SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
C U R R E N T R E P O R T
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 10, 1997
-----------------
Date of Report (Date Of Earliest Event Reported)
FIRST CITIZENS FINANCIAL CORPORATION
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(Exact Name Of Registrant As Specified In Its Charter)
Delaware
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(State Or Other Jurisdiction Of Incorporation)
0-17912 52-1638667
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(Commission File Number) (IRS Employer Identification No.)
22 Firstfield Road
Gaithersburg, Maryland 20878
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(Address Of Principal Executive Offices) (Zip Code)
(301) 527-2400
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(Registrant's Telephone Number, including Area Code)
NOT APPLICABLE
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(Former Name Or Former Address, If Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On March 10, 1997, First Citizens Financial
Corporation, a Delaware corporation (the "Company"), and
Provident Bankshares Corporation, a Maryland corporation
("Provident"), entered into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which the
Company will merge with and into Provident (the
"Merger"). The Merger is expected to qualify as a tax-
free reorganization for federal income tax purposes and
to be accounted for as a pooling of interests. The
Merger Agreement also provides that immediately following
the Merger, Citizens Savings Bank, F.S.B. ("Citizens
Bank"), a federally chartered savings bank and a wholly
owned subsidiary of the Company, will be merged (the
"Bank Merger") with and into Provident Bank of Maryland
("Provident Bank"), a Maryland-chartered commercial bank
and a wholly owned subsidiary of Provident, pursuant to a
Subsidiary Agreement and Plan of Merger to be entered
into between Citizens Bank and Provident Bank.
Pursuant to the Merger Agreement, each share of
common stock, par value $0.01 per share ("Company Common
Stock"), of the Company outstanding on the effective date
of the Merger will (subject to certain exceptions) be
converted into the right to receive .73 shares of common
stock, par value $1.00 per share, of Provident
("Provident Common Stock"), together with the
corresponding number of rights attached thereto. No
fractional shares of Provident Common Stock will be
issued in the Merger, and holders of Company Common Stock
who otherwise would be entitled to receive a fractional
share of Provident Common Stock will receive a cash
payment in lieu thereof. In addition, if the average
closing price of Provident Common Stock for the ten
trading days immediately preceding receipt of the last
regulatory approval for the Merger (determined without
regard to any related waiting periods) is below $35.625,
the Company may terminate the Merger Agreement unless
Provident increases the exchange ratio in the Merger such
that the value of Provident Common Stock (based on such
average closing price) to be received in the Merger is
not less than $26.006 per share of Company Common Stock.
Consummation of the Merger is subject to a
number of conditions, including, but not limited to, the
approval of the Merger Agreement and the Merger by the
requisite vote of the stockholders of each of the Company
and Provident and the receipt of all required regulatory
approvals.
At the effective time of the Merger, Provident
will cause its board of directors and the board of
directors of Provident Bank to be expanded by two
directorships, and Herbert Jorgensen, Chairman and CEO of
the Company, and Enos Fry, President of the Company, will
be appointed directors of Provident and Provident Bank.
Mr. Fry will also serve as a Group Manager of Provident
pursuant to an employment agreement to be entered into
with Provident upon consummation of the Merger, and Mr.
Jorgensen will be retained by Provident in a consulting
role following the Merger.
As a condition to the execution and delivery by
Provident of the Merger Agreement, the Company and
Provident entered into a Stock Option Agreement, dated as
of March 10, 1997 (the "Option Agreement"), pursuant to
which the Company granted Provident an irrevocable option
(the "Option") to purchase up to 291,388 shares (subject
to adjustment as set forth therein) of Company Common
Stock at a purchase price of $23.00 per share. The
Option will become exercisable only upon the occurrence
of certain events described therein, none of which has
occurred as of the date hereof. In addition, the Company
has agreed to pay a termination fee of $1.7 million to
Provident following termination of the Merger Agreement
under certain circumstances.
The Merger Agreement and the Option Agreement
are attached hereto as exhibits and are incorporated
herein by reference. The foregoing summaries of the
Merger Agreement and the Option Agreement do not purport
to be complete and are qualified in their entirety by
reference to such exhibits.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(c) Exhibits
2.1 Agreement and Plan of Merger, dated
as of March 10, 1997, by and between
First Citizens Financial Corporation
and Provident Bankshares Corporation
2.2 Stock Option Agreement, dated as of
March 10, 1997, by and between First
Citizens Financial Corporation and
Provident Bankshares Corporation
SIGNATURE
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
hereunder duly authorized.
Dated: March 10, 1997
FIRST CITIZENS FINANCIAL
CORPORATION
By: /s/ Enos K. Fry
--------------------------
Name: Enos K. Fry
Title: Vice Chairman and
President
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger, dated
as of March 10, 1997, by and between
First Citizens Financial Corporation
and Provident Bankshares Corporation
2.2 Stock Option Agreement, dated as of
March 10, 1997, by and between First
Citizens Financial Corporation and
Provident Bankshares Corporation
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
PROVIDENT BANKSHARES CORPORATION
AND
FIRST CITIZENS FINANCIAL CORPORATION
DATED AS OF MARCH 10, 1997
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1. The Merger . . . . . . . . . . . . . . . . . . . . 2
1.2. Effective Time . . . . . . . . . . . . . . . . . . 2
1.3. Effects of the Merger . . . . . . . . . . . . . . . 2
1.4. Conversion of Company Common Stock . . . . . . . . 2
1.5. Stock Options . . . . . . . . . . . . . . . . . . . 4
1.6. Buyer Common Stock . . . . . . . . . . . . . . . . 5
1.7. Articles of Incorporation . . . . . . . . . . . . . 6
1.8. By-Laws . . . . . . . . . . . . . . . . . . . . . . 6
1.9. Directors and Officers . . . . . . . . . . . . . . 6
1.10. Tax Consequences. . . . . . . . . . . . . . . . . . 6
ARTICLE II
EXCHANGE OF SHARES
2.1. Buyer to Make Shares Available . . . . . . . . . . 7
2.2. Exchange of Shares . . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Corporate Organization . . . . . . . . . . . . . . 10
3.2. Capitalization . . . . . . . . . . . . . . . . . . 12
3.3. Authority; No Violation . . . . . . . . . . . . . . 14
3.4. Consents and Approvals . . . . . . . . . . . . . . 16
3.5. Regulatory Reports; Examinations . . . . . . . . . 17
3.6. Financial Statements . . . . . . . . . . . . . . . 18
3.7. Broker's Fees . . . . . . . . . . . . . . . . . . . 19
3.8. Absence of Certain Changes or Events . . . . . . . 19
3.9. Legal Proceedings . . . . . . . . . . . . . . . . . 20
3.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . 21
3.11. Employees . . . . . . . . . . . . . . . . . . . . . 23
3.12. SEC Reports . . . . . . . . . . . . . . . . . . . . 25
3.13. Company Information . . . . . . . . . . . . . . . . 26
3.14. Compliance with Applicable Law . . . . . . . . . . 26
3.15. Certain Contracts . . . . . . . . . . . . . . . . 26
3.16. Agreements with Regulatory Agencies . . . . . . . . 28
3.17. Investment Securities . . . . . . . . . . . . . . . 28
3.18. Takeover Provisions . . . . . . . . . . . . . . . . 28
3.19. Environmental Matters . . . . . . . . . . . . . . . 29
3.20. Opinion . . . . . . . . . . . . . . . . . . . . . . 30
3.21. Loan Portfolio. . . . . . . . . . . . . . . . . . . 31
3.22. Accounting for the Merger; Reorganization . . . . . 32
3.23. Property. . . . . . . . . . . . . . . . . . . . . . 32
3.24. Approvals . . . . . . . . . . . . . . . . . . . . . 33
3.25. Equity and Real Estate Investments. . . . . . . . . 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1. Corporate Organization . . . . . . . . . . . . . . 33
4.2. Capitalization . . . . . . . . . . . . . . . . . . 35
4.3. Authority; No Violation . . . . . . . . . . . . . . 36
4.4. Consents and Approvals . . . . . . . . . . . . . . 38
4.5. Financial Statements . . . . . . . . . . . . . . . 39
4.6. Broker's Fees . . . . . . . . . . . . . . . . . . . 40
4.7. Absence of Certain Changes or Events . . . . . . . 40
4.8. Legal Proceedings . . . . . . . . . . . . . . . . . 41
4.9. Compliance with Applicable Law . . . . . . . . . . 41
4.10. SEC Reports . . . . . . . . . . . . . . . . . . . . 42
4.11. Buyer Information . . . . . . . . . . . . . . . . . 42
4.12. Ownership of Company Common Stock . . . . . . . . . 43
4.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . 43
4.14. Employees . . . . . . . . . . . . . . . . . . . . . 44
4.15. Agreements with Regulatory Agencies . . . . . . . . 45
4.16. Regulatory Reports; Examinations. . . . . . . . . . 45
4.17. Environmental Matters . . . . . . . . . . . . . . . 46
4.18. Accounting for the Merger; Reorganization . . . . . 47
4.19. Loan Portfolio. . . . . . . . . . . . . . . . . . . 47
4.20. Opinion . . . . . . . . . . . . . . . . . . . . . . 49
4.21. Approvals . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. Covenants of the Company . . . . . . . . . . . . . 49
5.2. Covenants of Buyer . . . . . . . . . . . . . . . . 54
ARTICLE VI
ADDITIONAL AGREEMENTS
6.l. Regulatory Matters . . . . . . . . . . . . . . . . 56
6.2. Access to Information . . . . . . . . . . . . . . . 57
6.3. Shareholder Meetings . . . . . . . . . . . . . . . 59
6.4. Legal Conditions to Merger . . . . . . . . . . . . 59
6.5. Affiliates; Publication of Combined Financial
Results . . . . . . . . . . . . . . . . . . . . . . 60
6.6. NASDAQ Approval . . . . . . . . . . . . . . . . . . 60
6.7. Employee Benefit Plans; Existing Agreements;
Employment and Consulting Agreements . . . . . . . 61
6.8. Indemnification . . . . . . . . . . . . . . . . . . 64
6.9. Subsequent Interim Financial Statements . . . . . . 67
6.10. Additional Agreements . . . . . . . . . . . . . . . 67
6.11. Advice of Changes . . . . . . . . . . . . . . . . . 68
6.12. Current Information . . . . . . . . . . . . . . . . 68
6.13. Directorships . . . . . . . . . . . . . . . . . . . 69
6.14. Accountants' Letters. . . . . . . . . . . . . . . . 69
6.15. Execution and Authorization of Bank Merger
Agreement . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation To Effect
the Merger . . . . . . . . . . . . . . . . . . . . 70
7.2. Conditions to Obligations of Buyer . . . . . . . . 72
7.3. Conditions to Obligations of the Company . . . . . 75
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1. Termination . . . . . . . . . . . . . . . . . . . . 77
8.2. Effect of Termination; Expenses . . . . . . . . . . 80
8.3. Amendment . . . . . . . . . . . . . . . . . . . . . 80
8.4. Extension; Waiver . . . . . . . . . . . . . . . . . 81
ARTICLE IX
GENERAL PROVISIONS
9.1. Closing . . . . . . . . . . . . . . . . . . . . . . 81
9.2. Nonsurvival of Representations . . . . . . . . . . 82
9.3. Expenses . . . . . . . . . . . . . . . . . . . . . 82
9.4. Notices . . . . . . . . . . . . . . . . . . . . . . 82
9.5. Interpretation . . . . . . . . . . . . . . . . . . 83
9.6. Counterparts . . . . . . . . . . . . . . . . . . . 84
9.7. Entire Agreement . . . . . . . . . . . . . . . . . 84
9.8. Governing Law . . . . . . . . . . . . . . . . . . . 84
9.9. Enforcement of Agreement . . . . . . . . . . . . . 84
9.10. Severability. . . . . . . . . . . . . . . . . . . . 84
9.11. Publicity . . . . . . . . . . . . . . . . . . . . . 85
9.12. Assignment; No Third Party Beneficiaries. . . . . . 85
EXHIBIT LIST
Exhibit 3.2 - Option Agreement
Exhibit 6.7(e)(i) - Employment Agreement
Exhibit 6.7(e)(ii) - Change in Control Agreement
Exhibit 6.7(e)(iii) - Consulting Agreement
Exhibit 6.15 - Bank Merger Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 10, 1997, by
and between Provident Bankshares Corporation, a Maryland
corporation ("Buyer"), and First Citizens Financial Corporation,
a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Buyer and the Company
have determined that it is in the best interests of their
respective companies and their shareholders to consummate the
business combination transaction provided for herein in which the
Company will, subject to the terms and conditions set forth
herein, merge (the "Merger") with and into Buyer ; and
WHEREAS, as soon as practicable after the execution and
delivery of this Agreement, it is contemplated that Provident
Bank of Maryland, a Maryland-chartered commercial bank and a
wholly owned subsidiary of Buyer ("Buyer Bank", and sometimes
referred to herein as the "Surviving Bank"), and Citizens Savings
Bank, F.S.B., a federally chartered savings bank and a wholly
owned subsidiary of the Company (the "Bank"), will enter into a
Subsidiary Agreement and Plan of Merger (the "Bank Merger
Agreement") providing for the merger (the "Subsidiary Merger") of
the Bank with and into Buyer Bank, and it is intended that the
Subsidiary Merger be consummated immediately following
consummation of the Merger; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also
to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and
intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of
this Agreement, in accordance with the Maryland General Corporate
Law (the "MGCL"), at the Effective Time (as defined in Section
1.2 hereof), the Company shall merge with and into the Buyer.
The Buyer shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger, and
shall continue its corporate existence under the laws of the
State of Maryland. The name of the surviving corporation shall
continue to be Provident Bankshares Corporation. Upon
consummation of the Merger, the separate corporate existence of
the Company shall terminate.
1.2. Effective Time. The Merger shall become effective
at the date and time set forth in the articles of merger (the
"Articles of Merger") which shall be filed with the Department of
Assessment and Taxation of the State of Maryland (the
"Department") on the Closing Date (as defined in Section 9.1
hereof). The term "Effective Time" shall be the date and time
when the Merger becomes effective, as set forth in the Articles
of Merger.
1.3. Effects of the Merger. At and after the Effective
Time, the Merger shall have the effects set forth in Section
3-114 of the MGCL.
1.4. Conversion of Company Common Stock.
(a) At the Effective Time, subject to Sections 2.2(e)
and 8.1(g) hereof and the last sentence of this Section 1.4(a),
each share of the common stock, par value $.01 per share, of the
Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of
Company Common Stock held (1) in the Company's treasury or (2)
directly or indirectly by Buyer or the Company or any of their
respective Subsidiaries (as defined in Section 3.1(a)) which are
not Trust Account Shares or DPC shares (as such terms are defined
in Section 1.4(b) hereof)) shall, by virtue of this Agreement and
without any action on the part of the holder thereof, be
converted into and exchangeable for .73 shares (the "Exchange
Ratio") of the common stock, par value $1.00 per share, of Buyer
("Buyer Common Stock") (together with the number of Buyer Rights
(as defined in Section 4.2 hereof) associated therewith). All of
the shares of Company Common Stock converted into Buyer Common
Stock pursuant to this Article I shall no longer be outstanding
and shall automatically be cancelled and shall cease to exist,
and each certificate (each a "Certificate") previously
representing any such shares of Company Common Stock shall
thereafter only represent the right to receive (i) the number of
whole shares of Buyer Common Stock and (ii) the cash in lieu of
fractional shares into which the shares of Company Common Stock
represented by such Certificate have been converted pursuant to
this Section 1.4(a) and Section 2.2(e) hereof. Certificates
previously representing shares of Company Common Stock shall be
exchanged for certificates representing whole shares of Buyer
Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in
accordance with Section 2.2 hereof, without any interest thereon.
If, between the date hereof and the Effective Time, the shares of
Buyer Common Stock shall be changed into a different number or
class of shares by reason of any reclassification,
recapitalization, splitup, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with
a record date within said period, the Exchange Ratio shall be
appropriately adjusted.
(b) At the Effective Time, all shares of Company
Common Stock that are owned by the Company as treasury stock and
all shares of Company Common Stock that are owned directly or
indirectly by Buyer or the Company or any of their respective
Subsidiaries (other than shares of Company Common Stock (x) held
directly or indirectly in trust accounts, managed accounts and
the like or otherwise held in a fiduciary capacity that are
beneficially owned by third parties (any such shares, and shares
of Buyer Common Stock which are similarly held, whether held
directly or indirectly by Buyer or the Company, as the case may
be, being referred to herein as "Trust Account Shares") and (y)
held by Buyer or the Company or any of their respective
Subsidiaries in respect of a debt previously contracted (any such
shares of Company Common Stock, and shares of Buyer Common Stock
which are similarly held, whether held directly or indirectly by
Buyer or the Company, being referred to herein as "DPC Shares"))
shall be cancelled and shall cease to exist and no stock of Buyer
or other consideration shall be delivered in exchange therefor.
All shares of Buyer Common Stock that are owned by the Company or
any of its Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become treasury stock of Buyer.
1.5. Stock Options. (a) At the Effective Time, each option
granted by the Company (a "Company Option") to purchase shares of
Company Common Stock which is outstanding and unexercised
immediately prior thereto shall be converted automatically into
an option to purchase shares of Buyer Common Stock in an amount
and at an exercise price determined as provided below (and
otherwise subject to the terms of the Company's Director's Stock
Option Plan, the 1986 Stock Option Plan and the Employee Stock
Option Plan (collectively, the "Company Option Plans")):
(1) The number of shares of Buyer Common Stock to be
subject to the new option shall be equal to the product of the
number of shares of Company Common Stock subject to the original
option and the Exchange Ratio, provided that any fractional share
of Buyer Common Stock resulting from such multiplication shall be
rounded down to the nearest share; and
(2) The exercise price per share of Buyer Common Stock
under the new option shall be equal to the exercise price per
share of Company Common Stock under the original option divided
by the Exchange Ratio, provided that such exercise price shall be
rounded up to the nearest cent.
The adjustment 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
and is intended to be effected in a manner which is consistent
with Section 424(a) of the Code. The duration and other terms of
the new option shall be the same as the original option, except
that all references to the Company shall be deemed to be
references to Buyer.
(b) Prior to the Effective Time, Buyer shall reserve
for issuance, the number of shares of Buyer Common Stock
necessary to satisfy Buyer's obligations under this Section 1.5.
Within thirty days after the Effective Time, Buyer shall file
with the Securities and Exchange Commission (the "SEC") a
registration statement on an appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Buyer Common Stock subject to options to
acquire Buyer Common Stock issued pursuant to Section 1.5(a)
hereof, and shall use its reasonable best efforts to maintain the
current status of the prospectus contained therein, as well as
comply with applicable state securities or "blue sky" laws, for
so long as such options remain outstanding.
1.6. Buyer Common Stock. Except for shares of Buyer
Common Stock owned by the Company or any of its Subsidiaries
(other than Trust Account Shares and DPC Shares), which shall be
converted into treasury stock of Buyer as contemplated by Section
1.4 hereof, the shares of Buyer Common Stock outstanding
immediately prior to the Effective Time shall be unaffected by
the Merger and at the Effective Time, such shares shall remain
issued and outstanding.
1.7. Articles of Incorporation. At the Effective Time,
the Articles of Incorporation of the Buyer, as in effect at the
Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation.
1.8. By-Laws. At the Effective Time, the By-Laws of the
Buyer , as in effect immediately prior to the Effective Time,
shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with applicable law.
1.9. Directors and Officers. Except as provided in Section
6.13 hereof, the directors and officers of the Buyer immediately
prior to the Effective Time shall be the directors and officers
of the Surviving Corporation, each to hold office in accordance
with the Articles of Incorporation and By-Laws of the Surviving
Corporation until their respective successors are duly elected or
appointed and qualified.
1.10. Tax Consequences. It is intended that the Merger
constitutes a reorganization within the meaning of Section 368(a)
of the Code, and that this Agreement shall constitute a "plan of
reorganization" for purposes of Section 368 of the Code.
ARTICLE II
EXCHANGE OF SHARES
2.1. Buyer to Make Shares Available. At or prior to the
Effective Time, Buyer shall deposit, or shall cause to be
deposited, with a bank or trust company (which may be a
Subsidiary of Buyer) (the "Exchange Agent") selected by Buyer and
reasonably satisfactory to the Company, for the benefit of the
holders of Certificates, for exchange in accordance with this
Article II, certificates representing the shares of Buyer Common
Stock and the cash in lieu of fractional shares (such cash and
certificates for shares of Buyer Common Stock, together with any
dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in
exchange for outstanding shares of Company Common Stock.
2.2. Exchange of Shares. (a) As soon as practicable after
the Effective Time, and in no event more than three business days
thereafter, the Exchange Agent shall mail to each holder of
record of a Certificate or Certificates a form letter of
transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the shares
of Buyer Common Stock and the cash in lieu of fractional shares
into which the shares of Company Common Stock represented by such
Certificate or Certificates shall have been converted pursuant to
this Agreement. The Company shall have the right to review both
the letter of transmittal and the instructions. Upon surrender
of a Certificate for exchange and cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of
whole shares of Buyer Common Stock to which such holder of
Company Common Stock shall have become entitled pursuant to the
provisions of Article I hereof and (y) a check representing the
amount of cash in lieu of fractional share, if any, which such
holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Article II, and
the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on the cash in lieu of
fractional shares and unpaid dividends and distributions, if any,
payable to holders of Certificates.
(b) No dividends or other distributions declared after
the Effective Time with respect to Buyer Common Stock and payable
to the holders of record thereof shall be paid to the holder of
any unsurrendered Certificate until the holder thereof shall
surrender such Certificate in accordance with this Article II.
After the surrender of a Certificate in accordance with this
Article II, the record holder thereof shall be entitled to
receive any such dividends or other distributions, without any
interest thereon which theretofore had become payable with
respect to the shares of Buyer Common Stock represented by such
Certificate.
(c) If any certificate representing shares of Buyer
Common Stock is to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered,
it shall be a condition of the issuance thereof that the
Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and
otherwise in proper form for transfer, and that the person
requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of Buyer Common
Stock in any name other than that of the registered holder of the
Certificate surrendered, or required for any other reason, or
shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the
shares of Company Common Stock which were issued and outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be cancelled and
exchanged for certificates representing shares of Buyer Common
Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained
herein, no certificates or scrip representing fractional shares
of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with
respect to Buyer Common Stock shall be payable on or with respect
to any fractional share, and such fractional share interests
shall not entitle the owner thereof to vote or to any other
rights of a shareholder of Buyer. In lieu of the issuance of any
such fractional share, Buyer shall pay to each former stockholder
of the Company who otherwise would be entitled to receive a
fractional share of Buyer Common Stock an amount in cash
determined by multiplying (i) the average of the closing sales
prices of Buyer Common Stock on the Nasdaq National Market
("NASDAQ") as reported by The Wall Street Journal (or, if not
reported thereby, another authoritative source) for the five
consecutive trading days immediately preceding the date on which
the Effective Time shall occur by (ii) the fraction of a share of
Buyer Common Stock to which such holder would otherwise be
entitled to receive pursuant to Section 1.4 hereof.
(f) Any portion of the Exchange Fund that remains
unclaimed by the stockholders of the Company for twelve months
after the Effective Time shall be paid to Buyer. Any
stockholders of the Company who have not theretofore complied
with this Article II shall thereafter look only to Buyer for
payment of their shares of Buyer Common Stock, cash in lieu of
fractional shares and unpaid dividends and distributions on the
Buyer Common Stock deliverable in respect of each share of
Company Common Stock such stockholder holds as determined
pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Buyer, the
Company, the Exchange Agent or any other person shall be liable
to any former holder of shares of Company Common Stock for any
amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by Buyer, the posting by such person
of a bond in such amount as Buyer may direct as indemnity against
any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the shares of Buyer Common
Stock and cash in lieu of fractional shares deliverable in
respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer as follows:
3.1. Corporate Organization. (a) The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has the
corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business
in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect
(as defined below) on the Company. The Company is duly
registered as a savings and loan holding company under the Home
Owners' Loan Act of 1933, as amended. The Certificate of
Incorporation and Amended Bylaws of the Company, copies of which
have previously been delivered to Buyer, are true, complete and
correct copies of such documents as in effect as of the date of
this Agreement. As used in this Agreement, the term "Material
Adverse Effect" means, with respect to Buyer or the Company, as
the case may be, any effect that (i) is material and adverse to
the business, results of operations or financial condition of
Buyer and its Subsidiaries taken as a whole or the Company and
its Subsidiaries taken as a whole, respectively, or (ii)
materially impairs the ability of the Company or the Buyer to
consummate the transactions contemplated hereby; provided,
however, that Material Adverse Effect shall not be deemed to
include the impact of (a) changes in laws and regulations or
interpretations thereof that are generally applicable to the
banking or savings and loan industries, (b) changes in generally
accepted accounting principles or regulatory accounting
principles that are generally applicable to the banking or
savings and loan industries, (c) expenses incurred in connection
with the transactions contemplated hereby and (d) changes
attributable to or resulting from changes in general economic
conditions, including changes in the prevailing level of interest
rates. As used in this Agreement, the word "Subsidiary" when
used with respect to any party means any corporation, partnership
or other organization, whether incorporated or unincorporated,
which is consolidated with such party for financial reporting
purposes.
(b) The Bank is a stock savings bank duly organized,
validly existing and in good standing under the laws of the
United States. The Bank is the only Subsidiary of the Company
that is a "Significant Subsidiary" as such term is defined in
Regulation S-X promulgated by the SEC. The deposits of the Bank
are insured by the Federal Deposit Insurance Corporation (the
"FDIC") through the Savings Association Insurance Fund to the
fullest extent permitted by law, and all premiums and assessments
required to be paid in connection therewith have been paid when
due by the Bank. Each of the Company's other Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or
organization. Each of the Company's Subsidiaries has the
corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now
being conducted and is duly licensed or qualified to do business
in each jurisdiction in which the nature of the business
conducted by it or the character or the location of the
properties and assets owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on
the Company. The charter and bylaws of the Subsidiaries of the
Company, copies of which have previously been made available to
Buyer, are true, complete and correct copies of such documents as
in effect as of the date of this Agreement.
(c) The minute books of the Company and each of its
Subsidiaries contain true, complete and accurate records in all
material respects of all meetings and other corporate actions
held or taken since December 31, 1993 of their respective
stockholders and Boards of Directors (including committees of
their respective Boards of Directors).
3.2. Capitalization. (a) The authorized capital stock of
the Company consists of 8,000,000 shares of Company Common Stock
and 2,000,000 shares of preferred stock, par value $.01 per share
(the "Company Preferred Stock"). As of the date of this
Agreement, there are (x) 2,943,320 shares of Company Common Stock
issued and outstanding and no shares of Company Common Stock held
in the Company's treasury, (y) no shares of Company Common Stock
reserved for issuance upon exercise of outstanding stock options
except for (i) 639,126 shares of Company Common Stock reserved for
issuance pursuant to the Company Option Plans and (ii) 291,388
shares of Company Common Stock reserved for issuance upon exercise
of the option issued to Buyer pursuant to the Stock Option
Agreement, dated March 10, 1997, between Buyer and the Company
(the "Option Agreement"), and (z) no shares of Company Preferred
Stock issued or outstanding, held in the Company's treasury or
reserved for issuance upon exercise of outstanding stock options
or otherwise. All of the issued and outstanding shares of Company
Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. Except as
referred to above or reflected in Section 3.2(a) of the Disclosure
Schedule which is being delivered to Buyer concurrently herewith
(the "Company Disclosure Schedule"), the Company does not have
and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character
calling for the purchase or issuance of any shares of Company
Common Stock, Company Preferred Stock or any other equity
security of the Company or any securities representing the right
to purchase or otherwise receive any shares of Company Common
Stock, Company Preferred Stock or any other equity security of
the Company. The names of the optionees, the date of each option
to purchase Company Common Stock granted, the number of shares
subject to each such option, the expiration date of each such
option, and the price at which each such option may be exercised
under the Company Option Plans are set forth in Section 3.2(a) of
the Company Disclosure Schedule.
(b) Section 3.2(b) of the Company Disclosure Schedule
sets forth a true and correct list of all of the Subsidiaries of
the Company as of the date of this Agreement. Except as set
forth in Section 3.2(b) of the Company Disclosure Schedule, the
Company owns, directly or indirectly, all of the issued and
outstanding shares of the capital stock of each of such
Subsidiaries, free and clear of all liens, charges, encumbrances
and security interests whatsoever, and all of such shares are
duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No Subsidiary of
the Company has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of
capital stock or any other equity security of such Subsidiary or
any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security
of such Subsidiary. Assuming compliance by Buyer with Section
1.5 hereof, at the Effective Time, there will not be any
outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character by which the Company or any of its
Subsidiaries will be bound calling for the purchase or issuance
of any shares of the capital stock of the Company or any of its
Subsidiaries.
3.3. Authority; No Violation. (a) The Company has full
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of the Company. The
Board of Directors of the Company has directed that this
Agreement and the transactions contemplated hereby be submitted
to the Company's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by
the requisite vote of the Company's stockholders, no other
corporate proceedings on the part of the Company are necessary to
approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and (assuming due
authorization, execution and delivery by Buyer) constitutes a
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as enforcement
may be limited by general principles of equity whether applied in
a court of law or a court of equity and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies
generally.
(b) The Bank has full corporate power and authority to
execute and deliver the Bank Merger Agreement and to consummate
the transactions contemplated thereby. The execution and
delivery of the Bank Merger Agreement and the consummation of the
transactions contemplated thereby will be duly and validly
approved by the Board of Directors of the Bank. Upon the due and
valid approval of the Bank Merger Agreement by the Company as the
sole stockholder of the Bank and by the Board of Directors of the
Bank, no other corporate proceedings on the part of the Bank will
be necessary to consummate the transactions contemplated thereby.
The Bank Merger Agreement, upon execution and delivery by the
Bank, will be duly and validly executed and delivered by the Bank
and (assuming due authorization, execution and delivery by Buyer
Bank) will constitute a valid and binding obligation of the Bank,
enforceable against the Bank in accordance with its terms, except
as enforcement may be limited by laws affecting insured
depository institutions, general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and
remedies generally.
(c) Except as set forth in Section 3.3(c) of the
Company Disclosure Schedule, neither the execution and delivery
of this Agreement and the Option Agreement by the Company or the
Bank Merger Agreement by the Bank, nor the consummation by the
Company or the Bank, as the case may be, of the transactions
contemplated hereby or thereby, nor compliance by the Company or
the Bank with any of the terms or provisions hereof or thereof,
will (i) violate any provision of the Certificate of
Incorporation or Amended By-Laws of the Company or the charter,
bylaws or similar governing documents of any of its Subsidiaries,
or (ii) assuming that the consents and approvals referred to in
Section 3.4 hereof are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to the Company or any of its
Subsidiaries, or any of their respective properties or assets, or
(y) violate, conflict with, result in a breach of any provision
of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a
right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any
of the respective properties or assets of the Company or any of
its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is a party, or by
which they or any of their respective properties or assets may be
bound or affected, except (in the case of clause (y) above) for
such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, would not have or be reasonably
likely to have a Material Adverse Effect on the Company.
3.4. Consents and Approvals. Except for (a) the filing of
applications or notices, as applicable, with the Board of
Governors of the Federal Reserve System (the "Federal Reserve
Board") under the Bank Holding Company Act of 1956, as amended
(the "BHC Act") and approval of such applications or notices, (b)
the filing of an application with the FDIC under the Bank Merger
Act and approval of such application, (c) the filing of
applications or notices, as applicable, with the Office of Thrift
Supervision (the "OTS") and the approval of such applications or
notices, (d) the filing of applications or notices, as
applicable, with the Commissioner of Financial Regulation of the
State of Maryland (the "Commissioner") and approval of such
applications or notices, (e) the filing with the SEC of a joint
proxy statement in definitive form relating to the meetings of
the Company's stockholders and Buyer's stockholders to be held in
connection with this Agreement and the transactions contemplated
hereby (the "Proxy Statement"), (f) the approval of this
Agreement by the requisite vote of the stockholders of the
Company, (g) the filing of the Articles of Merger with the
Department pursuant to the MGCL, (h) the filings required by the
Bank Merger Agreement, (i) the approval of the Bank Merger
Agreement by the Company as the sole stockholder of the Bank, and
(j) such filings, authorizations or approvals as may be set forth
in Section 3.4 of the Company Disclosure Schedule, no consents or
approvals of or filings or registrations with any court,
administrative agency or commission or other governmental
authority or instrumentality or self-regulatory organization, as
defined in Section 3(a)(26) of the Exchange Act (each a
"Governmental Entity"), or with any third party are necessary on
behalf of the Company in connection with (1) the execution and
delivery by the Company of this Agreement, (2) the consummation
by the Company of the Merger and the other transactions
contemplated hereby, (3) the execution and delivery by the Bank
of the Bank Merger Agreement, and (4) the consummation by the
Bank of the Subsidiary Merger.
3.5. Regulatory Reports; Examinations. The Company and
each of its Subsidiaries have timely filed all material reports,
registrations and statements, together with any amendments
required to be made with respect thereto, that they were required
to file since December 31, 1993 with any Governmental Entity and
have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a
Governmental Entity in the regular course of the business of the
Company and its Subsidiaries and except as set forth in Section
3.5 of the Company Disclosure Schedule, no Governmental Entity
has initiated any proceeding or, to the best knowledge of the
Company, investigation into the business or operations of the
Company or any of its Subsidiaries since December 31, 1993.
There is no unresolved material violation, criticism, or
exception by any Governmental Entity with respect to any report
or statement relating to any examinations of the Company or any
of its Subsidiaries.
3.6. Financial Statements. The Company has previously
delivered to Buyer copies of (a) the consolidated statement of
financial condition of the Company and its Subsidiaries as of
December 31, 1995, and the related consolidated statements of
income, stockholders' equity and cash flows for the fiscal year
then ended, as reported in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 (the "1995 10-
K") filed with the SEC under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), accompanied by the audit report
of Arthur Andersen LLP, independent public accountants with
respect to the Company, (b) the consolidated statement of
financial condition of the Company and its Subsidiaries as of
December 31, 1994, and the related consolidated statements of
income, stockholders' equity and cash flows for the fiscal years
1993 and 1994, as reported in the 1995 10-K, accompanied by the
audit report of KPMG Peat Marwick LLP, and (c) the unaudited
consolidated statements of financial condition of the Company and
its Subsidiaries as of September 30, 1995 and September 30, 1996
and the related unaudited consolidated statements of income, cash
flows and stockholders' equity for the nine month periods then
ended as reported in the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1996 filed with the SEC
pursuant to the Exchange Act. The December 31, 1995 consolidated
statement of financial condition of the Company (including the
related notes, where applicable) fairly presents the consolidated
financial position of the Company and its Subsidiaries as of the
date thereof, and the other financial statements referred to in
this Section 3.6 (including the related notes, where applicable)
fairly present, and the financial statements referred to in
Section 6.9 hereof will fairly present (subject, in the case of
the unaudited statements, to recurring audit adjustments normal
in nature and amount), the results of the consolidated operations
and consolidated financial position of the Company and its
Subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth; each of such statements
(including the related notes, where applicable) comply, and the
financial statements referred to in Section 6.9 hereof will
comply, in all material respects with applicable accounting
requirements and with the published rules and regulations of the
SEC with respect thereto; and each of such statements (including
the related notes, where applicable) has been, and the financial
statements referred to in Section 6.9 hereof will be, prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q. The books and records of
the Company and its Subsidiaries have been, and are being,
maintained in all material respects in accordance with GAAP and
any other applicable legal and accounting requirements and
reflect only actual transactions.
3.7. Broker's Fees. Neither the Company nor any Subsidiary
of the Company nor any of their respective officers or directors
has employed any broker or finder or incurred any liability for
any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement, the
Option Agreement or the Bank Merger Agreement, except that the
Company has engaged, and will pay a fee or commission to,
Endicott Financial Advisors L.L.C. ("Endicott") in accordance
with the terms of a letter agreement between the Company and
Endicott, a true, complete and correct copy of which has
previously been delivered by the Company to Buyer.
3.8. Absence of Certain Changes or Events. (a) Except as
may be set forth in Section 3.8(a) of the Company Disclosure
Schedule, (i) since September 30, 1996, neither the Company nor
any of its Subsidiaries has incurred any material liability,
except in the ordinary course of their business consistent with
their past practices (excluding the incurrence of expenses in
connection with this Agreement and the transactions contemplated
hereby), (ii) since September 30, 1996, no event has occurred
which has caused or would reasonably be expected to cause,
individually or in the aggregate, a Material Adverse Effect on
the Company, and (iii) for the period from September 30, 1996 to
the date of this Agreement, the Company and its Subsidiaries have
carried on their respective businesses in the ordinary course
consistent with their past practices (excluding the execution of
this Agreement and related matters).
(b) Except as set forth in Section 3.8(b) of the
Company Disclosure Schedule, since September 30, 1996, neither
the Company nor any of its Subsidiaries has (i) increased the
wages, salaries, compensation, pension, or other fringe benefits
or perquisites payable to any executive officer, employee, or
director from the amount thereof in effect as of September 30,
1996 (which amounts have been previously disclosed to Buyer),
granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or
paid any bonus other than year end bonuses for fiscal 1996 as
listed in Section 3.8 of the Company Disclosure Schedule, (ii)
suffered any strike, work stoppage, slowdown or other labor
disturbance, (iii) been a party to a collective bargaining
agreement, contract or other agreement or understanding with a
labor union or organization, or (iv) had any union organizing
activities.
3.9. Legal Proceedings. (a) Except as set forth in Section
3.9 of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries is a party to any, and there are no
pending or, to the best of the Company's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any
nature against the Company or any of its Subsidiaries or
challenging the validity or propriety of the transactions
contemplated by this Agreement or the Bank Merger Agreement as to
which there is a reasonable probability of an adverse
determination and which, if adversely determined, would,
individually or in the aggregate, have or would be reasonably
expected to have a Material Adverse Effect on the Company.
(b) There is no injunction, order, judgment, decree or
regulatory restriction imposed upon the Company, any of its
Subsidiaries or the assets of the Company or any of its
Subsidiaries which has had, or could reasonably be expected to
have, a Material Adverse Effect on the Company.
3.10. Taxes. (a) Except as set forth in Section 3.10
of the Company Disclosure Schedule, each of the Company and its
Subsidiaries has (i) duly and timely filed (including applicable
extensions granted without penalty) all material Tax Returns (as
hereinafter defined) required to be filed at or prior to the
Effective Time, and such Tax Returns are true, correct and
complete in all material respects, and (ii) paid in full or made
adequate provision in the financial statements of the Company (in
accordance with GAAP) for all material Taxes (as hereinafter
defined). No deficiencies for any Taxes have been proposed,
asserted or assessed against or with respect to the Company or
any of its Subsidiaries. Except as set forth in Section 3.10 of
the Company Disclosure Schedule, (i) there are no liens for Taxes
upon the assets of either the Company or its Subsidiaries except
for statutory liens for current Taxes not yet due, (ii) neither
the Company nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect
of any fiscal year which have not since been filed and no request
for waivers of the time to assess any Taxes are pending or
outstanding, (iii) with respect to each taxable period of the
Company and its Subsidiaries, the federal and state income Tax
Returns of the Company and its Subsidiaries have been audited by
the Internal Revenue Service or appropriate state tax authorities
or the time for assessing and collecting income Tax with respect
to such taxable period has closed and such taxable period is not
subject to review, (iv) neither the Company nor any of its
Subsidiaries has filed or been included in a combined,
consolidated or unitary income Tax Return other than one in which
the Company was the parent of the group filing such Tax Return,
(v) neither the Company nor any of its Subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes
(other than the allocation of federal income taxes as provided by
Regulation 1.1552-l(a)(1) under the Code), (vi) neither the
Company nor any of its Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code (or
any similar or corresponding provision or requirement of state,
local or foreign income Tax law), by reason of the voluntary
change in accounting method (nor has any taxing authority
proposed in writing any such adjustment or change of accounting
method), (vii) neither the Company nor any of its Subsidiaries
has filed a consent pursuant to Section 341(f) of the Code, and
(viii) neither the Company nor any of its Subsidiaries has made
any payment or will be obligated to make any payment in
connection with this transaction (by contract or otherwise) which
will not be deductible by reason of Section 280G of the Code.
(b) For purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies, penalties or other assessments
imposed by any United States federal, state, local or foreign
taxing authority, including, but not limited to income, excise,
property, sales, transfer, franchise, payroll, withholding,
social security or other taxes, including any interest, penalties
or additions attributable thereto.
(c) For purposes of this Agreement, "Tax Return" shall
mean any return, report, information return or other document
(including any related or supporting information) with respect to
Taxes.
3.11. Employees. (a) Section 3.11(a) of the Company
Disclosure Schedule sets forth a true and complete list of each
employee benefit plan, arrangement or agreement (including,
without limitation, each employment, severance and similar
agreement) that is maintained or contributed to or required to be
contributed to as of the date of this Agreement (the "Plans") by
the Company, any of its Subsidiaries or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), all of which
together with the Company would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), for the
benefit of any director, employee or former employee of the
Company, any Subsidiary or any ERISA Affiliate.
(b) The Company has heretofore delivered to Buyer true
and complete copies of each of the Plans and all related
documents, including but not limited to (i) the actuarial report
for such Plan (if applicable) for each of the last two years, and
(ii) the most recent determination letter from the Internal
Revenue Service (if applicable) for such Plan.
(c) Except as set forth in Section 3.11(c) of the
Company Disclosure Schedule, (i) each of the Plans has been
operated and administered in all material respects including with
respect to requirements of reporting and disclosure, in
accordance with its terms and applicable law, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to
be "qualified" within the meaning of Section 401(a) of the Code
either (1) has received a favorable determination letter from the
IRS, or (2) is or will be the subject of an application for a
favorable determination letter, and the Company is not aware of
any circumstances likely to result in the revocation or denial of
any such favorable determination letter nor is the Company aware
of any disqualifying defect which has been either voluntary
corrected or corrected under an administrative program sponsored
by the Internal Revenue Service, (iii) with respect to each Plan
which is subject to Title IV of ERISA, the present value of
accrued benefits under such Plan, based upon the actuarial
assumptions used for funding purposes in the most recent
actuarial report prepared by such Plan's actuary with respect to
such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including
without limitation death or medical benefits (whether or not
insured), with respect to current or former employees of the
Company, its Subsidiaries or any ERISA Affiliate beyond their
retirement or other termination of service, other than (w)
coverage mandated by applicable law, (x) death benefits or
retirement benefits under any "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (y) deferred
compensation benefits accrued as liabilities on the books of the
Company, its Subsidiaries or the ERISA Affiliates or (z) benefits
the full cost of which is borne by the current or former employee
(or his beneficiary), (v) no liability under Title IV of ERISA
has been incurred by the Company, its Subsidiaries or any ERISA
Affiliate that has not been satisfied in full, and no condition
exists that presents a risk to the Company, its Subsidiaries or
an ERISA Affiliate of incurring a liability thereunder, (vi) no
Plan is a "multiemployer pension plan," as such term is defined
in Section 3(37) of ERISA, (vii) all contributions or other
amounts payable by the Company, its Subsidiaries or any ERISA
Affiliates as of the Effective Time with respect to each Plan in
respect of current or prior plan years have been paid or accrued
in accordance with generally accepted accounting practices and
Section 412 of the Code and the Company is not aware of any
excise tax liability under Section 4972 of the Code, (viii)
neither the Company, its Subsidiaries nor any ERISA Affiliate has
engaged in a transaction in connection with which the Company,
its Subsidiaries or any ERISA Affiliate could be subject to
either a civil penalty assessed pursuant to Section 409 or 502
(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of
the Code, (ix) there are no pending, or, to the best knowledge of
the Company, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the Plans
or any trusts related thereto and (x) the consummation of the
transactions contemplated by this Agreement will not (y) entitle
any current or former employee or officer of the Company or any
ERISA Affiliate to severance pay, termination pay or any other
payment, except as expressly provided in this Agreement or (z)
accelerate the time of payment or vesting or increase the amount
of compensation due any such employee or officer.
3.12. SEC Reports. The Company has previously made
available to Buyer an accurate and complete copy of each (a)
final registration statement, prospectus, report, schedule and
definitive proxy statement filed since January 1, 1994 by the
Company with the SEC pursuant to the Securities Act or the
Exchange Act (the "Company Reports") and (b) communication mailed
by the Company to its stockholders since January 1, 1994, and no
such Company Report (including exhibits and amendments thereto)
or communication contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances in which they were made, not
misleading, except that information as of a later date shall be
deemed to modify information as of an earlier date. The Company
has timely filed all Company Reports and other documents required
to be filed by it pursuant to the Securities Act and the Exchange
Act, and, as of their respective dates, all Company Reports
complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
3.13. Company Information. The information relating to
the Company and its Subsidiaries to be contained or incorporated
by reference in the Proxy Statement and the registration
statement on Form S-4 (the "S-4") of which the Proxy Statement
will be included as a prospectus, or in any other document filed
with any other Governmental Entity in connection herewith, will
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein,
in light of the circumstances in which they are made, not
misleading.
3.14. Compliance with Applicable Law. The Company and
each of its Subsidiaries hold, and have at all times held, all
material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order,
rule, regulation, policy and/or guideline of any Governmental
Entity relating to the Company or any of its Subsidiaries, except
where the failure to hold such license, franchise, permit or
authorization or such noncompliance or default would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company, and neither the Company nor any of its
Subsidiaries knows of, or has received notice of, any material
violations of any of the above.
3.15. Certain Contracts. (a) Except as set forth in
Section 3.15(a) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, plan, commitment or understanding (whether
written or oral) (i) with respect to the employment of any
directors, officers, employees or consultants, (ii) which, upon
the consummation of the transactions contemplated by this
Agreement, will (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Buyer, the Company,
the Bank, the Surviving Corporation, the Surviving Bank, or any
of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a material contract (as defined in Item
601(b) (10) of Regulation S-K of the SEC) to be performed after
the date of this Agreement that has not been filed with or
incorporated by reference in the Company Reports, (iv) which is
an agreement, not otherwise described by clauses (i) through
(iii) hereof, involving the payment by the Company or any of its
Subsidiaries of more than $100,000 per annum, (v) which
materially restricts the conduct of any line of business of the
Company or any of its Subsidiaries, or (vi) under which any of
the benefits will be increased, or the vesting of the benefits
will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement (other than those
plans, agreements or arrangements set forth in Section 3.11(a) of
the Company Disclosure Schedule). Each contract, arrangement,
plan, commitment or understanding of the type described in this
Section 3.15(a), whether or not set forth in Section 3.15(a) of
the Company Disclosure Schedule, is referred to herein as a
"Company Contract"). The Company has made available to Buyer
true, complete and correct copies of each Company Contract and
any amendments or modifications thereof.
(b) Except as set forth in Section 3.15(b) of the
Company Disclosure Schedule, (i) each Company Contract is valid
and binding and in full force and effect, (ii) the Company and
each of its Subsidiaries have performed all obligations required
to be performed by it to date under each Company Contract, except
where such noncompliance, individually or in the aggregate, would
not have or be reasonably expected to have a Material Adverse
Effect on the Company, (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would
constitute, a default on the part of the Company or any of its
Subsidiaries under any such Company Contract, except where such
default, individually or in the aggregate, would not have or be
reasonably expected to have a Material Adverse Effect on the
Company and (iv) no other party to such Company Contract is, to
the best knowledge of the Company, in default in any respect
thereunder, except where such default, individually or in the
aggregate, would not have or be reasonably expected to have a
Material Adverse Effect on the Company.
3.16. Agreements with Regulatory Agencies. Except as
set forth in Section 3.16 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is subject to any
cease-and-desist or other order issued by, or is a party to any
written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive
by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any board resolutions at the request of
(each, whether or not set forth on Section 3.16 of the Company
Disclosure Schedule, a "Regulatory Agreement"), any Governmental
Entity that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its
management or its business, nor has the Company or any of its
Subsidiaries been advised by any Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.
3.17. Investment Securities. Section 3.17 of the
Company Disclosure Schedule sets forth the book and market value
as of December 31, 1996 of the investment securities, mortgage
backed securities and securities held for sale of the Company and
its Subsidiaries.
3.18. Takeover Provisions. The Board of Directors of
the Company has approved the transactions contemplated by this
Agreement, the Bank Merger Agreement and the Option Agreement
such that the provisions of Section 203 of the DGCL will not,
assuming the accuracy of the representations contained in Section
4.12 hereof, apply to this Agreement, the Bank Merger Agreement,
the Option Agreement or any of the transactions contemplated
hereby or thereby.
3.19. Environmental Matters. Except as set forth in
Section 3.19 of the Company Disclosure Schedule:
(a) To the best of the Company's knowledge, each of
the Company, its Subsidiaries, the Participation Facilities and
the Loan Properties (each as hereinafter defined) are, and have
been, in compliance with all applicable federal, state and local
laws including common law, regulations and ordinances and with
all applicable decrees, orders and contractual obligations
relating to pollution or the discharge of, or exposure to
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum or other regulated substances or materials
(collectively, "Hazardous Materials") in the environment or
workplace ("Environmental Laws"), except for violations which,
either individually or in the aggregate, have not had and cannot
reasonably be expected to have a Material Adverse Effect on the
Company.
(b) There is no suit, claim, action or proceeding,
pending or, to the best of the Company's knowledge, threatened,
before any Governmental Entity or other forum in which the
Company, any of its Subsidiaries, any Participation Facility or
any Loan Property, has been or, with respect to threatened
proceedings, may be, named as a defendant (x) for alleged
noncompliance (including by any predecessor), with any
Environmental Laws, or (y) relating to the release, threatened
release or exposure to Hazardous Material whether or not
occurring at or on a site owned, leased or operated by the
Company or any of its Subsidiaries, any Participation Facility or
any Loan Property, except where such noncompliance or release has
not had, and cannot be reasonably expected to result in, either
individually or in the aggregate, a Material Adverse Effect on
the Company;
(c) During the period and, to the best knowledge of
the Company, prior to the period of (x) the Company's or any of
its Subsidiaries' ownership or operation of any of their
respective current properties, (y) the Company's or any of its
Subsidiaries' participation in the management of any
Participation Facility, or (z) the Company's or any of its
Subsidiaries' holding of a security interest in a Loan Property,
there has been no release of Hazardous Materials in, on, under or
affecting any such property, except where such release has not
had and cannot reasonably be expected to result in, either
individually or in the aggregate, a Material Adverse Effect on
the Company; and
(d) The following definitions apply for purposes of
this Section 3.19: (x) "Loan Property" means any property in
which the Company or any of its Subsidiaries holds a security
interest, and, where required by the context, said term means the
owner or operator of such property; and (y) "Participation
Facility" means any facility in which the Company or any of its
Subsidiaries participates in the management and, where required
by the context, said term means the owner or operator of such
property.
3.20. Opinion. The Company has received a written
opinion from Endicott to the effect that, subject to the terms,
conditions and qualifications set forth therein, as of the date
thereof, the consideration to be received by the stockholders of
the Company pursuant to this Agreement is fair to such
stockholders from a financial point of view. Such opinion has
not been amended or rescinded as of the date of this Agreement.
3.21. Loan Portfolio. (a) Except as set forth in
Section 3.21 of the Company Disclosure Schedule, as of February
28, 1997, neither the Company nor any of its Subsidiaries is a
party to any written or oral (i) loan agreement, note or
borrowing arrangement (including, without limitation, leases,
credit enhancements, commitments and guarantees) (collectively,
"Loans"), other than Loans the unpaid principal balance of which
does not exceed $250,000, under the terms of which the obligor
is, as of the date of this Agreement, over 90 days delinquent in
payment of principal or interest or in default of any other
material provision, or (ii) Loan as of the date of this Agreement
with any director, executive officer or, to the best of the
Company's knowledge, greater than five percent stockholder of the
Company or any of its Subsidiaries, or to the best knowledge of
the Company, any person, corporation or enterprise controlling,
controlled by or under common control with any of the foregoing,
other than Loans the unpaid principal balance of which does not
exceed $150,000. Section 3.21 of the Company Disclosure Schedule
sets forth (i) all of the Loans in original principal amount in
excess of $250,000 of the Company or any of its Subsidiaries that
as of the date of this Agreement are classified by any bank
examiner (whether regulatory or internal) as "Other Loans
Specially Mentioned", "Special Mention" "Substandard",
"Doubtful", "Loss", "Classified", "Criticized", "Credit Risk
Assets", "Concerned Loans", "Watch List" or words of similar
import, together with the principal amount of and accrued and
unpaid interest on each such Loan and the identity of the
borrower thereunder, (ii) by category of Loan (i.e., commercial,
consumer, etc.), all of the other Loans of the Company and its
Subsidiaries that as of the date of this Agreement are classified
as such, together with the aggregate principal amount of and
accrued and unpaid interest on such Loans by category and (iii)
each asset of the Company that as of the date of this Agreement
is classified as "Other Real Estate Owned" and the book value
thereof.
(b) Each Loan in original principal amount in excess
of $100,000 (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and what they
purport to be, (ii) to the extent secured, has been secured by
valid liens and security interests which have been perfected and
(iii) is the legal, valid and binding obligation of the obligor
named therein, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditors'
rights and to general equity principles, in each case other than
Loans as to which the failure to satisfy the foregoing standards
would not have a Material Adverse Effect on the Company.
3.22. Accounting for the Merger; Reorganization. As of
the date hereof, the Company has no reason to believe that the
Merger will fail to qualify (i) for pooling-of-interests
accounting treatment under GAAP or (ii) as a reorganization under
Section 368(a) of the Code.
3.23. Property. Except as set forth on Section 3.23 of
the Company Disclosure Schedule, each of the Company and its
Subsidiaries has good and marketable title, and has provided the
Buyer with evidence of same, as of the date hereof, free and
clear of all liens, encumbrances, mortgages, pledges, charges,
defaults or equitable interests to all of the properties and
assets, real and personal, tangible or intangible, which,
individually or in the aggregate, are material, and which are
reflected on the balance sheet of the Company as of September 30,
1996 or acquired after such date, except (i) liens for taxes not
yet due and payable, (ii) pledges to secure deposits and other
liens incurred in the ordinary course of banking business, (iii)
such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent or (iv) for
dispositions and encumbrances of, or on, such properties or
assets for adequate consideration in the ordinary course of
business. All leases pursuant to which the Company or any
Subsidiary of the Company, as lessee, leases real or personal
property which, individually or in the aggregate, are material
and are valid and enforceable in accordance with their respective
terms, and the Company has provided to Buyer evidence of same as
of the date hereof, and neither the Company nor any of its
Subsidiaries nor, to the best knowledge of the Company, any other
party thereto is in default in any material respect thereunder.
3.24. Approvals. As of the date of this Agreement, the
Company knows of no reason why all regulatory approvals required
for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger and the Subsidiary
Merger) should not be obtained.
3.25. Equity and Real Estate Investments. Except as set
forth in Section 3.25 of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries has any (i) equity
investments other than investments in wholly owned Subsidiaries,
or (ii) investments in real estate, other than assets classified
as "other real estate owned", or real estate development
projects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company as
follows:
4.1. Corporate Organization. (a) Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Maryland. Buyer has the corporate power and
authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character
or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not have a Material
Adverse Effect on Buyer. Buyer is duly registered as a bank
holding company under the BHC Act. The Articles of Incorporation
and Bylaws of Buyer, copies of which have previously been
delivered to the Company, are true, complete and correct copies
of such documents as in effect as of the date of this Agreement.
(b) Buyer Bank is a commercial bank duly organized,
validly existing and in good standing under the laws of the State
of Maryland. Buyer Bank is the only Subsidiary of the Buyer that
is a "significant subsidiary" as such term is defined in
Regulation S-X promulgated by the SEC. The deposits of Buyer
Bank are insured by the FDIC through the Bank Insurance Fund to
the fullest extent permitted by law, and all premiums and
assessments required to be paid in connection therewith have been
paid when due by Buyer Bank. Each other Subsidiary of Buyer is
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each Subsidiary
of Buyer has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as
it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on
Buyer. The certificate of incorporation or bylaws of Buyer Bank
and each other subsidiary of Buyer, copies of which have been
previously delivered to the Company, are true, complete and
correct copies of such documents as in effect as of the date of
this Agreement.
(c) The minute books of Buyer and each of its
Subsidiaries contain true, complete and accurate records in all
material respects of all meetings and other corporate actions
held or taken since December 31, 1993 of their respective
stockholders and Boards of Directors (including committees of
their respective Boards of Directors).
4.2. Capitalization. (a) The authorized capital stock of
Buyer consists of 30,000,000 shares of Buyer Common Stock and
5,000,000 shares of preferred stock, par value $1.00 per share
("Buyer Preferred Stock"), of which no shares have been
designated as Class A Preferred Stock of Buyer (the "Class A
Preferred Stock"). As of the date of this Agreement, there were
8,589,678 shares of Buyer Common Stock and no shares of Buyer
Preferred Stock issued and outstanding and 228,666 shares of
Buyer Common Stock held in Buyer's treasury. As of the date of
this Agreement, no shares of Buyer Common Stock or Buyer
Preferred Stock were reserved for issuance, except that 1,148,926
shares of Buyer Common Stock were reserved for issuance pursuant
to the Buyer's dividend reinvestment plan, 1,430,953 shares of
Buyer Common Stock were reserved for issuance pursuant to the
Buyer's Amended and Restated Stock Option Plan (the "Buyer Stock
Plan") and no shares of Class A Preferred Stock were reserved for
issuance upon exercise of the rights (the "Buyer Rights")
distributed to holders of Buyer Common Stock pursuant to the
Stockholder Protection Rights Agreement, dated as of January 18,
1995, between Buyer and Buyer Bank, as Rights Agent (the "Buyer
Rights Agreement"). All of the issued and outstanding shares of
Buyer Common Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
The shares of Buyer Common Stock to be issued pursuant to the
Merger will be duly authorized and validly issued and, at the
Effective Time, all such shares will be fully paid, nonassessable
and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
(b) Section 4.2(b) of the Disclosure Schedule which is
being delivered by Buyer to the Company herewith (the "Buyer
Disclosure Schedule") sets forth a true and correct list of all
of the Subsidiaries of Buyer as of the date of this Agreement.
Except as set forth in Section 4.2(b) of the Buyer Disclosure
Schedule, Buyer owns, directly or indirectly, all of the issued
and outstanding shares of capital stock of each of the
Subsidiaries of Buyer, free and clear of all liens, charges,
encumbrances and security interests whatsoever, and all of such
shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No Subsidiary of
Buyer has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character with
any party that is not a direct or indirect Subsidiary of Buyer
calling for the purchase or issuance of any shares of capital
stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security
of such Subsidiary.
4.3. Authority; No Violation. (a) Buyer has full corporate
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Buyer. The Board of
Directors of Buyer has directed that this Agreement and the
transactions contemplated hereby be submitted to Buyer's
stockholders for approval at a meeting of such stockholders and,
except for the adoption of this Agreement by the requisite vote
of Buyer's stockholders, no other corporate proceedings on the
part of Buyer are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Buyer and (assuming due authorization,
execution and delivery by the Company) constitutes a valid and
binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
(b) Buyer Bank has full corporate power and authority
to execute and deliver the Bank Merger Agreement and to
consummate the transactions contemplated thereby. The execution
and delivery of the Bank Merger Agreement and the consummation of
the transactions contemplated thereby will be duly and validly
approved by the Board of Directors of Buyer Bank. Upon the due
and valid approval of the Bank Merger Agreement by Buyer as the
sole stockholder of Buyer Bank, and by the Board of Directors of
Buyer Bank, no other corporate proceedings on the part of Buyer
Bank will be necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution
and delivery by Buyer Bank, will be duly and validly executed and
delivered by Buyer Bank and will (assuming due authorization,
execution and delivery by the Bank) constitute a valid and
binding obligation of Buyer Bank, enforceable against Buyer Bank
in accordance with its terms, except as enforcement may be
limited by laws affecting insured depository institutions,
general principles of equity whether applied in a court of law or
a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) Except as set forth in Section 4.3(c) of the Buyer
Disclosure Schedule, neither the execution and delivery of this
Agreement by Buyer or the Bank Merger Agreement by Buyer Bank,
nor the consummation by Buyer or Buyer Bank, as the case may be,
of the transactions contemplated hereby or thereby, nor
compliance by Buyer or Buyer Bank, as the case may be, with any
of the terms or provisions hereof or thereof, will (i) violate
any provision of the Articles of Incorporation or By-Laws of
Buyer or the articles of incorporation or by-laws or similar
governing documents of any other Subsidiaries of Buyer or (ii)
assuming that the consents and approvals referred to in Section
4.4 are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to Buyer or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result
in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of
Buyer or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or
obligation to which Buyer or any of its Subsidiaries is a party,
or by which they or any of their respective properties or assets
may be bound or affected, except (in the case of clause (y)
above) for such violations, conflicts, breaches or defaults which
either individually or in the aggregate will not have or be
reasonably likely to have a Material Adverse Effect on Buyer.
4.4. Consents and Approvals. Except for (a) the filing of
applications or notices, as applicable, with the Federal Reserve
Board under the BHC Act and approval of such applications or
notices, (b) the filing of an application with the FDIC under the
Bank Merger Act and approval of such application, (c) the filing
of applications or notices, as applicable, with the OTS and
approval of such applications or notices, (d) the filing of
applications or notices, as applicable, with the Commissioner and
approval of such applications and notices, (e) the filing with
the SEC of the Proxy Statement and with the SEC of the S-4, (f)
the approval of this Agreement by the requisite vote of the
stockholders of Buyer, (g) the filing of an application with
NASDAQ to list the Buyer Common Stock to be issued in the Merger
on the NASDAQ and the approval of such application, (h) the
filing of the Articles of Merger with the Department pursuant to
the MGCL, (i) such filings and approvals as are required to be
made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of the shares of
Buyer Common Stock pursuant to this Agreement, (j) the filings
required by the Bank Merger Agreement, (k) the approval of the
Bank Merger Agreement by Buyer as the sole stockholder of Buyer
Bank, and (l) such filings, authorizations or approvals as may be
set forth in Section 4.4 of the Buyer Disclosure Schedule, no
consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary on
behalf of Buyer in connection with (1) the execution and delivery
by Buyer of this Agreement, (2) the consummation by Buyer of the
Merger and the other transactions contemplated hereby, (3) the
execution and delivery by Buyer Bank of the Bank Merger
Agreement, and (4) the consummation by Buyer Bank of the
Subsidiary Merger.
4.5. Financial Statements. Buyer has previously delivered
to the Company copies of the consolidated statements of condition
of Buyer and its Subsidiaries as of December 31, 1995 and 1996
and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1994
through 1996, inclusive, as reported in Buyer's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 filed with
the SEC under the Exchange Act, in each case accompanied by the
audit report of Coopers & Lybrand L.L.P., independent public
accountants with respect to Buyer. The December 31, 1996
consolidated statement of condition of Buyer (including the
related notes, where applicable) fairly presents the consolidated
financial position of Buyer and its Subsidiaries as of the date
thereof, and the other financial statements referred to in this
Section 4.5 (including the related notes, where applicable)
fairly present and the financial statements referred to in
Section 6.9 hereof will fairly present (subject, in the case of
the unaudited statements, to recurring audit adjustments normal
in nature and amount) the results of the consolidated operations
and changes in stockholders' equity and consolidated financial
position of Buyer and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of
such statements (including the related notes, where applicable)
comply, and the financial statements referred to in Section 6.9
hereof will comply, in all material respects with applicable
accounting requirements and with the published rules and
regulations of the SEC with respect thereto; and each of such
statements (including the related notes, where applicable) has
been, and the financial statements referred to in Section 6.9
hereof will be, prepared in accordance with GAAP consistently
applied during the periods involved, except as indicated in the
notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of Buyer and its
Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal
and accounting requirements and reflect only actual transactions.
4.6. Broker's Fees. Neither Buyer nor any Subsidiary of
Buyer, nor any of their respective officers or directors, has
employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement, the
Option Agreement or the Bank Merger Agreement, except that Buyer
has engaged and will pay a fee or commission to Keefe, Bruyette &
Woods, Inc. ("KBW") in accordance with the terms of a letter
agreement between Buyer and KBW, a true, complete and correct
copy of which has previously been delivered by Buyer to the
Company.
4.7. Absence of Certain Changes or Events. Except as may be
set forth in Section 4.7 of the Buyer Disclosure Schedule, since
December 31, 1996, (i) neither Buyer nor any of its Subsidiaries
has incurred any material liability, except in the ordinary
course of business consistent with their past practices
(excluding the incurrence of expenses in connection with this
Agreement and the transactions contemplated hereby) and except in
connection with acquisitions permitted by Section 5.2(d) hereof,
(ii) no event has occurred which has caused or would reasonably
be expected to cause, individually or in the aggregate, a
Material Adverse Effect on Buyer and (iii) for the period from
December 31, 1996 to the date of this Agreement, Buyer and its
Subsidiaries have carried on their respective businesses in the
ordinary course consistent with their past practices (excluding
the execution of this Agreement and related matters).
4.8. Legal Proceedings. (a) Except as set forth in Section
4.8 of the Buyer Disclosure Schedule, neither Buyer nor any of
its Subsidiaries is a party to any and there are no pending or,
to the best of Buyer's knowledge, threatened, material legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against
Buyer or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by this Agreement, the
Bank Merger Agreement or the Option Agreement as to which there
is a reasonable probability of an adverse determination and
which, if adversely determined, would, individually or in the
aggregate, have or be reasonably expected to have or would be
reasonably expected to have a Material Adverse Effect on Buyer.
(b) There is no injunction, order, judgment, decree or
regulatory restriction imposed upon Buyer, any of its
Subsidiaries or the assets of Buyer or any of its Subsidiaries
which has had, or could reasonably be expected to have, a
Material Adverse Effect on Buyer
4.9. Compliance with Applicable Law. Buyer and each of its
Subsidiaries holds, and has at all times held, all material
licenses, franchises, permits and authorizations necessary for
the lawful conduct of their respective businesses under and
pursuant to all, and have complied with and are not in default in
any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity
relating to Buyer or any of its Subsidiaries, except where the
failure to hold such license, franchise, permit or authorization
or such noncompliance or default would not, individually or in
the aggregate, have, or be reasonably likely to have, a Material
Adverse Effect on Buyer, and neither Buyer nor any of its
Subsidiaries knows of, or has received notice of violation of,
any material violations of any of the above.
4.10. SEC Reports. Buyer has previously made available
to the Company an accurate and complete copy of each (a) final
registration statement, prospectus, report, schedule and
definitive proxy statement filed since January 1, 1994 by Buyer
with the SEC pursuant to the Securities Act or the Exchange Act
(the "Buyer Reports") and (b) communication mailed by Buyer to
its shareholders since January 1, 1994, and no such Buyer Report
(including exhibits and amendments thereto) or communication
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, except
that information as of a later date shall be deemed to modify
information as of an earlier date. Buyer has timely filed all
Buyer Reports and other documents required to be filed by it
under the Securities Act and the Exchange Act, and, as of their
respective dates, all Buyer Reports complied in all material
respects with the published rules and regulations of the SEC with
respect thereto.
4.11. Buyer Information. The information relating to
Buyer and its Subsidiaries to be contained or incorporated by
reference in the Proxy Statement and the S-4, or in any other
document filed with any other Governmental Entity in connection
herewith, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they
are made, not misleading.
4.12. Ownership of Company Common Stock. Except for the
shares covered by the Option Agreement and except as set forth in
Section 4.12 of the Buyer Disclosure Schedule, neither Buyer nor
any of its affiliates or associates (as such terms are defined
under the Exchange Act) (i) beneficially owns, directly or
indirectly, or (ii) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Company (other
than Trust Account Shares and DPC Shares).
4.13. Taxes. Except as set forth in Section 4.13 of the
Buyer Disclosure Schedule, each of Buyer and its Subsidiaries has
(i) duly and timely filed (including applicable extensions
granted without penalty) all material Tax Returns (as hereinafter
defined) required to be filed at or prior to the Effective Time,
and such Tax Returns are true, correct and complete in all
material respects, and (ii) paid in full or made adequate
provision in the financial statements of Buyer (in accordance
with GAAP) for all material Taxes. No deficiencies for any Taxes
have been proposed, asserted, or assessed against or with respect
to Buyer or any of its Subsidiaries. Except as set forth in
Section 4.13 of the Buyer Disclosure Schedule, (i) there are no
liens for Taxes upon the assets of either Buyer or its
Subsidiaries except for statutory liens for current Taxes not yet
due, (ii) neither Buyer nor any of its Subsidiaries has requested
any extension of time within which to file any Tax Returns in
respect of any fiscal year which have not since been filed and no
request for waivers of the time to assess any Taxes are pending
or outstanding, (iii) with respect to each taxable period of
Buyer and its Subsidiaries, the federal and state income Tax
Returns of Buyer and its Subsidiaries have been audited by the
Internal Revenue Service or appropriate state tax authorities or
the time for assessing and collecting income Tax with respect to
such taxable period has closed and such taxable period is not
subject to review, (iv) neither Buyer nor any of its Subsidiaries
has filed or been included in a combined, consolidated or unitary
income Tax Return other than one in which Buyer was the parent of
the group filing such Tax Return, (v) neither Buyer nor any of
its Subsidiaries is a party to any agreement providing for the
allocation or sharing of Taxes (other than the allocation of
federal income taxes as provided by Regulation 1.1552-l(a) (1)
under the Code), (vi) neither Buyer nor any of its Subsidiaries
is required to include in income any adjustment pursuant to
Section 481(a) of the Code (or any similar or corresponding
provision or requirement of state, local or foreign income Tax
law), by reason of the voluntary change in accounting method (nor
has any taxing authority proposed in writing any such adjustment
or change of accounting method), (vii) neither Buyer nor any of
its Subsidiaries has filed a consent pursuant to Section 341(f)
of the Code, and (viii) neither Buyer nor any of its Subsidiaries
has made any payment or will be obligated to make any payment in
connection with this transaction (by contract or otherwise) which
will not be deductible by reason of Section 280G of the Code.
4.14. Employees. (a) Section 4.14(a) of the Buyer
Disclosure Schedule sets forth a true and complete list of each
employee benefit plan, arrangement or agreement (including,
without limitation, each employment, severance and similar
agreement) that is maintained or contributed to or required to be
contributed to as of the date of this Agreement (the "Buyer
Plans") by Buyer, any of its Subsidiaries or by any trade or
business, whether or not incorporated (a "Buyer ERISA
Affiliate"), all of which together with Buyer would be deemed a
"single employer" within the meaning of Section 4001 of ERISA,
for the benefit of any director, employee or former employee of
Buyer, any Subsidiary or any Buyer ERISA Affiliate.
(b) All of the Buyer Plans comply in all material
respects with all applicable requirements of ERISA, the Code and
other applicable laws and have been operated in material
compliance with their terms; neither Buyer nor any of its
Subsidiaries has engaged in a "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) with
respect to any Buyer Plan which is likely to result in any
material penalties or taxes to the Buyer and its Subsidiaries
under Section 502(i) of ERISA or Section 4975 of the Code.
4.15. Agreements with Regulatory Agencies. Except as
set forth in Section 4.15 of the Buyer Disclosure Schedule,
neither Buyer nor any of its Subsidiaries is subject to any
cease-and-desist or other order issued by, or is a party to any
written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive
by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any board resolutions at the request of
(each, whether or not set forth in Section 4.15 of the Buyer
Disclosure Schedule, a "Buyer Regulatory Agreement"), any
Governmental Entity that restricts the conduct of its business or
that in any manner relates to its capital adequacy, its credit
policies, its management or its business, nor has Buyer or any of
its Subsidiaries been advised by any Governmental Entity that it
is considering issuing or requesting any Buyer Regulatory
Agreement.
4.16. Regulatory Reports; Examinations. Buyer and each
of its Subsidiaries have timely filed all material reports,
registrations and statements, together with any amendments
required to be made with respect thereto, that they were required
to file since December 31, 1993 with any Governmental Entity, and
have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a
Governmental Entity in the regular course of the business of
Buyer and its Subsidiaries, and except as set forth in Section
4.16 of Buyer Disclosure Schedule, no Governmental Entity has
initiated any proceeding or, to the best knowledge of Buyer,
investigation into the business or operations of Buyer or any of
its Subsidiaries since December 31, 1993. There is no unresolved
material violation, criticism, or exception by any Governmental
Entity with respect to any report or statement relating to any
examinations of Buyer or any of its Subsidiaries.
4.17. Environmental Matters. Except as set forth in
Section 4.17 of the Buyer Disclosure Schedule:
(a) To the best of Buyer's knowledge, each of Buyer,
its Subsidiaries, the Participation Facilities and the Loan
Properties (each as hereinafter defined) are, and have been, in
compliance with all applicable Environmental Laws, except for
violations which, either individually or in the aggregate, have
not had and cannot reasonably be expected to have a Material
Adverse Effect on Buyer;
(b) There is no suit, claim, action or proceeding,
pending or, to the best of Buyer's knowledge, threatened, before
any Governmental Entity or other forum in which Buyer any of its
Subsidiaries, any Participation Facility or any Loan Property,
has been or, with respect to threatened proceedings, may be,
named as a defendant (x) for alleged noncompliance (including by
any predecessor), with any Environmental Laws, or (y) relating to
the release, threatened release or exposure to Hazardous Material
whether or not occurring at or on a site owned, leased or
operated by Buyer or any of its Subsidiaries, any Participation
Facility or any Loan Property, except where such noncompliance or
release has not had, and cannot be reasonably expected to result
in, either individually or in the aggregate, a Material Adverse
Effect on Buyer;
(c) During the period or, to the best knowledge of
Buyer, prior to the period of (x) Buyer's or any of its
Subsidiaries' ownership or operation of any of their respective
current properties, (y) Buyer's or any of its Subsidiaries'
participation in the management of any Participation Facility, or
(z) Buyer's or any of its Subsidiaries' holding of a security
interest in a Loan Property, there has been no release of
Hazardous Materials in, on, under or affecting any such property,
except where such release has not had and cannot reasonably be
expected to result in, either individually or in the aggregate, a
Material Adverse Effect on Buyer; and
(d) The following definitions apply for purposes of
this Section 4.17: (x) "Loan Property" means any property in
which Buyer or any of its Subsidiaries holds a security interest,
and, where required by the context, said term means the owner or
operator of such property; and (y) "Participation Facility" means
any facility in which Buyer or any of its Subsidiaries
participates in the management and, where required by the
context, said term means the owner or operator of such property.
4.18. Accounting for the Merger; Reorganization.
Assuming compliance by Buyer with Section 6.14 hereof, as of the
date hereof, Buyer has no reason to believe that the Merger will
fail to qualify (i) for pooling-of-interests accounting treatment
under GAAP or (ii) as a reorganization under Section 368(a) of
the Code.
4.19. Loan Portfolio. (a) Except as set forth in
Section 4.19 of the Buyer Disclosure Schedule, as of December 31,
1996 neither Buyer nor any of its Subsidiaries is a party to any
written or oral (i) Loan, other than Loans the unpaid principal
balance of which does not exceed $250,000, under the terms of
which the obligor is, as of the date of this Agreement, over 90
days delinquent in payment of principal or interest or in default
of any other provision, or (ii) Loan as of the date of this
Agreement with any director, executive officer or, to the best of
Buyer's knowledge, greater than five percent stockholder of Buyer
or any of its Subsidiaries, or to the best knowledge of Buyer,
any person, corporation or enterprise controlling, controlled by
or under common control with any of the foregoing, other than
Loans the unpaid principal balance of which does not exceed
$150,000. Section 4.19 of the Buyer Disclosure Schedule sets
forth (i) all of the Loans in original principal amount in excess
of $250,000 of Buyer or any of its Subsidiaries that as of the
date of this Agreement are classified by any bank examiner
(whether regulatory or internal) as "Other Loans Specially
Mentioned," Special Mention," "Substandard," "Doubtful," "Loss,"
"Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans," "Watch List" or works of similar import, together with
the principal amount of and accrued and unpaid interest on each
such Loan and the identity of the borrower thereunder, (ii) by
category of Loan (i.e.,commercial, consumer, etc.), all of the
other Loans of Buyer and its Subsidiaries that as of the date of
this Agreement are classified as such, together with the
aggregate principal amount of and accrued and unpaid interest on
such Loans by category and (iii) each asset of Buyer that as of
the date of this Agreement is classified as "Other Real Estate
Owned" and the book value thereof.
(b) Each Loan in original principal amount in excess of
$100,000 (i) is evidenced by notes, agreements or other evidences
of indebtedness which are true, genuine and what they purport to
be, (ii) to the extent secured, has been secured by valid liens
and security interest which have been perfected and (iii) is the
legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles, in each case other than Loans as to
which the failure to satisfy the foregoing standards would not
have a Material Adverse Effect on Buyer.
4.20. Opinion. Buyer has received an opinion from KBW
to the effect that, subject to the terms, conditions and
qualifications set forth therein, as of the date thereof, the
aggregate consideration to be issued by Buyer pursuant to this
Agreement is fair to Buyer and its stockholders from a financial
point of view. Such opinion has not been amended or rescinded as
of the date of this Agreement.
4.21. Approvals. As of the date of this Agreement,
Buyer knows of no reason why all regulatory approvals required
for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger and the Subsidiary
Merger) should not be obtained.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. Covenants of the Company. During the period from the
date of this Agreement and continuing until the Effective Time,
except as expressly contemplated or permitted by this Agreement,
the Option Agreement or the Bank Merger Agreement or with the
prior written consent of Buyer, the Company and its Subsidiaries
shall carry on their respective businesses in the ordinary course
consistent with past practice. The Company will use its
reasonable best efforts to (x) preserve its business organization
and that of its Subsidiaries intact, (y) keep available to itself
and Buyer the present services of the employees of the Company
and its Subsidiaries and (z) preserve for itself and Buyer the
goodwill of the customers of the Company and its Subsidiaries and
others with whom business relationships exist. Without limiting
the generality of the foregoing, and except to the extent that
reasonable retention bonuses are paid to certain Company
employees pursuant to Section 5.1(k), as set forth in Section
5.1(k) or Section 5.1 of the Company Disclosure Schedule, or as
otherwise contemplated by this Agreement or consented to in
writing by Buyer, the Company shall not, and shall not permit any
of its Subsidiaries to:
(a) solely in the case of the Company, declare or pay
any dividends on, or make other distributions in respect of, any
shares of its capital stock;
(b) (i) split, combine or reclassify any shares of
its capital stock or (ii) repurchase, redeem or otherwise acquire
(except for the acquisition of Trust Account Shares and DPC
Shares, as such terms are defined in Section 1.4(b) hereof) any
shares of the capital stock of the Company or any Subsidiary of
the Company, or any securities convertible into or exercisable
for any shares of the capital stock of the Company or any
Subsidiary of the Company;
(c) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital
stock or any securities convertible into or exercisable for, or
any rights, warrants or options to acquire, any such shares, or
enter into any agreement with respect to any of the foregoing,
other than (i) the issuance of Company Common Stock pursuant to
stock options or similar rights to acquire Company Common Stock
granted pursuant to the Company Option Plans and outstanding
prior to the date of this Agreement, in each case in accordance
with their present terms and (ii) pursuant to the Option
Agreement;
(d) amend its Certificate of Incorporation, By-laws or
other similar governing documents;
(e) authorize or permit any of its officers,
directors, employees or agents to directly or indirectly solicit,
initiate or encourage any inquiries relating to, or the making of
any proposal which constitutes, a "takeover proposal" (as defined
below), or, except to the extent legally required for the
discharge of the fiduciary duties of the Board of Directors of
the Company, (i) recommend or endorse any takeover proposal, (ii)
participate in any discussions or negotiations, or (iii) provide
third parties with any nonpublic information, relating to any
such inquiry or proposal; provided, however, that the Company may
communicate information about any such takeover proposal to its
stockholders if, in the judgment of the Company's Board of
Directors, based upon the advice of outside counsel, such
communication is required under applicable law. The Company will
immediately cease and cause to be terminated any existing
activities, discussions or negotiations previously conducted with
any parties other than Buyer with respect to any of the
foregoing. The Company will take all actions necessary or
advisable to inform the appropriate individuals or entities
referred to in the first sentence hereof of the obligations
undertaken in this Section 5.l(e). The Company will notify Buyer
promptly if any such inquiries or takeover proposals are received
by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or
continued with, the Company, and the Company will promptly inform
Buyer of all of the relevant details with respect to the
foregoing. As used in this Agreement, "takeover proposal" shall
mean any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the Company
or any Subsidiary of the Company or any proposal or offer to
acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, the Company or any
Subsidiary of the Company other than the transactions
contemplated or permitted by this Agreement, the Option Agreement
or the Bank Merger Agreement;
(f) make any capital expenditures other than
expenditures which (i) are made in the ordinary course of
business or are necessary to maintain existing assets in good
repair and (ii) in any event are in an amount of no more than
$50,000;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire any assets, which would be material,
individually or in the aggregate, to the Company, other than in
connection with foreclosures, settlements in lieu of foreclosure
or troubled loan or debt restructuring in the ordinary course of
business consistent with prudent banking practices;
(i) take any action that is intended or may reasonably
be expected to result in any of its representations and
warranties set forth in this Agreement being or becoming untrue
in any material respect, or in any of the conditions to the
Merger set forth in Article VII not being satisfied, or in a
violation of any provision of this Agreement or the Bank Merger
Agreement except, in every case, as may be required by applicable
law provided, however, that nothing herein shall prevent the
Company from taking any action required by the Option Agreement;
(j) change its methods of accounting in effect at
December 31, 1995, except as required by changes in GAAP or
regulatory accounting principles as concurred to by the Company's
independent auditors;
(k) (i) except as required by applicable law or to
maintain qualification pursuant to the Code, adopt, amend, renew
or terminate any Plan or any agreement, arrangement, plan or
policy between the Company or any Subsidiary of the Company and
one or more of its current or former directors, officers or
employees or (ii) except as set forth in Schedule 5.1(k) or
except as required by applicable law, increase in any manner the
compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan or agreement
as in effect as of the date hereof (including, without
limitation, the granting of stock options, stock appreciation
rights, restricted stock, restricted stock units or performance
units or shares) or (iii) enter into or amend the terms of loans
with any director, officer or employee on terms more preferable
than those terms offered to non-affiliated parties; provided,
however, that reasonable retention bonuses as contemplated by
Section 5.1(k) of the Company Disclosure Schedule may be paid by
the Company to selected employees and officers of the Company
after consultation with the Buyer;
(l) other than activities in the ordinary course of
business consistent with prior practice, sell, lease, encumber,
assign or otherwise dispose of, or agree to sell, lease,
encumber, assign or otherwise dispose of, any of its material
assets, properties or other rights or agreements;
(m) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money, or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other
individual, corporation or other entity;
(n) file any application to relocate or terminate the
operations of any banking office;
(o) make any equity investment or commitment to make
such an investment in real estate or in any real estate
development project, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt
restructuring in the ordinary course of business consistent with
prudent banking practices;
(p) create, renew, amend or terminate or give notice
of a proposed renewal, amendment or termination of, any material
contract, agreement or lease for goods, services or office space
to which the Company or any of its subsidiaries is a party or by
which the Company or any of its Subsidiaries or their respective
properties is bound;
(q) take any action which would cause the termination
or cancellation by the FDIC of insurance in respect of the Bank's
deposits; or
(r) agree to do any of the foregoing.
5.2. Covenants of Buyer. During the period from the date of
this Agreement and continuing until the Effective Time, except as
expressly contemplated or permitted by this Agreement or the Bank
Merger Agreement or with the prior written consent of the
Company, Buyer and its Subsidiaries shall carry on their
respective businesses in the ordinary course consistent with past
practice and consistent with prudent banking practice. Without
limiting the generality of the foregoing and except as set forth
in Section 5.2 of the Buyer Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by the
Company, Buyer shall not, and shall not permit any of its
Subsidiaries to:
(a) solely in the case of Buyer, declare or pay any
extraordinary or special dividends on or make any other
extraordinary or special distributions in respect of any of its
capital stock; provided, however, that nothing contained herein
shall prohibit Buyer from increasing the quarterly cash dividend
on the Buyer Common Stock in an amount consistent with past
practice;
(b) take any action that is intended or may reasonably
be expected to result in any of its representations and
warranties set forth in this Agreement being or becoming untrue
in any material respect, or in any of the conditions to the
Merger set forth in Article VII not being satisfied, or in a
violation of any provision of this Agreement except, in every
case, as may be required by applicable law provided, however,
that nothing contained herein shall limit the ability of Buyer to
exercise its rights under the Option Agreement;
(c) amend its Articles of Incorporation or By-laws or
other governing instrument in a manner which would adversely
affect in any manner the terms of the Buyer Common Stock or the
ability of Buyer to consummate the transactions contemplated
hereby;
(d) make or undertake any acquisition of any company
or business that could jeopardize the receipt of any Requisite
Regulatory Approval (as defined in Section 7.1(c)) or materially
delay the consummation of the Merger or the Subsidiary Merger; or
(e) agree to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.l. Regulatory Matters. (a) The parties shall cooperate
with respect to the preparation of the Proxy Statement and the
S-4 and shall promptly file such documents with the SEC. The
Buyer shall use all reasonable efforts to have the S-4 declared
effective by the SEC under the Securities Act as promptly as
practicable after the filing thereof, and each of the Company and
Buyer shall thereafter mail the Proxy Statement to each of its
stockholders. Buyer shall use all reasonable efforts to obtain
all necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by
this Agreement, and the Company shall furnish all information
concerning the Company and the holders of Company Common Stock as
may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other
and use all reasonable efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable
all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or
advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Merger and the
Subsidiary Merger). The Company and Buyer shall have the right
to review in advance, and to the extent practicable each will
consult the other on, in each case subject to applicable laws
relating to the exchange of information, all the information
relating to the Company or Buyer, as the case may be, and any of
their respective Subsidiaries, which appear in any filing made
with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions
contemplated by this Agreement (including without limitation the
Merger and the Subsidiary Merger). In exercising the foregoing
right, each of the parties hereto shall act reasonably and as
promptly as practicable. Each party will keep the other apprised
of the status of matters relating to completion of the
transactions contemplated herein.
(c) Buyer and the Company shall, upon request, furnish
each other with all information concerning themselves, their
Subsidiaries, directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection
with the Proxy Statement, the S-4 or any other statement, filing,
notice or application made by or on behalf of Buyer, the Company
or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger, the Subsidiary Merger and
the other transactions contemplated by this Agreement.
(d) Buyer and the Company shall promptly advise each
other upon receiving any communication from any Governmental
Entity whose consent or approval is required for consummation of
the transactions contemplated by this Agreement which causes such
party to believe that there is a reasonable likelihood that any
Requisite Regulatory Approval (as defined in Section 7.l(c)) will
not be obtained or that the receipt of any such approval will be
materially delayed.
6.2. Access to Information. (a) Upon reasonable notice
and subject to applicable laws relating to the exchange of
information, the Company shall, and shall cause each of its
Subsidiaries to, afford to the officers, employees, accountants,
counsel and other representatives of Buyer, access, during normal
business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments, records,
officers, employees, accountants, counsel and other
representatives and, during such period, the Company shall, and
shall cause its Subsidiaries to, make available to Buyer (i) a
copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to
the requirements of Federal securities laws or Federal or state
banking laws (other than reports or documents which the Company
is not permitted to disclose under applicable law) and (ii) all
other information concerning its business, properties and
personnel as Buyer may reasonably request. Neither Buyer nor any
of its Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would
violate or prejudice the rights of the Company's customers,
jeopardize any attorney client privilege or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this
Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. Buyer will hold
all such information in confidence to the extent required by, and
in accordance with, the provisions of the confidentiality
agreement, dated February 3, 1997, between Buyer and the Company
(the "Confidentiality Agreement").
(b) Upon reasonable notice and subject to applicable
laws relating to the exchange of information, Buyer shall, and
shall cause its Subsidiaries to, afford to the officers,
employees, accountants, counsel and other representatives of the
Company, access, during normal business hours during the period
prior to the Effective Time, to such information regarding Buyer
and its Subsidiaries as shall be reasonably necessary for the
Company to fulfill its obligations pursuant to this Agreement to
prepare the Proxy Statement or which may be reasonably necessary
for the Company to confirm that the representations and
warranties of Buyer contained herein are true and correct and
that the covenants of Buyer contained herein have been performed
in all material respects. Neither Buyer nor any of its
Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would
violate or prejudice the rights of Buyer's customers, jeopardize
any attorney-client privilege or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the
preceding sentence apply. The Company will hold all such
information in confidence to the extent required by, and in
accordance with, the provision of the Confidentiality Agreement.
(c) No investigation by either of the parties or their
respective representatives shall affect the representations,
warranties, covenants or agreements of the other set forth
herein.
6.3. Shareholder Meetings. The Company and Buyer each shall
take all steps necessary to duly call, give notice of, convene
and hold a meeting of its shareholders to be held as soon as is
reasonably practicable after the date on which the S-4 becomes
effective for the purpose of voting upon the approval of this
Agreement and the consummation of the transactions contemplated
hereby. The Company and Buyer each will, through its Board of
Directors, except to the extent legally required for the
discharge of the fiduciary duties of such board, recommend to its
respective shareholders approval of this Agreement and the
transactions contemplated hereby. The Company and Buyer shall
coordinate and cooperate with respect to the foregoing matters,
with a view towards, among other things, holding the respective
meetings of each party's shareholders on the same day.
6.4. Legal Conditions to Merger. Each of Buyer and the
Company shall, and shall cause its Subsidiaries to, use all
reasonable efforts (a) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal
requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger or the Subsidiary Merger
and to consummate the transactions contemplated by this Agreement
and (b) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party
which is required to be obtained by the Company or Buyer or any
of their respective Subsidiaries in connection with the Merger or
the Subsidiary Merger and the other transactions contemplated by
this Agreement, and to comply with the terms and conditions of
such consent, authorization, order or approval.
6.5. Affiliates; Publication of Combined Financial Results.
(a) Each of Buyer and the Company shall use its best efforts to
cause each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act
and for purposes of qualifying the Merger for "pooling-of-
interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this
Agreement, and in any event prior to the earlier of the date of
the stockholders meeting called by the Company to approve this
Agreement and the date of the stockholders meeting called by
Buyer to approve this Agreement, a written agreement, in the form
of Exhibit 6.5(a) hereto (in the case of affiliates of Buyer) or
6.5(b) hereto (in the case of affiliates of the Company).
(b) Buyer shall use its best efforts to publish, not
later than forty-five (45) days after the end of the month in
which the Effective Time occurs, financial results covering at
least thirty (30) days of post-Merger combined operations as
contemplated by and in accordance with the terms of SEC
Accounting Series Release No. 135.
6.6. NASDAQ Approval. Buyer shall use all reasonable
efforts to cause the shares of Buyer Common Stock to be issued in
the Merger to be approved for quotation on NASDAQ, subject to
official notice of issuance, as of the Effective Time.
6.7. Employee Benefit Plans; Existing Agreements; Employment
and Consulting Agreements. (a) The parties agree that, except
as otherwise provided in Section 6.7(b) below, appropriate steps
shall be taken to terminate all employee benefit plans of the
Company as of the Effective Time or as promptly as practicable
thereafter. Immediately following the termination of such plans,
Buyer agrees that the officers and employees of the Company or
the Bank (each a "Company Employee") who are employed by the
Buyer or Buyer Bank immediately following the Effective Time
shall be eligible to participate in Buyer's employee benefit
plans, including welfare and fringe benefit plans, on the same
basis as and subject to the same conditions as are applicable to
any newly-hired employee of Buyer (it being understood that
inclusion of Company Employees in Buyer's Plans may occur at
different times with respect to different plans); provided,
however, that with respect to each Buyer Plan including, without
limitation, severance benefits and vacation entitlement, for
purposes of determining eligibility to participate, vesting, and
entitlement to benefits, (but not for accrual of pension
benefits), service with the Company or the Bank shall be treated
as service with the Buyer or Buyer Bank; provided, however, that
such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits. Such
service also shall apply for purposes of satisfying any waiting
periods, evidence of insurability requirements, or the
application of any preexisting condition limitations. Company
Employees shall be given credit for amounts paid under a
corresponding benefit plan during the same period for purposes of
applying deductibles, co-payments and out-of-pocket maximums as
though such amounts had been paid in accordance with the terms
and conditions of the Buyer Plan or in the alternative, Buyer
shall reimburse employees of the Company for amounts paid under
Buyers Plans for purpose of applying deductibles, co-payments and
out-of-pocket maximums.
(b) The parties further agree that Citizens Savings
Bank, F.S.B. 401(k) Savings Plan (the "Savings Plan") will either
be merged into the Employee Retirement Savings Plan of Provident
Bank of Maryland (the "PB-Plan") effective as of a date following
the Effective Time of the Merger selected by the Buyer or, if so
elected by the Buyer, terminated immediately prior to, on, or
after the Effective Time of the Merger. The determination as to
whether the Savings Plan shall be terminated or merged into the
PB-Plan shall be made by the Buyer.
(c) Buyer agrees and acknowledges that, upon the
Effective Time, a "change in control" shall have occurred for
purposes of the Plans.
(d) Following the Effective Time, Buyer shall honor
and shall cause the Surviving Corporation and the Surviving Bank
to honor in accordance with their terms all employment, severance
and other compensation agreements and arrangements, including but
not limited to severance benefit plans, as in effect prior to the
execution of this Agreement and set forth in Section 6.7(d) of
the Company Disclosure Schedule (or as amended to the extent
permitted under Section 5.1(k) hereof) except as provided in
Section 6.7(e). Buyer shall (i) pay, or cause to be paid, to Mr.
Herbert W. Jorgensen, at the Effective Time, all amounts set
forth under Section 8(a)(ii) of the Employment Agreement, dated
November 22, 1995, between Mr. Jorgensen and the Company, (ii)
provide to Mr. Jorgensen, commencing at the Effective Time and
continuing for a period of three years, the benefits described
under Section 7(a)(iii) of such Employment Agreement, (iii) pay,
or cause to be paid, to Mr. Enos K. Fry, at the Effective Time,
all amounts set forth under Section 9(a)(ii) of the Employment
Agreement, dated January 1, 1995, between Mr. Fry and the Company
and (iv) provide to Mr. Fry, commencing upon a termination of his
employment with the Buyer prior to the third anniversary of the
Effective Date, and continuing for the balance of the period from
such termination through the third anniversary of the Effective
Date, the benefits described under Section 8(a)(iii) of such
Employment Agreement. Notwithstanding the foregoing, each of
Messrs. Jorgensen, Fry and Delaney shall have the option, if he
so elects prior to the date of the meeting of the Company's
shareholders contemplated by Section 6.3 hereof, to receive the
cash payments payable to him pursuant to this Section 6.7(d) (in
the case of Messrs. Jorgensen and Fry) and pursuant to Section
9(e)(1) of his employment agreement (in the case of Mr. Delaney)
on a deferred basis over a period of time specified by the
electing executive and through a grantor trust meeting the
requirements of Section 670 of the Code pursuant to a trust
agreement having terms reasonably acceptable to such electing
executive. The provisions of this Section 6.7(d) are intended to
be for the benefit of, and shall be enforceable by, Messrs.
Jorgensen, Fry and Delaney and each party to, or beneficiary of,
the foregoing agreements and arrangements, and his or her heirs
and representatives. The method of calculating the cash payments
owed under the employment or other agreements is set forth in
Section 6.7(d) of the Company Disclosure Schedule.
(e) At the Effective Time, Buyer, the Surviving Bank
and Mr. Enos K. Fry shall enter into an Employment Agreement and
Buyer, the Surviving Bank and Mr. Fry shall enter into a Change
in Control Agreement in the forms of Exhibit 6.7(e)(i) and
Exhibit 6.7(e)(ii), respectively, and Buyer and Mr. Jorgensen
shall enter into a Consulting Agreement in the form of Exhibit
6.7(e)(iii). The provisions of this Section 6.7(e) are intended
to be for the benefit of, and shall be enforceable by, each party
to the foregoing agreements and his or her heirs and
representatives.
(f) As of the Effective Time all plans and
arrangements of the Company not otherwise addressed above,
including any deferral fee or retirement plan for directors or
any supplemental retirement plan shall be terminated to the
extent the Buyer informs the Company that the Buyer shall not
continue such plan or arrangement. The payments owed under such
agreements is set forth in Section 6.7(f) of the Company
Disclosure Schedule; provided, however, that any such termination
shall not affect an individual's right to any benefit accrued
under such plan or arrangement as of the Effective Time.
(g) Any Company Employee whose employment with Buyer
or Buyer Bank is terminated shall receive severance benefits
consistent with Buyer's past practice determined on an individual
basis plus any accrued but unused vacation time pursuant to
Buyer's vacation plan or policy following the Effective Time.
(h) Cash bonuses in respect to calendar year 1997 will
be paid to Company employees immediately following the Effective
Time in an amount equal to the product of (A) the amount that
would have been paid to such Company Employee under the Company's
existing bonus plan in respect of calendar year 1997 assuming the
Company had achieved its target level of performance thereunder
and (B) a fraction the numerator of which is the number of days
for which such Company Employee shall have been employed by the
Company or the Bank prior to the Effective Time and the
denominator of which is 365; provided, however, that in
calculating the amounts payable under such bonus plan, net income
as defined in the bonus plan shall be calculated without regard
to merger related costs and charges.
6.8. Indemnification. (a) In the event of any
threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or
has been at any time prior to the date of this Agreement, or who
becomes prior to the Effective Time, a director or officer or
employee of the Company or any of its Subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party
based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director,
officer or employee of the Company, any of the Subsidiaries of
the Company or any of their respective predecessors or (ii) this
Agreement or any of the transactions contemplated hereby, whether
in any case asserted or arising before or after the Effective
Time, the parties hereto agree to cooperate and use their best
efforts to defend against and respond thereto. It is understood
and agreed that after the Effective Time, Buyer shall indemnify
and hold harmless, as and to the fullest extent permitted by
Maryland law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to
each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the
Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with Buyer;
provided, however, that (1) Buyer shall have the right to assume
the defense thereof and upon such assumption Buyer shall not be
liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except
that if Buyer elects not to assume such defense or counsel for
the Indemnified Parties reasonably advises that there are issues
which raise conflicts of interest between Buyer and the
Indemnified Parties, the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with Buyer,
and Buyer shall pay the reasonable fees and expenses of such
counsel for the Indemnified Parties, (2) Buyer shall in all cases
be obligated pursuant to this paragraph to pay for only one firm
of counsel for all Indemnified Parties, (3) Buyer shall not be
liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld) and
(4) Buyer shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become
final and nonappealable, that indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim
Indemnification under this Section 6.8, upon learning of any such
claim, action, suit, proceeding or investigation, shall promptly
notify Buyer thereof, provided that the failure to so notify
shall not affect the obligations of Buyer under this Section 6.8
except to the extent such failure to notify materially prejudices
Buyer. Buyer's obligations under this Section 6.8 shall continue
in full force and effect for a period of six (6) years from the
Effective Time; provided, however, that all rights to
indemnification in respect of any claim (a "Claim") asserted or
made within such period shall continue until the final
disposition of such Claim.
(b) Buyer shall cause the Company to maintain the
Company's existing directors' and officers' liability insurance
policy (or a policy providing coverage on substantially the same
terms and conditions) for acts or omissions occurring prior to
the Effective Time by persons who are currently covered by such
insurance policy maintained by the Company for a period of three
years following the Effective Time; provided, however, that in no
event shall Buyer be required to expend on an annual basis more
than 150% of the current amount expended by the Company (the
"Insurance Amount") to maintain or procure insurance coverage,
and further provided that if Buyer is unable to maintain or
obtain the insurance called for by this Section 6.8(b) Buyer
shall use all reasonable efforts to obtain as much comparable
insurance as available for the Insurance Amount.
(c) In the event Buyer or the Surviving Corporation or
any of its successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns
of Buyer or the Surviving Corporation, as the case may be, assume
the obligations set forth in this section.
(d) The provisions of this Section 6.8 are intended to
be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
6.9. Subsequent Interim Financial Statements. As soon as
reasonably available, but in no event later than March 31, 1997,
the Company will deliver to Buyer, its Annual Reports on Form 10-
K for the fiscal year ended December 31, 1996, as filed with the
SEC under the Exchange Act. As soon as reasonably available, but
in no event more than 45 days after the end of each fiscal
quarter ending after the date of this Agreement, Buyer will
deliver to the Company, and the Company will deliver to Buyer,
their respective Quarterly Reports on Form 10-Q, as filed with
the SEC under the Exchange Act.
6.10. Additional Agreements. In case at any time after
the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement or the Bank Merger
Agreement or to vest the Surviving Corporation or the Surviving
Bank with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the
Merger or the Subsidiary Merger, the proper officers and
directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be
reasonably requested by Buyer.
6.11. Advice of Changes. Buyer and the Company shall
promptly advise the other party of any change or event having a
Material Adverse Effect on it or which it believes would or would
be reasonably likely to cause or constitute a material breach of
any of its representations, warranties or covenants contained
herein. From time to time prior to the Effective Time (and on
the date prior to the Closing Date), each party will promptly
supplement or amend the Disclosure Schedules delivered in
connection with the execution of this Agreement to reflect any
matter which, if existing, occurring or known at the date of this
Agreement, would have been required to be set forth or described
in such Disclosure Schedules or which is necessary to correct any
information in such Disclosure Schedules which has been rendered
inaccurate thereby. No supplement or amendment to such
Disclosure Schedules shall have any effect for the purpose of
determining satisfaction of the conditions set forth in Sections
7.2(a) or 7.3(a) hereof, as the case may be, or the compliance by
the Company or Buyer, as the case may be, with the respective
covenants and agreements of such parties contained herein.
6.12. Current Information. During the period from the
date of this Agreement to the Effective Time, the Company will
cause one or more of its designated representatives to confer on
a regular and frequent basis (not less than monthly) with
representatives of Buyer and to report the general status of the
ongoing operations of the Company and its Subsidiaries. Each of
the parties will promptly notify the other of any material change
in the normal course of business or in the operation of the
properties of it or any of its Subsidiaries and of any
governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or
the institution or the threat of significant litigation involving
it or any of its Subsidiaries, and will keep the other fully
informed of such events.
6.13. Directorships. (a) Buyer shall cause its Board
of Directors to be expanded by two members and shall appoint
Herbert W. Jorgensen and Enos K. Fry (such persons, and any
substitute person as provided in the last sentence of this
paragraph, the "Nominees") to fill the vacancies on Buyer's Board
of Directors created by such increase as of the Effective Time.
In the event any Nominee shall be nominated and elected to a
class of directors of Buyer which provides for less than a two-
year term following the Effective Time, Buyer shall include such
person on the list of nominees for director presented by the
Board of Directors of Buyer and for which said Board shall
solicit proxies at the annual meeting of shareholders of Buyer
following the Effective Time at which directors of Buyer are
elected for such class. In the event that any Nominee is unable
to serve as a director of Buyer as a result of illness, death,
resignation or any other reason, such Nominee (or in the event of
the death of nominee, the other Nominee) shall select a
substitute nominee to serve as a member of the Board of Directors
of Buyer, subject to the approval of Buyer, which shall not be
unreasonably withheld and in accordance with the Buyer's Bylaws.
The provisions of this Section 6.13(a) are intended to be for the
benefit of, and shall be enforceable by, each Nominee.
(b) Following the Effective Time, Buyer shall
establish an advisory board with respect to its Montgomery County
operations, which shall meet at such times and at such places as
Buyer shall determine. Each advisory board member shall receive
annual retainer and meeting fees as determined by the Board of
Directors of Buyer. Buyer's obligations under this Section
6.13(b) shall continue for a period of three years following the
Effective Time. Herbert W. Jorgensen shall serve as the chairman
of such advisory board.
6.14. Accountants' Letters. Each of Buyer and the
Company shall use its commercially reasonable efforts to cause to
be delivered to the other party a letter of its respective
independent public accountants dated (i) the date on which the S-
4 shall become effective and (ii) a date shortly prior to the
Effective Time, and addressed to such other party, in form and
substance customary for "comfort" letters delivered by
independent accountants in accordance with Statement of Financial
Accounting Standards No. 72.
6.15. Execution and Authorization of Bank Merger
Agreement. As soon as reasonably practicable after the date of
this Agreement, (a) Buyer shall (i) cause the Board of Directors
of Buyer Bank to approve the Bank Merger Agreement, (ii) cause
Buyer Bank to execute and deliver the Bank Merger Agreement, and
(iii) approve the Bank Agreement as the sole shareholder of Buyer
Bank, and (b) the Company shall (i) cause the Board of Directors
of the Bank to approve the Bank Merger Agreement, (ii) cause the
Bank to execute and deliver the Bank Merger Agreement, and (iii)
approve the Bank Merger Agreement as the sole stockholder of the
Bank. The Bank Merger Agreement shall be in the form attached
hereto as Exhibit 6.15.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the
Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement shall have
been approved and adopted by the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Company
Common Stock entitled to vote thereon and by the affirmative vote
of the holders of at least two-thirds of the outstanding shares
of Buyer Common Stock entitled to vote thereon.
(b) NASDAQ Approval. The shares of Buyer Common Stock
which shall be issued to the stockholders of the Company upon
consummation of the Merger shall have been authorized for
quotation on NASDAQ, subject to official notice of issuance.
(c) Other Approvals. All regulatory approvals
required to consummate the transactions contemplated hereby
(including the Merger and the Subsidiary Merger) shall have been
obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired
(all such approvals and the expiration of all such waiting
periods being referred to herein as the "Requisite Regulatory
Approvals").
(d) S-4. The S-4 shall have become effective under
the Securities Act, and no stop order suspending the
effectiveness of the S-4 shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; No Illegality. No
order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
(an "Injunction") preventing the consummation of the Merger, the
Subsidiary Merger or any of the other transactions contemplated
by this Agreement, the Bank Merger Agreement and the Option
Agreement shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger
or the Subsidiary Merger.
7.2. Conditions to Obligations of Buyer. The obligations of
Buyer to effect the Merger is also subject to the satisfaction or
waiver by Buyer at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date;
provided, however, that such representations and warranties shall
be deemed to be true and correct in all material respects unless
the failure or failures of such representations and warranties to
be so true and correct, individually or in the aggregate,
represent a material adverse change from the business, financial
condition or results of operations of the Company and its
Subsidiaries taken as a whole as represented herein. Buyer shall
have received a certificate signed on behalf of the Company by
the Chief Executive Officer and the Chief Financial Officer of
the Company to the foregoing effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement
at or prior to the Closing Date, and Buyer shall have received a
certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company
to such effect.
(c) Consents Under Agreements. The consent, approval
or waiver of each person (other than the Governmental Entities
referred to in Section 7.1(c)) whose consent or approval shall be
required in order to permit the succession by the Surviving
Corporation or the Surviving Bank pursuant to the Merger or the
Subsidiary Merger, as the case may be, to any obligation, right
or interest of the Company or any Subsidiary of the Company under
any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument to which the Company or
any of its Subsidiaries is a party or is otherwise bound shall
have been obtained, except those consents or approvals for which
failure to obtain would not, individually or in the aggregate,
have a Material Adverse Effect on Buyer (after giving effect to
the transactions contemplated hereby).
(d) No Pending Governmental Actions. No proceeding
initiated by any Governmental Entity seeking an Injunction shall
be pending.
(e) Federal Tax Opinion. Buyer shall have received an
opinion of Muldoon, Murphy & Faucette, counsel to Buyer ("Buyer's
Counsel"), in form and substance reasonably satisfactory to
Buyer, dated as of the Effective Time, substantially to the
effect that, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with
the state of facts existing at the Effective Time, the Merger
will be treated as a reorganization within the meaning of Section
368(a) of the Code and that, accordingly, for federal income tax
purposes:
(i) No gain or loss will be recognized by
the Buyer or the Company as a result of the Merger,
except to the extent the Company or the Bank may be
required to recognize any income due to the recapture
of bad debt reserves.
(ii) No gain or loss will be recognized by
the stockholders of the Company who exchange all of
their Company Common Stock solely for Buyer Common
Stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share interest in
Buyer Common Stock);
(iii) The aggregate tax basis of the
Buyer Common Stock received by shareholders who
exchange all of their Company Common Stock solely for
Buyer Common Stock pursuant to the Merger will be the
same as the aggregate tax basis of the Company Common
Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractual share interest for which
cash is received).
In rendering such opinion, the Buyer's Counsel may require
and rely upon representations and covenants contained in
certificates of officers of Buyer, the Company and others.
(f) Pooling of Interests. Buyer shall have received a
letter from Coopers & Lybrand L.L.P., addressed to Buyer, dated
as of the Effective Time, to the effect that, based on a review
of this Agreement and related agreements (including without
limitation the agreements referred to in Section 6.5 hereof) and
the facts and circumstances then known to it, the Merger shall be
accounted for as a pooling-of-interests under GAAP.
(g) Proof of Title. The evidence of good and
marketable title or the evidence of valid and enforceable leases
for the Company's branch offices, as referred to in Section 3.23
of this Agreement, shall have been delivered to the Buyer in a
form reasonably satisfactory to the Buyer, except where the
Company's failure to establish either good and marketable title
or valid and enforceable leases would not have a Material Adverse
Effect on the Company.
7.3. Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to
the satisfaction or waiver by the Company at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. The
representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date;
provided, however, that such representations and warranties shall
be deemed to be true and correct in all material respects unless
the failure or failures of such representations and warranties to
be so true and correct, individually or in the aggregate,
represent a material adverse change from the business, financial
condition or results of operations of Buyer and its Subsidiaries
taken as a whole as represented herein. The Company shall have
received a certificate signed on behalf of Buyer by the Chief
Executive Officer and the Chief Financial Officer of Buyer to the
foregoing effect.
(b) Performance of Obligations of Buyer. Buyer shall
have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate
signed on behalf of Buyer by the Chief Executive Officer and the
Chief Financial Officer of Buyer to such effect.
(c) Consents Under Agreements. The consent, approval
or waiver of each person (other than the Governmental Entities
referred to in Section 7.1(c)) whose consent or approval shall be
required in connection with the transactions contemplated hereby
under any loan or credit agreement, note, mortgage, indenture,
lease, license or other agreement or instrument to which Buyer or
any of its Subsidiaries is a party or is otherwise bound shall
have been obtained, except those for which failure to obtain such
consents and approvals would not, individually or in the
aggregate, have a Material Adverse Effect on Buyer (after giving
effect to the transactions contemplated hereby).
(d) No Pending Governmental Actions. No Pending
proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) Federal Tax Opinion. The Company shall have
received an opinion of the Buyer's Counsel, in form and substance
reasonably satisfactory to the Company, dated as of the Effective
Date, substantially to the effect set forth in Section 7.2(e)
herein.
(f) Pooling of Interests. Buyer shall have received a
letter from Coopers & Lybrand L.L.P, addressed to Buyer, dated as
of the Effective Time, to the effect that, based on a review of
this Agreement and related agreements (including without
limitation the agreements referred to in Section 6.5 hereof) and
the facts and circumstances then known to it, the Merger shall be
accounted for as a pooling-of-interests under GAAP.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger
by the stockholders of the Company or Buyer:
(a) by mutual consent of the Company and Buyer in a
written instrument, if the Board of Directors of each so
determines by a vote of a majority of the members of its entire
Board;
(b) by either Buyer or the Company upon written notice
to the other party (i) 30 days after the date on which any
request or application for a Requisite Regulatory Approval shall
have been denied or withdrawn at the request or recommendation of
the Governmental Entity which must grant such Requisite
Regulatory Approval, unless within the 60-day period following
such denial or withdrawal a petition for rehearing or an amended
application has been filed with the applicable Governmental
Entity, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 8.1(b)(i) if
such denial or request or recommendation for withdrawal shall be
due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of
such party set forth herein or (ii) if any Governmental Entity of
competent jurisdiction shall have issued a final nonappealable
order enjoining or otherwise prohibiting the consummation of any
of the transactions contemplated by this Agreement;
(c) by either Buyer or the Company if the Merger shall
not have been consummated on or before December 31, 1997, unless
the failure of the Closing to occur by such date shall be due to
the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set
forth herein;
(d) by either Buyer or the Company (provided that the
terminating party shall not be in material breach of any of its
obligations under Section 6.3 and any related obligations
hereunder) if any approval of the stockholders of either of the
Company or Buyer required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain
the required vote at a duly held meeting of such stockholders or
at any adjournment or postponement thereof;
(e) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein) if there shall have been a material breach of any of the
representations or warranties set forth in this Agreement on the
part of the other party, which breach is not cured within 30 days
following written notice to the party committing such breach, or
which breach, by its nature, cannot be cured prior to the
Closing; provided, however, that neither party shall have the
right to terminate this Agreement pursuant to this Section 8.l(e)
unless the breach of any representation or warranty, together
with all other such breaches, would entitle the party receiving
such representation or warranty not to consummate the
transactions contemplated hereby under Section 7.2(a) (in the
case of a breach of a representation or warranty by the Company)
or Section 7.3(a) (in the case of a breach of a representation or
warranty by Buyer);
(f) by either Buyer or the Company (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein) if there shall have been a material breach of any of the
covenants or agreements set forth in this Agreement on the part
of the other party, which breach shall not have been cured within
30 days following receipt by the breaching party of written
notice of such breach from the other party hereto;
(g) by the Company, by action of its Board of
Directors by giving written notice of such election to Buyer
within two business days after the Valuation Period (as defined
below) in the event the Average Closing Price (as defined below),
is less than $35.625 per share; provided, however, that no right
of termination shall arise under this Section 8.1(g) if Buyer
elects within five business days of receipt of such written
notice to notify the Company in writing that it has increased the
Exchange Ratio such that the value of the product of such
increased Exchange Ratio and the Average Closing Price is not
less than $26.006 per share. As used herein, the term "Average
Closing Price" means the average closing sales price per share of
Buyer Common Stock on NASDAQ (as reported by The Wall Street
Journal or, if not reported thereby, another authoritative
source), for the 10 consecutive trading days (the "Valuation
Period") ending on the date on which the last approval of all the
regulatory approvals required to consummate the transactions is
obtained, without regard to any requisite waiting period in
respect thereof;
(h) by Buyer, if the Board of Directors of the Company
does not publicly recommend in the Proxy Statement that the
Company's stockholders approve and adopt this Agreement or if,
after recommending in the Proxy Statement that stockholders
approve and adopt this Agreement, the Board of Directors of the
Company shall have withdrawn, modified or amended such
recommendation in any respect materially adverse to Buyer; or
(i) by the Company, if the Board of Directors of Buyer
does not publicly recommend in the Proxy Statement that Buyer's
shareholders approve and adopt this Agreement or if, after
recommending in the Proxy Statement that stockholders approve and
adopt this Agreement, the Board of Directors of Buyer shall have
withdrawn, modified or amended such recommendation in any respect
materially adverse to the Company.
8.2. Effect of Termination; Expenses. In the event of
termination of this Agreement by either Buyer or the Company as
provided in Section 8.1, this Agreement shall forthwith become
void and have no effect except that (i) the last sentence of each
of Sections 6.2(a) and 6.2(b), and Sections 8.2 and 9.3, shall
survive any termination of this Agreement, (ii) notwithstanding
anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages
arising out of its willful breach of any provision of this
Agreement and (iii) in the event that both an Initial Triggering
Event and a Subsequent Triggering Event shall have occurred prior
to the occurrence of an Exercise Termination Event (as such terms
are defined in the Option Agreement), then, in lieu of any other
amounts payable by the Company hereunder, but in addition to the
Company's obligations under the Option Agreement, the Company
shall pay to Buyer a Termination Fee of $1,700,000.
8.3. Amendment. Subject to compliance with applicable law,
this Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at
any time before or after approval of the matters presented in
connection with the Merger by the stockholders of either the
Company or Buyer; provided, however, that after any approval of
this Agreement by Buyer's or the Company's stockholders, there
may not be, without further approval of such stockholders, any
amendment of this Agreement which reduces the amount or changes
the form of the consideration to be delivered to the Company
stockholders hereunder other than as contemplated by this
Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
8.4. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their
respective Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as
a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE IX
GENERAL PROVISIONS
9.1. Closing. Subject to the terms and conditions of this
Agreement and the Bank Merger Agreement, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. on the first
day which is (a) the last business day of a month and (b) at
least two business days after the satisfaction or waiver (subject
to applicable law) of the latest to occur of the conditions set
forth in Sections 7.1(a) and 7.1(c) hereof (the "Closing Date"),
at the offices of Buyer's Counsel unless another time, date or
place is agreed to in writing by the parties hereto.
9.2. Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants
and agreements in this Agreement or in any instrument delivered
pursuant to this Agreement (other than pursuant to the Option
Agreement, which shall terminate in accordance with its terms)
shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms
apply in whole or in part after the Effective Time.
9.3. Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense,
provided, however, that the costs and expenses of printing and
mailing the Proxy Statement to the shareholders of the Company
and Buyer shall be borne equally by Buyer and the Company, and
all filing and other fees paid to the SEC or any other
Governmental Entity in connection with the Merger, the Subsidiary
Merger and the other transactions contemplated hereby, shall be
borne equally by Buyer and the Company, provided further,
however, that nothing contained herein shall limit either party's
rights to recover any liabilities or damages arising out of the
other party's willful breach of any provision of this Agreement.
9.4. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation), mailed by
registered or certified mail (return receipt requested) or
delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Buyer, to:
Provident Bankshares Corporation
114 East Lexington Street
Baltimore, Maryland 21202
Attn: Robert L. Davis
General Counsel and Secretary
with a copy to:
Muldoon, Murphy & Faucette
501 Wisconsin Avenue, NW, Suite 508
Washington, D.C. 20016
Attn: Mary M. Sjoquist, Esq.
(b) if to the Company, to:
First Citizens Financial Corp.
22 First Field Road
Gaithersburg, Maryland 20878
Attn: Enos K. Fry
Vice Chairman of the Board and
President
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: William S. Rubenstein, Esq.
9.5. Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference
shall be to a Section of or Exhibit or Schedule to this Agreement
unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. The phrases "the date of this Agreement", "the date
hereof" and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to March 10, 1997.
9.6. Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each of the parties and delivered to the other parties,
it being understood that all parties need not sign the same
counterpart.
9.7. Entire Agreement. This Agreement (including the
documents and the instruments referred to herein) constitutes the
entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof, other than the Bank Merger
Agreement, the Option Agreement and the Confidentiality
Agreement.
9.8. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Maryland,
without regard to any applicable conflicts of law.
9.9. Enforcement of Agreement. The parties hereto agree
that irreparable damage would occur in the event that the
provisions contained in the last sentence of Section 6.2(a) and
the last sentence of Section 6.2(b) of this Agreement were not
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent
breaches of the last sentence of Section 6.2(a) and of the last
sentence of Section 6.2(b) of this Agreement and to enforce
specifically the terms and provisions thereof in any court of the
United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or
in equity.
9.10. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
9.11. Publicity. Except as otherwise required by law or
the rules of NASDAQ, so long as this Agreement is in effect,
neither Buyer nor the Company shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to, or
otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the consent of the other
party, which consent shall not be unreasonably withheld.
9.12. Assignment; No Third Party Beneficiaries. Neither
this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and
assigns. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to
herein) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, Buyer and the Company have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
PROVIDENT BANKSHARES CORPORATION
By:
--------------------------------
Name: Carl W. Stearn
Title: Chairman of the Board and
Chief Executive Officer
Attest:
-----------------------
Name:
Title:
FIRST CITIZENS FINANCIAL CORP.
By:
--------------------------------
Name: Enos K. Fry
Title: Vice Chairman of the
Board and President
Attest:
-----------------------
Name:
Title:
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER RESTRICTIONS
UNDER THE FEDERAL SECURITIES LAWS
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 10,
1997 (the "Agreement"), by and between First Citizens
Financial Corporation, a Delaware corporation ("Issuer"),
and Provident Bankshares Corporation, a Maryland
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into
an Agreement and Plan of Merger (the "Merger Agreement"),
of even date herewith, providing for, among other things,
the merger of Issuer with Grantee; and
WHEREAS, as a condition and inducement to
Grantee's execution of the Merger Agreement, Grantee has
requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the
foregoing and the respective representations, warranties,
covenants and agreements set forth herein and in the
Merger Agreement, and intending to be legally bound
hereby, Issuer and Grantee agree as follows:
1. Defined Terms. Capitalized terms which
are used but not defined herein shall have the meanings
ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and
conditions set forth herein, Issuer hereby grants to
Grantee an irrevocable option (the "Option") to purchase
up to 291,388 shares (subject to adjustment as set forth
herein) (the "Option Shares") of common stock, par value
$0.01 per share, of Issuer ("Issuer Common Stock") at a
purchase price (subject to adjustment as set forth
herein) of $23.00 per Option Share (the "Purchase
Price"), provided that in no event shall the number of
Option Shares for which the Option is exercisable exceed
9.9% of the issued and outstanding shares of Issuer
Common Stock without giving effect to any shares subject
to or issued pursuant to the Option.
3. Exercise of Option. (a) Provided that (i)
Grantee is not in material breach of the agreements or
covenants contained in the Merger Agreement and (ii) no
preliminary or permanent injunction or other order
against the delivery of Option Shares issued by any court
of competent jurisdiction in the United States shall be
in effect, Grantee may exercise the Option, in whole or
in part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined);
provided, however, that Grantee shall have sent the
written notice of such exercise (as provided in
subsection (d) of this Section 3) within 90 days
following such Subsequent Triggering Event; and provided
further, however, that any purchase of shares upon
exercise of the Option shall be subject to compliance
with applicable law; and provided further, however, that
if the Option cannot be exercised on any day because of
any injunction, order or similar restraint issued by a
court of competent jurisdiction, the period during which
the Option may be exercised shall be extended so that the
Option shall expire no earlier than on the 10th business
day after such injunction, order or restraint shall have
been dissolved or when such injunction, order or
restraint shall have become permanent and no longer
subject to appeal, as the case may be. Each of the
following shall be an Exercise Termination Event: (i)
the Effective Time; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an
Initial Triggering Event; or (iii) the passage of twelve
months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial
Triggering Event; provided, however, that if an Initial
Triggering Event continues or occurs beyond such
termination and prior to the passage of such twelve-month
period, the Exercise Termination Event shall be twelve
months from the expiration of the Last Triggering Event
(as hereinafter defined) but in no event more than 15
months after such termination of the Merger Agreement.
The "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The rights set forth in
Section 8 hereof shall terminate at the time set forth in
Section 8.
(b) The term "Initial Triggering Event"
shall mean any of the following events or transactions
occurring after the date hereof:
(i) Issuer or any of its Subsidiaries,
without having received Grantee's prior written
consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter
defined) with any person (other than Grantee or any
of its Subsidiaries) or Issuer or any of its
Subsidiaries, without having received Grantee's
prior written consent, shall have authorized,
recommended, proposed, or publicly announced its
intention to authorize, recommend or propose to
engage in, an Acquisition Transaction with any
person other than Grantee or a Subsidiary of
Grantee. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving
Issuer or any of its Subsidiaries (other than
internal mergers, reorganizations, consolidations or
dissolutions involving only existing Subsidiaries),
(x) a purchase, lease or other acquisition of all or
a substantial portion of the consolidated assets of
Issuer and its Subsidiaries, or (y) a purchase or
other acquisition (including by way of merger,
consolidation, Tender Offer or Exchange Offer (as
such terms are hereinafter defined), share exchange
or otherwise) of securities representing 10% or more
of the voting power of Issuer or any of its
Subsidiaries;
(ii) Any person other than Grantee or any
Subsidiary of Grantee shall have acquired beneficial
ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares
of Issuer Common Stock (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, as amended
(the "Exchange Act"), and the rules and regulations
thereunder) or any person other than Grantee or any
Subsidiary of Grantee shall have commenced (as such
term is defined under the rules and regulations of
the Securities and Exchange Commission (the "SEC")),
or shall have filed or publicly disseminated a
registration statement or similar disclosure
statement with respect to, a tender offer or
exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such
offer, such person would own or control 10% or more
of the then outstanding shares of Issuer Common
Stock (such an offer being referred to herein as a
"Tender Offer" or an "Exchange Offer,"
respectively);
(iii)(A) the holders of Issuer Common
Stock shall not have approved the Merger Agreement
and the transactions contemplated thereby, at the
meeting of such stockholders held for the purpose of
voting on such agreement, (B) such meeting shall not
have been held or shall have been cancelled prior to
termination of the Merger Agreement, or (C) the
Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its
intent to withdraw or modify, in any manner adverse
to Grantee, its recommendation that the stockholders
of Issuer approve the transactions contemplated by
the Merger Agreement, in each case after it shall
have been publicly announced that any person other
than Grantee or any Subsidiary of Grantee shall have
(x) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction,
(y) commenced a Tender Offer, or filed or publicly
disseminated a registration statement or similar
disclosure statement with respect to an Exchange
Offer, or (z) filed an application (or given a
notice), whether in draft or final form, under any
federal or state banking laws seeking regulatory
approval to engage in an Acquisition Transaction; or
(iv) Issuer shall have breached any
covenant or obligation or shall have willfully
breached any representation or warranty contained in
the Merger Agreement and such breach would entitle
Grantee to terminate the Merger Agreement in
accordance with the terms thereof (without regard to
any cure periods provided for in the Merger
Agreement unless such cure is promptly effected
without jeopardizing the consummation of the Merger
in accordance with the terms of the Merger
Agreement) after (A) a bona fide proposal is made by
any person other than Grantee or any Subsidiary of
Grantee to Issuer or its stockholders to engage in
an Acquisition Transaction, (B) any person other
than Grantee or any Subsidiary of Grantee states its
intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if
the Merger Agreement terminates, or (C) any person
other than Grantee or any Subsidiary of Grantee
shall have filed an application or notice, whether
in draft or final form, with any Governmental Entity
to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event"
shall mean either of the following events or transactions
occurring after the date hereof:
(i) The acquisition by any person of
beneficial ownership of 20% or more of the then
outstanding shares of Issuer Common Stock; or
(ii) The occurrence of the Initial
Triggering Event described in clause (i) of
subsection (b) of this Section 3, except that the
percentage referred to in clause (y) shall be 20%.
As used in this Agreement, "Person" shall have the
meaning specified in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act.
(d) In the event Grantee is entitled to
under the terms of this Agreement and wishes to exercise
the Option, it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice
Date") specifying (i) the total number of Option Shares
it intends to purchase pursuant to such exercise and (ii)
a place and date not earlier than three business days nor
later than 30 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing
Date"). If prior notification to or approval of any
regulatory authority is required in connection with such
purchase, Issuer shall cooperate in good faith with
Grantee in the filing of the required notice or
application for approval and the obtaining of any such
approval and the period of time that otherwise would run
pursuant to the preceding sentence shall run instead from
the date on which, as the case may be (i) any required
notification period has expired or been terminated or
(ii) such approval has been obtained, and in either
event, any requisite waiting period shall have passed.
4. Payment and Delivery of Certificates. (a)
On each Closing Date, Grantee shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank
account designated by Issuer, an amount equal to the
Purchase Price multiplied by the number of Option Shares
to be purchased on such Closing Date and (ii) present and
surrender this Agreement to the Issuer at the address of
the Issuer specified in Section 13(f) hereof.
(b) At each Closing, simultaneously with
the delivery of immediately available funds and surrender
of this Agreement as provided in Section 4(a) hereof,
Issuer shall deliver to Grantee (A) a certificate or
certificates representing the Option Shares to be
purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever, and (B) if the
Option is exercised in part only, an executed new
agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder. If
Issuer shall have issued rights or any similar securities
("Rights") pursuant to any shareholder rights, poison
pill or similar plan (a "Shareholder Rights Plan") prior
or subsequent to the date of this Agreement and such
Rights remain outstanding at the time of the issuance of
any Option Shares pursuant to an exercise of all or part
of the Option hereunder, then each Option Share issued
pursuant to such exercise shall also represent the number
of Rights issued per share of Issuer Common Stock with
terms substantially the same as and at least as favorable
to Grantee as are provided under the Shareholder Rights
Plan as then in effect.
(c) In addition to any other legend that
is required by applicable law, certificates for the
Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially
as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS
CERTIFICATE MAY BE SUBJECT TO RESTRICTIONS
ARISING UNDER THE FEDERAL SECURITIES LAWS AND
PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF MARCH 10, 1997. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY
THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall
be removed by delivery of substitute certificate(s)
without such legend if Grantee shall have delivered to
Issuer a copy of a letter from the staff of the SEC, or
an opinion of outside counsel reasonably satisfactory to
Issuer in form and substance reasonably satisfactory to
Issuer and its counsel, to the effect that such legend is
not required for purposes of the Securities Act of 1933,
as amended (the "Securities Act").
5. Representations and Warranties of Issuer.
Issuer hereby represents and warrants to Grantee as
follows:
(a) Due Authorization. Issuer has full
corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been
duly and validly executed and delivered by Issuer.
(b) No Violation. Neither the execution
and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance by
Issuer with any of the terms or provisions hereof, will
(i) violate any provision of the Certificate of
Incorporation (the "Organization Certificate") or Amended
ByLaws of Issuer or the certificates of incorporation,
by-laws or similar governing documents of any of its
Subsidiaries or (ii) (x) assuming that all of the
consents and approvals required under applicable law for
the purchase of Option Shares upon the exercise of the
Option are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Issuer or any of its
Subsidiaries, or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach
of any provisions of or the loss of any benefit under,
constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default)
under, result in the termination of or a right of
termination or cancellation under, accelerate the
performance required by, or result in the creation of any
lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or
assets of Issuer or any of its Subsidiaries under, any of
the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which
Issuer or any of its Subsidiaries is a party, or by which
they or any of their respective properties or assets may
be bound or affected.
(c) Authorized Stock. Issuer has taken
all necessary corporate and other action to authorize and
reserve and to permit it to issue, and, at all times from
the date of this Agreement until the obligation to
deliver Issuer Common Stock upon the exercise of the
Option terminates, will have reserved for issuance, upon
exercise of the Option, shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer
will take all necessary corporate action to authorize and
reserve for issuance all additional shares of Issuer
Common Stock (together with any Rights which may have
been issued with respect thereto) or other securities
which may be issued pursuant to Section 7 upon exercise
of the Option. The shares of Issuer Common Stock to be
issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock (together with
any Rights which may have been issued with respect
thereto) or other securities which may be issuable
pursuant to Section 7, upon issuance pursuant hereto,
shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of
all liens, claims, charges and encumbrances of any kind
or nature whatsoever (except any such lien or
encumbrance created by Grantee), including any preemptive
rights of any stockholder of Issuer.
6. Representations and Warranties of Grantee.
Grantee hereby represents and warrants to Issuer that:
(a) Due Authorization. Grantee has
corporate power and authority to enter into this
Agreement and, subject to any required regulatory
approvals or consents, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This
Agreement has been duly executed and delivered by
Grantee.
(b) Purchase Not for Distribution. This
Option is not being acquired with a view to the public
distribution thereof and neither this Option nor any
Option Shares will be transferred or otherwise disposed
of except in a transaction registered or exempt from
registration under the Securities Act.
7. Adjustment upon Changes in
Capitalization, etc. (a) In the event (i) of any change
in Issuer Common Stock by reason of a stock dividend,
stock split, split-up, recapitalization, combination,
exchange of shares or similar transaction or (ii) that
any Rights issued by Issuer shall become exercisable, the
type and number of shares or securities subject to the
Option, and the Purchase Price therefor, shall be
adjusted appropriately, and, in the case of any of the
transactions described in clause (i) above, proper
provision shall be made in the agreements governing such
transaction so that Grantee shall receive, upon exercise
of the Option, the number and class of shares or other
securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been
exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares
of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in
the first sentence of this Section 7(a)), the number of
shares of Issuer Common Stock subject to the Option shall
be adjusted so that, after such issuance, the Option,
together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 9.9% of the
number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject
or previously issued pursuant to the Option.
(b) In the event that Issuer shall enter into
an agreement (i) to consolidate with or merge into any
person, other than Grantee or one of its Subsidiaries,
and shall not be the continuing or surviving corporation
of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to
merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such
merger, the then outstanding shares of Issuer Common
Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or
any other property or the outstanding shares of Issuer
Common Stock immediately prior to such merger shall after
such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or
(iii) to sell or otherwise transfer all or substantially
all of its assets to any person, other than Grantee or
one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper
provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at
the election of Grantee, of any of (I) the Acquiring
Corporation (as defined below), (II) any person that
controls the Acquiring Corporation or (III) in the case
of a merger described in clause (ii), the Issuer (such
person being referred to as the "Substitute Option
Issuer").
(c) The Substitute Option shall have the
same terms as the Option, provided that if the terms of
the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as
possible and in no event less advantageous to Grantee.
The Substitute Option Issuer shall also enter into an
agreement with the then holder or holders of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be
exercisable for such number of shares of the Substitute
Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the
number of shares of Issuer Common Stock for which the
Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise
price of the Substitute Option per share of the
Substitute Common Stock (the "Substitute Purchase Price")
shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares
of the Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number
of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
(e) The following terms have the meanings
indicated:
(I) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially
all of the Issuer's assets (or the assets of its
Subsidiaries).
(II) "Substitute Common Stock" shall mean the
common stock issued by the Substitute Option Issuer upon
exercise of the Substitute Option.
(III) "Assigned Value" shall mean the highest of
(i) the price per share of Issuer Common Stock at which a
tender offer or exchange offer therefor has been made by
any person (other than Grantee), (ii) the price per share
of Issuer Common Stock to be paid by any person (other
than the Grantee) pursuant to an agreement with Issuer,
and (iii) the highest closing sales price per share of
Issuer Common Stock quoted on National Association of
Securities Dealers, Inc. Automated Quotation/National
Market System ("NASDAQ") (or if Issuer Common Stock is
not quoted on NASDAQ, the highest bid price per share as
quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a
recognized source) within the six-month period
immediately preceding the agreement referred to in
Section 7(c) hereof; provided, however, that in the event
of a sale of all or substantially all of Issuer's assets,
the Assigned Value shall be the sum of the price paid in
such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by
Grantee or by a Grantee Majority (as defined below),
divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. In the event that
an exchange offer is made for the Issuer Common Stock or
an agreement is entered into for a merger or
consolidation involving consideration other than cash,
the value of the securities or other property issuable or
deliverable in exchange for the Issuer Common Stock shall
be determined by a nationally recognized investment
banking firm selected by Grantee (or a majority of
interest of the Grantees if there shall be more than one
Grantee (a "Grantee Majority")) and reasonably acceptable
to Issuer, which determination shall be conclusive for
all purposes of this Agreement.
(IV) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the
one year immediately preceding the consolidation, merger
or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common
Stock on the day preceding such consolidation, merger or
sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by Issuer,
the person merging into Issuer or by any company which
controls or is controlled by such merging person, as
Grantee may elect.
(f) In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be
exercisable for more than 9.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior
to exercise of the Substitute Option. In the event that
the Substitute Option would be exercisable for more than
9.9% of the aggregate of the shares of Substitute Common
Stock but for this clause (f), the Substitute Option
Issuer shall make a cash payment to Grantee equal to the
excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over
(ii) the value of the Substitute Option after giving
effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee
(or a Grantee Majority).
(g) Issuer shall not enter into any
transaction described in subsection (b) of this Section 7
unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all
the obligations of Issuer hereunder and take all other
actions that may be necessary so that the provisions of
this Section 7 are given full force and effect
(including, without limitation, any action that may be
necessary so that the shares of Substitute Common Stock
are in no way distinguishable from or have lesser
economic value (other than any diminution in value
resulting from the fact that the shares of Substitute
Common Stock may be restricted securities, as defined in
Rule 144 under the Securities Act) than other shares of
common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and
10 shall apply to any securities for which the Option
becomes exercisable pursuant to this Section 7 and, as
applicable, references in such sections to "Issuer",
"Option", "Purchase Price" and "Issuer Common Stock"
shall be deemed to be references to "Substitute Option
Issuer", "Substitute Option", "Substitute Purchase Price"
and "Substitute Common Stock", respectively.
8. Repurchase at the Option of Grantee. (a)
At the request of Grantee at any time commencing upon the
first occurrence of a Repurchase Event (as defined in
Section 8(d) below) and ending 12 months immediately
thereafter, Issuer shall repurchase from Grantee (I) the
Option and (II) all shares of Issuer Common Stock
purchased by Grantee pursuant hereto with respect to
which Grantee then has beneficial ownership. The date on
which Grantee exercises its rights under this Section 8
is referred to as the "Request Date". Such repurchase
shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price
paid by Grantee for any shares of Issuer Common
Stock acquired pursuant to the Option with
respect to which Grantee then has beneficial
ownership;
(ii) the excess, if any, of (x) the
Applicable Price (as defined below) for each
share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant
to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to
which the Option has not been exercised; and
(iii) the excess, if any, of the
Applicable Price over the Purchase Price
(subject to adjustment pursuant to Section 7)
paid (or, in the case of Option Shares with
respect to which the Option has been exercised
but the Closing Date has not occurred, payable)
by Grantee for each share of Issuer Common
Stock with respect to which the Option has been
exercised and with respect to which Grantee
then has beneficial ownership, multiplied by
the number of such shares.
(b) If Grantee exercises its rights under
this Section 8, Issuer shall, within 10 business days
after the Request Date, pay the Section 8 Repurchase
Consideration to Grantee in immediately available funds
by wire transfer to a bank account designated by Grantee,
and Grantee shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Grantee then
has beneficial ownership, and Grantee shall warrant that
it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all
liens, claims, charges and encumbrances of any kind
whatsoever. Notwithstanding the foregoing, to the extent
that prior notification to or approval of any regulatory
authority is required in connection with the payment of
all or any portion of the Section 8 Repurchase
Consideration, Grantee shall have the ongoing option to
revoke its request for repurchase pursuant to Section 8
or to require that Issuer (a) deliver from time to time
that portion of the Section 8 Repurchase Consideration
that it is not then so prohibited from paying and (b)
promptly file the required notice or application for
approval and expeditiously process the same (and each
party shall cooperate with the other in the filing of any
such notice or application and the obtaining of any such
approval). If any regulatory authority disapproves of
any part of Issuer's proposed repurchase pursuant to this
Section 8, Issuer shall promptly give notice of such fact
to Grantee and redeliver to Grantee the Option and/or
Option Shares it is then prohibited from repurchasing,
and Grantee shall have the right (x) to exercise the
Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the
number of shares covered by the Option in respect of
which payment has been made pursuant to Section 8(a)(ii)
hereof or (y) to revoke its request for repurchase with
respect to any Option Shares in respect of which such
payment has been made and exercise the Option as to the
number of Option Shares for which the Option was
exercisable at the Request Date. Notwithstanding
anything herein to the contrary, (i) all of Grantee's
rights under this Section 8 shall terminate on the date
of termination of this Option pursuant to Section 3(a)
hereof, unless this Option shall have been exercised in
whole or part prior to the date of termination and (ii)
if this Option shall have been exercised in whole or in
part prior to the date of termination described in clause
(i) above, then Grantee's rights under this Section 8
shall terminate 12 months after such date of termination.
(c) For purposes of this Agreement, the
"Applicable Price" means the highest of (i) the highest
price per share of Issuer Common Stock paid for any such
share by the person or groups described in Section
8(d)(i) hereof, (ii) the price per share of Issuer Common
Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or
7(b)(iii) hereof or (iii) the highest closing sales price
per share of Issuer Common Stock quoted on NASDAQ (or if
Issuer Common Stock is not quoted on NASDAQ, the highest
bid price per share as quoted on the principal trading
market or securities exchange on which such shares are
traded as reported by a recognized source) during the 60
business days preceding the Request Date; provided,
however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of
the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer,
as determined by a nationally recognized investment
banking firm selected by Grantee, divided by the number
of shares of the Issuer Common Stock outstanding at the
time of such sale. If the consideration to be offered,
paid or received pursuant to either of the foregoing
clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good
faith by an independent nationally recognized investment
banking firm selected by Grantee (or a Grantee Majority)
and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event"
shall occur if (i) any person (other than Grantee or any
of its Subsidiaries) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 under
the Exchange Act) or the right to acquire beneficial
ownership of, or any "group" (as such term is defined
under the Exchange Act) (other than Grantee or any
Subsidiary of Grantee) shall have been formed which
beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the then outstanding shares
of Issuer Common Stock or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii)
hereof shall be consummated.
(e) Notwithstanding anything herein to
the contrary, the aggregate amount payable to Grantee
pursuant to this Section 8 shall not exceed $3,500,000.
9. Registration Rights. Issuer shall, if
requested by Grantee (or if applicable, a Grantee
Majority) at any time and from time to time within two
years of the date on which the Option first becomes
exercisable, provided that such period of time shall be
extended by the number of days, if any, by which Issuer
shall delay the registration of the Issuer Common Stock
pursuant to the proviso contained at the end of this
sentence, as expeditiously as possible prepare and file
up to two registration statements under the Securities
Act if such registration is necessary (or in any event up
to two suitable disclosure statements for federal
securities law purposes if no such registration is
required under the Securities Act) in order to permit the
sale or other disposition of any or all shares of Issuer
Common Stock or other securities that have been acquired
by or are issuable to Grantee upon exercise of the Option
in accordance with the intended method of sale or other
disposition stated by Grantee, including a "shelf"
registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer
shall use its best efforts to qualify such shares or
other securities under any applicable state securities
laws; provided, however, that Issuer may delay for a
period not to exceed 90 days filing a registration or
equivalent statement if Issuer shall in good faith
determine that (i) any such registration would adversely
affect an offering or contemplated offering of securities
by Issuer or (ii) the filing of such registration or
equivalent statement would, if not so delayed, materially
and adversely affect a then proposed or pending financial
project, acquisition, merger or corporate reorganization;
and provided further, that nothing contained herein shall
limit or adversely affect in any manner Grantee's rights
contained in the fourth following sentence hereof.
Issuer shall use its best efforts to cause each such
registration statement to become effective, to obtain all
consents or waivers of other parties which are required
therefor and to keep such registration statement
effective for such period not in excess of 180 days from
the day such registration statement first becomes
effective as may be reasonably necessary to effect such
sale or other disposition. Any registration or similar
statement prepared and filed under this Section 9, and
any sale covered thereby, shall be at Issuer's expense
except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's
counsel related thereto. Grantee shall provide all
information reasonably requested by Issuer for inclusion
in any registration or similar statement to be filed
hereunder. If during the time periods referred to in the
first sentence of this Section 9 Issuer effects a registration
under the Securities Act of Issuer Common Stock for its own
account or for any other stockholder of Issuer (other than on
Form S-4 or Form S-8, or any successor forms or any form
with respect to a dividend reinvestment or similar plan),
it shall allow Grantee the right to participate in such
registration, and such participation shall not affect the
obligation of Issuer to effect two registration
statements for Grantee under this Section 9; provided,
however, that, if the managing underwriters of such
offering advise Issuer in writing that in their opinion
the number of shares of Issuer Common Stock requested by
Grantee to be included in such registration, together
with the shares of Issuer Common Stock proposed to be
included in such registration, exceeds the number which
can be sold in such offering, Issuer shall include the
shares requested to be included therein by Grantee pro
rata with the shares intended to be included therein by
Issuer. In connection with any registration pursuant to
this Section 9, Issuer and Grantee shall provide each
other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification
and contribution in connection with such registration.
Notwithstanding anything to the contrary contained
herein, Issuer shall not be required to register Option
Shares pursuant to this Section 9 (i) prior to the
occurrence of a Subsequent Triggering Event, (ii) within
90 days after the effective date of a registration
referred to in the second preceding sentence pursuant to
which Grantee was afforded the opportunity to register
Option Shares and such shares were registered as
requested, (iii) unless a request therefor is made to
Issuer by a Grantee or Grantees which hold at least 25%
of the aggregate number of Option Shares (including
shares of Issuer Common Stock upon exercise of the
Option) then outstanding and (iv) on more than two
occasions by reason of the fact that there shall be more
than one Grantee as a result of any assignment of this
Agreement or division of this Agreement pursuant to
Section 11 hereof.
10. Listing. If Issuer Common Stock or any
other securities to be acquired upon exercise of the
Option are then authorized for quotation on NASDAQ or any
securities exchange, Issuer, upon the request of Grantee,
will promptly file an application to authorize for
quotation the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on
NASDAQ or such other securities exchange and will use its
best efforts to obtain approval of such listing as soon
as practicable.
11. Division of Option. Upon the occurrence
of a Subsequent Triggering Event, this Agreement (and the
Option granted hereby) are exchangeable, without expense,
at the option of Grantee, upon presentation and surrender
of this Agreement at the principal office of Issuer for
other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in
the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any other Agreements and
related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer
of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Agreement, and
(in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered
shall constitute an additional contractual obligation on
the part of Issuer, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Rights Agreement. Issuer shall not
approve, adopt or amend, or propose the approval and
adoption or amendment of, any Shareholder Rights Plan
unless such Shareholder Rights Plan contains terms which
provide, to the reasonable satisfaction of Grantee, that
(a) the Rights issued pursuant thereto will not become
exercisable by virtue of the fact that Grantee is the
Beneficial Owner of shares of Issuer Common Stock (x)
acquired or acquirable pursuant to the grant or exercise
of this Option and (y) held by Grantee or any of its
Subsidiaries as Trust Account Shares or DPC Shares and
(b) no restrictions or limitations with respect to the
exercise of any Rights acquired or acquirable by Grantee
will result or be imposed to the extent such Rights
relate to the shares of Issuer Common Stock described in
clause (a) of this Section 12. This covenant shall
survive for so long as Grantee is the Beneficial Owner of
the shares of Issuer Common Stock described in clause
(a)(x) of this Section 12.
13. 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) Waiver and Amendment. Any provision
of this Agreement may be waived at any time by the party
that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(c) Entire Agreement; No Third-Party
Beneficiary; Severability. This Agreement, together with
the Merger Agreement and the other agreements and
instruments referred to herein and therein, (a)
constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral,
between the parties with respect to the subject matter
hereof and (b) is not intended to confer upon any person
other than the parties hereto any rights or remedies
hereunder. Notwithstanding anything to the contrary
contained in this Agreement or the Merger Agreement, this
Agreement shall be deemed to amend the confidentiality
agreement, dated as of February 3, 1997, between Issuer
and Grantee so as to permit Grantee to enter into this
Agreement and exercise all of its rights hereunder,
including its right to acquire Issuer Common Stock upon
exercise of the Option. If any term, provision, covenant
or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory
agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory
agency determines that the Option does not permit Grantee
to acquire the full number of shares of Issuer Common
Stock as provided in Section 3 hereof (as adjusted
pursuant to Section 7 hereof), it is the express
intention of Issuer to allow Grantee to acquire such
lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law. This Agreement shall
be governed and construed in accordance with the laws of
the State of Maryland without regard to any applicable
conflicts of law rules.
(e) Descriptive Headings. The
descriptive headings contained herein are for convenience
of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail
(return receipt requested) to the parties at the
following addresses (or at such other address for a party
as shall be specified by like notice):
If to Issuer to:
First Citizens Financial Corporation
22 First Field Road
Gaithersburg, Maryland 20878
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: William S. Rubenstein, Esq.
If to Grantee to:
Provident Bankshares Corporation
114 East Lexington Street
Baltimore, Maryland 21202
Attention: Chief Executive Officer
with a copy to:
Muldoon, Murphy & Faucette
501 Wisconsin Avenue, N.W.
Suite 508
Washington, D.C. 20016
Attention: Mary M. Sjoquist, Esq.
(g) Counterparts. This Agreement and any
amendments hereto may be executed in two counterparts,
each of which shall be considered one and the same
agreement and shall become effective when both
counterparts have been signed, it being understood that
both parties need not sign the same counterpart.
(h) Assignment. Neither this Agreement
nor any of the rights, interests or obligations hereunder
or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party,
except that Grantee may assign this Agreement to a wholly
owned subsidiary of Grantee and after the occurrence of a
Subsequent Triggering Event Grantee may assign its rights
under this Agreement to one or more third parties.
Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be
enforceable by the parties and their respective
successors and assigns. As used in this Agreement,
Grantee shall include any person to whom this Agreement
or the Option shall be assigned by a previous Grantee in
accordance with the terms hereof.
(i) Further Assurances. In the event of
any exercise of the Option by Grantee, Issuer and Grantee
shall execute and deliver all other documents and
instruments and take all other action that may be
reasonably necessary in order to consummate the
transactions provided for by such exercise.
(j) Specific Performance. The parties
hereto agree that this Agreement may be enforced by
either party through specific performance, injunctive
relief and other equitable relief. Both parties further
agree to waive any requirement for the securing or
posting of any bond in connection with the obtaining of
any such equitable relief and that this provision is
without prejudice to any other rights that the parties
hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have
caused this Stock Option Agreement to be signed by their
respective officers thereunto duly authorized, all as of
the day and year first written above.
FIRST CITIZENS FINANCIAL CORPORATION
By ------------------------------
Name: Enos K. Fry
Title: President
PROVIDENT BANKSHARES CORPORATION
By ------------------------------
Name: Carl W. Stearn
Title: Chairman and CEO
