<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
February 25, 1998
- --------------------------------------------------------------------------------
(Date of earliest event reported)
Maryland Federal Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 0-18107 52-1640579
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3505 Hamilton Street, Hyattsville, Maryland 20782
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(301) 779-1200
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE>
Item 5. Other Events
On February 25, 1998, Maryland Federal Bancorp, Inc. (the "Company"),
BB&T Corporation ("BB&T") and BB&T Financial Corporation of Virginia ("BB&T
Financial"), a wholly-owned subsidiary of BB&T, entered into an Agreement and
Plan of Reorganization, dated as of February 25, 1998 (the "Agreement"),
which sets forth the terms and conditions pursuant to which the Company would
be merged with and into BB&T Financial (the "Merger"). The Agreement
provides, among other things, that as a result of the Merger, each
outstanding share of Company Common Stock will be converted into the right to
receive .5975 (subject to potential adjustment in the manner provided in the
Agreement, the "Exchange Ratio") of a share of BB&T Common Stock, provided
that if the product of the Exchange Ratio multiplied by the average closing
price per share of the BB&T Common Stock during a specified period preceding
consummation of the Merger is less than $36.00, the Exchange Ratio shall be
increased to the lesser of (i) the amount necessary to increase such product
to $36.00 or (ii) .6102. The Exchange Ratio also is subject to potential
adjustment at the election of BB&T in the event that the Company elects to
terminate the Agreement because the average price of the BB&T Common Stock
during a specified period falls below a specified level. It is anticipated
that the Merger will constitute a tax-free reorganization under the Internal
Revenue Code.
Consummation of the Merger is subject to a number of conditions,
including, but not limited to, (i) the approval of the Agreement by the
stockholders of the Company and (ii) the receipt of all required regulatory
approvals.
In connection with the Agreement, the Company and BB&T entered into a
Stock Option Agreement pursuant to which the Company granted BB&T an option
to purchase up to 19.9% of the Company's Common Stock upon the occurrence of
certain events, as set forth in the Stock Option Agreement.
In connection with its approval of the Agreement and the Stock Option
Agreement, the Company adopted an amendment to its Stockholder Rights Plan
which generally provides that none of the Agreement, the Stock Option
Agreement and the transactions contemplated thereby shall result in the grant
of any rights under such plan to any person or enable or require any of the
rights thereunder to be exercised, distributed or triggered.
The press release issued by the Company and BB&T with respect to the
announcement of the Agreement is included as Exhibit 99.1 hereto.
The foregoing descriptions of and references to all of the
above-mentioned agreements and documents are qualified in their entirety by
reference to the complete texts of the agreements and documents, which are
filed as exhibits to this Current Report on Form 8-K.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits:
2.1 Agreement and Plan of Reorganization, dated as of February 25,
1998, among the Company, BB&T and BB&T Financial, including
Exhibits A through E thereto
2.2 Stock Option Agreement, dated as of February 25, 1998, between
the Company and BB&T
4.2 Second Amendment, dated as of February 25, 1998, to the
Company Rights Agreement, dated as of January 18, 1990, as
amended
99.1 Press Release, dated February 25, 1998
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARYLAND FEDERAL BANCORP, INC.
Date: March 3, 1998 By: /s/ Robert H. Halleck
--------------------------------------
Robert H. Halleck
President and Chief Executive Officer
4
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
MARYLAND FEDERAL BANCORP, INC.,
BB&T FINANCIAL CORPORATION OF VIRGINIA
and
BB&T CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Defined Elsewhere . . . . . . . . . . . . . . . . . . 6
ARTICLE II
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Filing; Plan of Merger. . . . . . . . . . . . . . . . . . . 7
2.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Effect of Merger. . . . . . . . . . . . . . . . . . . . . . 8
2.6 Further Assurances. . . . . . . . . . . . . . . . . . . . . 8
2.7 Merger Consideration. . . . . . . . . . . . . . . . . . . . 9
2.8 Conversion of Shares; Payment of Merger Consideration . . . 9
2.9 Conversion of Stock Options . . . . . . . . . . . . . . . . 10
2.10 Merger of Subsidiary. . . . . . . . . . . . . . . . . . . . 11
2.11 Anti-Dilution . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MARYLAND FEDERAL . . . . . . . 12
3.1 Capital Structure . . . . . . . . . . . . . . . . . . . . . 12
3.2 Organization, Standing and Authority. . . . . . . . . . . . 12
3.3 Ownership of Subsidiaries. . . . . . . . . . . . . . . . . 12
3.4 Organization, Standing and Authority of the Subsidiaries. . 13
3.5 Authorized and Effective Agreement; Redemption of Rights
or Termination of Rights Agreement. . . . . . . . . . . . . 13
3.6 Securities Filings; Financial Statements; Statements True . 14
3.7 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . 15
3.8 Adverse Change. . . . . . . . . . . . . . . . . . . . . . . 15
3.9 Absence of Undisclosed Liabilities. . . . . . . . . . . . . 15
3.10 Properties. . . . . . . . . . . . . . . . . . . . . . . . . 15
3.11 Environmental Matters . . . . . . . . . . . . . . . . . . . 16
3.12 Loans; Allowance for Loan Losses. . . . . . . . . . . . . . 17
3.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Employees; Compensation; Benefit Plans. . . . . . . . . . . 18
3.15 Certain Contracts . . . . . . . . . . . . . . . . . . . . . 22
3.16 Legal Proceedings; Regulatory Approvals . . . . . . . . . . 23
3.17 Compliance with Laws; Filings . . . . . . . . . . . . . . . 23
3.18 Brokers and Finders . . . . . . . . . . . . . . . . . . . . 24
3.19 Repurchase Agreements; Derivatives. . . . . . . . . . . . . 24
<PAGE>
3.20 Deposit Accounts. . . . . . . . . . . . . . . . . . . . . . 25
3.21 Related Party Transactions. . . . . . . . . . . . . . . . . 25
3.22 Certain Information . . . . . . . . . . . . . . . . . . . . 25
3.23 Tax and Regulatory Matters. . . . . . . . . . . . . . . . . 25
3.24 State Takeover Laws . . . . . . . . . . . . . . . . . . . . 25
3.25 Labor Relations . . . . . . . . . . . . . . . . . . . . . . 26
3.26 Fairness Opinion. . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BB&T . . . . . . . . . . . . . 26
4.1 Capital Structure of BB&T . . . . . . . . . . . . . . . . . 26
4.2 Organization, Standing and Authority of BB&T. . . . . . . . 26
4.3 Authorized and Effective Agreement. . . . . . . . . . . . . 27
4.4 Organization, Standing and Authority of BB&T Subsidiaries . 27
4.5 Securities Documents; Statements True . . . . . . . . . . . 28
4.6 Financial Statements. . . . . . . . . . . . . . . . . . . . 28
4.7 Adverse Change. . . . . . . . . . . . . . . . . . . . . . . 28
4.8 Absence of Undisclosed Liabilities. . . . . . . . . . . . . 28
4.9 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 28
4.10 Certain Information . . . . . . . . . . . . . . . . . . . . 29
4.11 Tax and Regulatory Matters. . . . . . . . . . . . . . . . . 29
4.12 Share Ownership . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE V
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1 Maryland Federal Shareholder Meeting. . . . . . . . . . . . 30
5.2 Registration Statement; Proxy Statement/Prospectus. . . . . 30
5.3 Plan of Merger; Reservation of Shares . . . . . . . . . . . 30
5.4 Additional Acts . . . . . . . . . . . . . . . . . . . . . . 31
5.5 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . 31
5.6 Certain Accounting Matters. . . . . . . . . . . . . . . . . 32
5.7 Access to Information . . . . . . . . . . . . . . . . . . . 32
5.8 Press Releases. . . . . . . . . . . . . . . . . . . . . . . 33
5.9 Forbearances of Maryland Federal. . . . . . . . . . . . . . 33
5.10 Employment Agreements . . . . . . . . . . . . . . . . . . . 36
5.11 Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 36
5.12 Employee Benefits . . . . . . . . . . . . . . . . . . . . . 36
5.13 Directors and Officers Protection . . . . . . . . . . . . . 37
5.14 Forbearances of BB&T. . . . . . . . . . . . . . . . . . . . 38
5.15 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.16 Exchange Listing. . . . . . . . . . . . . . . . . . . . . . 38
5.17 Advisory Board for Maryland Region. . . . . . . . . . . . . 38
5.18 BB&T Rights Agreement . . . . . . . . . . . . . . . . . . . 39
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1 Conditions Precedent - BB&T and Maryland Federal . . . . . . . . 39
6.2 Conditions Precedent - Maryland Federal. . . . . . . . . . . . . 40
6.3 Conditions Precedent - BB&T . . . . . . . . . . . . . . . . . . 41
ARTICLE VII
TERMINATION, DEFAULT, WAIVER AND AMENDMENT. . . . . . . . . . . . . . 42
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 45
7.3 Survival of Representations, Warranties and Covenants. . . . . . 45
7.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.5 Amendment or Supplement. . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 46
8.3 No Assignment; Successors. . . . . . . . . . . . . . . . . . . . 46
8.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.5 Specific Performance . . . . . . . . . . . . . . . . . . . . . . 47
8.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 48
ANNEXES
Annex A Form of Articles of Merger for Virginia
Annex B Form of Articles of Merger for Maryland
Annex C Form of Employment Agreement with Robert H. Halleck
Annex D Form of Employment Agreements with David E. Baker, Nancy B.
Cohen and J. Diane Stevenson
Annex E Form of Employment Agreements with Lynn B. Hounslow and
Ronald R. O'Brien
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of
February 25, 1998, is among MARYLAND FEDERAL BANCORP, INC. ("Maryland Federal"),
a Maryland corporation having its principal office at Hyattsville, Maryland,
BB&T FINANCIAL CORPORATION OF VIRGINIA, a Virginia corporation having its
principal office at Virginia Beach, Virginia ("BB&T Financial"), and BB&T
CORPORATION ("BB&T"), a North Carolina corporation having its principal office
at Winston-Salem, North Carolina;
R E C I T A L S:
The parties desire that Maryland Federal shall be merged with and into BB&T
Financial (said transaction being hereinafter referred to as the "Merger")
pursuant to a plan of merger (the "Plan of Merger") substantially in the form
incorporated into sets of Articles of Merger attached as Annex A hereto
(collectively, "Articles of Merger"), and the parties desire to provide for
certain undertakings, conditions, representations, warranties and covenants in
connection with the transactions contemplated hereby. As a condition and
inducement to BB&T's willingness to enter into the Agreement, Maryland Federal
is concurrently granting to BB&T an option to acquire, under certain
circumstances, 1,290,000 shares of the common stock, par value $.01 per share,
of Maryland Federal (the "BB&T Option Agreement").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions
When used herein, the capitalized terms set forth below shall have the
following meanings:
"Affiliate" means, with respect to any Person, any Person, who directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with such Person and, without limiting the generality of
the foregoing, includes any executive officer or director of such Person and any
Affiliate of such executive officer or director.
"Bank Holding Company Act" shall mean the Federal Bank Holding Company Act
of 1956, as amended.
<PAGE>
"BB&T Common Stock" shall mean the shares of voting common stock, par value
$5.00 per share, of BB&T, with BB&T Rights attached issued pursuant to the BB&T
Rights Agreement.
"BB&T Option Agreement" shall mean the Stock Option Agreement dated as of
even date herewith under which BB&T has an option to purchase shares of Maryland
Federal Common Stock, as amended from time to time, which shall be executed
concurrently with execution of this Agreement.
"BB&T Rights" shall mean rights issued by BB&T pursuant to the BB&T Rights
Agreement.
"BB&T Rights Agreement" shall mean the Rights Agreement, dated December 17,
1996, between BB&T and Branch Banking and Trust Company, as Rights Agent,
relating to BB&T's Series B Junior Participating Preferred Stock, $5.00 par
value per share.
"BB&T Subsidiaries" shall mean all bank Subsidiaries of BB&T at the
Effective Time.
"Business Day" shall mean all days other than Saturdays, Sundays and
Federal Reserve holidays.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Department" shall mean the Department of Assessments and Taxation of the
State of Maryland.
"Disclosed" shall mean disclosed in the Maryland Federal Disclosure
Memorandum, referencing the Section number herein pursuant to which such
disclosure is being made.
"Environmental Claim" means any notice from any governmental authority or
third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup or remediation costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based upon, or resulting from a
violation of the Environmental Laws or the presence or release into the
environment of any Hazardous Substances.
"Environmental Laws" means all applicable federal, state and local laws and
regulations, as amended, relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface, or subsurface strata) and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over and including common law in respect of,
pollution
2
<PAGE>
or protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
6901 et seq., and other laws and regulations relating to emissions, discharges,
releases, or threatened releases of any Hazardous Substances, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of any Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"Financial Advisor" shall mean Sandler O'Neill & Partners, L.P.
"Financial Statements" shall mean (a) with respect to BB&T, (i) the
consolidated balance sheet (including related notes and schedules, if any) of
BB&T as of December 31, 1996, 1995, and 1994, and the related consolidated
statements of income, shareholders' equity and cash flows (including related
notes and schedules, if any) for each of the three years ended December 31,
1996, 1995, and 1994, as filed by BB&T in Securities Documents and (ii) the
consolidated balance sheets of BB&T (including related notes and schedules, if
any) and the related consolidated statements of income, shareholders' equity and
cash flows (including related notes and schedules, if any) included in
Securities Documents filed by BB&T with respect to periods ended subsequent to
December 31, 1996, and (b) with respect to Maryland Federal, (i) the
consolidated statements of financial condition (including related notes and
schedules, if any) of Maryland Federal as of February 28, 1997, February 29,
1996 and February 28, 1995, and the related consolidated statements of income
and retained earnings, and cash flows (including related notes and schedules,
if any) for each of the three years ended February 28, 1997, February 29, 1996
and February 28, 1995 as filed by Maryland Federal in Securities Documents and
(ii) the consolidated statements of financial condition of Maryland Federal
(including related notes and schedules, if any) and the related consolidated
statements of income and retained earnings, and cash flows (including related
notes and schedules, if any) included in Securities Documents filed by Maryland
Federal with respect to periods ended subsequent to February 28, 1997.
"GAAP" shall mean generally accepted accounting principles applicable to
financial institutions and their holding companies, as in effect at the relevant
date.
"Hazardous Substances" means any substance or material (i) identified in
CERCLA; (ii) determined to be toxic, a pollutant or a contaminant under any
applicable federal, state or local statutes, law, ordinance, rule or regulation,
including but not limited to petroleum products; (iii)
3
<PAGE>
asbestos; (iv) radon; (v) poly-chlorinated biphiphenyls and (vi) such other
materials, substances or waste which are otherwise dangerous, hazardous, harmful
to human health or the environment.
"IRS" shall mean the Internal Revenue Service.
"Maryland Federal Common Stock" shall mean the shares of voting common
stock, par value $.01 per share, of Maryland Federal, with Maryland Federal
Rights attached issued pursuant to the Maryland Federal Rights Agreement.
"Maryland Federal Disclosure Memorandum" shall mean the written information
in one or more documents, each of which is entitled "Maryland Federal Disclosure
Memorandum" and dated on or before the date of this Agreement and delivered not
later than the date of execution of this Agreement by Maryland Federal to BB&T,
and describing in reasonable detail the matters contained therein. Each
disclosure made therein shall be in existence on the date of this Agreement and
shall specifically reference each Section of this Agreement under which such
disclosure is made. Information disclosed with respect to one Section shall be
deemed to be disclosed for purposes of any other Section only if such disclosure
is sufficient to put BB&T on notice that the disclosure is intended to be
responsive with respect to such other Section.
"Maryland Federal Rights" shall mean rights issued by Maryland Federal
pursuant to the Maryland Federal Rights Agreement.
"Maryland Federal Rights Agreement" shall mean the Rights Agreement, dated
January 18, 1990, between Maryland Federal and Registrar and Transfer Company,
as Rights Agent, relating to Maryland Federal's Series A Junior Participating
Preferred Stock, par value $.01 per share.
"Maryland Federal Subsidiaries" shall mean Maryland Federal Savings and
Loan Association, any and all other Subsidiaries of Maryland Federal as of the
date hereof and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Maryland Federal after the date hereof
and held as a Subsidiary by Maryland Federal at the Effective Time.
"Material Adverse Effect" on BB&T or Maryland Federal shall mean an event,
change, or occurrence which, individually or together with any other event,
change or occurrence, (i) has a material adverse effect on the financial
condition, results of operations, business or business prospects of BB&T and the
BB&T Subsidiaries taken as a whole, or Maryland Federal and the Maryland Federal
Subsidiaries taken as a whole, or (ii) materially impairs the ability of BB&T,
BB&T Financial or Maryland Federal to perform its obligations under this
Agreement or to consummate the Merger and the other transactions contemplated by
this Agreement; provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) actions and omissions of BB&T or Maryland Federal
taken with the prior written consent of the other in contemplation of the
transactions contemplated hereby (including any actions taken by Maryland
Federal pursuant to Section 5.6 hereof), (b) the direct effects of compliance
with this Agreement on the operating performance of the parties, including
expenses incurred by the parties in consummating
4
<PAGE>
the transactions contemplated by this Agreement or relating to any litigation
arising as a result of the Merger and (c) any effect with respect to either BB&T
or Maryland Federal caused, in whole or in part, by the other.
"MGCL" shall mean the General Corporation Law of the State of Maryland, as
amended.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OTS" shall mean the Office of Thrift Supervision.
"Proxy Statement/Prospectus" shall mean the proxy statement and prospectus,
together with any supplements thereto, to be sent to shareholders of Maryland
Federal to solicit their votes in connection with a proposal to approve this
Agreement and the Plan of Merger.
"Registration Statement" shall mean the registration statement of BB&T
(including the Proxy Statement/Prospectus) as declared effective by the
Commission under the Securities Act, including any post-effective amendments or
supplements thereto as filed with the Commission under the Securities Act, with
respect to the BB&T Common Stock to be issued in connection with the
transactions contemplated by this Agreement.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests (other than rights
pursuant to the Rights Agreements described under the definitions of "BB&T
Common Stock" and "Maryland Federal Common Stock"), and stock appreciation
rights, performance units and similar stock-based rights whether or not they
obligate the issuer thereof to issue stock or other securities or to pay cash.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws, including but not limited to periodic
and other reports filed pursuant to Section 13 of the Exchange Act.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939 as amended; and the rules and
regulations of the Commission promulgated thereunder.
"State Board" shall mean the Virginia State Corporation Commission, Bureau
of Financial Institutions.
5
<PAGE>
"Stock Option" shall mean, collectively, any option granted under the Stock
Option Plans, outstanding and unexercised on the date hereof to acquire shares
of Maryland Federal Common Stock, aggregating 631,253 shares.
"Stock Option Plans" shall mean Maryland Federal's 1992 Stock Incentive
Plan, 1993 Directors' Stock Option Plan and 1995 Stock Option Plan.
"Stock Purchase Plan" shall mean Maryland Federal's 1988 Employee Stock
Purchase Plan.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either owns or controls 50% or
more of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 50% or more of the outstanding equity
securities is owned directly or indirectly by its parent (in determining whether
one entity owns or controls 50% or more of the outstanding equity securities of
another, equity securities owned or controlled in a fiduciary capacity shall be
deemed owned and controlled by the beneficial owner).
"TILA" shall mean the Truth in Lending Act, as amended.
"VSCA" shall mean the Virginia Stock Corporation Act, as amended.
1.2 Terms Defined Elsewhere
The capitalized terms set forth below are defined in the following
sections:
Agreement Introduction
Articles of Merger Recitals
BB&T Introduction
BB&T Financial Introduction
BB&T Option Agreement Recitals
BB&T Option Plan Section 2.9(a)
BB&T Ratio Section 7.1(g)
Closing Section 2.4
Closing Date Section 2.4
Constituent Corporations Section 2.1
Converted Value Section 7.1(g)
Determination Date Section 7.1(g)
Effective Time Section 2.3
Exchange Ratio Section 2.7(a)
Index Group Section 7.1(g)
Index Price Section 7.1(g)
Maryland Federal Introduction
Maryland Federal Preferred Stock Section 3.1
6
<PAGE>
Merger Recitals
Merger Consideration Section 2.7
PBGC Section 3.14(b)(iv)
Plan Section 3.14(b)(i)
Plan of Merger Recitals
Starting Date Section 7.1(g)
Surviving Corporation Section 2.1(a)
VSCC Section 2.2
ARTICLE II
THE MERGER
2.1 Merger
BB&T Financial and Maryland Federal are constituent corporations (the
"Constituent Corporations") to the Merger as contemplated by the VSCA. At the
Effective Time:
(a) Maryland Federal shall be merged with and into BB&T Financial in
accordance with the applicable provisions of the MGCL and the VSCA, with BB&T
Financial being the surviving corporate entity (hereinafter sometimes referred
to as the "Surviving Corporation").
(b) The separate existence of Maryland Federal shall cease and the Merger
shall in all respects have the effect provided in Section 2.5.
(c) The Articles of Incorporation of BB&T Financial at the Effective Time
shall become the Articles of Incorporation of the Surviving Corporation.
(d) The Bylaws of BB&T Financial at the Effective Time shall become the
Bylaws of the Surviving Corporation.
2.2 Filing; Plan of Merger
The Merger shall not become effective unless this Agreement and the Plan of
Merger are duly approved by shareholders holding the requisite number of shares
of each of Maryland Federal and BB&T Financial. Upon fulfillment or waiver of
the conditions specified in Article VI and provided that this Agreement has not
been terminated pursuant to Article VII, the Constituent Corporations will cause
the Articles of Merger to be executed and filed with the Department as provided
in Section 3-107 of the MGCL and the Virginia State Corporation Commission
("VSCC") as provided in Section 13.1-720 of the VSCA. The Plan of Merger is
incorporated herein by reference, and adoption of this Agreement by the Boards
of Directors of the Constituent Corporations and approval by the shareholders of
the Constituent Corporations shall constitute adoption and approval of the Plan
of Merger.
7
<PAGE>
2.3 Effective Time
The Merger shall be effective at the day and hour specified in the Articles
of Merger filed with the Department and the VSCC (herein sometimes referred to
as the "Effective Time").
2.4 Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Womble Carlyle Sandridge & Rice,
PLLC, Winston-Salem, North Carolina, at 10:00 a.m. on the date designated by
BB&T which is within thirty days following the satisfaction of the conditions to
Closing set forth in Article VI (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing, or
such later date as the parties may otherwise agree (the "Closing Date").
2.5 Effect of Merger
From and after the Effective Time, the Merger shall have the effects
specified in Section 13.1-721 of the VSCA and Section 3-114 of the MGCL.
Without limiting the foregoing, from and after the Effective Time, the separate
existence of Maryland Federal shall cease, and the Surviving Corporation shall
thereupon and thereafter, to the extent consistent with its Articles of
Incorporation, possess all of the rights, privileges, immunities and franchises,
of a public as well as a private nature, of each of the Constituent
Corporations; and all property, real, personal and mixed, and all debts due on
whatever account, and all other chooses in action, and each and every other
interest of or belonging to or due to each of the Constituent Corporations shall
be taken and deemed to be transferred to and vested in the Surviving Corporation
without further act or deed; and the title to any real estate or any interest
therein vested in either of the Constituent Corporations shall not revert or be
in any way impaired by reason of the Merger. The Surviving Corporation shall
thenceforth be responsible for all the liabilities, obligations and penalties of
each of the Constituent Corporations; and any claim, existing action or
proceeding, civil or criminal, pending by or against either of the Constituent
Corporations may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place; and any judgment rendered
against either of the Constituent Corporations may be enforced against the
Surviving Corporation. Neither the rights of creditors nor any liens upon the
property of either of the Constituent Corporations shall be impaired by reason
of the Merger.
2.6 Further Assurances
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any further deeds, assignments or assurances in law
or any other actions are necessary, desirable or proper to vest, perfect or
confirm of record or otherwise, in the Surviving Corporation, the title to any
property or rights of the Constituent Corporations acquired or to be acquired by
reason of, or as a result of, the Merger, the Constituent Corporations agree
that such Constituent Corporations and their proper officers and directors shall
and will execute and deliver all such proper deeds, assignments and assurances
in law and do all things necessary, desirable
8
<PAGE>
or proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purpose of this Agreement,
and that the proper officers and directors of the Surviving Corporation are
fully authorized and directed in the name of the Constituent Corporations or
otherwise to take any and all such actions.
2.7 Merger Consideration
As used herein, the term "Merger Consideration" shall mean the portion of a
whole share of BB&T Common Stock to be exchanged for each share of Maryland
Federal Common Stock issued and outstanding as of the Effective Time and cash
(without interest) to be payable in exchange for any fractional share of BB&T
Common Stock which would otherwise be exchanged for a share of Maryland Federal
Common Stock, determined as follows:
(a) The number of shares of BB&T Common Stock to be issued in exchange for
each issued and outstanding share of Maryland Federal Common Stock shall be in
the ratio of .5975 shares of BB&T Common Stock for each share of Maryland
Federal Common Stock, subject to adjustment in the manner set forth in this
Section 2.7(a) and pursuant to Sections 2.11 and 7.1(g) (the "Exchange Ratio");
provided, that if the product of the Exchange Ratio multiplied by the Average
Closing Price (as defined in Section 7.1(g)) is less than $36.00, the Exchange
Ratio shall be increased to the lesser of (i) the amount necessary to increase
such product to $36.00, or (ii) .6102 (subject to potential adjustment pursuant
to Section 7.01(g)).
(b) The amount of cash payable with respect to any fractional share of
BB&T Common Stock shall be determined by multiplying the fractional part of such
share by the Average Closing Price. No person will be entitled to dividends,
voting rights or any other rights as a BB&T shareholder in respect of any
fractional share.
2.8 Conversion of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of Maryland Federal or the holders of record of Maryland Federal
Common Stock, each share of Maryland Federal Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into and shall
represent the right to receive, upon surrender of the certificate representing
such share of Maryland Federal Common Stock (as provided in subsection (d)
below), the Merger Consideration.
(b) Each share of the common stock of BB&T Financial issued and
outstanding immediately prior to the Effective Time shall continue to be issued
and outstanding.
(c) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of Maryland Federal Common Stock
shall be deemed upon the Effective Time for all purposes to represent only the
right to receive the Merger Consideration. No interest will be paid or accrued
on the Merger Consideration upon the surrender of the certificate or
certificates representing shares of Maryland Federal Common Stock. With respect
9
<PAGE>
to any certificate for Maryland Federal Common Stock that has been lost or
destroyed, BB&T shall pay the Merger Consideration attributable to such
certificate upon receipt of a surety bond or other adequate indemnity as
required in accordance with BB&T's standard policy, and evidence reasonably
satisfactory to BB&T of ownership of the shares represented thereby. After the
Effective Time, no transfer of the shares of Maryland Federal Common Stock
outstanding immediately prior to the Effective Time shall be made on the stock
transfer books of the Surviving Corporation.
(d) Promptly after the Effective Time, BB&T shall cause to be delivered or
mailed to each Maryland Federal shareholder a form of letter of transmittal and
instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any shares of Maryland
Federal Common Stock. Upon surrender of such certificates or other evidence of
ownership meeting the requirements of Section 2.8(c), together with such letter
of transmittal duly executed and completed in accordance with the instructions
thereto, and such other documents as may be reasonably requested, BB&T shall
promptly cause the transfer to the persons entitled thereto of the Merger
Consideration.
(e) The Surviving Corporation shall pay any dividends or other
distributions with a record date prior to the Effective Time which have been
declared or made by Maryland Federal in respect of shares of Maryland Federal
Common Stock in accordance with the terms of this Agreement and which remain
unpaid at the Effective Time. To the extent permitted by law, former
shareholders of record of Maryland Federal shall be entitled to vote after the
Effective Time at any meeting of BB&T shareholders the number of whole shares of
BB&T Common Stock into which their respective shares of Maryland Federal Common
Stock are converted, regardless of whether such holders have exchanged their
certificates representing Maryland Federal Common Stock for certificates
representing BB&T Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by BB&T on the
BB&T Common Stock, the record date for which is at or after the Effective Time,
the declaration shall include dividends or other distributions on all shares of
BB&T Common Stock issuable pursuant to this Agreement, but after the Effective
Time no dividend or other distribution payable to the holders of record of BB&T
Common Stock as of any time subsequent to the Effective Time shall be delivered
to the holder of any certificate representing Maryland Federal Common Stock
until such holder surrenders such certificate for exchange as provided in this
Section 2.8. Upon surrender of such certificate, both the BB&T Common Stock
certificate and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share of
Maryland Federal Common Stock represented by such certificate.
2.9 Conversion of Stock Options
(a) At the Effective Time, each Stock Option then outstanding (and which
by its terms does not lapse on or before the Effective Time), whether or not
then exercisable, shall be converted automatically into and become an option
under the BB&T 1995 Omnibus Stock Incentive Plan or successor plan thereto (the
"BB&T Option Plan"), and shall be governed by the
10
<PAGE>
terms and conditions of the BB&T Option Plan; provided, however, that in no
event shall the vesting, exercise and duration provisions of any Stock Option be
less favorable following conversion to an option under the BB&T Option Plan than
as provided under the individual stock option agreements as in effect under the
applicable Stock Option Plan immediately preceding the Effective Time. In
making such conversion, (i) the number of shares of BB&T Common Stock subject to
each such Stock Option shall be the number of whole shares of BB&T (omitting any
fractional share) determined by multiplying the number of shares of Maryland
Federal Common Stock subject to such Stock Option immediately prior to the
Effective Time by the Exchange Ratio, (ii) the per share exercise price under
each such Stock Option shall be adjusted by dividing the per share exercise
price under each such Stock Option by the Exchange Ratio and rounding up to the
nearest cent and (iii) no restrictions on transfers shall be placed on shares of
BB&T Common Stock received through the exercise of the option, except to the
extent that such restrictions would have been placed on such shares under the
Stock Option Plans or are required by the Securities Laws. In addition, each
such Stock Option which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Code, and the regulations promulgated thereunder,
so as to continue as an incentive stock option under Section 424(a) of the Code,
and so as not to constitute a modification, extension, or renewal of the option,
within the meaning of Section 424(h) of the Code. BB&T and Maryland Federal
agree to take all necessary steps to effectuate the foregoing provisions of this
Section 2.9. Each grant of a converted option to any individual who subsequent
to the Merger will be a director or officer of BB&T as construed under Rule
16b-3 shall, as a condition to such conversion, be approved in accordance with
the provisions of Rule 16b-3.
(b) As soon as practicable following the Effective Time, BB&T shall
deliver to the participants receiving converted options under the BB&T Option
Plan an appropriate notice setting forth such participant's rights pursuant
thereto. BB&T has reserved under the BB&T Option Plan adequate shares of BB&T
Common Stock for delivery upon exercise of any such converted options, and such
shares of BB&T Common Stock shall be registered under the Securities Act as of
the Effective Time.
2.10 Merger of Subsidiary
In the event that BB&T shall request, Maryland Federal shall take such
actions, and shall cause the Maryland Federal Subsidiaries to take such actions,
as may be required in order to effect, at the Effective Time, the merger of one
or more of the Maryland Federal Subsidiaries with and into, in each case, one of
the BB&T Subsidiaries.
2.11 Anti-Dilution
In the event BB&T changes the number of shares of BB&T Common Stock issued
and outstanding prior to the Effective Time as a result of a stock split, stock
dividend or other similar recapitalization, and the record date thereof (in the
case of a stock dividend) or the effective date thereof (in the case of a stock
split or similar recapitalization for which a record date is not
11
<PAGE>
established) shall be prior to the Effective Time, the Merger Consideration and
the Exchange Ratio shall be proportionately adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MARYLAND FEDERAL
Except as Disclosed, Maryland Federal represents and warrants to BB&T as
follows (no representation or warranty herein of Maryland Federal shall be
deemed to be inaccurate unless the inaccuracy would permit BB&T to refuse to
consummate the Merger under the applicable standard set forth in Section
6.3(a)):
3.1 Capital Structure
The authorized capital stock of Maryland Federal consists of 15,000,000
shares of Maryland Federal Common Stock, par value $.01 per share, and
10,000,000 shares of preferred stock ("Maryland Federal Preferred Stock"). As
of the date hereof, 6,481,912 shares of Maryland Federal Common Stock are issued
and outstanding, and no shares of the Maryland Federal Preferred Stock are
issued and outstanding. No other classes of capital stock of Maryland Federal,
common or preferred, are authorized, issued or outstanding. All outstanding
shares of Maryland Federal Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. No shares of capital stock have
been reserved for any purpose, except for (i) shares of Maryland Federal Common
Stock reserved in connection with the Stock Option Plans and the Stock Purchase
Plan, (ii) shares of Series A Junior Participating Preferred Stock of Maryland
Federal reserved for issuance pursuant to the Maryland Federal Rights Agreement,
and (iii) 1,290,000 shares of Maryland Federal Common Stock reserved in
connection with the BB&T Option Agreement. Maryland Federal has granted options
to acquire 631,253 shares of Maryland Federal Common Stock under the Stock
Option Plans, which options remain outstanding as of the date hereof. Except
with respect to the Stock Purchase Plan and as set forth in this Section 3.1,
there are no Rights authorized, issued or outstanding with respect to the
capital stock of Maryland Federal. Holders of Maryland Federal Common Stock do
not have preemptive rights.
3.2 Organization, Standing and Authority
Maryland Federal is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland, with full corporate power
and authority to carry on its business as now conducted and to own, lease and
operate its assets. Maryland Federal is not required to be qualified to do
business in any other state of the United States or foreign jurisdiction.
3.3 Ownership of Subsidiaries
Section 3.3 of the Maryland Federal Disclosure Memorandum lists all of the
Maryland Federal Subsidiaries and, with respect to each, its jurisdiction of
organization, jurisdictions in which it is qualified or otherwise licensed to
conduct business, the number of shares or ownership
12
<PAGE>
interests owned by Maryland Federal (directly or indirectly), the percentage
ownership interest so owned by Maryland Federal and its business activities.
The outstanding shares of capital stock or other equity interests of the
Maryland Federal Subsidiaries are validly issued and outstanding, fully paid and
nonassessable, and all such shares are directly or indirectly owned by Maryland
Federal free and clear of all liens, claims and encumbrances or preemptive
rights of any person. No Rights are authorized, issued or outstanding with
respect to the capital stock or other equity interests of the Maryland Federal
Subsidiaries, and there are no agreements, understandings or commitments
relating to the right of Maryland Federal to own, to vote or to dispose of said
interests. None of the shares of capital stock or other equity interests of the
Maryland Federal Subsidiaries have been issued in violation of the preemptive
rights of any person. Section 3.3 of the Maryland Federal Disclosure Memorandum
also lists all shares of capital stock or other securities or ownership
interests of any corporation, partnership, joint venture, or other organization
(other than the Maryland Federal Subsidiaries) owned directly or indirectly by
Maryland Federal.
3.4 Organization, Standing and Authority of the Subsidiaries
Each Maryland Federal Subsidiary which is a depository institution is a
federally chartered savings and loan association, the deposits of which are
insured by the SAIF. Each of the Maryland Federal Subsidiaries is validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of the Maryland Federal Subsidiaries has full power and
authority to carry on its business as now conducted, and is duly qualified to do
business in each jurisdiction Disclosed with respect to it. No Maryland Federal
Subsidiary is required to be qualified to do business in any other state of the
United States or foreign jurisdiction, or is engaged in any type of activities
that have not been Disclosed.
3.5 Authorized and Effective Agreement; Redemption of Rights or Termination of
Rights Agreement
(a) Maryland Federal has all requisite corporate power and authority to
enter into and (subject to receipt of all necessary governmental approvals and
the receipt of approval of the Maryland Federal shareholders of this Agreement
and the Plan of Merger) to perform all of its obligations under this Agreement,
the Articles of Merger and the BB&T Option Agreement. The execution and
delivery of this Agreement, the Articles of Merger and the BB&T Option
Agreement, and consummation of the transactions contemplated hereby and thereby,
have been duly and validly authorized by all necessary corporate action, except,
in the case of this Agreement and the Plan of Merger, the approval of the
Maryland Federal shareholders pursuant to and to the extent required by
applicable law. This Agreement and the Plan of Merger constitute legal, valid
and binding obligations of Maryland Federal, and each is enforceable against
Maryland Federal in accordance with its terms, in each such case subject to (i)
bankruptcy, fraudulent transfer, insolvency, moratorium, reorganization,
conservatorship, receivership, or other similar laws from time to time in effect
relating to or affecting the enforcement of the rights of creditors of FDIC
insured institutions or the enforcement of
13
<PAGE>
creditors' rights generally; and (ii) general principles of equity, and except
that the availability of equitable remedies or injunctive relief is within the
discretion of the appropriate court.
(b) Neither the execution and delivery of this Agreement, the Articles of
Merger or the BB&T Option Agreement, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by Maryland Federal with any of
the provisions hereof or thereof, shall (i) conflict with or result in a breach
of any provision of the Articles of Incorporation or bylaws of Maryland Federal
or any Maryland Federal Subsidiary, (ii) constitute or result in a breach of any
term, condition or provision of, or constitute a default under, or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon any property or
asset of Maryland Federal or any Maryland Federal Subsidiary pursuant to, any
note, bond, mortgage, indenture, license, permit, contract, agreement or other
instrument or obligation, or (iii) subject to receipt of all required
governmental approvals, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Maryland Federal or any Maryland Federal
Subsidiary.
(c) Other than consents or approvals required from, or notices to,
regulatory authorities as provided in Section 5.4(b) hereof, no notice to,
filing with, or consent of, any public body or authority is necessary for the
consummation by Maryland Federal of the Merger and the other transactions
contemplated in this Agreement.
(d) Effective prior to execution of this Agreement, Maryland Federal has
taken all action necessary to amend the Maryland Federal Rights Agreement so
that execution of this Agreement and the BB&T Option Agreement and consummation
of the transactions contemplated herein and therein, including without
limitation consummation of the Merger pursuant to this Agreement or acquisition
of shares pursuant to the BB&T Option Agreement, shall not result in the grant
of any Maryland Federal Rights to any person under the Maryland Federal Rights
Agreement or enable or require any of the Maryland Federal Rights thereunder to
be exercised, distributed or triggered.
3.6 Securities Filings; Financial Statements; Statements True
(a) Maryland Federal has timely filed all Securities Documents required by
the Securities Laws since February 28, 1994. Maryland Federal has Disclosed or
made available to BB&T a true and complete copy of each Securities Document
filed by Maryland Federal with the Commission after February 28, 1994 and prior
to the date hereof, which are all of the Securities Documents that Maryland
Federal was required to file during such period. As of their respective dates
of filing, such Securities Documents complied with the Securities Laws as then
in effect, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The Financial Statements of Maryland Federal fairly present the
consolidated financial position of Maryland Federal and the Maryland Federal
Subsidiaries as of the dates
14
<PAGE>
indicated and the consolidated statements of income and retained earnings,
changes in shareholders' equity and statements of cash flows for the periods
then ended (subject, in the case of unaudited interim statements, to the absence
of notes and to normal year-end audit adjustments that are not material in
amount or effect) in conformity with GAAP applied on a consistent basis.
(c) No statement, certificate, instrument or other writing furnished or to
be furnished hereunder by Maryland Federal or any Maryland Federal Subsidiary to
BB&T contains or will contain any untrue statement of a material fact or will
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
3.7 Minute Books
The minute books of Maryland Federal and each of the Maryland Federal
Subsidiaries contain or will contain at Closing accurate records of all meetings
and other corporate actions of its shareholders and Board of Directors
(including committees of its Board of Directors).
3.8 Adverse Change
Since February 28, 1997, Maryland Federal and the Maryland Federal
Subsidiaries have not incurred any liability except as disclosed in the most
recent Maryland Federal Financial Statements, or entered into any transactions
with Affiliates, in each case other than in the ordinary course of business
consistent with past practices, nor has there been any adverse change or any
event involving a prospective adverse change in the business, financial
condition, results of operations or business prospects of Maryland Federal and
the Maryland Federal Subsidiaries on a consolidated basis.
3.9 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of Maryland Federal and
the Maryland Federal Subsidiaries are disclosed in the most recent Financial
Statements of Maryland Federal or were incurred in the ordinary course of its
business since the date of Maryland Federal's most recent Financial Statements.
3.10 Properties
(a) Maryland Federal and the Maryland Federal Subsidiaries have good and
marketable title, free and clear of all liens, encumbrances, charges, defaults
or equitable interests, to all of the properties and assets, real and personal,
reflected on the consolidated balance sheet included in the Financial Statements
of Maryland Federal as of February 28, 1997 or acquired after such date, except
(i) liens for current 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) dispositions and
encumbrances for adequate consideration in the ordinary course of business.
15
<PAGE>
(b) All leases and licenses pursuant to which Maryland Federal or any
Maryland Federal Subsidiary, as lessee or licensee, leases or licenses rights
to real or personal property, are valid and enforceable in accordance with
their respective terms.
3.11 Environmental Matters
(a) Maryland Federal and the Maryland Federal Subsidiaries are and at
all times have been in compliance with all Environmental Laws. Neither
Maryland Federal nor any Maryland Federal Subsidiary has received any
communication alleging that Maryland Federal or the Maryland Federal
Subsidiary is not in such compliance, and there are no present circumstances
that would prevent or interfere with the continuation of such compliance.
(b) There are no pending Environmental Claims, neither Maryland Federal
nor any Maryland Federal Subsidiary has received notice of any pending
Environmental Claims, and, to the best knowledge of Maryland Federal, there
are no conditions or facts existing which might reasonably be expected to
result in legal, administrative, arbitral or other proceedings asserting
Environmental Claims or other claims, causes of action or governmental
investigations of any nature seeking to impose, or that could result in the
imposition of, any liability arising under any Environmental Laws upon (i)
Maryland Federal or any Maryland Federal Subsidiary, (ii) any person or
entity whose liability for any Environmental Claim Maryland Federal or any
Maryland Federal Subsidiary has or may have retained or assumed, either
contractually or by operation of law, (iii) any real or personal property
owned or leased by Maryland Federal or any Maryland Federal Subsidiary, or
any real or personal property which Maryland Federal or any Maryland Federal
Subsidiary has or is judged to have managed or supervised or participated in
the management of, or (iv) any real or personal property in which Maryland
Federal or any Maryland Federal Subsidiary holds a security interest securing
a loan recorded on the books of Maryland Federal or any Maryland Federal
Subsidiary. Neither Maryland Federal nor any Maryland Federal Subsidiary is
subject to any agreement, order, judgment, decree or memorandum by or with
any court, governmental authority, regulatory agency or third party imposing
any liability under any Environmental Laws.
(c) Maryland Federal and the Maryland Federal Subsidiaries are in
compliance with all recommendations contained in any environmental audits,
analyses and surveys received by Maryland Federal relating to all real and
personal property owned or leased by Maryland Federal or any Maryland Federal
Subsidiary and all real and personal property of which Maryland Federal or
any Maryland Federal Subsidiary has or is judged to have managed or
supervised or participated in the management of.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim, or other claim or action or governmental investigation
that could result in the imposition of any liability arising under any
Environmental Laws, against Maryland Federal or any Maryland Federal
Subsidiary or against any person or entity whose liability for any
Environmental Claim Maryland Federal
16
<PAGE>
or any Maryland Federal Subsidiary has or may have retained or assumed,
either contractually or by operation of law.
3.12 Loans; Allowance for Loan Losses
(a) All of the loans on the books of Maryland Federal and the Maryland
Federal Subsidiaries are valid and properly documented, and were made in the
ordinary course of business. Neither the terms of such loans, nor any of the
loan documentation, nor the manner in which such loans have been administered
and serviced, violates any federal, state or local law, rule, regulation or
ordinance applicable thereto, including without limitation, the TILA,
Regulations O and Z of the Federal Reserve Board, the CRA, the Equal Credit
Opportunity Act, as amended, and state laws, rules and regulations relating
to consumer protection, installment sales and usury.
(b) The allowances for loan losses reflected on the consolidated
balance sheets included in the Financial Statements of Maryland Federal are
adequate as of their respective dates under the requirements of GAAP and
applicable regulatory requirements and guidelines.
3.13 Tax Matters
(a) Maryland Federal and the Maryland Federal Subsidiaries and each of
their predecessors have timely filed (or requests for extensions have been
timely filed and any such extensions either are pending or have been granted
and have not expired) all federal, state and local (and, if applicable,
foreign) tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns, and withholding and employment tax returns) and have
paid, or where payment is not required to have been made, have set up an
adequate reserve or accrual for the payment of, all taxes required to be paid
in respect of the periods covered by such returns and, as of the Effective
Time, will have paid, or where payment is not required to have been made,
will have set up an adequate reserve or accrual for the payment of, all taxes
for any subsequent periods ending on or prior to the Effective Time. Neither
Maryland Federal nor any Maryland Federal Subsidiary has or will have any
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established. Maryland Federal and the Maryland Federal
Subsidiaries have paid, or where payment is not required to have been made
have set up an adequate reserve or accrual for payment of, all taxes required
to be paid or accrued for the preceding or current fiscal year for which a
return is not yet due.
(b) All federal, state and local (and, if applicable, foreign) tax
returns filed by Maryland Federal and the Maryland Federal Subsidiaries are
complete and accurate. Neither Maryland Federal nor any Maryland Federal
Subsidiary is delinquent in the payment of any tax, assessment or
governmental charge. No deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against Maryland Federal or any Maryland Federal Subsidiary which have not
been settled and paid. There are currently no agreements in effect with
respect to Maryland Federal or any Maryland Federal
17
<PAGE>
Subsidiary to extend the period of limitations for the assessment or
collection of any tax. No audit examination or deficiency or refund
litigation with respect to such returns is pending.
(c) Deferred taxes have been provided for in accordance with GAAP
consistently applied.
(d) Neither Maryland Federal nor any of the Maryland Federal
Subsidiaries is a party to any tax allocation or sharing agreement or has
been a member of an affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was Maryland Federal or
a Maryland Federal subsidiary) or has any liability for taxes of any person
(other than Maryland Federal and the Maryland Federal Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor or by contract or
otherwise.
(e) Each of Maryland Federal and the Maryland Federal Subsidiaries is
in compliance with, and its records contain all information and documents
(including properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and tax withholding requirements under
federal, state, and local tax laws, and such records identify with
specificity all accounts subject to backup withholding under Section 3406 of
the Code.
(f) Neither Maryland Federal nor any of the Maryland Federal
Subsidiaries has made any payments, is obligated to make any payments, or is
a party to any contract that could obligate it to make any payments that
would be disallowed as a deduction under Sections 280G or 162(m) of the Code.
3.14 Employees; Compensation; Benefit Plans
(a) Compensation. Maryland Federal has Disclosed a complete and
correct list of the name, age, position, rate of compensation and any
incentive compensation arrangements, bonuses or commissions or fringe or
other benefits, whether payable in cash or in kind, of each director,
shareholder, independent contractor, consultant and agent of Maryland Federal
and of each Maryland Federal Subsidiary and each other person (in each case
other than as an employee) to whom Maryland Federal or any Maryland Federal
Subsidiary pays or provides, or has an obligation, agreement (written or
unwritten), policy or practice of paying or providing, retirement, health,
welfare or other benefits of any kind or description whatsoever.
(b) Employee Benefit Plans.
(i) Maryland Federal has Disclosed an accurate and complete
list of all Plans, as defined below, contributed to, maintained or
sponsored by Maryland Federal or any Maryland Federal Subsidiary,
to which Maryland Federal or any Maryland Federal Subsidiary is
obligated to contribute or has any liability or potential
liability, whether direct or indirect, including all Plans
contributed to, maintained or sponsored by
18
<PAGE>
each member of the controlled group of corporations, within the
meaning of Sections 414(b), 414(c), 414(m) and 414(o) of the Code,
of which Maryland Federal or any Maryland Federal Subsidiary is a
member. For purposes of this Agreement, the term "Plan" shall mean
a plan, arrangement, agreement or program described in the
foregoing provisions of this Section 3.14(b)(i) and which is: (A) a
profit-sharing, deferred compensation, bonus, stock option, stock
purchase, pension, retainer, consulting, retirement, severance,
welfare or incentive plan, agreement or arrangement, whether or not
funded and whether or not terminated, (B) an employment agreement,
(C) a personnel policy or fringe benefit plan, policy, program or
arrangement providing for benefits or perquisites to current or
former employees, officers, directors or agents, whether or not
funded, and whether or not terminated, including without limitation
benefits relating to automobiles, clubs, vacation, child care,
parenting, sabbatical, sick leave, severance, medical, dental,
hospitalization, life insurance and other types of insurance, or
(D) any other employee benefit plan as defined in Section 3(3) of
ERISA, whether or not funded and whether or not terminated.
(ii) Neither Maryland Federal nor any Maryland Federal
Subsidiary contributes to, has an obligation to contribute to or
otherwise has any liability or potential liability with respect to
(A) any multiemployer plan as defined in Section 3(37) of ERISA,
(B) any plan of the type described in Sections 4063 and 4064 of
ERISA or in Section 413 of the Code (and regulations promulgated
thereunder), or (C) any plan which provides health, life insurance,
accident or other "welfare-type" benefits to current or future
retirees or former employees or directors, their spouses or
dependents, other than in accordance with Section 4980B of the Code
or applicable state continuation coverage law.
(iii) None of the Plans obligates Maryland Federal or any
Maryland Federal Subsidiary to pay separation, severance,
termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or solely as a result of
a "change in control," as such term is used in Section 280G of the
Code (and regulations promulgated thereunder).
(iv) Each Plan has been maintained, funded and administered in
compliance in all respects with its own terms and in compliance in
all respects with all applicable laws and regulations, including
but not limited to ERISA and the Code. No actions, suits, claims,
complaints, charges, proceedings, hearings, examinations,
investigations, audits or demands with respect to the Plans (other
than routine claims for benefits) are pending or threatened, and
there are no facts which could give rise to or be expected
19
<PAGE>
to give rise to any actions, suits, claims, complaints, charges,
proceedings, hearings, examinations, investigations, audits or
demands. No Plan that is subject to the funding requirements of
Section 412 of the Code or Section 302 of ERISA has incurred any
"accumulated funding deficiency" as such term is defined in such
Sections of ERISA and the Code, whether or not waived, and each
Plan has always fully met the funding standards required under
Title I of ERISA and Section 412 of the Code. No liability to the
Pension Benefit Guaranty Corporation ("PBGC") (except for routine
payment of premiums) has been or is expected to be incurred with
respect to any Plan that is subject to Title IV of ERISA, no
reportable event (as such term is defined in Section 4043 of ERISA)
has occurred with respect to any such Plan, and the PBGC has not
commenced or threatened the termination of any Plan. None of the
assets of Maryland Federal or any Maryland Federal Subsidiary is
the subject of any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code, neither Maryland Federal nor any
Maryland Federal Subsidiary has been required to post any security
pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code,
and there are no facts which could be expected to give rise to such
lien or such posting of security. No event has occurred and no
condition exists that would subject Maryland Federal or any
Maryland Federal Subsidiary to any tax under Sections 4971, 4972,
4976, 4977 or 4979 of the Code or to a fine or penalty under
Section 502(c) of ERISA.
(v) Each Plan that is intended to be qualified under Section
401(a) of the Code, and each trust (if any) forming a part thereof,
has received a favorable determination letter from the IRS as to
the qualification under the Code of such Plan and the tax exempt
status of such related trust, and nothing has occurred since the
date of such determination letter that could adversely affect the
qualification of such Plan or the tax exempt status of such related
trust.
(vi) No underfunded "defined benefit plan" (as such term is
defined in Section 3(35) of ERISA) has been, during the five years
preceding the Closing Date, transferred out of the controlled group
of corporations (within the meaning of Sections 414(b), (c), (m)
and (o) of the Code) of which Maryland Federal or any Maryland
Federal Subsidiary is a member or was a member during such
five-year period.
(vii) As of the Closing Date, the fair market value of the
assets of each Plan that is a tax qualified defined benefit plan
equals or exceeds the present value of all vested and non-vested
liabilities thereunder determined in accordance with reasonable
actuarial methods, factors and assumptions applicable to a defined
benefit plan on an ongoing basis. With respect to each Plan that
is subject to the funding requirements of
20
<PAGE>
Section 412 of the Code and Section 302 of ERISA, all required
contributions for all periods ending prior to or as of the Closing
Date (including periods from the first day of the then-current plan
year to the Closing Date and including all quarterly contributions
required in accordance with Section 412(m) of the Code) shall have
been made. With respect to each other Plan, all required payments,
premiums, contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing Date shall have been made. No
tax qualified Plan has any unfunded liabilities.
(viii) No prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt under
Section 408 of ERISA or Section 4975 of the Code, whether by
statutory, class or individual exemption) has occurred with respect
to any Plan which would result in the imposition, directly or
indirectly, of any excise tax, penalty or other liability under
Section 4975 of the Code or Section 409 or 502(i) of ERISA.
Neither Maryland Federal nor, to the best knowledge of Maryland
Federal, any Maryland Federal Subsidiary, any trustee,
administrator or other fiduciary of any Plan, or any agent of any
of the foregoing has engaged in any transaction or acted or failed
to act in a manner that could subject Maryland Federal or any
Maryland Federal Subsidiary to any liability for breach of
fiduciary duty under ERISA or any other applicable law.
(ix) With respect to each Plan, all reports and information
required to be filed with any government agency or distributed to
Plan participants and their beneficiaries have been duly and timely
filed or distributed.
(x) Maryland Federal and each Maryland Federal Subsidiary has
been and is presently in compliance with all of the requirements of
Section 4980B of the Code.
(xi) Neither Maryland Federal nor any Maryland Federal
Subsidiary has a liability as of February 28, 1997 under any Plan
that, to the extent disclosure is required under GAAP, is not
reflected on the consolidated balance sheet included in the
Financial Statements of Maryland Federal as of February 28, 1997 or
otherwise Disclosed.
(xii) Neither the consideration nor implementation of the
transactions contemplated under this Agreement will increase (A)
Maryland Federal's or any Maryland Federal Subsidiary's obligation
to make contributions or any other payments to fund benefits
accrued under the Plans as of the date of this Agreement or (B) the
benefits accrued or
21
<PAGE>
payable with respect to any participant under the Plans (except to
the extent benefits may be deemed increased by accelerated vesting,
accelerated allocation of previously unallocated Plan assets or by
the conversion of all stock options in accordance with Section 2.9
hereof.
(xiii) With respect to each Plan, Maryland Federal has
Disclosed or made available to BB&T, true, complete and correct
copies of (A) all documents pursuant to which the Plans are
maintained, funded and administered, including summary plan
descriptions, (B) the three most recent annual reports (Form 5500
series) filed with the IRS (with attachments), (C) the three most
recent actuarial reports, if any, (D) the three most recent
financial statements, (E) all governmental filings for the last
three years, including without limitation, excise tax returns and
reportable events filings, and (F) all governmental rulings,
determinations, and opinions (and pending requests for governmental
rulings, determinations, and opinions) during the past three years.
(xiv) Each of the Plans as applied to Maryland Federal and any
Maryland Federal Subsidiary may be amended or terminated at any
time by action of Maryland Federal's Board of Directors, committee
of the board of Directors or duly authorized officer, in each case
subject to the terms of the Plan and compliance with applicable
laws and regulations (and limited, in the case of multiemployer
plans, to termination of the participation of Maryland Federal or a
Maryland Federal Subsidiary thereunder).
3.15 Certain Contracts
(a) Neither Maryland Federal nor any Maryland Federal Subsidiary is a
party to, is bound or affected by, or receives benefits under (i) any
agreement, arrangement or commitment, written or oral, the default of which
would have a Material Adverse Effect, whether or not made in the ordinary
course of business (other than loans or loan commitments made or certificates
or deposits received or borrowings obtained in the ordinary course of the
banking business), or any agreement restricting its business activities,
including without limitation agreements or memoranda of understanding with
regulatory authorities, (ii) any agreement, indenture or other instrument,
written or oral, relating to the borrowing of money by Maryland Federal or
any Maryland Federal Subsidiary or the guarantee by Maryland Federal or any
Maryland Federal Subsidiary of any such obligation, which cannot be
terminated within less than 30 days after the Closing Date by Maryland
Federal or any Maryland Federal Subsidiary (without payment of any penalty or
cost, except with respect to Federal Home Loan Bank or Federal Reserve Bank
advances), (iii) any agreement, arrangement or commitment, written or oral,
relating to the employment of a consultant, independent contractor or agent,
or the employment, election or retention in office of any present or former
director or officer, which cannot be terminated within less than 30 days
after the Closing Date by Maryland Federal or any Maryland Federal Subsidiary
22
<PAGE>
(without payment of any penalty or cost), or that provides benefits which are
contingent, or the application of which is materially altered, upon the
occurrence of a transaction involving Maryland Federal of the nature
contemplated by this Agreement or the BB&T Option Agreement, or (iv) any
agreement or plan, written or oral, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the BB&T Option Agreement or the value of
any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or the BB&T Option Agreement.
Each matter Disclosed pursuant to this Section 3.15(a) is in full force and
effect as of the date hereof.
(b) Neither Maryland Federal nor any Maryland Federal Subsidiary is in
default under any agreement, commitment, arrangement, lease, insurance
policy, or other instrument, whether entered into in the ordinary course of
business or otherwise and whether written or oral, and there has not occurred
any event that, with the lapse of time or giving of notice or both, would
constitute such a default.
3.16 Legal Proceedings; Regulatory Approvals
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of Maryland
Federal, threatened against Maryland Federal or any Maryland Federal
Subsidiary or against any asset, interest, plan or right of Maryland Federal
or any Maryland Federal Subsidiary, or, to the best knowledge of Maryland
Federal, against any officer, director or employee of any of them in their
capacity as such. There are no actions, suits or proceedings instituted,
pending or, to the best knowledge of Maryland Federal, threatened against any
present or former director or officer of Maryland Federal or any Maryland
Federal Subsidiary that would reasonably be expected to give rise to a claim
against Maryland Federal or any Maryland Federal Subsidiary for
indemnification. There are no actual or, to the best knowledge of Maryland
Federal, threatened actions, suits or proceedings which present a claim to
restrain or prohibit the transactions contemplated herein or in the BB&T
Option Agreement. To the best knowledge of Maryland Federal, no fact or
condition relating to Maryland Federal or any Maryland Federal Subsidiary
exists (including without limitation noncompliance with the CRA) that would
prevent Maryland Federal or BB&T from obtaining all of the federal and state
regulatory approvals contemplated herein.
3.17 Compliance with Laws; Filings
Each of Maryland Federal and each Maryland Federal Subsidiary is in
compliance with all statutes and regulations (including, but not limited to,
the CRA, TILA and regulations promulgated thereunder, and other consumer
banking laws), and has obtained and maintained all permits, licenses and
registrations applicable to the conduct of its business, and neither Maryland
Federal nor any Maryland Federal Subsidiary has received notification that
has not lapsed, been withdrawn or abandoned by any agency or department of
federal, state or local government (i) asserting a violation or possible
violation of any such statute or regulation, (ii) threatening to
23
<PAGE>
revoke any permit, license, registration, or other government authorization,
or (iii) restricting or in any way limiting its operations. Neither Maryland
Federal nor any Maryland Federal Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, directive, memorandum of
understanding or commitment, and none of them has received any communication
requesting that it enter into any of the foregoing. Since February 28, 1994,
Maryland Federal and each of the Maryland Federal Subsidiaries has filed all
reports, registrations, notices and statements, and any amendments thereto,
that it was required to file with federal and state regulatory authorities,
including without limitation the OTS, Commission and the FDIC. Each such
report, registration, notice and statement, and each amendment thereto,
complied with applicable legal requirements.
3.18 Brokers and Finders
Neither Maryland Federal nor any Maryland Federal Subsidiary, nor any of
their respective officers, directors or employees, has employed any broker,
finder or financial advisor or incurred any liability for any fees or
commissions in connection with the transactions contemplated herein, in the
Plan of Merger or in the BB&T Option Agreement, except for fees to
accountants and lawyers and an obligation to the Financial Advisor, the
nature and extent of which have been Disclosed, for investment banking
services.
3.19 Repurchase Agreements; Derivatives
(a) With respect to all agreements currently outstanding pursuant to
which Maryland Federal or any Maryland Federal Subsidiary has purchased
securities subject to an agreement to resell, Maryland Federal or the
Maryland Federal Subsidiary has a valid, perfected first lien or security
interest in the securities or other collateral securing such agreement, and
the value of such collateral equals or exceeds the amount of the debt secured
thereby. With respect to all agreements currently outstanding pursuant to
which Maryland Federal or any Maryland Federal Subsidiary has sold securities
subject to an agreement to repurchase, neither Maryland Federal nor the
Maryland Federal Subsidiary has pledged collateral materially in excess of
the amount of the debt secured thereby. Neither Maryland Federal nor any
Maryland Federal Subsidiary has pledged collateral materially in excess of
the amount required under any interest rate swap or other similar agreement
currently outstanding.
(b) Neither Maryland Federal nor any Maryland Federal Subsidiary is a
party to or has agreed to enter into an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor, or collar financial contract, or
any other interest rate or foreign currency protection contract not included
on its balance sheets in the Financial Statements, which is a financial
derivative contract (including various combinations thereof), except for
options and forwards entered into in the ordinary course of its mortgage
lending business consistent with past practice and current policy.
24
<PAGE>
3.20 Deposit Accounts
The deposit accounts of the Maryland Federal Subsidiaries that are
depository institutions are insured by the SAIF to the maximum extent
permitted by federal law, and the Maryland Federal Subsidiaries have paid all
premiums and assessments and filed all reports required to have been paid or
filed under all rules and regulations applicable to the SAIF.
3.21 Related Party Transactions
Maryland Federal has Disclosed all existing transactions, investments
and loans, including loan guarantees existing as of the date hereof (other
than deposit relationships and consumer loans entered into in the ordinary
course of business and on arm's length terms), to which Maryland Federal or
any Maryland Federal Subsidiary is a party with any director, executive
officer or 5% shareholder of Maryland Federal or any person, corporation, or
enterprise controlling, controlled by or under common control with any of the
foregoing. All such transactions, investments and loans are on terms no less
favorable to Maryland Federal than could be obtained from unrelated parties.
3.22 Certain Information
When the Proxy Statement/Prospectus is mailed, and at the time of the
meeting of shareholders of Maryland Federal to vote on the Plan of Merger,
the Proxy Statement/Prospectus and all amendments or supplements thereto,
with respect to all information set forth therein provided by Maryland
Federal, (i) shall comply with the applicable provisions of the Securities
Laws, and (ii) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
3.23 Tax and Regulatory Matters
Neither Maryland Federal nor any Maryland Federal Subsidiary has taken
or agreed to take any action which would or could reasonably be expected to
(i) cause the Merger not to constitute a reorganization under Section 368 of
the Code or (ii) materially impede or delay receipt of any consents of
regulatory authorities referred to in Section 5.4(b) or result in failure of
the condition in Section 6.3(b).
3.24 State Takeover Laws
Maryland Federal and each Maryland Federal Subsidiary have taken all
necessary action to exempt the transactions contemplated by this Agreement
from any applicable moratorium, fair price, business combination, control
share or other anti-takeover laws, including without limitation the
provisions of Sections 3-601 to 3-604 and 3-701 to 3-709 of the MGCL.
25
<PAGE>
3.25 Labor Relations
Neither Maryland Federal nor any Maryland Federal Subsidiary is the
subject of any claim or allegation that it has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment, nor is Maryland Federal
or any Maryland Federal Subsidiary party to any collective bargaining
agreement. There is no strike or other labor dispute involving Maryland
Federal or any Maryland Federal Subsidiary, pending or threatened, or to the
best knowledge of Maryland Federal, is there any activity involving any
employees of Maryland Federal or any Maryland Federal Subsidiary seeking to
certify a collective bargaining unit or engaging in any other organization
activity.
3.26 Fairness Opinion
Maryland Federal has received from the Financial Advisor an opinion
that, as of the date hereof, the Merger Consideration is fair to the
shareholders of Maryland Federal from a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BB&T
BB&T represents and warrants to Maryland Federal as follows (no
representation or warranty herein of BB&T shall be deemed to be inaccurate
unless the inaccuracy would permit Maryland Federal to refuse to consummate
the Merger under the applicable standard set forth in Section 6.2(a)):
4.1 Capital Structure of BB&T
The authorized capital stock of BB&T consists of (i) 5,000,000 shares of
preferred stock, par value $5.00 per share, of which 2,000,000 shares have
been designated as Series B Junior Participating Preferred Stock and the
remainder are undesignated, and none of which shares are issued and
outstanding, and (ii) 300,000,000 shares of BB&T Common Stock (or such larger
number as shall be approved from time to time by the shareholders), of which
136,051,623 shares were issued and outstanding on December 31, 1997. All
outstanding shares of BB&T Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. The shares of BB&T Common Stock
reserved as provided in Section 5.3 are free of any Rights and have not been
reserved for any other purpose, and such shares are available for issuance as
provided pursuant to the Plan of Merger. Holders of BB&T Common Stock do not
have preemptive rights.
4.2 Organization, Standing and Authority of BB&T
BB&T is a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina, with full corporate
power and authority to carry on its
26
<PAGE>
business as now conducted and to own, lease and operate its assets, and is
duly qualified to do business in the states of the United States where its
ownership or leasing of property or the conduct of its business requires such
qualification. BB&T is registered as a bank holding company under the Bank
Holding Company Act.
4.3 Authorized and Effective Agreement
(a) Each of BB&T and BB&T Financial has all requisite corporate power
and authority to enter into and (subject to receipt of all necessary
government approvals) perform all of its obligations under this Agreement.
The execution and delivery of this Agreement and consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of each of BB&T and
BB&T Financial. This Agreement and the Plan of Merger attached hereto
constitute legal, valid and binding obligations of BB&T and BB&T Financial,
and each is enforceable against BB&T and BB&T Financial in accordance with
its terms, in each case subject to (i) bankruptcy, insolvency, moratorium,
reorganization, conservatorship, receivership or other similar laws in effect
from time to time relating to or affecting the enforcement of the rights of
creditors; and (ii) general principles of equity (whether applied in a court
of law or in equity), and except that the availability of equitable remedies
or injunctive relief is within the discretion of the appropriate court.
(b) Neither the execution and delivery of this Agreement or the
Articles of Merger, nor consummation of the transactions contemplated hereby,
nor compliance by BB&T or BB&T Financial with any of the provisions hereof or
thereof shall (i) conflict with or result in a breach of any provision of the
Articles of Incorporation or bylaws of BB&T or any BB&T Subsidiary, (ii)
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of
any lien, charge or encumbrance upon any property or asset of BB&T or any
BB&T Subsidiary pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to BB&T or
any BB&T Subsidiary.
(c) Other than consents or approvals required from, or notices to,
regulatory authorities as provided in Section 5.4(b) hereof, no notice to,
filing with, or consent of, any public body or authority is necessary for the
consummation by BB&T and BB&T Financial of the Merger and the other
transactions contemplated in this Agreement.
4.4 Organization, Standing and Authority of BB&T Subsidiaries
Each of the BB&T Subsidiaries and BB&T Financial, is duly organized,
validly existing and in good standing under applicable laws. BB&T owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock of each of the BB&T Subsidiaries and BB&T Financial. Each of the BB&T
Subsidiaries and BB&T Financial (i) has full power and authority to carry on
its business as now conducted and (ii) is duly qualified to do business in
the states of the United
27
<PAGE>
States and foreign jurisdictions where its ownership or leasing of property
or the conduct of its business requires such qualification.
4.5 Securities Documents; Statements True
BB&T has timely filed all Securities Documents required by the
Securities Laws since December 31, 1994. As of their respective dates of
filing, such Securities Documents complied with the Securities Laws as then
in effect, and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. No statement, certificate, instrument or other
writing furnished or to be furnished hereunder by BB&T, BB&T Financial or any
other BB&T Subsidiary to Maryland Federal contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.6 Financial Statements
The Financial Statements of BB&T fairly present or will fairly present,
as the case may be, the consolidated financial position of BB&T and the BB&T
Subsidiaries as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity and changes in cash flows for the
periods then ended (subject, in the case of unaudited interim statements, to
the absence of any notes and to normal year-end audit adjustments that are
not material in amount or effect) in conformity with GAAP consistently
applied.
4.7 Adverse Change
Since December 31, 1996, BB&T and the BB&T Subsidiaries on a
consolidated basis have not incurred any liability except as disclosed on the
most recent BB&T Financial Statements, or entered into any transactions with
Affiliates, other than in the ordinary course of business consistent with
past practices, nor has there been any adverse change or any event involving
a prospective adverse change in the business, financial condition, results of
operations or business prospects of BB&T and the BB&T Subsidiaries on a
consolidated basis.
4.8 Absence of Undisclosed Liabilities
All liabilities (including contingent liabilities) of BB&T and the BB&T
Subsidiaries are disclosed in the most recent Financial Statements of BB&T or
on a consolidated basis incurred in the ordinary course of business since the
date of BB&T's most recent Financial Statements.
4.9 Compliance with Laws
Each of BB&T and the BB&T Subsidiaries is in compliance with all
statutes and regulations (including, but not limited to, the CRA, TILA and
regulations promulgated thereunder
28
<PAGE>
and other consumer banking laws) and has obtained and maintained all permits,
licenses and registrations applicable to the conduct of its business, and
neither BB&T nor any of the BB&T Subsidiaries has received any notification
that has not lapsed, been withdrawn or abandoned from any agency or
department of federal, state or local government (i) asserting a violation or
possible violation of any such statute or regulation, (ii) threatening to
revoke any license, franchise, permit or government authorization, or (iii)
restricting or in any way limiting its operations. Neither BB&T nor any of
the BB&T Subsidiaries is subject to any regulatory or supervisory cease and
desist order, agreement, directive, memorandum of understanding or
commitment, and none of them has received any communication requesting that
they enter into any of the foregoing.
4.10 Certain Information
When the Proxy Statement/Prospectus is mailed, and at all times
subsequent to such mailing up to and including the time of the meeting of
shareholders of Maryland Federal to vote on the Merger, the Proxy
Statement/Prospectus and all amendments or supplements thereto, with respect
to all information set forth therein relating to BB&T, (i) shall comply with
the applicable provisions of the Securities Laws, and (ii) shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
4.11 Tax and Regulatory Matters
Neither BB&T nor any BB&T Subsidiary has taken or agreed to take any
action which would or could reasonably be expected to (i) cause the Merger
not to constitute a reorganization under Section 368 of the Code, provided,
however, that nothing contained herein shall limit the ability of BB&T to
exercise its rights under the BB&T Option Agreement, or (ii) materially
impede or delay receipt of any consents of regulatory authorities referred to
in Section 5.4(b) hereof or result in failure of the condition in Section
6.3(b) hereof.
4.12 Share Ownership
As of the date of this Agreement, BB&T does not own (except in a
fiduciary capacity) any shares of Maryland Federal Common Stock.
4.13 Legal Proceedings; Regulatory Approvals
There are no actual or, to the best knowledge of BB&T, threatened
actions, suits or proceedings instituted, which present a claim to restrain
or prohibit the transactions contemplated herein. To the best knowledge of
BB&T, no fact or condition relating to BB&T or any BB&T Subsidiary exists
(including without limitation noncompliance with the CRA) that would prevent
BB&T or Maryland Federal from obtaining all of the federal and state
regulatory approvals contemplated herein.
29
<PAGE>
ARTICLE V
COVENANTS
5.1 Maryland Federal Shareholder Meeting
Maryland Federal shall submit this Agreement and the Plan of Merger to
its shareholders for approval at a meeting to be held as soon as practicable,
and by approving execution of this Agreement, the Board of Directors of
Maryland Federal agrees that it shall, at the time the Proxy
Statement/Prospectus is mailed to the shareholders of Maryland Federal,
recommend that Maryland Federal's shareholders vote for such approval;
provided, that the Board of Directors of Maryland Federal may withdraw or
modify such recommendation only if the Board of Directors shall determine in
good faith that such recommendation should not be made in light of its
fiduciary duty to Maryland Federal's shareholders following consideration of
written advice of independent legal counsel to the effect that making such
recommendation or failing to withdraw or modify such recommendation would
more likely than not constitute a breach of the fiduciary duties of such
Board to the shareholders of Maryland Federal.
5.2 Registration Statement; Proxy Statement/Prospectus
As promptly as practicable after the date hereof, BB&T shall prepare and
file the Registration Statement with the Commission. Maryland Federal will
furnish to BB&T the information required to be included in the Registration
Statement with respect to its business and affairs before it is filed with
the Commission and again before any amendments are filed, and shall have the
right to review and consult with BB&T on the form of, and any
characterizations of such information included in, the Registration Statement
prior to the filing with the Commission. Such Registration Statement, at the
time it becomes effective and at the Effective Time, shall in all material
respects conform to the requirements of the Securities Act and the applicable
rules and regulations of the Commission. The Registration Statement shall
include the form of Proxy Statement/Prospectus. BB&T and Maryland Federal
shall use their reasonable best efforts to cause the Proxy
Statement/Prospectus to be approved by the Commission for mailing to the
Maryland Federal shareholders, and such Proxy Statement/Prospectus shall, on
the date of mailing, conform in all material respects to the requirements of
the Securities Laws and the applicable rules and regulations of the
Commission thereunder. Maryland Federal shall cause the Proxy
Statement/Prospectus to be mailed to shareholders in accordance with all
applicable notice requirements under the Securities Laws and the MGCL.
5.3 Plan of Merger; Reservation of Shares
At the Effective Time, the Merger shall be effected in accordance with
the Plan of Merger. In connection therewith, BB&T undertakes and agrees (i)
to cause BB&T Financial to adopt the Plan of Merger; (ii) to vote the shares
of BB&T Financial common stock for approval of the Plan of Merger; and (iii)
to pay or cause to be paid when due the Merger Consideration. BB&T has
reserved for issuance such number of shares of BB&T Common Stock as shall be
necessary to pay the Merger Consideration and agrees not to take any action
that would cause the
30
<PAGE>
aggregate number of authorized shares of BB&T Common Stock available for
issuance hereunder not to be sufficient to effect the Merger.
5.4 Additional Acts
(a) Maryland Federal agrees to take such actions requested by BB&T as
may be reasonably necessary to modify the structure of, or to substitute
parties to (so long as such substitute is BB&T or a BB&T Subsidiary) the
transactions contemplated hereby, provided that such modifications do not (i)
change the amount or form of Merger Consideration, (ii) adversely affect the
tax treatment of receiving the Merger Consideration, or (iii) abrogate the
covenants and other agreements contained in this Agreement, including without
limitation the covenant not to take any action that would substantially delay
or impair the prospects of completing the Merger pursuant to this Agreement
and the Plan of Merger.
(b) As promptly as practicable after the date hereof, BB&T and Maryland
Federal shall submit notice or applications for prior approval of the
transactions contemplated herein to the Federal Reserve Board, the OTS and
any other federal, state or local government agency, department or body to
which notice is required or from which approval is required for consummation
of the Merger and the other transactions contemplated hereby. Maryland
Federal and BB&T each represents and warrants to the other that all
information included (or submitted for inclusion) concerning it, its
respective Subsidiaries, and any of its respective directors, officers and
shareholders, shall be true, correct and complete in all material respects as
of the date presented.
(c) BB&T agrees that its Board of Directors or authorized Board
committee shall approve prior to the Effective Time each grant of a converted
option (as described in Section 2.9(a)) to any individual who, subsequent to
consummation of the Merger, will be a director or officer of BB&T under Rule
16b-3 of the Exchange Act.
5.5 Best Efforts
Each of BB&T and Maryland Federal shall use, and shall cause each of
their respective Subsidiaries to use, its reasonable best efforts in good
faith to (i) furnish such information as may be required in connection with
and otherwise cooperate in the preparation and filing of the documents
referred to in Sections 5.2 and 5.4 or elsewhere herein, and (ii) take or
cause to be taken all action necessary or desirable on its part to fulfill
the conditions in Article VI and to consummate the transactions herein
contemplated at the earliest practicable date. Neither BB&T nor Maryland
Federal shall take, or cause, or to the best of its ability permit to be
taken, any action that would substantially delay or impair the prospects of
completing the Merger pursuant to this Agreement and the Plan of Merger.
31
<PAGE>
5.6 Certain Accounting Matters
Maryland Federal shall cooperate with BB&T concerning accounting and
financial matters necessary or appropriate to facilitate the Merger (taking
into account BB&T's policies, practices and procedures), including without
limitation issues arising in connection with record keeping, loan
classification, valuation adjustments, levels of loan loss reserves and other
accounting practices; provided, that any action taken pursuant to this
Section 5.6 shall not be deemed to constitute or result in the breach of any
representation or warranty of Maryland Federal contained in this Agreement;
and provided further, that Maryland Federal shall not be required to
implement any changes in accounting or financial matters pursuant to this
Section 5.6(i) if such action is not in accordance with generally accepted
accounting principles or is prohibited by applicable law, and (ii) unless and
until BB&T agrees in writing that it believes, in its good faith judgment,
that the Merger will constitute a reorganization under Section 368 of the
Code, and that all conditions to BB&T's obligation to consummate the Merger
set forth in Sections 6.1 and 6.3 (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing
or otherwise to be dated at the Effective Time, the delivery of which shall
continue to be conditions to BB&T's obligation to consummate the Merger) have
been satisfied or waived.
5.7 Access to Information
Maryland Federal and BB&T will each keep the other advised of all
material developments relevant to its business and the businesses of its
Subsidiaries, and to consummation of the Merger, and each shall provide to
the other, upon request, reasonable details of any such development. Upon
reasonable notice, Maryland Federal shall afford to representatives of BB&T
access, during normal business hours during the period prior to the Effective
Time, to all of the properties, books, contracts, commitments and records of
Maryland Federal and the Maryland Federal Subsidiaries and, during such
period, shall make available all information concerning their businesses as
may be reasonably requested. Upon reasonable notice, BB&T shall afford to
representatives of Maryland Federal access during normal business hours,
during the period prior to the Effective Time, to appropriate records as may
reasonably be required to fulfill any fiduciary duty to review such records
as the Board of Directors of Maryland Federal may have to its shareholders.
No investigation pursuant to this Section 5.7 shall affect or be deemed to
modify any representation or warranty made by, or the conditions to the
obligations hereunder of, either party hereto. Each party hereto shall, and
shall cause each of its directors, officers, attorneys and advisors to,
maintain the confidentiality of all information obtained hereunder which is
not otherwise publicly disclosed by the other party, said undertakings with
respect to confidentiality to survive any termination of this Agreement
pursuant to Section 7.1. In the event of the termination of this Agreement,
each party shall return to the other party upon request all confidential
information previously furnished in connection with the transactions
contemplated by this Agreement.
32
<PAGE>
5.8 Press Releases
BB&T and Maryland Federal shall agree with each other as to the form and
substance of any press release related to this Agreement and the Plan of Merger
or the transactions contemplated hereby and thereby, and consult with each other
as to the form and substance of other public disclosures related thereto;
provided, that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which in the opinion
of its counsel is required by law.
5.9 Forbearances of Maryland Federal
Except with the prior written consent of BB&T, between the date hereof and
the Effective Time, Maryland Federal shall not, and shall cause each of the
Maryland Federal Subsidiaries not to:
(a) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted,
or establish or acquire any new Subsidiary or engage in any new category or
type of business activity;
(b) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock, other than regularly
scheduled quarterly dividends of $.1125 per share of Maryland Federal
Common Stock payable on record dates and in amounts consistent with past
practices; provided that any dividend declared or payable on the shares of
Maryland Federal Common Stock for the quarterly period during which the
Effective Time occurs shall, unless otherwise agreed upon in writing by
BB&T and Maryland Federal, be declared with a record date prior to the
Effective Time only if the normal record date for payment of the
corresponding quarterly dividend to holders of BB&T Common Stock is before
the Effective Time;
(c) issue any shares of its capital stock (including treasury
shares), except pursuant to (i) the Stock Purchase Plan for the offering
period pursuant thereto which commenced on February 1, 1998 and ends on
July 31, 1998 (and only with respect to elections to purchase in effect on
the date hereof, which elections provide for purchases of shares in numbers
consistent with past experience), (ii) Stock Options outstanding as of the
date hereof pursuant to the Stock Option Plans, or (iii) the BB&T Option
Agreement;
(d) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(e) amend its articles of incorporation or bylaws; impose or permit
imposition, of any lien, charge or encumbrance on any share of stock held
by it in any Maryland Federal Subsidiary, or permit any such lien, charge
or encumbrance to exist; or waive or
33
<PAGE>
release any material right or cancel or compromise any debt or claim, in
each case other than in the ordinary course of business;
(f) merge with any other entity or permit any other entity to merge
into it, or consolidate with any other entity; acquire control over any
other entity; or liquidate, sell or otherwise dispose of any assets or
acquire any assets, other than in the ordinary course of its business
consistent with past practices;
(g) fail to comply in any material respect with any laws,
regulations, ordinances or governmental actions applicable to it and to the
conduct of its business;
(h) increase the rate of compensation of any of its directors,
officers or employees (excluding increases in compensation resulting from
(x) in the case of officers and employees, increases in the ordinary course
of business consistent with past practice and (y) the exercise of Stock
Options outstanding as of the date of this Agreement), or pay or agree to
pay any bonus to, or provide any new employee benefit or incentive to, any
of its directors, officers or employees (except for any bonus that might be
earned and payable for the year ending February 28, 1998 pursuant to
Maryland Federal's bonus program, if any, as in effect at the beginning of
such year);
(i) enter into or substantially modify (except as may be required by
applicable law or regulation) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees; provided, however, that this subparagraph shall not prevent
renewal of any of the foregoing consistent with past practice;
(j) solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a substantial
portion of the assets of, or a substantial equity interest in, Maryland
Federal or any Maryland Federal Subsidiary or any business combination with
Maryland Federal or any Maryland Federal Subsidiary other than as
contemplated by this Agreement; or authorize any officer, director, agent
or affiliate of Maryland Federal or any Maryland Federal Subsidiary to do
any of the above; or fail to notify BB&T immediately if any such inquiries
or proposals are received, any such information is requested or required,
or any such negotiations or discussions are sought to be initiated;
provided, that this subsection (j) shall not apply to furnishing
information, negotiations or discussions following an unsolicited offer if,
as a result of such offer, Maryland Federal is advised in writing by
independent legal counsel that the failure to so furnish information or
negotiate would more likely than not constitute a breach of the fiduciary
duties of Maryland Federal's Board of Directors to its shareholders;
34
<PAGE>
(k) enter into (i) any material agreement, arrangement or commitment
not made in the ordinary course of business, (ii) any agreement, indenture
or other instrument not made in the ordinary course of business relating to
the borrowing of money by Maryland Federal or a Maryland Federal Subsidiary
or guarantee by Maryland Federal or a Maryland Federal Subsidiary of any
obligation, (iii) any agreement, arrangement or commitment relating to the
employment or severance of a consultant or the employment, severance,
election or retention in office of any present or former director, officer
or employee (this clause shall not apply to the election of directors by
shareholders or the reappointment of officers in the normal course), or
(iv) any contract, agreement or understanding with a labor union;
(1) change its lending, investment or asset liability management
policies in any material respect, except as may be required by applicable
law, regulation, or directives, and except that after approval of the
Agreement and the Plan of Merger by its shareholders and after receipt of
the requisite regulatory approvals for the transactions contemplated by
this Agreement and the Plan of Merger, Maryland Federal shall cooperate in
good faith with BB&T to adopt policies, practices and procedures consistent
with those utilized by BB&T, effective on or before the Closing Date;
(m) change its methods of accounting in effect at February 28, 1997,
except as required by changes in GAAP concurred in by BB&T, which
concurrence shall not be unreasonably withheld, or change any of its
methods of reporting income and deductions for federal income tax purposes
from those employed in the preparation of its federal income tax returns
for the year ended February 28, 1997, except as required by changes in law
or regulation;
(n) incur any commitments for capital expenditures or obligation to
make capital expenditures in excess of $50,000, for any one expenditure, or
$150,000, in the aggregate;
(o) incur any indebtedness other than deposits from customers,
advances from the Federal Home Loan Bank or Federal Reserve Bank and
reverse repurchase arrangements in the ordinary course of business;
(p) take any action which would or could reasonably be expected to
(i) cause the Merger not to constitute a reorganization under Section 368
of the Code as determined by BB&T, (ii) result in any inaccuracy of a
representation or warranty herein which would allow for a termination of
this Agreement, or (iii) cause any of the conditions precedent to the
transactions contemplated by this Agreement to fail to be satisfied;
(q) dispose of any material assets other than in the ordinary course
of business; or
(r) agree to do any of the foregoing.
35
<PAGE>
5.10 Employment Agreements
BB&T (or its specified banking subsidiary) agrees to enter into an
employment agreement with Robert H. Halleck substantially in the form of Annex C
hereto, employment agreements with David E. Baker, Nancy B. Cohen and J.
Diane Stevenson substantially in the form of Annex D hereto, and employment
agreements with Lynn B. Hounslow and Ronald R. O'Brien substantially in the form
of Annex E hereto.
5.11 Affiliates
Maryland Federal shall use its reasonable best efforts to cause all persons
who are Affiliates of Maryland Federal to deliver to BB&T promptly following
execution of this Agreement a written agreement providing that such person will
not dispose of BB&T Common Stock received in the Merger except in compliance
with the Securities Act and the rules and regulations promulgated thereunder,
and in any event shall use its reasonable best efforts to cause such affiliates
to deliver to BB&T such written agreement prior to the Closing Date.
5.12 Employee Benefits
(a) BB&T shall cause the 401(k) plan of Maryland Federal to be merged
with the 401(k) plan maintained by BB&T and the BB&T Subsidiaries, and the
account balances of former employees of Maryland Federal or the Maryland
Federal Subsidiaries who are participants in the Maryland Federal plan shall
be transferred to the accounts of such employees under the BB&T 401(k) plan.
Following such merger and transfer, such accounts shall be governed and
controlled by the terms of the BB&T 401(k) plan as in effect from time to
time (and subject to BB&T's right to terminate such plan). For purposes of
administering the 401(k) plan, service with Maryland Federal and the Maryland
Federal Subsidiaries shall be deemed to be service with BB&T or the BB&T
Subsidiaries for participation and vesting purposes, but not for purposes of
benefit accrual.
(b) As soon as practicable following the Effective Time, BB&T shall
take any and all action necessary to terminate Maryland Federal's defined
benefit pension plan (the "Maryland Federal Pension Plan") pursuant to a
standard termination in accordance with Section 4041 of ERISA and to provide
for full vesting of the accrued benefits of all participants in the Maryland
Federal Pension Plan and the distribution of the assets thereof to the
participants. The actions relating to termination of the Maryland Federal
Pension Plan shall be conditioned upon receiving a favorable determination
letter from the IRS with regard to the termination of the Maryland Federal
Pension Plan. BB&T will use its reasonable best efforts to seek the issuance
of such letter as soon as practicable following the Effective Time. Each
employee of Maryland Federal or a Maryland Federal Subsidiary at the
Effective Time who becomes an employee immediately following the Effective
Time of BB&T or a BB&T Subsidiary ("Employer Entity") shall be given credit
under BB&T's defined benefit pension plan for service with Maryland Federal
and the Maryland Federal Subsidiaries for participation and vesting purposes,
but not for purposes of benefit accrual.
36
<PAGE>
(c) Each employee of Maryland Federal at the Effective Time who becomes an
employee immediately following the Effective Time of an Employer Entity shall be
eligible to participate in the group hospitalization, medical, dental, life,
disability and other welfare benefit plans and programs available to employees
of the Employer Entity, subject to the terms of such plans and programs;
provided, that service with Maryland Federal shall be deemed to be service with
the Employer Entity for the purpose of determining eligibility to participate in
such welfare plans and programs.
(d) Each employee of Maryland Federal or a Maryland Federal Subsidiary who
becomes an employee of BB&T or a BB&T Subsidiary and is terminated by BB&T or a
BB&T Subsidiary subsequent to the Effective Time, excluding any employee who has
an existing employment or special termination agreement which is Disclosed,
shall be entitled to severance pay in accordance with the general severance
policy maintained by BB&T, if and to the extent that such employee is entitled
to severance pay under such policy. Such employee's service with Maryland
Federal or a Maryland Federal Subsidiary shall be treated as service with BB&T
for purposes of determining the amount of severance pay, if any, under BB&T's
severance policy.
(e) BB&T agrees to honor all employment agreements, severance agreements
and the deferred compensation agreement (including related trust agreement) that
Maryland Federal and the Maryland Federal Subsidiaries have with their current
and former employees and directors and which have been Disclosed to BB&T
pursuant to this Agreement, except to the extent any such agreements shall be
superseded or terminated at the Closing or following the Closing Date.
5.13 Directors and Officers Protection
BB&T or a BB&T Subsidiary shall purchase and keep in force for a period of
three years after the Effective Time directors' and officers' liability
insurance providing coverage to directors and officers of Maryland Federal for
acts or omissions occurring prior to the Effective Time. Such insurance shall
provide at least the same coverage and amounts as contained in Maryland
Federal's policy on the date hereof; provided, that in no event shall the annual
premium on such policy exceed 150% of the annual premium payments on Maryland
Federal's policy in effect as of the date hereof (the "Maximum Amount"). If
the amount of the premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, BB&T shall use its reasonable best efforts
to maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount. Notwithstanding
the foregoing, BB&T further agrees to indemnify (and advance expenses to) all
individuals who are or have been officers, directors or employees of Maryland
Federal or any Maryland Federal Subsidiary prior to the Effective Time from any
acts or omissions in such capacities prior to the Effective Time, to the fullest
extent that such indemnification is provided pursuant to the Articles of
Incorporation of Maryland Federal on the date hereof and is permitted under the
MGCL. Limitations on liability contained in the Articles of Incorporation of
Maryland Federal on the date hereof shall be applicable following the Merger
with respect to actions preceding the Merger and which were subject to such
limitations.
37
<PAGE>
5.14 Forbearances of BB&T
Except with the prior written consent of Maryland Federal, between the date
hereof and the Effective Time, neither BB&T nor any BB&T Subsidiary shall take
any action which would or might be expected to (i) cause the business
combination contemplated hereby not to constitute a reorganization under Section
368 of the Code; (ii) result in any inaccuracy of a representation or warranty
herein which would allow for termination of this Agreement; (iii) cause any of
the conditions precedent to the transactions contemplated by this Agreement to
fail to be satisfied; or (iv) fail to comply in any material respect with any
laws, regulations, ordinances or governmental actions applicable to it and to
the conduct of its business.
5.15 Reports
Each of Maryland Federal and BB&T shall file (and shall cause the Maryland
Federal Subsidiaries and the BB&T Subsidiaries, respectively, to file), between
the date of this Agreement and the Effective Time, all reports required to be
filed by it with the Commission and any other regulatory authorities having
jurisdiction over such party, and shall deliver to BB&T or Maryland Federal, as
the case may be, copies of all such reports promptly after the same are filed.
If financial statements are contained in any such reports filed with the
Commission, such financial statements will fairly present the consolidated
financial position of the entity filing such statements as of the dates
indicated and the consolidated results of operations, changes in shareholders'
equity, and cash flows for the periods then ended in accordance with GAAP
(subject in the case of interim financial statements to the absence of notes and
to normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the Commission will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to a regulatory authority other than
the Commission shall be prepared in accordance with requirements applicable to
such reports.
5.16 Exchange Listing
BB&T shall use its reasonable best efforts to list, prior to the Effective
Time, on the NYSE, subject to official notice of issuance, the shares of BB&T
Common Stock to be issued to the holders of Maryland Federal Common Stock
pursuant to the Merger, and BB&T shall give all notices and make all filings
with the NYSE required in connection with the transactions contemplated herein.
5.17 Advisory Board for Maryland Region.
As of the Effective Time and for at least three years thereafter, BB&T
shall offer to each of the members of the Board of Directors of Maryland Federal
a seat on the Advisory Board of its newly created Maryland Region, and shall
offer to the Chairman of the Board of Directors of Maryland Federal the position
of Chairman of such Advisory Board. For three years following the Effective
Time, the Advisory Board members elected pursuant to this Section 5.17 and who
38
<PAGE>
continue to serve shall receive, as compensation for service on the Advisory
Board of the Maryland Region, Advisory Board member's fees (annual retainer and
attendance fees) equal in amount each year (prorated for any partial year) to
the annual retainer and schedule of attendance fees for Directors of Maryland
Federal in effect on January 1, 1998. In addition, such Chairman shall receive
for the three-year period (or lesser period of his service as Chairman) the
special Chairman's compensation which was in effect with respect to him on
January 1, 1998. Following such three-year period, Advisory Board Members and
the Chairman, if they continue to serve in such capacities, shall receive fees
in accordance with the standard schedule of fees for service thereon as in
effect from time to time. For three years after the Effective Time, no such
Advisory Board Member shall be prohibited from serving thereon because he shall
have attained the maximum age for service thereon (currently age 70).
5.18 BB&T Rights Agreement
BB&T agrees (a) that any BB&T Rights issued pursuant to the BB&T Rights
Agreement shall be issued with respect to each share of BB&T Common Stock issued
pursuant to the terms hereof regardless of whether there has occurred a
"Distribution Date" under the terms of the BB&T Rights Agreement prior to the
Effective Time, (i) to the extent permitted by Section 22 of the BB&T Rights
Agreement and (ii) unless all BB&T Rights in respect of outstanding shares of
BB&T Common Stock have been redeemed or otherwise terminated prior to the
Effective Time and (b) subject to the foregoing, to take all action reasonably
necessary or advisable to enable the holder of each such share of BB&T Common
Stock to obtain the benefit of such BB&T Rights notwithstanding their prior
distribution, including, without limitation, amendment of the BB&T Rights
Agreement (to the extent permissible under the terms thereof) in connection with
any such distribution of BB&T Rights.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - BB&T and Maryland Federal
The respective obligations of BB&T and Maryland Federal to effect the
transactions contemplated by this Agreement shall be subject to satisfaction or
waiver of the following conditions at or prior to the Effective Time:
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the Plan of Merger, and consummation of
the transactions contemplated hereby and thereby, shall have been duly and
validly taken, including without limitation the approval of the shareholders of
Maryland Federal and of BB&T Financial of the Agreement and the Plan of Merger;
(b) The Registration Statement (including any post-effective amendments
thereto) shall be effective under the Securities Act, no proceedings shall be
pending or to the knowledge of BB&T threatened by the Commission to suspend the
effectiveness of such Registration Statement
39
<PAGE>
and the BB&T Common Stock to be issued as contemplated in the Plan of Merger
shall have either been registered or be subject to exemption from registration
under applicable state securities laws;
(c) The parties shall have received all regulatory approvals required in
connection with the transactions contemplated by this Agreement and the Plan of
Merger, all notice periods and waiting periods with respect to such approvals
shall have passed and all such approvals shall be in effect;
(d) None of BB&T, any of the BB&T Subsidiaries, Maryland Federal or any of
the Maryland Federal Subsidiaries shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated by this Agreement; and
(e) Maryland Federal and BB&T shall have received an opinion of BB&T's
legal counsel, in form and substance satisfactory to Maryland Federal and BB&T,
substantially to the effect that the Merger will constitute one or more
reorganizations under Section 368 of the Code and that the shareholders of
Maryland Federal will not recognize any gain or loss to the extent that such
shareholders exchange shares of Maryland Federal Common Stock for shares of BB&T
Common Stock.
6.2 Conditions Precedent - Maryland Federal
The obligations of Maryland Federal to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction of the following
additional conditions at or prior to the Effective Time, unless waived by
Maryland Federal pursuant to Section 7.4:
(a) All representations and warranties of BB&T shall be evaluated as of
the date of this Agreement and as of the Effective Time as though made on and as
of the Effective Time (or on the date designated in the case of any
representation and warranty which specifically relates to an earlier date),
except as otherwise contemplated by this Agreement or consented to in writing by
Maryland Federal. The representations and warranties of BB&T set forth in
Sections 4.1, 4.2, 4.3(a), 4.3(b)(i), 4.4 and 4.11 shall be true and correct
(except for inaccuracies which are de minimis in amount). There shall not exist
inaccuracies in the representations and warranties of BB&T set forth in this
Agreement (including the representations and warranties set forth in Sections
4.1, 4.2, 4.3(a), 4.3(b)(i) and 4.4) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse Effect on
BB&T.
(b) BB&T shall have performed in all material respects all obligations and
complied in all material respects with all covenants required by this Agreement
to be performed at or prior to the Effective Time.
(c) BB&T shall have delivered to Maryland Federal a certificate, dated the
Closing Date and signed by its Chairman or President or an Executive Vice
President, acting on behalf
40
<PAGE>
of BB&T in his or her capacity as such officer, to the effect that the
conditions set forth in Sections 6.1(a), 6.1(b), 6.1(c), 6.1(d), 6.2(a) and
6.2(b) hereof, to the extent applicable to BB&T, have been satisfied and that
there are no actions, suits, claims, governmental investigations or procedures
instituted, pending or, to the best of such officer's knowledge, threatened that
reasonably may be expected to have a Material Adverse Effect on BB&T or that
present a claim to restrain or prohibit the transactions contemplated herein or
in the Plan of Merger.
(d) Maryland Federal shall have received opinions of counsel to BB&T in
the form reasonably acceptable to Maryland Federal's legal counsel.
(e) All approvals of the transactions contemplated herein from the Federal
Reserve Board and any other state or federal government agency, department or
body, the approval of which is required for the consummation of the Merger,
shall have been received and all waiting period with respect to such approvals
shall have expired.
(f) The shares of BB&T Common Stock issuable pursuant to the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
6.3 Conditions Precedent - BB&T
The obligations of BB&T to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Time, unless waived by BB&T pursuant to
Section 7.4:
(a) All representations and warranties of Maryland Federal shall be
evaluated as of the date of this Agreement and as of the Effective Time as
though made on and as of the Effective Time (or on the date designated in the
case of any representation and warranty which specifically relates to an earlier
date), except as otherwise contemplated by this Agreement or consented to in
writing by BB&T. The representations and warranties of Maryland Federal set
forth in Sections 3.1, 3.2 (except the last sentence thereof), 3.3 (except the
last sentence thereof), 3.4 (except the last sentence thereof), 3.5(a),
3.5(b)(i), 3.23 and 3.24 shall be true and correct (except for inaccuracies
which are de minimis in amount). There shall not exist inaccuracies in the
representations and warranties of Maryland Federal set forth in this Agreement
(including the representations and warranties set forth in the Sections
designated in the preceding sentence) such that the effect of such inaccuracies
individually or in the aggregate has, or is reasonably likely to have, a
Material Adverse Effect with respect to Maryland Federal.
(b) No regulatory approval shall have imposed any condition or requirement
which, in the reasonable opinion of the Board of Directors of BB&T, would so
materially adversely affect the business or economic benefits to BB&T of the
transactions contemplated by this Agreement as to render consummation of such
transactions inadvisable or unduly burdensome.
41
<PAGE>
(c) Maryland Federal shall have performed in all material respects all
obligations and complied in all material respects with all covenants required by
this Agreement to be performed at or prior to the Effective Time.
(d) Maryland Federal shall have delivered to BB&T a certificate, dated the
Closing Date and signed by its Chairman or President, acting on behalf of
Maryland Federal and in his or her capacity as such officer, to the effect that
the conditions set forth in Sections 6.1(a), 6.1(c), 6.1(d), 6.3(a) and 6.3(c)
hereof, to the extent applicable to Maryland Federal, have been satisfied and
that there are no actions, suits, claims, governmental investigations or
procedures instituted, pending or, to the best of such officer's knowledge,
threatened that reasonably may be expected to have a Material Adverse Effect on
Maryland Federal or that present a claim to restrain or prohibit the
transactions contemplated herein or in the Plan of Merger.
(e) BB&T shall have received opinions of counsel to Maryland Federal in
the form reasonably acceptable to BB&T's legal counsel.
ARTICLE VII
TERMINATION, DEFAULT, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) At any time prior to the Effective Time, by the mutual consent in
writing of the parties hereto.
(b) At any time prior to the Effective Time, by either party (i) in the
event of a material breach by the other party of any covenant or agreement
contained in this Agreement, or (ii) in the event of an inaccuracy of any
representation or warranty of the other party contained in this Agreement, which
inaccuracy would provide the nonbreaching party the ability to refuse to
consummate the Merger under the applicable standard set forth in Section 6.2(a)
hereof in the case of Maryland Federal and Section 6.3(a) hereof in the case of
BB&T; and, in the case of (i) or (ii), if such breach or inaccuracy has not been
cured by the earlier of thirty days following written notice of such breach to
the party committing such breach or the Effective Time.
(c) At any time prior to the Effective Time, by either party hereto in
writing, if any of the conditions precedent to the obligations of the other
party to consummate the transactions contemplated hereby cannot be satisfied or
fulfilled prior to the Closing Date, and the party giving the notice is not in
breach of any of its representations, warranties, covenants or undertakings
herein.
(d) At any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.4 hereof are denied,
and the time period for appeals and requests for reconsideration has run.
42
<PAGE>
(e) At any time, by either party hereto in writing, if the shareholders of
Maryland Federal do not approve the Agreement and the Plan of Merger.
(f) At any time following December 31, 1998 by either party hereto in
writing, if the Effective Time has not occurred by the close of business on such
date, and the party giving the notice is not in breach of any of its
representations, warranties, covenants or undertakings herein.
(g) By Maryland Federal at any time during the five-day period commencing
on the Determination Date if both of the following conditions are satisfied:
(1) the Converted Value shall be less than $30.60; and
(2) (i) the quotient obtained by dividing the Average Closing Price
by $62.00 (such number being referred to herein as the "BB&T Ratio") shall
be less than (ii) 90% of the quotient obtained by dividing the Index Price
on the Determination Date by the Index Price on the Starting Date;
subject, however, to the following three sentences. If Maryland Federal
determines not to consummate the Merger pursuant to this Section 7.1(g), it
shall give prompt written notice of its election to terminate to BB&T, which
notice may be withdrawn at any time prior to the lapse of the five-day period
commencing on the Determination Date. During the five-day period commencing
with its receipt of such notice, BB&T shall have the option to elect to increase
the Exchange Ratio to a number such that the Converted Value is not less than
$30.60. The election contemplated by the preceding sentence shall be made by
giving notice to Maryland Federal of such election and the revised Exchange
Ratio, whereupon no termination shall have occurred pursuant to this Section
7.1(g), and this Agreement shall remain in effect in accordance with its terms
(except as the Exchange Ratio shall have been so modified), and any references
in this Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 7.1(g). If the Closing Date
shall occur during the five-day period such option is in effect, the Closing
Date shall be extended until the fifth Business Day following the close of such
five-day period.
For purposes of this Section 7.1(g), the following terms shall have the
meanings indicated:
"Converted Value" shall mean the product of the Average Closing Price
multiplied by the Exchange Ratio.
"Determination Date" shall mean the tenth calendar day preceding the
Effective Time (the tenth day to be determined by counting the day preceding the
Effective Time as the first day).
"Index Group" shall mean the 14 bank holding companies listed below, the
common stocks of all of which shall be publicly traded and as to which there
shall not have been, since the Starting Date and before the Determination Date,
any public announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in
43
<PAGE>
transactions with a value exceeding 25% of the acquiror's market capitalization.
In the event that any such company or companies are removed from the Index
Group, the weights (which have been determined based upon the number of shares
of outstanding common stock) shall be redistributed proportionately for purposes
of determining the Index Price. The 14 bank holding companies and the weights
attributed to them are as follows:
<TABLE>
<CAPTION>
Bank Holding Companies % Weighting
---------------------- -----------
<S> <C>
Wachovia Corp. 11.22
Fifth Third Bancorp 8.46
Comerica Inc. 5.70
Summit Bancorp 9.62
Mercantile Bancorp 7.11
Northern Trust Corp. 6.07
Huntington Bancshares Inc. 10.45
Firstar Corp. 7.90
Crestar Financial Corp. 6.07
South Trust Corp. 5.58
Regions Financial Corp. 7.45
Marshall & Ilsley Corp. 5.53
AmSouth Bancorp 4.39
Union Planters Corp. 4.45
------------
Total 100.00%
------------
------------
</TABLE>
"Index Price" on a given date shall mean the weighted average (weighted in
accordance with the "% Weighting" listed above) of the closing sales prices of
the companies composing the Index Group (determined as of the Starting Date
based on the average closing price per share (as reported by The Wall Street
Journal on the day preceding the Starting Date) and as provided with respect to
the Average Closing Price in the case of the Determination Date).
"Starting Date" shall mean the date of this Agreement.
If any company belonging to the Index Group or BB&T declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares, or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or BB&T
shall be appropriately adjusted for the purposes of applying this Section
7.1(g).
44
<PAGE>
7.2 Effect of Termination
In the event this Agreement and the Plan of Merger is terminated pursuant
to Section 7.1 hereof, both this Agreement and the Plan of Merger shall become
void and have no effect, except that (i) the provisions hereof relating to
confidentiality and expenses set forth in the last two sentences of Section 5.7
and in Section 8.1, respectively, shall survive any such termination and (ii) a
termination pursuant to Section 7.1(b) hereof shall not relieve the breaching
party from liability for an uncured breach of the covenant, agreement,
representation or warranty giving rise to such termination. The BB&T Option
Agreement shall be governed by its own terms.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or the Plan
of Merger or in any instrument delivered pursuant hereto or thereto shall expire
on, and be terminated and extinguished at, the Effective Time, other than
covenants that by their terms are to be performed after the Effective Time
(including, without limitation, Sections 5.10, 5.12, 5.13 and 5.17), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive BB&T or Maryland Federal (or any
director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
BB&T or Maryland Federal, the aforesaid representations, warranties and
covenants being material inducements to consummation by BB&T and Maryland
Federal of the transactions contemplated herein.
7.4 Waiver
Except with respect to any required regulatory approval, each party hereto,
by written instrument signed by an executive officer of such party, may at any
time (whether before or after approval of the Agreement and the Plan of Merger
by the Maryland Federal shareholders) extend the time for the performance of any
of the obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement, the Plan of Merger or any document delivered pursuant hereto
or thereto, (ii) compliance with any of the covenants, undertakings or
agreements of the other party, or satisfaction of any of the conditions
precedent to its obligations, contained herein or in the Plan of Merger, or
(iii) the performance by the other party of any of its obligations set out
herein or therein; provided that no such extension or waiver, or amendment or
supplement pursuant to this Section 7.4, executed after approval by the
Maryland Federal shareholders of this Agreement and the Plan of Merger, shall
modify either the amount or the form of the consideration to be provided to
holders of Maryland Federal Common Stock upon consummation of the Merger.
45
<PAGE>
7.5 Amendment or Supplement
This Agreement or the Plan of Merger may be amended or supplemented at any
time in writing by mutual agreement of BB&T and Maryland Federal, subject to the
proviso to Section 7.4 hereof.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel;
provided, however, that the filing fees and printing costs incurred in
connection with the Registration Statement shall be borne 50% by BB&T and 50% by
Maryland Federal.
8.2 Entire Agreement
This Agreement, including the documents and other writings referenced
herein or delivered pursuant hereto, contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and thereunder
and supersedes all arrangements or understandings with respect thereto, written
or oral, entered into on or before the date hereof. The terms and conditions of
this Agreement and the BB&T Option Agreement shall inure to the benefit of and
be binding upon the parties hereto and thereto and their respective successors.
Nothing in this Agreement or the BB&T Option Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto and thereto,
and their respective successors, any rights, remedies, obligations or
liabilities, except for the rights of directors and officers of Maryland Federal
to enforce rights in Sections 5.13 and 5.17.
8.3 No Assignment; Successors
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person, except upon the prior written consent
of each other party. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
nationally recognized overnight express courier or by facsimile transmission,
addressed or directed as follows:
46
<PAGE>
If to Maryland Federal:
Robert H. Halleck
Maryland Federal Bancorp, Inc.
3505 Hamilton Street
Hyattsville, Maryland 20782
Telephone: 301-779-1200
Fax: 301-864-2076
With a required copy to:
Timothy B. Matz, Esq.
Gerard L. Hawkins, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
12th Floor
Washington D.C., 20005
Telephone: 202-347-0300
Fax: 202-347-2172
If to BB&T or BB&T Financial:
Scott E. Reed
BB&T Corporation
150 South Stratford Road
4th Floor
Winston-Salem, North Carolina 27104
Telephone: 336-733-3088
Fax: 336-733-2296
With a required copy to:
William A. Davis, II
Womble Carlyle Sandridge & Rice, PLLC
200 West Second Street
Winston-Salem, North Carolina 27102
Telephone: 336-721-3624
Fax: 336-733-8364
Any party may by notice change the address to which notice or other
communications to it are to be delivered.
8.5 Specific Performance
Maryland Federal acknowledges that the Maryland Federal Common Stock and
the Maryland Federal business and assets are unique, and that if Maryland
Federal shall refuse to
47
<PAGE>
consummate the transaction contemplated by this Agreement without cause and in
breach of its obligations hereunder, such failure by Maryland Federal will cause
irreparable harm to BB&T for which there will be no adequate remedy at law, in
which event BB&T shall be entitled, in addition to its other remedies at law, to
specific performance of this Agreement.
8.6 Captions
The captions contained in this Agreement are for reference only and are not
part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
48
<PAGE>
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of North Carolina applicable to agreements made and entirely
to be performed within such jurisdiction, except to the extent that mandatory
provisions of federal law, the VSCA or the MGCL is applicable.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers, all as of the day and year first above written.
BB&T CORPORATION
By /s/ John A. Allison, IV
----------------------------------------------
Name: John A. Allison, IV
Title: Chairman and Chief Executive Officer
BB&T FINANCIAL CORPORATION OF VIRGINIA
By /s/ Henry G. Williamson, Jr.
----------------------------------------------
Name: Henry G. Williamson, Jr.
Title: Senior Executive Vice President
MARYLAND FEDERAL BANCORP, INC.
By /s/ Robert H. Halleck
----------------------------------------------
Name: Robert H. Halleck
Title: President and Chief Executive Officer
49
<PAGE>
ANNEX A
ARTICLES OF MERGER
MERGING
MARYLAND FEDERAL BANCORP, INC.
(a Corporation of the State of Maryland)
INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
(a Corporation of the State of Virginia)
FIRST: BB&T Financial Corporation of Virginia, a corporation
organized and existing under the laws of the State of Virginia ("BB&T
Financial"), and Maryland Federal Bancorp, Inc., a corporation organized and
existing under the laws of the State of Maryland ("Maryland Federal"), agree
that Maryland Federal shall be merged into BB&T Financial, and the mode of
carrying the same into effect are as herein set forth in these Articles of
Merger and the Plan of Merger attached hereto as Annex A.
SECOND: BB&T Financial shall survive the merger and shall continue
under the name BB&T Financial Corporation of Virginia.
THIRD: The parties to the Articles of Merger are BB&T Financial, a
corporation organized on the ______ day of _________________, 199__, under
the Virginia Stock Corporation Act, as amended, and qualified to do business
in Maryland as of the ____ day of _____________, 199__, and Maryland Federal,
a corporation organized and existing under the laws of the State of Maryland.
FOURTH: The following amendments to the charter of the surviving
corporation are to be effected as part of the merger:
The Articles of Incorporation and Bylaws of the surviving
corporation shall continue as the Articles of Incorporation and
Bylaws of the surviving corporation until amended in accordance
with their terms and the Virginia Stock Corporation Act.
FIFTH: The total number of shares of stock of all classes which BB&T
Financial has authority to issue is _______________ (__________) shares,
divided into ____________ (___________) shares of ____________ stock of the
par value of __________________________ Dollars ($_________) each, of the
aggregate par value of ___________________ Dollars ($__________) and
________________ shares of __________ stock without par value.
The total number of shares of stock of all classes which said Maryland
Federal has authority to issue is Twenty-Five Million (25,000,000) shares,
divided into Fifteen Million (15,000,000) shares of common stock of the par
value of $0.01 per share, of the aggregate par
<PAGE>
value of One Hundred Fifty Thousand Dollars ($150,000), and Ten Million
(10,000,000) shares of preferred stock without par value.
SIXTH: The manner and basis of converting or exchanging issued stock
of the merged corporation into different stock or other consideration and the
manner of dealing with any issued stock of the merged corporation not to be
so converted or exchanged shall be as set forth in the Plan of Merger set
forth as Annex A hereto.
SEVENTH: The principal office of said Maryland Federal is located in
the County of Prince George's, State of Maryland.
Maryland Federal owns property in the Counties of Anne Arundel,
Montgomery and Prince George's, State of Maryland, the title to which could
be affected by the recording of an instrument among the Land Records.
EIGHTH: The location of the principal office of the surviving
corporation in the State of Virginia, the state of its incorporation, is
________________, and the name and post office address of a resident agent of
said surviving corporation in Maryland is ______________, at
_________________________________.
NINTH: The terms and conditions of the merger transaction as set
forth in these Articles of Merger and the Plan of Merger set forth as Annex A
hereto were advised, authorized and approved by Maryland Federal, in the
manner and by the vote required by its Articles of Incorporation and the laws
of Maryland. The manner in which the merger was approved is as follows:
The merger was (a) duly advised by the board of directors of
Maryland Federal by the adoption on February 25, 1998 of a
resolution approving the merger substantially upon the terms and
conditions set forth in these Articles of Merger and directing
that the proposed merger be submitted for action thereon at a
meeting of the stockholders of said corporation, and (b) duly
approved by the stockholders of said corporation in the manner
and by the vote required by law at the said meeting of the
stockholders held on _______________, 1998, by the affirmative
vote of the holders of two-thirds of all the votes entitled to be
cast on the matter by the holders of the only class of stock
entitled to vote separately thereon.
TENTH: The terms and conditions of the transaction as set forth in
these articles were duly advised and authorized and approved by said BB&T
Financial in the manner and by the vote required by the laws of the State of
Virginia and by the charter of the said corporation. The manner in which the
merger was approved is as follows:
<PAGE>
The merger was (a) duly advised by the board of directors of BB&T
Financial by the adoption on February 25, 1998 of a resolution
approving the merger substantially upon the terms and conditions
set forth in these Articles of Merger and directing that the
proposed merger be submitted for action thereon at a meeting of
the sole stockholder of said corporation, and (b) duly approved
by the sole stockholder of said corporation by written consent
dated _______________, 1998.
ELEVENTH: The following other provisions are deemed by the merging
corporation necessary to effect the merger: See Plan of Merger set forth as
Annex A hereto.
IN WITNESS WHEREOF, Maryland Federal and BB&T Financial, the parties to
the merger, have caused these articles of merger to be signed in their
respective corporate names and on their behalf by their respective presidents
or vice-presidents and witnessed or attested by their respective secretaries
or assistant secretaries, as of the ______ day of ________________, 1998.
MARYLAND FEDERAL BANCORP, INC.
By:
--------------------------------
President (or Vice-President)
Attest: (Witness:)
- ----------------------------------
Secretary (or Assistant Secretary)
BB&T FINANCIAL CORPORATION OF VIRGINIA
By:
--------------------------------
President (or Vice-President)
Attest: (Witness:)
- ----------------------------------
Secretary (or Assistant Secretary)
<PAGE>
THE UNDERSIGNED, President (or Vice-President) of Maryland Federal
Bancorp, Inc., who executed on behalf of said corporation the foregoing
Articles of Merger, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said corporation, the foregoing
Articles of Merger to be the corporate act of said corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
MARYLAND FEDERAL BANCORP, INC.
By:
--------------------------------
Title:
--------------------------
THE UNDERSIGNED, President (or Vice-President) of BB&T Financial
Corporation of Virginia, who executed on behalf of said corporation the
foregoing Articles of Merger, of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Articles of Merger to be the corporate act of said corporation and
further certifies that, to the best of his knowledge, information and belief,
the matters and facts set forth therein with respect to the approval thereof
are true in all material respects, under the penalties of perjury.
BB&T FINANCIAL CORPORATION OF VIRGINIA
By:
--------------------------------
Title:
--------------------------
<PAGE>
Annex A
PLAN OF MERGER
OF
MARYLAND FEDERAL BANCORP, INC.
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
Section 1. Corporations Proposing to Merge and Surviving
Corporation. Maryland Federal Bancorp, Inc., a Maryland corporation
("Maryland Federal"), shall be merged (the "Merger") with and into BB&T
Financial Corporation of Virginia, a Virginia corporation ("BB&T Financial"),
pursuant to the terms and conditions of this Plan of Merger (the "Plan of
Merger") and of the Agreement and Plan of Reorganization, dated as of
February 25, 1998, (the "Agreement"), by and among Maryland Federal, BB&T
Financial and BB&T Corporation, a North Carolina corporation and parent
corporation of BB&T Financial ("BB&T"). The effective time for the Merger
(the "Effective Time") shall be set forth in the Articles of Merger to be
filed with the Clerk of the State Corporation Commission of Virginia and the
Articles of Merger to be filed with the Department of Assessments and
Taxation of the State of Maryland. BB&T Financial shall continue as the
surviving corporation (the "Surviving Corporation") in the Merger and the
separate corporate existence of Maryland Federal shall cease.
Section 2. Effects of the Merger. The Merger shall have the effects
set forth in Section 3-114 of the General Corporation Law of the State of
Maryland (the "MGCL") and in Section 13.1-721 of the Virginia Stock
Corporation Act (the "VSCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of BB&T Financial as in effect immediately prior
to the Effective Time shall remain in effect as the Articles of Incorporation
and Bylaws of the Surviving Corporation following the Effective Time until
changed in accordance with their terms and the VSCA.
Section 4. Conversion of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Maryland Federal or the holders of record of shares of
the common stock, par value $.01 per share, of Maryland Federal ("Maryland
Federal Common Stock"), each share of Maryland Federal Common Stock issued
and outstanding immediately prior to the Effective Time shall be converted
into and shall represent the right to receive, upon surrender of the
certificate representing such share of Maryland Federal Common Stock (as
provided in subsection (d) below), the Merger Consideration (as defined below
in Section 5).
(b) Each share of the common stock of BB&T Financial issued and
outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding.
<PAGE>
(c) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of Maryland Federal Common
Stock shall be deemed upon the Effective Time for all purposes to represent
only the right to receive the Merger Consideration. No interest will be paid
or accrued on the Merger Consideration upon the surrender of the certificate
or certificates representing shares of Maryland Federal Common Stock. With
respect to any certificate for Maryland Federal Common Stock that has been
lost or destroyed, BB&T shall pay the Merger Consideration attributable to
such certificate upon receipt of a surety bond or other adequate indemnity as
required in accordance with BB&T's standard policy, and evidence reasonably
satisfactory to BB&T of ownership of the shares represented thereby. After
the Effective Time, no transfer of the shares of Maryland Federal Common
Stock outstanding immediately prior to the Effective Time shall be made on
the stock transfer books of the Surviving Corporation.
(d) Promptly after the Effective Time, BB&T shall cause to be delivered
or mailed to each Maryland Federal shareholder a form of letter of
transmittal and instructions for use in effecting the surrender of the
certificates which, immediately prior to the Effective Time, represented any
shares of Maryland Federal Common Stock (the "Instruction Letter"). Upon
surrender of such certificates or other evidence of ownership meeting the
requirements of the foregoing subsection (c), together with such letter of
transmittal duly executed and completed in accordance with the instructions
thereto, and such other documents as may be reasonably requested, BB&T shall
promptly cause the transfer to the persons entitled thereto of the Merger
Consideration.
(e) The Surviving Corporation shall pay any dividends or other
distributions with a record date prior to the Effective Time which have been
declared or made by Maryland Federal in respect of shares of Maryland Federal
Common Stock in accordance with the terms of the Agreement and which remain
unpaid at the Effective Time. To the extent permitted by law, former
shareholders of record of Maryland Federal shall be entitled to vote after
the Effective Time at any meeting of BB&T shareholders the number of whole
shares of BB&T Common Stock into which their respective shares of Maryland
Federal Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing Maryland Federal Common Stock for
certificates representing shares of the voting common stock, par value $5.00
per share, of BB&T ("BB&T Common Stock") in accordance with the provisions of
this Plan of Merger. Whenever a dividend or other distribution is declared
by BB&T on the BB&T Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares of BB&T Common Stock issuable pursuant to this
Agreement, but after the Effective Time no dividend or other distribution
payable to the holders of record of BB&T Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing Maryland Federal Common Stock until such holder
surrenders such certificate for exchange as provided in this Section 4. Upon
surrender of such certificate, both the BB&T Common Stock certificate and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share of Maryland Federal
Common Stock represented by such certificate.
2
<PAGE>
Section 5. Merger Consideration
As used herein, the term "Merger Consideration" shall mean the portion
of a whole share of BB&T Common Stock to be exchanged for each share of
Maryland Federal Common Stock issued and outstanding as of the Effective Time
and cash (without interest) to be payable in exchange for any fractional
share of BB&T Common Stock which would otherwise be exchanged for a share of
Maryland Federal Common Stock, determined as follows:
(a) The number of shares of BB&T Common Stock to be issued in exchange
for each issued and outstanding share of Maryland Federal Common Stock shall
be in the ratio of .5975 shares of BB&T Common Stock for each share of
Maryland Federal Common Stock, subject to adjustment in the manner set forth
below and pursuant to Sections 2.11 and 7.1(g) of the Agreement (the
"Exchange Ratio"); provided, that if the product of the Exchange Ratio
multiplied by the Average Closing Price (as defined in subsection (b) below)
is less than $36.00, the Exchange Ratio shall be increased to the lesser of
(i) the amount necessary to increase such product to $36.00, or (ii) .6102,
subject to potential adjustment pursuant to Section 7.1(g) of the Agreement.
(b) For purposes of this Section 5, the "Average Closing Price" shall
mean the average closing price per share of BB&T Common Stock on the New York
Stock Exchange, Inc. ("NYSE") Composite Transactions List (as reported by
The Wall Street Journal) for the ten trading days (determined by excluding
days on which the NYSE is closed) immediately preceding the tenth calendar
day preceding the Effective Time (the tenth day to be determined by counting
the day preceding the Effective Time as the first day).
(c) The amount of cash payable with respect to any fractional share of
BB&T Common Stock shall be determined by multiplying the fractional part of
such share by the Average Closing Price. No person will be entitled to
dividends, voting rights or any other rights as a BB&T shareholder in respect
of any fractional share.
(d) In the event BB&T changes the number of shares of BB&T Common Stock
issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend or other similar recapitalization, and the record date
thereof (in the case of a stock dividend) or the effective date thereof (in
the case of a stock split or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the Merger
Consideration and the Exchange Ratio shall be proportionately adjusted.
Section 6. Conversion of Stock Options
(a) At the Effective Time, each option (a "Stock Option") granted under
Maryland Federal's 1992 Stock Incentive Plan, 1993 Directors' Stock Option
Plan and 1995 Stock Option Plan (collectively, the "Stock Option Plans"),
outstanding and unexercised as of the Effective Time to acquire shares of
Maryland Federal Common Stock, aggregating 631,253 shares as of February 25,
1998 (and which by its terms does not lapse on or before the Effective Time),
whether or not then
3
<PAGE>
exercisable, shall be converted automatically into and become an option under
the BB&T 1995 Omnibus Stock Incentive Plan or successor plan thereto (the
"BB&T Option Plan"), and shall be governed by the terms and conditions of the
BB&T Option Plan; provided, however, that in no event shall the vesting,
exercise and duration provisions of any Stock Option be less favorable
following conversion to an option under the BB&T Option Plan than as provided
under the individual stock option agreements as in effect under the
applicable Stock Option Plan immediately preceding the Effective Time. In
making such conversion, (i) the number of shares of BB&T Common Stock subject
to each such Stock Option shall be the number of whole shares of BB&T
(omitting any fractional share) determined by multiplying the number of
shares of Maryland Federal Common Stock subject to such Stock Option
immediately prior to the Effective Time by the Exchange Ratio, (ii) the per
share exercise price under each such Stock Option shall be adjusted by
dividing the per share exercise price under each such Stock Option by the
Exchange Ratio and rounding up to the nearest cent and (iii) no restrictions
on transfers shall be placed on shares of BB&T Common Stock received through
the exercise of the option, except to the extent that such restrictions would
have been placed on such shares under the Stock Option Plans or are required
by the Securities Act of 1933, as amended; the Securities Exchange Act of
1934, as amended; the Investment Company Act of 1940, as amended; the Trust
Indenture Act of 1939, as amended; and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder. In addition, each
such Stock Option which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder, so as to continue as an
incentive stock option under Section 424(a) of the Code, and so as not to
constitute a modification, extension, or renewal of the option, within the
meaning of Section 424(h) of the Code. BB&T and Maryland Federal agree to
take all necessary steps to effectuate the foregoing provisions of this
Section 6. Each grant of a converted option to any individual who subsequent
to the Merger will be a director or officer of BB&T as construed under Rule
16b-3 of the Securities Exchange Act of 1934, as amended, shall, as a
condition to such conversion, be approved in accordance with the provisions
of Rule 16b-3.
(b) As soon as practicable following the Effective Time, BB&T shall
deliver to the participants receiving converted options under the BB&T Option
Plan an appropriate notice setting forth such participant's rights pursuant
thereto. BB&T has reserved under the BB&T Option Plan adequate shares of
BB&T Common Stock for delivery upon exercise of any such converted options,
and such shares of BB&T Common Stock shall be registered under the Securities
Act of 1933, as amended, as of the Effective Time.
Section 7. No Fractional Shares. Notwithstanding any other term or
provision hereof, no fraction of a share of BB&T Common Stock, and no
certificates or script therefor or other evidence of ownership thereof, will
be issued in connection with the conversion of Maryland Federal Common Stock
in the Merger, and no right to receive cash in lieu thereof shall entitle the
holder thereof to any voting or other rights of a holder of shares or
fractional share interests of the Surviving Corporation. In lieu of such
fractional shares, any holder of shares who would otherwise be entitled to
fractional shares of BB&T Common Stock will, upon receipt by the Surviving
Corporation of the Instruction Letter and other documents described in
Section 4(c), above, be paid
4
<PAGE>
the cash value of each such fraction, computed in accordance with the ratio
set forth in Section 5 above.
Section 8. Amendment. At any time before the Effective Time, this
Plan of Merger may be amended, provided that no such amendment executed after
approval by the Maryland Federal shareholders of the Agreement and this Plan
of Merger shall modify either the amount or the form of the consideration to
be provided to holders of Maryland Federal Common Stock upon consummation of
the Merger.
5
<PAGE>
ANNEX B
ARTICLES OF MERGER
OF
MARYLAND FEDERAL BANCORP, INC.
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
The undersigned corporations, pursuant to Section 13.1-720 of the Virginia
Stock Corporation Act, hereby execute the following Articles of Merger.
ONE
The merger of Maryland Federal Bancorp, Inc., a Maryland corporation
("Maryland Federal"), with and into BB&T Financial Corporation of Virginia, a
Virginia corporation ("BB&T Financial"), shall be in accordance with the Plan
of Merger attached hereto as Annex A (the "Plan of Merger").
TWO
The Plan of Merger was submitted to the shareholders of (i) Maryland
Federal by its Board of Directors in accordance with the General Corporation
Law of the State of Maryland and (ii) BB&T Financial by its Board of
Directors and sole shareholder in accordance with the provisions of Section
13.1-718 of the Virginia Stock Corporation Act:
A. The number of outstanding shares of voting common stock, par value
$0.01, of Maryland Federal (the only voting group entitled to vote on the
Plan of Merger) entitled to be cast and number of undisputed votes cast for
the Plan of Merger were:
Outstanding Shares Undisputed Votes Cast for the Plan
______________ ___________________________
The number of undisputed votes cast for the Plan of Merger was
sufficient for approval of the Plan of Merger.
The merger is permitted under the General Corporation Law of the State
of Maryland, and Maryland Federal has complied with such law in effecting the
merger.
B. The Plan of Merger was adopted by written consent of the sole
shareholder of BB&T Financial.
<PAGE>
THREE
The articles of merger shall become effective at ______ _.m. on ______,
1998.
The undersigned duly authorized officer of each of BB&T Financial and
Maryland Federal declares that the facts herein stated are true as of
__________________, 1998.
BB&T FINANCIAL CORPORATION OF VIRGINIA
By:
-------------------------------------
Name:
------------------------------
Title:
------------------------------
MARYLAND FEDERAL BANCORP, INC.
By:
-------------------------------------
Name:
------------------------------
Title:
------------------------------
2
<PAGE>
Annex A
PLAN OF MERGER
OF
MARYLAND FEDERAL BANCORP, INC.
WITH AND INTO
BB&T FINANCIAL CORPORATION OF VIRGINIA
Section 1. Corporations Proposing to Merge and Surviving
Corporation. Maryland Federal Bancorp, Inc., a Maryland corporation
("Maryland Federal"), shall be merged (the "Merger") with and into BB&T
Financial Corporation of Virginia, a Virginia corporation ("BB&T Financial"),
pursuant to the terms and conditions of this Plan of Merger (the "Plan of
Merger") and of the Agreement and Plan of Reorganization, dated as of
February 25, 1998, (the "Agreement"), by and among Maryland Federal, BB&T
Financial and BB&T Corporation, a North Carolina corporation and parent
corporation of BB&T Financial ("BB&T"). The effective time for the Merger
(the "Effective Time") shall be set forth in the Articles of Merger to be
filed with the Clerk of the State Corporation Commission of Virginia and the
Articles of Merger to be filed with the Department of Assessments and
Taxation of the State of Maryland. BB&T Financial shall continue as the
surviving corporation (the "Surviving Corporation") in the Merger and the
separate corporate existence of Maryland Federal shall cease.
Section 2. Effects of the Merger. The Merger shall have the effects
set forth in Section 3-114 of the General Corporation Law of the State of
Maryland (the "MGCL") and in Section 13.1-721 of the Virginia Stock
Corporation Act (the "VSCA").
Section 3. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of BB&T Financial as in effect immediately prior
to the Effective Time shall remain in effect as the Articles of Incorporation
and Bylaws of the Surviving Corporation following the Effective Time until
changed in accordance with their terms and the VSCA.
Section 4. Conversion of Shares; Payment of Merger Consideration
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Maryland Federal or the holders of record of shares of
the common stock, par value $.01 per share, of Maryland Federal ("Maryland
Federal Common Stock"), each share of Maryland Federal Common Stock issued
and outstanding immediately prior to the Effective Time shall be converted
into and shall represent the right to receive, upon surrender of the
certificate representing such share of Maryland Federal Common Stock (as
provided in subsection (d) below), the Merger Consideration (as defined below
in Section 5).
(b) Each share of the common stock of BB&T Financial issued and
outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding.
<PAGE>
(c) Until surrendered, each outstanding certificate which prior to the
Effective Time represented one or more shares of Maryland Federal Common
Stock shall be deemed upon the Effective Time for all purposes to represent
only the right to receive the Merger Consideration. No interest will be paid
or accrued on the Merger Consideration upon the surrender of the certificate
or certificates representing shares of Maryland Federal Common Stock. With
respect to any certificate for Maryland Federal Common Stock that has been
lost or destroyed, BB&T shall pay the Merger Consideration attributable to
such certificate upon receipt of a surety bond or other adequate indemnity as
required in accordance with BB&T's standard policy, and evidence reasonably
satisfactory to BB&T of ownership of the shares represented thereby. After
the Effective Time, no transfer of the shares of Maryland Federal Common
Stock outstanding immediately prior to the Effective Time shall be made on
the stock transfer books of the Surviving Corporation.
(d) Promptly after the Effective Time, BB&T shall cause to be delivered
or mailed to each Maryland Federal shareholder a form of letter of
transmittal and instructions for use in effecting the surrender of the
certificates which, immediately prior to the Effective Time, represented any
shares of Maryland Federal Common Stock (the "Instruction Letter"). Upon
surrender of such certificates or other evidence of ownership meeting the
requirements of the foregoing subsection (c), together with such letter of
transmittal duly executed and completed in accordance with the instructions
thereto, and such other documents as may be reasonably requested, BB&T shall
promptly cause the transfer to the persons entitled thereto of the Merger
Consideration.
(e) The Surviving Corporation shall pay any dividends or other
distributions with a record date prior to the Effective Time which have been
declared or made by Maryland Federal in respect of shares of Maryland Federal
Common Stock in accordance with the terms of the Agreement and which remain
unpaid at the Effective Time. To the extent permitted by law, former
shareholders of record of Maryland Federal shall be entitled to vote after
the Effective Time at any meeting of BB&T shareholders the number of whole
shares of BB&T Common Stock into which their respective shares of Maryland
Federal Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing Maryland Federal Common Stock for
certificates representing shares of the voting common stock, par value $5.00
per share, of BB&T ("BB&T Common Stock") in accordance with the provisions of
this Plan of Merger. Whenever a dividend or other distribution is declared
by BB&T on the BB&T Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares of BB&T Common Stock issuable pursuant to this
Agreement, but after the Effective Time no dividend or other distribution
payable to the holders of record of BB&T Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing Maryland Federal Common Stock until such holder
surrenders such certificate for exchange as provided in this Section 4. Upon
surrender of such certificate, both the BB&T Common Stock certificate and any
undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share of Maryland Federal
Common Stock represented by such certificate.
2
<PAGE>
Section 5. Merger Consideration
As used herein, the term "Merger Consideration" shall mean the portion
of a whole share of BB&T Common Stock to be exchanged for each share of
Maryland Federal Common Stock issued and outstanding as of the Effective Time
and cash (without interest) to be payable in exchange for any fractional
share of BB&T Common Stock which would otherwise be exchanged for a share of
Maryland Federal Common Stock, determined as follows:
(a) The number of shares of BB&T Common Stock to be issued in exchange
for each issued and outstanding share of Maryland Federal Common Stock shall
be in the ratio of .5975 shares of BB&T Common Stock for each share of
Maryland Federal Common Stock, subject to adjustment in the manner set forth
below and pursuant to Sections 2.11 and 7.1(g) of the Agreement (the
"Exchange Ratio"); provided, that if the product of the Exchange Ratio
multiplied by the Average Closing Price (as defined in subsection (b) below)
is less than $36.00, the Exchange Ratio shall be increased to the lesser of
(i) the amount necessary to increase such product to $36.00, or (ii) .6102,
subject to potential adjustment pursuant to Section 7.1(g) of the Agreement.
(b) For purposes of this Section 5, the "Average Closing Price" shall
mean the average closing price per share of BB&T Common Stock on the New York
Stock Exchange, Inc. ("NYSE") Composite Transactions List (as reported by
The Wall Street Journal) for the ten trading days (determined by excluding
days on which the NYSE is closed) immediately preceding the tenth calendar
day preceding the Effective Time (the tenth day to be determined by counting
the day preceding the Effective Time as the first day).
(c) The amount of cash payable with respect to any fractional share of
BB&T Common Stock shall be determined by multiplying the fractional part of
such share by the Average Closing Price. No person will be entitled to
dividends, voting rights or any other rights as a BB&T shareholder in respect
of any fractional share.
(d) In the event BB&T changes the number of shares of BB&T Common Stock
issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend or other similar recapitalization, and the record date
thereof (in the case of a stock dividend) or the effective date thereof (in
the case of a stock split or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the Merger
Consideration and the Exchange Ratio shall be proportionately adjusted.
Section 6. Conversion of Stock Options
(a) At the Effective Time, each option (a "Stock Option") granted under
Maryland Federal's 1992 Stock Incentive Plan, 1993 Directors' Stock Option
Plan and 1995 Stock Option Plan (collectively, the "Stock Option Plans"),
outstanding and unexercised as of the Effective Time to acquire shares of
Maryland Federal Common Stock, aggregating 631,253 shares as of February 25,
1998 (and which by its terms does not lapse on or before the Effective Time),
whether or not then
3
<PAGE>
exercisable, shall be converted automatically into and become an option under
the BB&T 1995 Omnibus Stock Incentive Plan or successor plan thereto (the
"BB&T Option Plan"), and shall be governed by the terms and conditions of the
BB&T Option Plan; provided, however, that in no event shall the vesting,
exercise and duration provisions of any Stock Option be less favorable
following conversion to an option under the BB&T Option Plan than as provided
under the individual stock option agreements as in effect under the
applicable Stock Option Plan immediately preceding the Effective Time. In
making such conversion, (i) the number of shares of BB&T Common Stock subject
to each such Stock Option shall be the number of whole shares of BB&T
(omitting any fractional share) determined by multiplying the number of
shares of Maryland Federal Common Stock subject to such Stock Option
immediately prior to the Effective Time by the Exchange Ratio, (ii) the per
share exercise price under each such Stock Option shall be adjusted by
dividing the per share exercise price under each such Stock Option by the
Exchange Ratio and rounding up to the nearest cent and (iii) no restrictions
on transfers shall be placed on shares of BB&T Common Stock received through
the exercise of the option, except to the extent that such restrictions would
have been placed on such shares under the Stock Option Plans or are required
by the Securities Act of 1933, as amended; the Securities Exchange Act of
1934, as amended; the Investment Company Act of 1940, as amended; the Trust
Indenture Act of 1939, as amended; and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder. In addition, each
such Stock Option which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder, so as to continue as an
incentive stock option under Section 424(a) of the Code, and so as not to
constitute a modification, extension, or renewal of the option, within the
meaning of Section 424(h) of the Code. BB&T and Maryland Federal agree to
take all necessary steps to effectuate the foregoing provisions of this
Section 6. Each grant of a converted option to any individual who subsequent
to the Merger will be a director or officer of BB&T as construed under Rule
16b-3 of the Securities Exchange Act of 1934, as amended, shall, as a
condition to such conversion, be approved in accordance with the provisions
of Rule 16b-3.
(b) As soon as practicable following the Effective Time, BB&T shall
deliver to the participants receiving converted options under the BB&T Option
Plan an appropriate notice setting forth such participant's rights pursuant
thereto. BB&T has reserved under the BB&T Option Plan adequate shares of
BB&T Common Stock for delivery upon exercise of any such converted options,
and such shares of BB&T Common Stock shall be registered under the Securities
Act of 1933, as amended, as of the Effective Time.
Section 7. No Fractional Shares. Notwithstanding any other term or
provision hereof, no fraction of a share of BB&T Common Stock, and no
certificates or script therefor or other evidence of ownership thereof, will
be issued in connection with the conversion of Maryland Federal Common Stock
in the Merger, and no right to receive cash in lieu thereof shall entitle the
holder thereof to any voting or other rights of a holder of shares or
fractional share interests of the Surviving Corporation. In lieu of such
fractional shares, any holder of shares who would otherwise be entitled to
fractional shares of BB&T Common Stock will, upon receipt by the Surviving
Corporation of the Instruction Letter and other documents described in
Section 4(c), above, be paid
4
<PAGE>
the cash value of each such fraction, computed in accordance with the ratio
set forth in Section 5 above.
Section 8. Amendment. At any time before the Effective Time, this
Plan of Merger may be amended, provided that no such amendment executed after
approval by the Maryland Federal shareholders of the Agreement and this Plan
of Merger shall modify either the amount or the form of the consideration to
be provided to holders of Maryland Federal Common Stock upon consummation of
the Merger.
5
<PAGE>
ANNEX C
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of _____________
1998, by and among BB&T CORPORATION ("BB&T"), a North Carolina corporation
having its principal office at Winston-Salem, North Carolina, BRANCH BANKING
& TRUST COMPANY OF VIRGINIA ("Employer"), a Virginia corporation and wholly
owned subsidiary of BB&T and ___________________________ (the "Employee");
WITNESSETH THAT:
WHEREAS, Employee has been an officer of Maryland Federal Bancorp,
Inc. ("Maryland Federal") and Maryland Federal Savings and Loan Association,
a wholly owned subsidiary of Maryland Federal, and Maryland Federal merged
with BB&T Financial Corporation of Virginia, a wholly-owned subsidiary of
BB&T, effective _____________, 1998;
WHEREAS, the parties have agreed to enter into this Employment
Agreement incident to said merger;
WHEREAS, Employer considers the continued availability of
Employee's services to be important to the management and conduct of
Employer's business and desires to secure the continued availability of
Employee's services; and
WHEREAS, Employee is willing to make his services available to
Employer on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. As of the date hereof, Employee shall be employed
as Regional President of the Maryland Region of Employer. Employee hereby
accepts and agrees to such employment, subject to the general supervision and
pursuant to the orders, advice, and direction of Employer and its Board of
Directors. Employee shall perform such duties as are customarily performed by
one holding the position of Regional President of Employer, and shall
additionally render such other services and duties as may be reasonably
assigned to him from time to time by Employer, consistent with his position.
2. Term of Employment. The term of this Agreement (the "Term")
shall commence on the date hereof and shall terminate on the day next
preceding the fifth anniversary of such date.
3. Compensation.
a. For all services rendered by Employee to Employer under
this Agreement, Employer shall pay to Employee, during the Term, a minimum
annual salary ("Base Salary") at a rate not less than the annual base salary
payable to Employee by Maryland Federal
<PAGE>
as of the day immediately preceding the date of this Agreement, payable in
accordance with the payroll practices of Employer applicable to officers.
b. Employee shall participate in any bonus or incentive plan
of Employer, whether such plan provides for awards in cash or securities,
made available to similarly situated officers of Employer, as such plan or
plans may be modified from time to time, or such other similar plans of
Employer for which Employee may become eligible and designated a participant.
c. Following the date hereof, Employee shall be entitled to
an annual Base Salary increase each year determined in accordance with
Employer's annual salary plan, based on Employer's performance and the
performance of Employee; provided that in no event shall Employee's Base
Salary increase at any time be less than the average base salary increase
(determined as a percentage of base salary) provided generally to similarly
situated officers of Employer.
d. Except as otherwise specifically provided herein, for as
long as Employee is employed by Employer, Employee also shall be entitled to
receive, on the same basis as similarly situated officers of Employer,
employee pension (including 401(k)) and welfare benefits and group employee
benefits such as sick leave, vacation, group disability and health, dental,
life, and accident insurance, stock option plan and similar indirect
compensation which Employer may from time to time extend to its similarly
situated officers.
e. For as long as Employee is employed by Employer, Employer
shall reimburse Employee or otherwise provide for or pay all reasonable
expenses incurred by Employee in furtherance of or in connection with the
business of Employer, subject to such standard documentation requirements as
may be established by Employer from time to time.
f. In addition to the foregoing provisions of this Section
3, Employer shall pay to Employee for each year during the Term, in lieu of
the right to use of an automobile and certain other fringe benefits, the sum
of $26,400 (prorated for any partial year). Such sum shall be payable in
accordance with the payroll practices of Employer applicable to officers, and
may (but need not) be combined for payment purposes with payments of Base
Salary. In no event, however, shall amounts payable under this Section 3(f)
be deemed to be Base Salary for purposes of applying subparagraphs (a), (b)
and (c) of this Section 3, nor shall such amounts be deemed to be
compensation of Employee for purposes of determining accruals, contributions,
grants or benefits under any plan or program described in subparagraph (d) of
this Section 3.
g. Employer agrees to assume and honor the terms of the
Non-Qualified Executive Deferred Compensation Plan entered into on May 16,
1996 by and between Maryland Federal and Employee, including the related
Trust Agreement entered into on May 16, 1996 by and between Maryland Federal
and Stephen W. Nealon, Esq., and Employer agrees to maintain in effect such
plan and trust.
2
<PAGE>
4. Covenants of Employee.
a. To the extent and subject to the limitations provided in
the following subsections of this Section 4 (whichever may be applicable),
upon termination of Employee's employment, Employee will not directly or
indirectly, either as a principal, agent, employee, employer, stockholder,
co-partner or in any other individual or representative capacity whatsoever:
(i) engage in a Competitive Business anywhere in the States of Maryland,
Virginia, North Carolina or South Carolina, or the District of Columbia, or
any county contiguous to any said State or District; or (ii) solicit, or
assist any other person in so soliciting, any depositors or customers of
Employer, BB&T or their Affiliates to make deposits in or to become customers
of any other financial institution conducting a Competitive Business; or
(iii) induce any employees to terminate their employment with Employer, BB&T
or their Affiliates. As used in this Agreement, the term "Competitive
Business" means the banking and financial services business, which includes
consumer savings, commercial banking and the insurance and trust businesses,
or the savings and loan or mortgage banking business, or any other business
in which Employer, BB&T or their Affiliates are engaged; the term "Affiliate"
means a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, another Person; and the term "Person" means any person, partnership,
corporation, company, group or other entity.
b. If Employee voluntarily terminates employment with
Employer at any time, Employee will be subject to the provisions of Section
4(a) until the second anniversary of Employee's termination.
c. If Employee's employment is terminated by Employer for
Just Cause (as defined in Section 6(b)), Employee will be subject to the
provisions of Section 4(a) until the second anniversary of Employee's
termination.
d. If Employee's employment is terminated by Employer for
reasons other than Just Cause (as defined in Section 6(b)) at any time,
Employee will be subject to the provisions of Section 4(a) until the later
of: (i) the first anniversary of Employee's termination or (ii) the date as
of which Employee ceases to receive Termination Compensation as provided in
Section 6(c).
e. Notwithstanding any other provision of this Agreement to
the contrary, if Employee voluntarily terminates his employment with Employer
in accordance with Section 6(d), Employee will not be subject to Section 4(a).
f. During the Term of Employee's employment hereunder and
thereafter, and except as required by any court, supervisory authority or
administrative agency or as may be otherwise required by applicable law,
Employee shall not, without the written consent of the Board of Directors of
Employer or a person authorized thereby, disclose to any person, other than
an employee of Employer, BB&T or an Affiliate thereof or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by Employee of his duties as an employee of Employer, any
confidential information obtained by
3
<PAGE>
him while in the employ of Employer, unless such information has become a
matter of public knowledge at the time of such disclosure.
g. The covenants contained in this Section 4 shall be
construed and interpreted in any judicial proceeding to permit their
enforcement to the maximum extent permitted by law. Employee agrees that the
restraints imposed herein are necessary for the reasonable and proper
protection of Employer, BB&T and their Affiliates and that each and every one
of the restraints is reasonable in respect to activities restricted, length
of time and geographic area. Employee further acknowledges that damages at
law would not be a measurable or adequate remedy for breach of the covenants
contained in this Section 4 and, accordingly, Employee agrees to submit to
the equitable jurisdiction of any court of competent jurisdiction in
connection with any action to enjoin Employee from violating any such
covenants.
5. Disability. If, by reason of physical or mental disability
during the Term, Employee is unable to carry out the essential functions of
his employment hereunder for six consecutive months, his services hereunder
may be terminated by action of the Board of Directors of Employer determining
so to do upon one month's notice to be effective at any time after the period
of six continuous months of disability and while such disability continues.
If, prior to the effective time of such notice, Employee shall recover from
such disability and return to the full-time active discharge of his duties,
then such notice shall be of no further force and effect and Employee's
employment shall continue as if the same had been uninterrupted. If Employee
shall not so recover from his disability and return to his duties, then his
services shall terminate at the effective time of such one month's notice
with the same force and effect as if that date had been the end of the Term
originally provided for hereunder. During the first six months of the period
of Employee's disability, Employee shall continue to earn all compensation
(including bonuses and incentive compensation) to which Employee would have
been entitled as if he had not been disabled, such compensation to be paid at
the time, in the amounts, and in the manner provided in Section 3(a),
inclusive of any compensation received pursuant to any applicable disability
insurance plan of Employer or BB&T. Thereafter, Employee shall receive
compensation to which he is entitled under any applicable disability
insurance plan maintained by the Employer or BB&T. In the event a dispute
arises between Employee and Employer concerning Employee's physical or mental
ability to continue or return to the performance of his duties as aforesaid,
Employee shall submit to examination by a competent physician mutually
agreeable to the parties, and the physician's opinion as to Employee's
capability to so perform will be final and binding.
6. Termination.
a. If Employee shall die during the Term, this Agreement and
the employment relationship hereunder will automatically terminate on the
date of death, which date shall be the last day of the Term.
b. Employer shall have the right to terminate Employee's
employment under this Agreement at any time for Just Cause, which termination
shall be effective immediately. Termination for "Just Cause" shall include
termination for Employee's personal dishonesty, gross incompetence, willful
misconduct, breach of a fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation
4
<PAGE>
(other than traffic violations or similar offenses) or final cease-and-desist
order, conviction of a felony or of a misdemeanor involving moral turpitude,
unethical business practices in connection with Employer's or BB&T's
business, misappropriation of Employer's or BB&T's assets or those of their
Affiliates, or material breach of any other provision of this Agreement,
provided that Employee has received written notice from Employer of such
material breach and such breach remains uncured thirty days after the
delivery of such notice. In the event Employee's employment under this
Agreement is terminated for Just Cause, or if Employee shall voluntarily
terminate employment hereunder other than for Good Reason as described in
Section 6(d) prior to the one-year anniversary of the date of this Agreement,
Employee shall have no right to receive compensation or other benefits under
this Agreement for any period after such termination.
c. Employer may terminate Employee's employment other than
for "Just Cause", as described in Subparagraph (b) above, at any time upon
written notice to Employee, which termination shall be effective immediately.
In the event Employer terminates Employee pursuant to this Subparagraph (c),
(i) Employee will receive the highest amount of the annual cash compensation
(including cash bonuses and other cash-based benefits, including for these
purposes amounts earned or payable whether or not deferred) received from
Maryland Federal or Employer during any of the three calendar years
immediately preceding such termination ("Termination Compensation") in each
year until the end of the Term (prorated for any partial year), so long as
Employee complies with Section 4(a) of the Agreement, and (ii) Employer and
BB&T shall use their best efforts to accelerate vesting of any unvested
benefits of Employee under any employee stock-based or other benefit plan or
arrangement to the extent permitted by the terms of such plan. The
Termination Compensation shall be payable at the times salary payments would
have been made in accordance with Section 3(a). In addition, Employee shall
continue to participate in the same group hospitalization plan, health care
plan, dental care plan, life or other insurance or death benefit plan, and
any other present or future similar group employee benefit plan or program
for which officers of Employer generally are eligible, on the same terms as
were in effect prior to Employee's termination, either under Employer's plans
or comparable coverage, for all periods Employee receives Termination
Compensation. Notwithstanding anything in this Agreement to the contrary, if
Employee breaches Section 4(a) of this Agreement during the period that he is
receiving Termination Compensation, Employee will not be entitled to receive
any further Termination Compensation pursuant to this Section 6(c).
d. In the event of a Change of Control of Employer or BB&T
at any time after the date hereof, Employee may voluntarily terminate
employment with Employer or BB&T up until twelve months after the Change of
Control for "Good Reason" and, subject to Section 6(g), (x) be entitled to
receive in a lump sum (i) any compensation due but not yet paid through the
date of termination and (ii) in lieu of any further salary payments from the
date of termination to the end of the Term, an amount equal to his annual
Termination Compensation times 2.99, and (y) shall continue to participate in
the same group hospitalization plan, health care plan, dental care plan, life
or other insurance or death benefit plan, and any other present or future
similar group employee benefit plan or program for which officers of Employer
generally are eligible, or comparable plans or coverage, for a period of
three years following termination of employment by Employee, on the same
terms as were in effect either (A) at the date of such
5
<PAGE>
termination, or (B) if such plans and programs in effect prior to the Change
of Control of Employer or BB&T were, considered together as a whole,
materially more generous to the officers of Employer, then at the date of the
Change of Control. Any such benefits shall be paid by Employer to the same
extent as they were so paid prior to the termination or the Change of Control
of Employer or BB&T, as appropriate.
"Good Reason" shall mean the occurrence of any of the following
events without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the
position and status of Regional President of Employer;
(b) a reduction by Employer in Employee's pay grade or base
salary as then in effect, or the exclusion of Employee from
participation in Employer's benefit plans in which he previously
participated as in effect at the date hereof or as the same may be
increased from time to time during the Term, or Employer's failure to
increase (within twelve months of Employee's last increase in Base
Salary) Employee's Base Salary in an amount which at least equals, on
a percentage basis, the average percentage increase in Base Salary
generally provided for similarly situated officers of Employer; or
(c) an involuntary relocation of Employee more than 100 miles
from the location where Employee worked immediately prior to the
Change in Control or the breach by Employer of any material provision
of this Agreement; or
(d) any purported termination of the employment of Employee by
Employer which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any
person or group of persons (as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934) together with its affiliates, excluding
employee benefit plans of Employer or BB&T, is or becomes, directly or
indirectly, the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) of securities of Employer or BB&T
representing 20% or more of the combined voting power of Employer's or BB&T's
then outstanding securities; or (ii) as a result of a tender offer or
exchange offer for the purchase of securities of Employer or BB&T (other than
such an offer by BB&T for its own securities), or as a result of a proxy
contest, merger, consolidation or sale of assets, or as a result of any
combination of the foregoing, individuals who at the beginning of any
two-year period constitute BB&T's Board of Directors, plus new directors
whose election or nomination for election by BB&T's shareholders is approved
by a vote of at least two-thirds of the directors still in office who were
directors at the beginning of such two-year period, cease for any reason
during such two-year period to constitute at least two-thirds of the members
of such Board of Directors; or (iii) the shareholders of BB&T approve a
merger or consolidation of BB&T with any other corporation or entity
regardless of which entity is the survivor, other than a merger or
consolidation which would result in the voting securities of BB&T outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or being converted into voting securities of the surviving
entity) at least
6
<PAGE>
60% of the combined voting power of the voting securities of BB&T or such
surviving entity outstanding immediately after such merger or consolidation;
or (iv) the shareholders of BB&T approve a plan of complete liquidation or
winding-up of BB&T or an agreement for the sale or disposition by BB&T of all
or substantially all of BB&T's assets; or (v) any event which BB&T's Board of
Directors determines should constitute a Change of Control.
e. In the event Employee elects to resign from employment
under this Agreement for other than "Good Reason," death or disability
following the one-year anniversary of the date of this Agreement, Employee
shall be entitled to receive a lump sum amount equal to his annual
Termination Compensation times the lesser of (i) the number of years until
the end of the Term, with partial years rounded to two decimal places, or
(ii) 2.99.
f. In receiving any payments pursuant to this Section 6,
Employee shall not be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Employee hereunder, and
such amounts shall not be reduced or terminated whether or not Employee
obtains other employment.
g. Notwithstanding anything in this Agreement to the
contrary, if any of the payments provided for under this Agreement (the
"Agreement Payments"), together with any other payments that Employee has the
right to receive (such other payments together with the Agreement Payments
are referred to as the "Total Payments"), would constitute a "parachute
payment" as defined in Section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code") (a "Parachute Payment"), the Agreement Payments
shall be reduced by the smallest amount necessary so that no portion of such
Total Payments would be Parachute Payments. In the event Employer shall make
an Agreement Payment to Employee that would constitute a Parachute Payment,
Employee shall return such payment to Employer (together with interest at the
rate set forth in Section 1274(b)(2)(B) of the Code). For purposes of
determining whether and the extent to which the Total Payments constitute
Parachute Payments, no portion of the Total Payments the receipt of which
Employee has effectively waived in writing shall be taken into account.
7. Other Employment.
During the term of this Agreement, Employee shall devote all of his
business time, attention, knowledge and skills solely to the business and
interest of Employer, BB&T and their Affiliates, and Employer, BB&T and their
Affiliates shall be entitled to all of the benefits, profits and other
emoluments arising from or incident to all work, services and advice of
Employee, and Employee shall not, during the Term hereof, become interested
directly or indirectly, in any manner, as partner, officer, director,
stockholder, advisor, employee or in any other capacity in any other business
similar to Employer's or BB&T's business; provided, however, that nothing
herein contained (including without limitation the provisions of Section
4(a)) shall be deemed to prevent or limit the right of Employee to invest in
a business similar to Employer's or BB&T's business if such investment is
limited to less than one percent of the capital stock or other securities of
any corporation or similar organization whose stock or securities are
publicly owned or are regularly traded on any public exchange.
7
<PAGE>
8. Miscellaneous.
a. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland without regard to conflicts
of law principles thereof.
b. This Agreement constitutes the entire Agreement between
Employee and Employer with respect to the subject matter hereof, and
supersedes in their entirety any and all prior oral or written agreements,
understandings or arrangements between Employee and Maryland Federal or
Employer or any of their respective affiliates relating to the terms of
Employee's employment by Employer or Maryland Federal, and all such
agreements, understandings and arrangements are hereby terminated and are of
no force and effect, including without limitation, Employee's employment
agreement with Employer, as amended and restated on May 18, 1995. Employee
hereby expressly disclaims any rights under any such agreements,
understandings and arrangements. This Agreement may not be amended or
terminated except by an agreement in writing signed by both parties.
c. This Agreement may be executed in one or more
counterparts, all of which, taken together, shall constitute one and the same
instrument.
d. Any notice or other communication required or permitted
under this Agreement shall be effective only if it is in writing and
delivered in person or by nationally recognized overnight courier service or
deposited in the mails, postage prepaid, return receipt requested, addressed
as follows:
To Employer or BB&T:
BB&T Corporation
200 West Second Street
Winston-Salem, NC 27101
Attention: Chief Operating Officer
To Employee:
________________
[Address]
Notices given in person or by overnight courier service shall be deemed given
when delivered in person or to the courier addressed as required by this
Section 8(d), and notices given by mail shall be deemed given three days
after deposit in the mails. Any party hereto may designate by written notice
to the other party in accordance herewith any other address to which notices
addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the
8
<PAGE>
other provisions hereof. It is understood and agreed that no failure or
delay by Employer, BB&T or Employee in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
f. This Agreement may not be assigned by Employee without
the written consent of Employer. This Agreement shall be binding on any
successors or assigns of either party hereto.
g. For purposes of this Agreement, employment of Employee by
any Affiliate of BB&T shall be deemed to be employment by Employer hereunder,
and a transfer of employment of Employee from one such Affiliate to another
shall not be deemed to be a termination of employment of Employee by Employer
or a cessation of the Term, it being the intention of the parties hereto that
employment of Employee by any Affiliate of BB&T shall be treated as
employment of Employer and that the provisions of this Agreement shall
continue to be fully applicable following any such transfer. By executing
this Agreement, BB&T shall guarantee to Employee the performance hereunder of
Employer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
BB&T CORPORATION
By:________________________________
Name:___________________________
Title:__________________________
BRANCH BANKING & TRUST
COMPANY OF VIRGINIA
By:________________________________
Name:___________________________
Title:__________________________
EMPLOYEE:
___________________________________
______________
9
<PAGE>
ANNEX D
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of _____________
1998, by and among BB&T CORPORATION ("BB&T"), a North Carolina corporation
having its principal office at Winston-Salem, North Carolina, BRANCH BANKING &
TRUST COMPANY OF VIRGINIA ("Employer"), a Virginia corporation and wholly owned
subsidiary of BB&T and ________________________________ (the "Employee");
WITNESSETH THAT:
WHEREAS, Employee has been an officer of Maryland Federal Bancorp,
Inc. ("Maryland Federal") and Maryland Federal Savings and Loan Association, a
wholly owned subsidiary of Maryland Federal, and Maryland Federal merged with
BB&T Financial Corporation of Virginia, a wholly-owned subsidiary of BB&T,
effective _____________, 1998;
WHEREAS, the parties have agreed to enter into this Employment
Agreement incident to said merger;
WHEREAS, Employer considers the continued availability of Employee's
services to be important to the management and conduct of Employer's business
and desires to secure the continued availability of Employee's services; and
WHEREAS, Employee is willing to make his services available to
Employer on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. As of the date hereof, Employee shall be employed as
Vice President of Employer. Employee hereby accepts and agrees to such
employment, subject to the general supervision and pursuant to the orders,
advice, and direction of Employer and its Board of Directors. Employee shall
perform such duties as are customarily performed by one holding the position of
Vice President of Employer, and shall additionally render such other services
and duties as may be reasonably assigned to him from time to time by Employer,
consistent with his position.
2. Term of Employment. The term of this Agreement (the "Term")
shall commence on the date hereof and shall terminate on the day next preceding
the third anniversary of such date.
3. Compensation.
a. For all services rendered by Employee to Employer under this
Agreement, Employer shall pay to Employee, during the Term, a minimum annual
salary ("Base Salary") at a rate not less than the annual base salary payable to
Employee by Maryland Federal
<PAGE>
as of the day immediately preceding the date of this Agreement, payable in
accordance with the payroll practices of Employer applicable to officers.
b. Employee shall participate in any bonus or incentive plan of
Employer, whether such plan provides for awards in cash or securities, made
available to similarly situated officers of Employer, as such plan or plans may
be modified from time to time, or such other similar plans of Employer for which
Employee may become eligible and designated a participant.
c. Following the date hereof, Employee shall be entitled to an
annual Base Salary increase each year determined in accordance with Employer's
annual salary plan, based on Employer's performance and the performance of
Employee; provided that in no event shall Employee's Base Salary increase at any
time be less than the average base salary increase (determined as a percentage
of base salary) provided generally to similarly situated officers of Employer.
d. Except as otherwise specifically provided herein, for as
long as Employee is employed by Employer, Employee also shall be entitled to
receive, on the same basis as similarly situated officers of Employer, employee
pension (including 401(k)) and welfare benefits and group employee benefits such
as sick leave, vacation, group disability and health, dental, life, and accident
insurance, stock option plan and similar indirect compensation which Employer
may from time to time extend to its similarly situated officers.
e. For as long as Employee is employed by Employer, Employer
shall reimburse Employee or otherwise provide for or pay all reasonable expenses
incurred by Employee in furtherance of or in connection with the business of
Employer, subject to such standard documentation requirements as may be
established by Employer from time to time.
4. Covenants of Employee.
a. To the extent and subject to the limitations provided in the
following subsections of this Section 4 (whichever may be applicable), upon
termination of Employee's employment, Employee will not directly or indirectly,
either as a principal, agent, employee, employer, stockholder, co-partner or in
any other individual or representative capacity whatsoever: (i) engage in a
Competitive Business anywhere in the States of Maryland, Virginia, North
Carolina or South Carolina, or the District of Columbia, or any county
contiguous to any said State or District; or (ii) solicit, or assist any other
person in so soliciting, any depositors or customers of Employer, BB&T or their
Affiliates to make deposits in or to become customers of any other financial
institution conducting a Competitive Business; or (iii) induce any employees to
terminate their employment with Employer, BB&T or their Affiliates. As used in
this Agreement, the term "Competitive Business" means the banking and financial
services business, which includes consumer savings, commercial banking and the
insurance and trust businesses, or the savings and loan or mortgage banking
business, or any other business in which Employer, BB&T or their Affiliates are
engaged; the term "Affiliate" means a Person that directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
2
<PAGE>
common control with, another Person; and the term "Person" means any person,
partnership, corporation, company, group or other entity.
b. If Employee voluntarily terminates employment with Employer
at any time, Employee will be subject to the provisions of Section 4(a) until
the second anniversary of Employee's termination.
c. If Employee's employment is terminated by Employer for Just
Cause (as defined in Section 6(b)), Employee will be subject to the provisions
of Section 4(a) until the second anniversary of Employee's termination.
d. If Employee's employment is terminated by Employer for
reasons other than Just Cause (as defined in Section 6(b)) at any time, Employee
will be subject to the provisions of Section 4(a) until the later of: (i) the
first anniversary of Employee's termination or (ii) the date as of which
Employee ceases to receive Termination Compensation as provided in Section 6(c).
e. Notwithstanding any other provision of this Agreement to the
contrary, if Employee voluntarily terminates his employment with Employer in
accordance with Section 6(d), Employee will not be subject to Section 4(a).
f. During the Term of Employee's employment hereunder and
thereafter, and except as required by any court, supervisory authority or
administrative agency or as may be otherwise required by applicable law,
Employee shall not, without the written consent of the Board of Directors of
Employer or a person authorized thereby, disclose to any person, other than an
employee of Employer, BB&T or an Affiliate thereof or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by Employee of his duties as an employee of Employer, any
confidential information obtained by him while in the employ of Employer, unless
such information has become a matter of public knowledge at the time of such
disclosure.
g. The covenants contained in this Section 4 shall be construed
and interpreted in any judicial proceeding to permit their enforcement to the
maximum extent permitted by law. Employee agrees that the restraints imposed
herein are necessary for the reasonable and proper protection of Employer, BB&T
and their Affiliates and that each and every one of the restraints is reasonable
in respect to activities restricted, length of time and geographic area.
Employee further acknowledges that damages at law would not be a measurable or
adequate remedy for breach of the covenants contained in this Section 4 and,
accordingly, Employee agrees to submit to the equitable jurisdiction of any
court of competent jurisdiction in connection with any action to enjoin Employee
from violating any such covenants.
5. Disability. If, by reason of physical or mental disability
during the Term, Employee is unable to carry out the essential functions of his
employment hereunder for six consecutive months, his services hereunder may be
terminated by action of the Board of Directors of Employer determining so to do
upon one month's notice to be effective at any time after the period of six
continuous months of disability and while such disability continues. If, prior
to the
3
<PAGE>
effective time of such notice, Employee shall recover from such disability and
return to the full-time active discharge of his duties, then such notice shall
be of no further force and effect and Employee's employment shall continue as if
the same had been uninterrupted. If Employee shall not so recover from his
disability and return to his duties, then his services shall terminate at the
effective time of such one month's notice with the same force and effect as if
that date had been the end of the Term originally provided for hereunder.
During the first six months of the period of Employee's disability, Employee
shall continue to earn all compensation (including bonuses and incentive
compensation) to which Employee would have been entitled as if he had not been
disabled, such compensation to be paid at the time, in the amounts, and in the
manner provided in Section 3(a), inclusive of any compensation received pursuant
to any applicable disability insurance plan of Employer or BB&T. Thereafter,
Employee shall receive compensation to which he is entitled under any applicable
disability insurance plan maintained by the Employer or BB&T. In the event a
dispute arises between Employee and Employer concerning Employee's physical or
mental ability to continue or return to the performance of his duties as
aforesaid, Employee shall submit to examination by a competent physician
mutually agreeable to the parties, and the physician's opinion as to Employee's
capability to so perform will be final and binding.
6. Termination.
a. If Employee shall die during the Term, this Agreement and
the employment relationship hereunder will automatically terminate on the date
of death, which date shall be the last day of the Term.
b. Employer shall have the right to terminate Employee's
employment under this Agreement at any time for Just Cause, which termination
shall be effective immediately. Termination for "Just Cause" shall include
termination for Employee's personal dishonesty, gross incompetence, willful
misconduct, breach of a fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, conviction of a felony or of a misdemeanor involving
moral turpitude, unethical business practices in connection with Employer's or
BB&T's business, misappropriation of Employer's or BB&T's assets or those of
their Affiliates, or material breach of any other provision of this Agreement,
provided that Employee has received written notice from Employer of such
material breach and such breach remains uncured thirty days after the delivery
of such notice. In the event Employee's employment under this Agreement is
terminated for Just Cause, or if Employee shall voluntarily terminate employment
hereunder other than for Good Reason as described in Section 6(d) prior to the
one-year anniversary of the date of this Agreement, Employee shall have no right
to receive compensation or other benefits under this Agreement for any period
after such termination.
c. Employer may terminate Employee's employment other than for
"Just Cause", as described in Subparagraph (b) above, at any time upon written
notice to Employee, which termination shall be effective immediately. In the
event Employer terminates Employee pursuant to this Subparagraph (c), (i)
Employee will receive the highest amount of the annual cash compensation
(including cash bonuses and other cash-based benefits, including for these
purposes amounts earned or payable whether or not deferred) received from
Maryland
4
<PAGE>
Federal or Employer during any of the three calendar years immediately preceding
such termination ("Termination Compensation") in each year until the end of the
Term (prorated for any partial year), so long as Employee complies with Section
4(a) of the Agreement, and (ii) Employer and BB&T shall use their best efforts
to accelerate vesting of any unvested benefits of Employee under any employee
stock-based or other benefit plan or arrangement to the extent permitted by the
terms of such plan. The Termination Compensation shall be payable at the times
salary payments would have been made in accordance with Section 3(a). In
addition, Employee shall continue to participate in the same group
hospitalization plan, health care plan, dental care plan, life or other
insurance or death benefit plan, and any other present or future similar group
employee benefit plan or program for which officers of Employer generally are
eligible, on the same terms as were in effect prior to Employee's termination,
either under Employer's plans or comparable coverage, for all periods Employee
receives Termination Compensation. Notwithstanding anything in this Agreement
to the contrary, if Employee breaches Section 4(a) of this Agreement during the
period that he is receiving Termination Compensation, Employee will not be
entitled to receive any further Termination Compensation pursuant to this
Section 6(c).
d. In the event of a Change of Control of Employer or BB&T at
any time after the date hereof, Employee may voluntarily terminate employment
with Employer or BB&T up until twelve months after the Change of Control for
"Good Reason" and, subject to Section 6(g), (x) be entitled to receive in a lump
sum (i) any compensation due but not yet paid through the date of termination
and (ii) in lieu of any further salary payments from the date of termination to
the end of the Term, an amount equal to his annual Termination Compensation
times 2.99, and (y) shall continue to participate in the same group
hospitalization plan, health care plan, dental care plan, life or other
insurance or death benefit plan, and any other present or future similar group
employee benefit plan or program for which officers of Employer generally are
eligible, or comparable plans or coverage, for a period of three years following
termination of employment by Employee, on the same terms as were in effect
either (A) at the date of such termination, or (B) if such plans and programs in
effect prior to the Change of Control of Employer or BB&T were, considered
together as a whole, materially more generous to the officers of Employer, then
at the date of the Change of Control. Any such benefits shall be paid by
Employer to the same extent as they were so paid prior to the termination or the
Change of Control of Employer or BB&T, as appropriate.
"Good Reason" shall mean the occurrence of any of the following events
without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the
position and status of Vice President of Employer;
(b) a reduction by Employer in Employee's pay grade or base
salary as then in effect, or the exclusion of Employee from
participation in Employer's benefit plans in which he previously
participated as in effect at the date hereof or as the same may be
increased from time to time during the Term, or Employer's failure to
increase (within twelve months of Employee's last increase in Base
Salary) Employee's Base Salary in an amount which at least equals, on
a
5
<PAGE>
percentage basis, the average percentage increase in Base Salary
generally provided for similarly situated officers of Employer; or
(c) an involuntary relocation of Employee more than 100 miles
from the location where Employee worked immediately prior to the
Change in Control or the breach by Employer of any material provision
of this Agreement; or
(d) any purported termination of the employment of Employee by
Employer which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any
person or group of persons (as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934) together with its affiliates, excluding
employee benefit plans of Employer or BB&T, is or becomes, directly or
indirectly, the "beneficial owner" (as defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934) of securities of Employer or BB&T
representing 20% or more of the combined voting power of Employer's or BB&T's
then outstanding securities; or (ii) as a result of a tender offer or exchange
offer for the purchase of securities of Employer or BB&T (other than such an
offer by BB&T for its own securities), or as a result of a proxy contest,
merger, consolidation or sale of assets, or as a result of any combination of
the foregoing, individuals who at the beginning of any two-year period
constitute BB&T's Board of Directors, plus new directors whose election or
nomination for election by BB&T's shareholders is approved by a vote of at least
two-thirds of the directors still in office who were directors at the beginning
of such two-year period, cease for any reason during such two-year period to
constitute at least two-thirds of the members of such Board of Directors; or
(iii) the shareholders of BB&T approve a merger or consolidation of BB&T with
any other corporation or entity regardless of which entity is the survivor,
other than a merger or consolidation which would result in the voting securities
of BB&T outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting securities of the surviving
entity) at least 60% of the combined voting power of the voting securities of
BB&T or such surviving entity outstanding immediately after such merger or
consolidation; or (iv) the shareholders of BB&T approve a plan of complete
liquidation or winding-up of BB&T or an agreement for the sale or disposition by
BB&T of all or substantially all of BB&T's assets; or (v) any event which BB&T's
Board of Directors determines should constitute a Change of Control.
e. In the event Employee elects to resign from employment under
this Agreement for other than "Good Reason," death or disability following the
one-year anniversary of the date of this Agreement, Employee shall be entitled
to receive a lump sum amount equal to his annual Termination Compensation times
the lesser of (i) the number of years until the end of the term, with partial
years rounded to two decimal places, or (ii) 2.
f. In receiving any payments pursuant to this Section 6,
Employee shall not be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Employee hereunder, and
such amounts shall not be reduced or terminated whether or not Employee obtains
other employment.
6
<PAGE>
g. Notwithstanding anything in this Agreement to the contrary,
if any of the payments provided for under this Agreement (the "Agreement
Payments"), together with any other payments that Employee has the right to
receive (such other payments together with the Agreement Payments are referred
to as the "Total Payments"), would constitute a "parachute payment" as defined
in Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code") (a "Parachute Payment"), the Agreement Payments shall be reduced by the
smallest amount necessary so that no portion of such Total Payments would be
Parachute Payments. In the event Employer shall make an Agreement Payment to
Employee that would constitute a Parachute Payment, Employee shall return such
payment to Employer (together with interest at the rate set forth in Section
1274(b)(2)(B) of the Code). For purposes of determining whether and the extent
to which the Total Payments constitute Parachute Payments, no portion of the
Total Payments the receipt of which Employee has effectively waived in writing
shall be taken into account.
7. Other Employment.
During the term of this Agreement, Employee shall devote all of his
business time, attention, knowledge and skills solely to the business and
interest of Employer, BB&T and their Affiliates, and Employer, BB&T and their
Affiliates shall be entitled to all of the benefits, profits and other
emoluments arising from or incident to all work, services and advice of
Employee, and Employee shall not, during the Term hereof, become interested
directly or indirectly, in any manner, as partner, officer, director,
stockholder, advisor, employee or in any other capacity in any other business
similar to Employer's or BB&T's business; provided, however, that nothing herein
contained (including without limitation the provisions of Section 4(a)) shall be
deemed to prevent or limit the right of Employee to invest in a business similar
to Employer's or BB&T's business if such investment is limited to less than one
percent of the capital stock or other securities of any corporation or similar
organization whose stock or securities are publicly owned or are regularly
traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland without regard to conflicts of
law principles thereof.
b. This Agreement constitutes the entire Agreement between
Employee and Employer with respect to the subject matter hereof, and supersedes
in their entirety any and all prior oral or written agreements, understandings
or arrangements between Employee and Maryland Federal or Employer or any of
their respective affiliates relating to the terms of Employee's employment by
Employer or Maryland Federal, and all such agreements, understandings and
arrangements are hereby terminated and are of no force and effect, including
without limitation, Employee's employment agreement with Employer, dated
_______________. Employee hereby expressly disclaims any rights under any such
agreements, understandings and arrangements. This Agreement may not be amended
or terminated except by an agreement in writing signed by both parties.
7
<PAGE>
c. This Agreement may be executed in one or more counterparts,
all of which, taken together, shall constitute one and the same instrument.
d. Any notice or other communication required or permitted
under this Agreement shall be effective only if it is in writing and delivered
in person or by nationally recognized overnight courier service or deposited in
the mails, postage prepaid, return receipt requested, addressed as follows:
To Employer or BB&T:
BB&T Corporation
200 West Second Street
Winston-Salem, NC 27101
Attention: Chief Operating Officer
To Employee:
________________
[Address]
Notices given in person or by overnight courier service shall be deemed given
when delivered in person or to the courier addressed as required by this Section
8(d), and notices given by mail shall be deemed given three days after deposit
in the mails. Any party hereto may designate by written notice to the other
party in accordance herewith any other address to which notices addressed to him
shall be sent.
e. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. It is understood and
agreed that no failure or delay by Employer, BB&T or Employee in exercising any
right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
f. This Agreement may not be assigned by Employee without the
written consent of Employer. This Agreement shall be binding on any successors
or assigns of either party hereto.
g. For purposes of this Agreement, employment of Employee by
any Affiliate of BB&T shall be deemed to be employment by Employer hereunder,
and a transfer of employment of Employee from one such Affiliate to another
shall not be deemed to be a termination of employment of Employee by Employer or
a cessation of the Term, it being the intention of the parties hereto that
employment of Employee by any Affiliate of BB&T shall be treated as employment
of Employer and that the provisions of this Agreement shall continue to
8
<PAGE>
be fully applicable following any such transfer. By executing this Agreement,
BB&T shall guarantee to Employee the performance hereunder of Employer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
BB&T CORPORATION
By: ________________________________
Name:___________________________
Title:__________________________
BRANCH BANKING & TRUST
COMPANY OF VIRGINIA
By: ________________________________
Name:___________________________
Title:__________________________
EMPLOYEE:
______________________________________
______________
9
<PAGE>
ANNEX E
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of _____________
1998, by and among BB&T CORPORATION ("BB&T"), a North Carolina corporation
having its principal office at Winston-Salem, North Carolina, BRANCH BANKING
& TRUST COMPANY OF VIRGINIA ("Employer"), a Virginia corporation and wholly
owned subsidiary of BB&T and ________________________________ (the
"Employee");
WITNESSETH THAT:
WHEREAS, Employee has been an officer of Maryland Federal Bancorp,
Inc. ("Maryland Federal") and Maryland Federal Savings and Loan Association,
a wholly owned subsidiary of Maryland Federal, and Maryland Federal merged
with BB&T Financial Corporation of Virginia, a wholly-owned subsidiary of
BB&T, effective _____________, 1998;
WHEREAS, the parties have agreed to enter into this Employment
Agreement incident to said merger;
WHEREAS, Employer considers the continued availability of
Employee's services to be important to the management and conduct of
Employer's business and desires to secure the continued availability of
Employee's services; and
WHEREAS, Employee is willing to make his services available to
Employer on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Employment. As of the date hereof, Employee shall be employed
as Vice President of Employer. Employee hereby accepts and agrees to such
employment, subject to the general supervision and pursuant to the orders,
advice, and direction of Employer and its Board of Directors. Employee shall
perform such duties as are customarily performed by one holding the position
of Vice President of Employer, and shall additionally render such other
services and duties as may be reasonably assigned to him from time to time by
Employer, consistent with his position.
2. Term of Employment. The term of this Agreement (the "Term")
shall commence on the date hereof and shall terminate on the day next
preceding the second anniversary of such date.
3. Compensation.
a. For all services rendered by Employee to Employer under
this Agreement, Employer shall pay to Employee, during the Term, a minimum
annual salary ("Base Salary") at a rate not less than the annual base salary
payable to Employee by Maryland Federal
<PAGE>
as of the day immediately preceding the date of this Agreement, payable in
accordance with the payroll practices of Employer applicable to officers.
b. Employee shall participate in any bonus or incentive plan
of Employer, whether such plan provides for awards in cash or securities,
made available to similarly situated officers of Employer, as such plan or
plans may be modified from time to time, or such other similar plans of
Employer for which Employee may become eligible and designated a participant.
c. Following the date hereof, Employee shall be entitled to
an annual Base Salary increase each year determined in accordance with
Employer's annual salary plan, based on Employer's performance and the
performance of Employee; provided that in no event shall Employee's Base
Salary increase at any time be less than the average base salary increase
(determined as a percentage of base salary) provided generally to similarly
situated officers of Employer.
d. Except as otherwise specifically provided herein, for as
long as Employee is employed by Employer, Employee also shall be entitled to
receive, on the same basis as similarly situated officers of Employer,
employee pension (including 401(k)) and welfare benefits and group employee
benefits such as sick leave, vacation, group disability and health, dental,
life, and accident insurance, stock option plan and similar indirect
compensation which Employer may from time to time extend to its similarly
situated officers.
e. For as long as Employee is employed by Employer, Employer
shall reimburse Employee or otherwise provide for or pay all reasonable
expenses incurred by Employee in furtherance of or in connection with the
business of Employer, subject to such standard documentation requirements as
may be established by Employer from time to time.
4. Covenants of Employee.
a. To the extent and subject to the limitations provided in
the following subsections of this Section 4 (whichever may be applicable),
upon termination of Employee's employment, Employee will not directly or
indirectly, either as a principal, agent, employee, employer, stockholder,
co-partner or in any other individual or representative capacity whatsoever:
(i) engage in a Competitive Business anywhere in the States of Maryland,
Virginia, North Carolina or South Carolina, or the District of Columbia, or
any county contiguous to any said State or District; or (ii) solicit, or
assist any other person in so soliciting, any depositors or customers of
Employer, BB&T or their Affiliates to make deposits in or to become customers
of any other financial institution conducting a Competitive Business; or
(iii) induce any employees to terminate their employment with Employer, BB&T
or their Affiliates. As used in this Agreement, the term "Competitive
Business" means the banking and financial services business, which includes
consumer savings, commercial banking and the insurance and trust businesses,
or the savings and loan or mortgage banking business, or any other business
in which Employer, BB&T or their Affiliates are engaged; the term "Affiliate"
means a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
2
<PAGE>
common control with, another Person; and the term "Person" means any person,
partnership, corporation, company, group or other entity.
b. If Employee voluntarily terminates employment with
Employer at any time, Employee will be subject to the provisions of
Section 4(a) until the second anniversary of Employee's termination.
c. If Employee's employment is terminated by Employer for
Just Cause (as defined in Section 6(b)), Employee will be subject to the
provisions of Section 4(a) until the second anniversary of Employee's
termination.
d. If Employee's employment is terminated by Employer for
reasons other than Just Cause (as defined in Section 6(b)) at any time,
Employee will be subject to the provisions of Section 4(a) until the later
of: (i) the first anniversary of Employee's termination or (ii) the date as
of which Employee ceases to receive Termination Compensation as provided in
Section 6(c).
e. Notwithstanding any other provision of this Agreement to
the contrary, if Employee voluntarily terminates his employment with Employer
in accordance with Section 6(d), Employee will not be subject to Section 4(a).
f. During the Term of Employee's employment hereunder and
thereafter, and except as required by any court, supervisory authority or
administrative agency or as may be otherwise required by applicable law,
Employee shall not, without the written consent of the Board of Directors of
Employer or a person authorized thereby, disclose to any person, other than
an employee of Employer, BB&T or an Affiliate thereof or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by Employee of his duties as an employee of Employer, any
confidential information obtained by him while in the employ of Employer,
unless such information has become a matter of public knowledge at the time
of such disclosure.
g. The covenants contained in this Section 4 shall be
construed and interpreted in any judicial proceeding to permit their
enforcement to the maximum extent permitted by law. Employee agrees that the
restraints imposed herein are necessary for the reasonable and proper
protection of Employer, BB&T and their Affiliates and that each and every one
of the restraints is reasonable in respect to activities restricted, length
of time and geographic area. Employee further acknowledges that damages at
law would not be a measurable or adequate remedy for breach of the covenants
contained in this Section 4 and, accordingly, Employee agrees to submit to
the equitable jurisdiction of any court of competent jurisdiction in
connection with any action to enjoin Employee from violating any such
covenants.
5. Disability. If, by reason of physical or mental disability
during the Term, Employee is unable to carry out the essential functions of
his employment hereunder for six consecutive months, his services hereunder
may be terminated by action of the Board of Directors of Employer determining
so to do upon one month's notice to be effective at any time after the period
of six continuous months of disability and while such disability continues.
If, prior to the
3
<PAGE>
effective time of such notice, Employee shall recover from such disability
and return to the full-time active discharge of his duties, then such notice
shall be of no further force and effect and Employee's employment shall
continue as if the same had been uninterrupted. If Employee shall not so
recover from his disability and return to his duties, then his services shall
terminate at the effective time of such one month's notice with the same
force and effect as if that date had been the end of the Term originally
provided for hereunder. During the first six months of the period of
Employee's disability, Employee shall continue to earn all compensation
(including bonuses and incentive compensation) to which Employee would have
been entitled as if he had not been disabled, such compensation to be paid at
the time, in the amounts, and in the manner provided in Section 3(a),
inclusive of any compensation received pursuant to any applicable disability
insurance plan of Employer or BB&T. Thereafter, Employee shall receive
compensation to which he is entitled under any applicable disability
insurance plan maintained by the Employer or BB&T. In the event a dispute
arises between Employee and Employer concerning Employee's physical or mental
ability to continue or return to the performance of his duties as aforesaid,
Employee shall submit to examination by a competent physician mutually
agreeable to the parties, and the physician's opinion as to Employee's
capability to so perform will be final and binding.
6. Termination.
a. If Employee shall die during the Term, this Agreement and
the employment relationship hereunder will automatically terminate on the
date of death, which date shall be the last day of the Term.
b. Employer shall have the right to terminate Employee's
employment under this Agreement at any time for Just Cause, which termination
shall be effective immediately. Termination for "Just Cause" shall include
termination for Employee's personal dishonesty, gross incompetence, willful
misconduct, breach of a fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, conviction of a felony or of a misdemeanor involving
moral turpitude, unethical business practices in connection with Employer's
or BB&T's business, misappropriation of Employer's or BB&T's assets or those
of their Affiliates, or material breach of any other provision of this
Agreement, provided that Employee has received written notice from Employer
of such material breach and such breach remains uncured thirty days after the
delivery of such notice. In the event Employee's employment under this
Agreement is terminated for Just Cause, or if Employee shall voluntarily
terminate employment hereunder other than for Good Reason as described in
Section 6(d) prior to the one-year anniversary of the date of this Agreement,
Employee shall have no right to receive compensation or other benefits under
this Agreement for any period after such termination.
c. Employer may terminate Employee's employment other than
for "Just Cause", as described in Subparagraph (b) above, at any time upon
written notice to Employee, which termination shall be effective immediately.
In the event Employer terminates Employee pursuant to this Subparagraph (c),
(i) Employee will receive the highest amount of the annual cash compensation
(including cash bonuses and other cash-based benefits, including for these
purposes amounts earned or payable whether or not deferred) received from
Maryland
4
<PAGE>
Federal or Employer during any of the three calendar years immediately
preceding such termination ("Termination Compensation") in each year until
the end of the Term (prorated for any partial year), so long as Employee
complies with Section 4(a) of the Agreement, and (ii) Employer and BB&T shall
use their best efforts to accelerate vesting of any unvested benefits of
Employee under any employee stock-based or other benefit plan or arrangement
to the extent permitted by the terms of such plan. The Termination
Compensation shall be payable at the times salary payments would have been
made in accordance with Section 3(a). In addition, Employee shall continue to
participate in the same group hospitalization plan, health care plan, dental
care plan, life or other insurance or death benefit plan, and any other
present or future similar group employee benefit plan or program for which
officers of Employer generally are eligible, on the same terms as were in
effect prior to Employee's termination, either under Employer's plans or
comparable coverage, for all periods Employee receives Termination
Compensation. Notwithstanding anything in this Agreement to the contrary, if
Employee breaches Section 4(a) of this Agreement during the period that he is
receiving Termination Compensation, Employee will not be entitled to receive
any further Termination Compensation pursuant to this Section 6(c).
d. In the event of a Change of Control of Employer or BB&T
at any time after the date hereof, Employee may voluntarily terminate
employment with Employer or BB&T up until twelve months after the Change of
Control for "Good Reason" and, subject to Section 6(g), (x) be entitled to
receive in a lump sum (i) any compensation due but not yet paid through the
date of termination and (ii) in lieu of any further salary payments from the
date of termination to the end of the Term, an amount equal to his annual
Termination Compensation times 2.99, and (y) shall continue to participate in
the same group hospitalization plan, health care plan, dental care plan, life
or other insurance or death benefit plan, and any other present or future
similar group employee benefit plan or program for which officers of Employer
generally are eligible, or comparable plans or coverage, for a period of
three years following termination of employment by Employee, on the same
terms as were in effect either (A) at the date of such termination, or (B) if
such plans and programs in effect prior to the Change of Control of Employer
or BB&T were, considered together as a whole, materially more generous to the
officers of Employer, then at the date of the Change of Control. Any such
benefits shall be paid by Employer to the same extent as they were so paid
prior to the termination or the Change of Control of Employer or BB&T, as
appropriate.
"Good Reason" shall mean the occurrence of any of the following
events without Employee's express written consent:
(a) the assignment to Employee of duties inconsistent with the
position and status of Vice President of Employer;
(b) a reduction by Employer in Employee's pay grade or base
salary as then in effect, or the exclusion of Employee from
participation in Employer's benefit plans in which he previously
participated as in effect at the date hereof or as the same may be
increased from time to time during the Term, or Employer's failure
to increase (within twelve months of Employee's last increase in
Base Salary) Employee's Base Salary in an amount which at least
equals, on a
5
<PAGE>
percentage basis, the average percentage increase in Base Salary
generally provided for similarly situated officers of Employer; or
(c) an involuntary relocation of Employee more than 100 miles
from the location where Employee worked immediately prior to the
Change in Control or the breach by Employer of any material
provision of this Agreement; or
(d) any purported termination of the employment of Employee by
Employer which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any
person or group of persons (as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934) together with its affiliates, excluding
employee benefit plans of Employer or BB&T, is or becomes, directly or
indirectly, the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) of securities of Employer or BB&T
representing 20% or more of the combined voting power of Employer's or BB&T's
then outstanding securities; or (ii) as a result of a tender offer or
exchange offer for the purchase of securities of Employer or BB&T (other than
such an offer by BB&T for its own securities), or as a result of a proxy
contest, merger, consolidation or sale of assets, or as a result of any
combination of the foregoing, individuals who at the beginning of any
two-year period constitute BB&T's Board of Directors, plus new directors
whose election or nomination for election by BB&T's shareholders is approved
by a vote of at least two-thirds of the directors still in office who were
directors at the beginning of such two-year period, cease for any reason
during such two-year period to constitute at least two-thirds of the members
of such Board of Directors; or (iii) the shareholders of BB&T approve a
merger or consolidation of BB&T with any other corporation or entity
regardless of which entity is the survivor, other than a merger or
consolidation which would result in the voting securities of BB&T outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or being converted into voting securities of the surviving
entity) at least 60% of the combined voting power of the voting securities of
BB&T or such surviving entity outstanding immediately after such merger or
consolidation; or (iv) the shareholders of BB&T approve a plan of complete
liquidation or winding-up of BB&T or an agreement for the sale or disposition
by BB&T of all or substantially all of BB&T's assets; or (v) any event which
BB&T's Board of Directors determines should constitute a Change of Control.
e. In the event Employee elects to resign from employment
under this Agreement for other than "Good Reason," death or disability
following the one-year anniversary of the date of this Agreement, Employee
shall be entitled to receive a lump sum amount equal to his annual
Termination Compensation times the lesser of (i) the number of years until
the end of the term, with partial years rounded to two decimal places, or
(ii) 1.
f. In receiving any payments pursuant to this Section 6,
Employee shall not be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Employee hereunder, and
such amounts shall not be reduced or terminated whether or not Employee
obtains other employment.
6
<PAGE>
g. Notwithstanding anything in this Agreement to the
contrary, if any of the payments provided for under this Agreement (the
"Agreement Payments"), together with any other payments that Employee has the
right to receive (such other payments together with the Agreement Payments
are referred to as the "Total Payments"), would constitute a "parachute
payment" as defined in Section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code") (a "Parachute Payment"), the Agreement Payments
shall be reduced by the smallest amount necessary so that no portion of such
Total Payments would be Parachute Payments. In the event Employer shall make
an Agreement Payment to Employee that would constitute a Parachute Payment,
Employee shall return such payment to Employer (together with interest at the
rate set forth in Section 1274(b)(2)(B) of the Code). For purposes of
determining whether and the extent to which the Total Payments constitute
Parachute Payments, no portion of the Total Payments the receipt of which
Employee has effectively waived in writing shall be taken into account.
7. Other Employment.
During the term of this Agreement, Employee shall devote all of his
business time, attention, knowledge and skills solely to the business and
interest of Employer, BB&T and their Affiliates, and Employer, BB&T and their
Affiliates shall be entitled to all of the benefits, profits and other
emoluments arising from or incident to all work, services and advice of
Employee, and Employee shall not, during the Term hereof, become interested
directly or indirectly, in any manner, as partner, officer, director,
stockholder, advisor, employee or in any other capacity in any other business
similar to Employer's or BB&T's business; provided, however, that nothing
herein contained (including without limitation the provisions of Section
4(a)) shall be deemed to prevent or limit the right of Employee to invest in
a business similar to Employer's or BB&T's business if such investment is
limited to less than one percent of the capital stock or other securities of
any corporation or similar organization whose stock or securities are
publicly owned or are regularly traded on any public exchange.
8. Miscellaneous.
a. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland without regard to conflicts
of law principles thereof.
b. This Agreement constitutes the entire Agreement between
Employee and Employer with respect to the subject matter hereof, and
supersedes in their entirety any and all prior oral or written agreements,
understandings or arrangements between Employee and Maryland Federal or
Employer or any of their respective affiliates relating to the terms of
Employee's employment by Employer or Maryland Federal, and all such
agreements, understandings and arrangements are hereby terminated and are of
no force and effect, including without limitation, Employee's employment
agreement with Employer, dated _______________. Employee hereby expressly
disclaims any rights under any such agreements, understandings and
arrangements. This Agreement may not be amended or terminated except by an
agreement in writing signed by both parties.
7
<PAGE>
c. This Agreement may be executed in one or more
counterparts, all of which, taken together, shall constitute one and the same
instrument.
d. Any notice or other communication required or permitted
under this Agreement shall be effective only if it is in writing and
delivered in person or by nationally recognized overnight courier service or
deposited in the mails, postage prepaid, return receipt requested, addressed
as follows:
To Employer or BB&T:
BB&T Corporation
200 West Second Street
Winston-Salem, NC 27101
Attention: Chief Operating Officer
To Employee:
________________
[Address]
Notices given in person or by overnight courier service shall be deemed given
when delivered in person or to the courier addressed as required by this
Section 8(d), and notices given by mail shall be deemed given three days
after deposit in the mails. Any party hereto may designate by written notice
to the other party in accordance herewith any other address to which notices
addressed to him shall be sent.
e. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. It is
understood and agreed that no failure or delay by Employer, BB&T or Employee
in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
f. This Agreement may not be assigned by Employee without
the written consent of Employer. This Agreement shall be binding on any
successors or assigns of either party hereto.
g. For purposes of this Agreement, employment of Employee by
any Affiliate of BB&T shall be deemed to be employment by Employer hereunder,
and a transfer of employment of Employee from one such Affiliate to another
shall not be deemed to be a termination of employment of Employee by Employer
or a cessation of the Term, it being the intention of the parties hereto that
employment of Employee by any Affiliate of BB&T shall be treated as
employment of Employer and that the provisions of this Agreement shall
continue to
8
<PAGE>
be fully applicable following any such transfer. By executing this
Agreement, BB&T shall guarantee to Employee the performance hereunder of
Employer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
BB&T CORPORATION
By:___________________________________
Name:_____________________________
Title:____________________________
BRANCH BANKING & TRUST
COMPANY OF VIRGINIA
By: __________________________________
Name:_____________________________
Title:____________________________
EMPLOYEE:
______________________________________
______________
<PAGE>
Exhibit 2.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of February 25, 1998 by and between MARYLAND FEDERAL BANCORP, INC., a
Maryland corporation ("Maryland Federal" or "Issuer"), and BB&T CORPORATION,
a North Carolina corporation ("Grantee").
WHEREAS, Grantee, BB&T Financial Corporation of Virginia, a wholly-owned
subsidiary of Grantee ("BB&T Financial") and Issuer have entered into that
certain Agreement and Plan of Reorganization, dated this date (the "Merger
Agreement"), providing for, among other things, the merger of Issuer with and
into BB&T Financial, with the result that Issuer will become a part of a
wholly owned subsidiary of Grantee; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has
agreed, to grant to Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of 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 1,290,000 shares (as adjusted as set forth herein the
"Option Shares," which shall include the Option Shares before and after any
transfer of such Option Shares), of the common stock of Issuer, par value
$.01 per share ("Issuer Common Stock"), at a purchase price per Option Share
(subject to adjustment as set forth herein, the "Purchase Price") equal to
$30.50.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined),
as applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary
or permanent injunction or other order against the delivery of shares covered
by the Option issued by any court of competent jurisdiction in the United
States shall be in effect, Holder may exercise the Option, in whole or in
part, at any time and from time to time following the occurrence of a
Purchase Event (as hereinafter defined); provided that the Option shall
terminate and be of no further force and effect upon the earliest to occur of
(A) the Effective Time, (B) subject to clause (E) below, termination of the
Merger Agreement in accordance with the terms thereof prior to the occurrence
of a Purchase Event or a Preliminary Purchase Event (as hereinafter defined)
(other than a termination of the Merger
<PAGE>
Agreement by Grantee pursuant to Section 7.1(b) thereof (a "Default
Termination")), (C) 12 months after a Default Termination, (D) 12 months
after any termination of the Merger Agreement (other than a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event and (E) subject to clause (D) above, 12 months after
termination of the Merger Agreement pursuant to Section 7.1(e) thereof;
provided further, that any purchase of shares upon exercise of the Option
shall be subject to compliance with applicable law, including, without
limitation, the Bank Holding Company Act of 1956, as amended (the "BHC Act").
Notwithstanding anything to the contrary contained herein, the Option may
not be exercised (nor may any of Grantee's rights under Sections 8 and 9
hereof be exercised) at any time when Grantee shall be in willful breach of
any of its covenants or agreements contained in the Merger Agreement under
circumstances that would entitle Issuer to terminate the Merger Agreement.
Subject to compliance with Section 12(h) hereof, the term "Holder" shall mean
the holder or holders of the Option from time to time, including initially
Grantee. The rights set forth in Section 8 hereof shall terminate when the
right to exercise the Option terminates (other than as a result of a complete
exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall
have authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an
agreement with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As
used herein, the term "Acquisition Transaction" shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's
Subsidiaries and other subsidiaries of Issuer), (B) the disposition, by
sale, lease, exchange or otherwise, of assets of Issuer or any of its
Subsidiaries representing in either case 15% or more of the consolidated
assets of Issuer and its Subsidiaries (other than a sale of loan
receivables in a financing transaction in the normal course of business
consistent with past practices), or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 15% or more
of the voting power of Issuer or any of its Subsidiaries; or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act) of or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined under the Exchange Act), other than a group of which Grantee
or any of the Subsidiaries of Grantee is a member, shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 25% or more of the then-outstanding shares of Issuer
Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have
2
<PAGE>
filed a registration statement under the Securities Act with respect to, a
tender offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such person would own
or control 10% or more of the then-outstanding shares of Issuer Common
Stock (such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held
for the purpose of voting on the Merger Agreement, such meeting shall
not have been held or shall have been canceled prior to termination of
the Merger Agreement, or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the recommendation
of Issuer's Board of Directors with respect to the Merger Agreement, in
each case after any person (other than Grantee or any Subsidiary of
Grantee) shall have (A) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, (B) commenced a Tender
Offer or filed a registration statement under the Securities Act with
respect to an Exchange Offer, or (C) filed an application (or given a
notice), whether in draft or final form, under any federal or state
statute or regulation (including an application or notice filed under
the BHC Act, the Bank Merger Act, the Home Owners' Loan Act or the
Change in Bank Control Act of 1978) seeking the consent to an
Acquisition Transaction from any federal or state governmental or
regulatory authority or agency.
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) Notwithstanding the foregoing, the obligation of Maryland
Federal to issue Option Shares upon exercise of the Option shall be deferred
(but shall not terminate): (i) until the receipt of all required governmental
or regulatory approvals or consents necessary for Maryland Federal to issue
the Option Shares or Holder to exercise the Option, or until the expiration
or termination of any waiting period required by law, or (ii) so long as any
injunction or other order, decree or ruling issued by any federal or state
court of competent jurisdiction is in effect which prohibits the sale or
delivery of the Option Shares.
(e) In the event Holder 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 15 business days from the
Notice Date for the closing (the "Closing") of such purchase (the "Closing
Date"). If prior consent of any governmental or regulatory agency or
authority is required in connection with such purchase, Issuer shall
cooperate with Holder in the filing of the required notice or application for
such consent and the obtaining of such consent at Holder's expense, and the
Closing shall occur not earlier than three business days nor later than 15
business days following receipt of such consents (and expiration of any
mandatory waiting periods).
3
<PAGE>
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder 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
referenced in Section 12(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, (i) Issuer shall deliver to Holder (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 subject to no preemptive rights, 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, and (ii) Holder
shall deliver to Issuer a letter evidencing Holder's agreement not to offer,
sell or otherwise dispose of such Option Shares in violation of applicable
federal and state law or of the provisions of this Agreement.
(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 IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK
OPTION AGREEMENT DATED AS OF FEBRUARY 25, 1998. 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 Holder shall
have delivered to Issuer a copy of a letter from the staff of the Commission,
or an opinion of counsel 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.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to
enter into this Agreement and, subject to its obtaining any approvals or
consents referred to herein, 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 executed and delivered by Issuer.
4
<PAGE>
(b) 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 hereof 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, the number of shares of Issuer Common Stock necessary
for Holder 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 or other securities which may be issued pursuant to
Section 7 hereof 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 or other securities which may be issuable
pursuant to Section 7 hereof, 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, including any preemptive rights of any shareholder of
Issuer.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to its obtaining any approvals or
consents referred to herein, 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) Grantee represents that it is acquiring the Option for
Grantee's own account and not with a view to, or for sale in connection with,
any distribution of the Option or the Option Shares. Grantee represents that
it is aware that neither the Option nor the Option Shares is the subject of a
registration statement filed with and declared effective by the Commission
pursuant to Section 5 of the Securities Act, but instead each is being
offered in reliance upon the exemption from the registration requirement
provided by Section 4(2) thereof and the representations and warranties made
by Grantee in connection therewith. Grantee represents that neither the
Option nor the Option Shares will be transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the
Securities Laws, and that with respect to any transfer or other disposition
proposed to be made in reliance upon an exemption from registration, such
transfer or other disposition shall not be made unless Maryland Federal first
receives an opinion of counsel in form and substance reasonably acceptable to
it regarding the availability of such exemption.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event 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, the type and number of shares or
securities subject to the Option and the Purchase Price therefor shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Holder shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Holder would have received
5
<PAGE>
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, it,
when added to the number of shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to
or issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement (prior
to termination of the Option pursuant to Section 3(a) hereof): (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and Issuer 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;
(iii) to permit any person, other than Grantee or one of its Subsidiaries, to
acquire all of the outstanding shares of Issuer Common Stock pursuant to a
statutory share exchange; or (iv) 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, deemed granted by either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause
(ii), the Issuer (in each case, 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 identical to those of 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 agreement 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 the 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 for which the Substitute Option
is exercisable.
6
<PAGE>
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), Issuer in a merger in which Issuer is the continuing or
surviving person, the corporation that shall acquire all of the
outstanding shares of Issuer Common Stock pursuant to a statutory share
exchange, or 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 (x) the
price per share of the Issuer Common Stock at which a Tender Offer or
Exchange Offer therefor has been made by any person (other than
Grantee), (y) the price per share of the Issuer Common Stock to be paid
by any person (other than the Grantee) pursuant to an agreement with
Issuer, and (z) the highest closing sales price per share of Issuer
Common Stock quoted on the Nasdaq National Market System within the
six-month period immediately preceding the agreement; provided, that in
the event of a sale of less than 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 majority in interest of the Grantees if there shall
be more than one Grantee (a "Grantee Majority")), divided by the number
of shares of the 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 mutually selected by Grantee and Issuer (or if applicable,
Acquiring Corporation). (If there shall be more than one Grantee, any
such selection shall be made by a Grantee Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one-year period immediately
preceding effectiveness of the consolidation, merger, share exchange 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 the
effectiveness of such consolidation, merger, share exchange 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 merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing sections shall
the Substitute Option be exercisable for more than 19.9% 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 19.9% 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).
7
<PAGE>
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 than other shares of common stock issued by the
Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10 and 11 hereof shall apply,
with appropriate adjustments, 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 Holder.
(a) Subject to the last sentence of Section 3(a) hereof, at the
request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d)) and ending 12 months
immediately thereafter, Issuer shall repurchase from Holder the Option and
all shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which
Holder 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 Holder for any shares of
Issuer Common Stock acquired by Holder pursuant to the Option with
respect to which Holder 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 Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the
8
<PAGE>
Option and the certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Holder then has beneficial
ownership, and Holder 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
the consent or approval of any governmental or regulatory agency or authority
is required in connection with the payment of all or any portion of the
Section 8 Repurchase Consideration, Holder shall have the ongoing option to
revoke its request for repurchase pursuant to Section 8, in whole or in part,
or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from
paying and 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), in which case the ten business day period of time that would
otherwise run pursuant to the preceding sentence for the payment of the
portion of the Section 8 Repurchase Consideration shall run instead from the
date on which, as the case may be, any required notification period has
expired or been terminated or such approval has been obtained and, in either
event, any requisite waiting period shall have passed. If any governmental
or regulatory agency or authority disapproves of any part of Issuer's
proposed repurchase pursuant to this Section 8, Issuer shall promptly give
notice of such fact to Holder. If any governmental or regulatory agency or
authority prohibits the repurchase in part but not in whole, then Holder
shall have the right (i) to revoke the repurchase request or (ii) to the
extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent
to each, and Holder shall thereupon have the right to exercise the Option as
to the number of Option Shares for which the Option was exercisable at the
Request Date less the sum of the number of shares covered by the Option in
respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the
preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) hereof.
(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 Sections 7(b)(i), 7(b)(ii), 7(b)(iii) or
7(b)(iv) hereof, or (iii) the highest closing sales price per share of Issuer
Common Stock quoted on the Nasdaq National Market (or if Issuer Common Stock
is not quoted on the Nasdaq National Market, 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 chosen by Holder)
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 an independent nationally recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the
number of shares of the Issuer Common Stock outstanding at the time of such
sale. If the consideration to be
9
<PAGE>
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 Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) shall have acquired
actual ownership or control, or any "group" (as such term is defined under
the Exchange Act) shall have been formed which shall have acquired actual
ownership or control, 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), 7(b)(iii) or 7(b)(iv) shall be consummated.
9. Registration Rights.
(a) For a period of 24 months following termination of the Merger
Agreement, Issuer shall, subject to the conditions of subsection (c) below,
if requested by any Holder, including Grantee and any permitted transferee of
the Option Shares ("Selling Holder"), as expeditiously as possible prepare
and file a registration statement under the Securities Laws if necessary 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 Selling Holder upon exercise of the Option in accordance with the intended
method of sale or other disposition stated by the Selling Holder in such
request, including, without limitation, 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
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities
Laws in connection with an underwritten public offering of such Issuer Common
Stock, Issuer will promptly give written notice to Holder of its intention to
do so and, upon the written request of Holder given within 30 days after
receipt of any such notice (which request shall specify the number of shares
of Issuer Common Stock intended to be included in such underwritten public
offering by Selling Holder), Issuer will cause all such shares, the holders
of which shall have requested participation in such registration, to be so
registered and included in such underwritten public offering; provided, that
Issuer may elect to cause any such shares not to be so registered (i) if the
underwriters in good faith object for a valid business reason, or (ii) in the
case of a registration solely to implement a dividend reinvestment or similar
plan, an employee benefit plan or a registration filed on Form S-4 or any
successor form, or a registration filed on a form which does not permit
registration of resales; provided, further, that such election pursuant to
clause (i) may be made only one time. If some but not all the shares of
Issuer Common Stock, with respect to which Issuer shall have received
requests for registration pursuant to this subsection (b), shall be excluded
from such registration, Issuer shall make appropriate allocation of shares to
be registered among Selling Holders and any other person (other than Issuer
or any person exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale.
10
<PAGE>
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subsection (a) above to become
effective and to obtain all consents or waivers of other parties which are
required therefor and to keep such registration statement effective,
provided, that Issuer may delay any registration of Option Shares required
pursuant to subsection (a) above for a period not exceeding 90 days in the
event that Issuer shall in good faith determine that any such registration
would adversely affect an offering or contemplated offering of other
securities by Issuer, and Issuer shall not be required to register Option
Shares under the Securities Laws pursuant to subsection (a) above:
(i) prior to the occurrence of a Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subsection (b) above pursuant to which the Selling Holders
concerned were afforded the opportunity to register such shares under the
Securities Laws and such shares were registered as requested; and
(v) unless a request therefor is made to Issuer by Selling Holders
holding at least 25% or more of the aggregate number of Option Shares
then outstanding.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration
of nine months from the effective date of such registration statement.
Issuer shall use all reasonable efforts to make any filings, and take all
steps, under all applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares,
provided, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and
expenses of counsel), accounting expenses, legal expenses, including
reasonable fees and expenses of one counsel to the Selling Holders whose
Option Shares are being registered, printing expenses, reasonable expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subsection (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subsection (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any
other expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
11
<PAGE>
(e) In connection with any registration under subsection (a) or
(b) above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against
all expenses, losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party
are caused by any untrue statement or alleged untrue statement or omission or
alleged omission that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to Issuer by such indemnified party
expressly for use therein, and Issuer and each officer, director and
controlling person of Issuer shall be indemnified by such Selling Holder, or
by such underwriter, as the case may be, for all such expenses, losses,
claims, damages and liabilities caused by any untrue or alleged untrue
statement or omission or alleged omission that was included by Issuer in any
such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance upon,
and in conformity with, information furnished in writing to Issuer by such
holder or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subsection (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be
sought against any indemnifying party under this subsection (e), such
indemnified party shall notify the indemnifying party in writing of the
commencement of such action, but the failure so to notify the indemnifying
party shall not relieve it of any liability which it may otherwise have to
any indemnified party under this subsection (e). In case notice of
commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in
and, to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense of such action at its own expense,
with counsel chosen by it and satisfactory to such indemnified party. The
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel (other than reasonable costs of investigation) shall be paid by
the indemnified party unless (i) the indemnifying party agrees to pay them,
(ii) the indemnifying party fails to assume the defense of such action with
counsel satisfactory to the indemnified party, or (iii) the indemnified party
has been advised by counsel that one or more legal defenses may be available
to the indemnifying party that may be contrary to the interest of the
indemnified party, in which case the indemnifying party shall be entitled to
assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subsection (e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to
be indemnified, shall contribute to the amount paid or payable by such party
to be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is
12
<PAGE>
appropriate to reflect the relative benefits received by Issuer, all Selling
Holders and the underwriters from the offering of the securities and also the
relative fault of Issuer, all Selling Holders and the underwriters in
connection with the statements or omissions which resulted in such expenses,
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result
of the expenses, losses, claims, damages and liabilities referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim; provided, that in no case shall any Selling Holder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with
other holders.
In connection with any registration pursuant to subsection (a)
or (b) above, Issuer and each Selling Holder (other than Grantee) shall enter
into an agreement containing the indemnification provisions of this
subsection (e).
(f) Issuer shall comply with all reporting requirements and will
do all such other things as may be necessary to permit the expeditious sale
at any time of any Option Shares by the Selling Holders in accordance with
and to the extent permitted by any rule or regulation promulgated by the
Commission from time to time, including, without limitation, Rules 144 and
144A. Issuer shall at its expense provide the Selling Holders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Laws, or
required pursuant to any state securities laws or the rules of any stock
exchange.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save Holder harmless, without limitation as
to time, against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation
or trading or listing on the Nasdaq National Market or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of Issuer Common
Stock or other securities to be acquired upon exercise of the Option on the
Nasdaq National Market or any other securities exchange or any automated
quotations system maintained by a self-regulatory organization and will use
its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. Division of Option. This Agreement (and the Option granted hereby)
is exchangeable, without expense, at the option of Holder, 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
13
<PAGE>
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. 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 documents
and instruments referred to herein and therein, between Grantee and Issuer
(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 (other than any transferees of the Option
Shares or any permitted transferee of this Agreement pursuant to Section
12(h) hereof) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state governmental or regulatory agency or
authority 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 Holder to acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3
and 8 hereof (as adjusted pursuant to Section 7 hereof), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of North
Carolina without regard to any applicable conflicts of law rules, except to
the extent that the federal laws of the United States shall govern.
(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
14
<PAGE>
or certified mail (return receipt requested) to the parties at the addresses
set forth in the Merger Agreement (or at such other address for a party as
shall be specified by like notice).
(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; Transfer. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option shall be
assigned or transferred 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 Grantee may assign or transfer its rights hereunder in whole or
in part after the occurrence of a Purchase Event. In the case of any
permitted assignment or transfer of the Option, Issuer shall do all things
necessary to facilitate the same, and the Holder to whom the Option is
assigned or transferred shall make the representations contained in Section 6
hereof (with Holder substituted for Grantee) and shall agree in writing to
the terms and conditions hereof. 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.
(i) Further Assurances. In the event of any exercise of the
Option by Holder, Issuer and Holder 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.
MARYLAND FEDERAL BANCORP, INC. BB&T CORPORATION
By: /s/ Robert H. Halleck By: /s/ John A. Allison, IV
----------------------- --------------------------
Name: Robert H. Halleck Name: John A. Allison, IV
Title:President and Chief Title: Chairman and Chief
Executive Officer Executive Officer
15
<PAGE>
EXHIBIT 4.2
SECOND AMENDMENT
TO
RIGHTS AGREEMENT
SECOND AMENDMENT, dated as of February 25, 1998 (this "Second
Amendment"), to the Rights Agreement, dated as of January 18, 1990, between
Maryland Federal Bancorp, Inc. (the "Company") and Registrar and Transfer
Co., as Rights Agent (the "Rights Agent"), as amended by the First Amendment,
dated as of January 18, 1990, to the Rights Agreement between the Company and
the Rights Agent (as amended, the "Rights Agreement").
WITNESSETH:
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company may
prior to any Distribution Date (as defined in the Rights Agreement)
supplement or amend the Rights Agreement without the approval of holders of
Company Common Stock or holders of Rights Certificates (as defined in the
Rights Agreement), none of which are outstanding as of the date hereof; and
WHEREAS, the Company desires to amend the Rights Agreement in the manner
set forth in this Second Amendment, and pursuant to Section 27 of the Rights
Agreement, the Company hereby directs that the Rights Agreement should be
amended as set forth in this Second Amendment.
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Amendment to Section 1(a). Section 1(a) of the Rights
Agreement is hereby amended by inserting the following phrase after the last
word and before the period at the end of the definition of "Acquiring Person":
"; provided that, notwithstanding the foregoing or any
other provision of this Agreement, none of BB&T
Corporation ("BB&T"), any Subsidiary of BB&T, including
without limitation BB&T Financial Corporation of
Virginia ("BB&T Financial"), or any other Person shall
be deemed to be an Acquiring Person by virtue of (i)
the Agreement and Plan of Reorganization, dated as of
February 26, 1998, among the Company, BB&T and BB&T
Financial, as the same may be amended from time to
time, or (ii) the Stock Option Agreement, dated as of
February 26, 1998, between the Company and Parent, as
the
<PAGE>
same may be amended from time to time, or (iii) consummation of
the transactions contemplated by the foregoing agreements."
2. This Second Amendment shall be effective immediately upon its
execution and the Rights Agreement shall continue in full force and effect as
amended hereby.
3. Governing Law. This Second Amendment shall be deemed to be a
contract made under the laws of the State of Maryland and for all purposes
shall be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such state.
4. Counterparts. This Second Amendment may be executed in any number
of counterparts, each of which shall for all purposes be deemed an original,
and all of which together shall constitute but one and the same instrument.
Except as expressly set forth herein, this Second Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the
Rights Agreement, all of which are ratified and affirmed in all respects and
shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to be
duly executed as of the day and year first above written.
Attest: MARYLAND FEDERAL BANCORP, INC.
/s/ Sarah M. Costlow By: /s/ Robert H. Halleck
- ----------------------------- ---------------------------
Name: Sarah M. Costlow Name: Robert H. Halleck
Title: Secretary Title: President and Chief
Executive Officer
Attest: REGISTRAR AND TRANSFER CO.
/s/ William P. Tatler By: /s/ Margaret A. Villani
- ---------------------------- ---------------------------
Name: William P. Tatler Name: Margaret A. Villani
Title: Vice President and Assistant Title: Vice President
Secretary
2
<PAGE>
EXHIBIT 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
Contacts:
ANALYSTS
B. Gloyden Stewart Jr. Scott E. Reed
BB&T BB&T
Senior Vice President Sr. Exec. Vice President
Investor Relations Chief Financial Officer
(919) 246-4219 (336) 733-3088
MEDIA
Bob Denham Robert H. Halleck
BB&T Maryland Federal
Vice President President and Chief Executive Officer
Public Relations (301) 779-1200
(336) 733-2202
BB&T to acquire Maryland Federal Bancorp, Inc.
Winston-Salem, N.C. - BB&T Corporation (NYSE-BBK) announced today that
it will acquire Maryland Federal Bancorp, Inc. (NASDAQ-MFSL) of Hyattsville,
Md., in a $265.3 million stock transaction based on BB&T's closing price of
$62 on Tuesday, February 24.
The Maryland Federal acquisition will more than double BB&T's presence
in the metropolitan Washington, D.C. area. The boards of directors of both
companies approved the transaction, which is valued at $37.05 per share of
Maryland Federal common stock. It will be accounted for as a purchase.
Based on BB&T's closing price Tuesday, the exchange ratio will be .5975
shares of BB&T common stock for each share of Maryland Federal common stock.
The exchange ratio fluctuates between BB&T stock prices of $59 and $60.25.
Below $59 and above $60.25, the exchange ratio is fixed. Any adjustment will
be based on the average BB&T stock price for a specified 10-day period prior
to closing.
Maryland Federal Bancorp, with approximately $!.2 billion in assets,
operates 28 branches in 24 cities as offices of Maryland Federal Bank, its
only subsidiary. It ranks by deposits as the 11th largest financial
institution in Maryland.
"Maryland Federal is a sound, quality institution with a strong capital
position and an outstanding reputation for superior customer service," said
BB&T Chairman John Allison. "They strengthen our position in one of the
fastest growing markets in the nation and establish us in a state that ranks
fifth nationally in median household and personal income per capita."
BB&T, which ranks No. 1 in deposit share in North Carolina, will have
approximately $5 billion in assets in Virginia and the metropolitan D.C. area
after the completed acquisitions of Franklin Bancorporation of Washington,
D.C., Life Bancorp of Norfolk, Va., and Maryland Federal.
<PAGE>
Page 2
Maryland Federal
"Both our companies believe that financial institutions today
distinguish themselves by the way they treat their customers," said Maryland
Federal President and Chief Executive Officer Robert Halleck. "BB&T believes
in respecting the individual and providing the highest level of personal
service possible, which is what makes this partnership so exciting to us.
Rarely do you find an institution of their size placing that much emphasis on
quality service, but they do. They have a unique community banking concept
that allows local bankers to make their own decisions.
"We're really excited about what this means to our customers," Halleck
said. "They'll have more products and services from which to choose and all
the advantages of a $30 billion bank."
"Halleck, 55, will become president of the new Maryland region, one of
18 BB&T regions in a four-state area. BB&T's regional structure emphasizes
autonomy and local decision-making. Each region is headed by a president and
a strong management team. "This structure will allow us to remain close to
our customers," Halleck said.
Directors of Maryland Federal Bancorp will become members of BB&T's
regional board for the new Maryland region. The merger, which is subject to
the approval of the shareholders of Maryland Federal and federal and state
banking regulators, is expected to be completed in the third quarter of 1998.
BB&T recently announced an agreement to acquire Franklin Bancorporation
of Washington, D.C. Robert P. Pincus, Franklin's chief executive officer,
will become president of BB&T's Metropolitan Washington Region, which will
include the District of Columbia, northern Virginia and a portion of suburban
Maryland.
BB&T, a multibank holding company with approximately $30 billion in
assets, operates 506 banking offices in the Carolinas and Virginia.
