $12.05 of F&M Bancorp common stock. Using the December 31, 1995
closing stock price of F&M Bancorp common stock of $29.75, each share of Home
Federal Corporation common stock would have been exchanged for .41 shares of
F&M Bancorp common stock.
Two directors of Home Federal Corporation will be invited to serve as
directors of F&M Bancorp. The acquisition is subject to the approval of federal
regulatory authorities and shareholder approval of both companies. Charles Webb
and Company is serving as financial advisor to Home Federal Corporation in this
transaction.
Home Federal Corporation has total assets as of December 31, 1995 of
approximately $214,615,000. F&M Bancorp had total assets as of December 31, 1995
of approximately $739,854,000. Home Federal Savings Bank, the primary subsidiary
of Home Federal Corporation, currently operates 8 banking offices and 11 ATM's
in both Washington and Allegheny Counties in Maryland. Home Federal Corporation
currently has 2,519,010 shares of common stock outstanding, and F&M Bancorp
currently has 4,419,424 shares of common stock outstanding.
Mr. Phoebus stated, "The proposed transaction provides a unique opportunity
for Home Federal Savings Bank and for the stockholders of Home Federal
Corporation, as well as for our employees, customers, and the community. By this
affiliation with F&M Bancorp and the increased resources which the merger makes
available, Home Federal can look forward to continued growth by expanding its
products, services and delivery systems to our existing customers and new
customers as well. We are very pleased that Home Federal will be able to
continue to operate as a subsidiary of F&M Bancorp, allowing our employees to
continue to serve our customer base through our 8 Home Federal offices."
"We are delighted to welcome Home Federal Savings Bank to F&M Bancorp."
stated Faye Cannon, President of F&M Bancorp. "This transaction provides the
opportunity for F&M Bancorp to grow and expand into contiguous Washington
County, a significant industrial and transportation hub for Western Maryland.
We value the importance of placing the customer at the center of our business
and this community banking philosophy is one that is shared by Home Federal.
Through this affiliation, both organizations will be able to enhance the
delivery of products and services to our individual and business customers,
while building long term value for stockholders."
As a subsidiary of F&M Bancorp, Farmers and Mechanics National Bank is the
fifth largest banking institution headquartered in Maryland and operates a full
service commercial bank through 24 full service community banking offices and 32
ATM's throughout Frederick, Carroll, and Montgomery Counties in central
Maryland. Farmers and Mechanics National Bank, a member of the FDIC, provides
financial services to both individuals and business markets and is a member of
the MOST, CIRRUS, MAC, and VISA regional, national, and international ATM
networks.
