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SECURITIES AND EXCHANGE COMMISSION
450 5th STREET, N.W.
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 29, 1998
CECIL BANCORP, INC.
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(Exact Name of Registrant as Specified in Charter)
Maryland 0-24926 52-1883546
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
127 North Street, Elkton, Maryland 21921
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(Address of Principal Executive Officer)
Registrant's telephone number, including area code:(410)398-1650
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On May 29, 1998, Cecil Bancorp, Inc. ("Cecil") announced
it signed a definitive agreement with Columbian Bank, A Federal
Savings Bank ("Columbian") whereby Cecil will acquire Columbian
in a transaction pursuant to which Cecil will form an interim
savings bank subsidiary which will merge into Columbian, with
Columbian as a surviving subsidiary of Cecil. The merger will
be accounted for as a pooling of interests and is intended to be
tax free to all shareholders. Columbian shareholders will
receive approximately 1.7 shares of Cecil common stock for each
share of Columbian common stock, subject to adjustment pursuant
to a formula which is tied to the trading price of Cecil common
stock. Consummation of the transaction requires the
satisfaction of certain conditions, including the approval of
Columbian shareholders and the receipt of certain regulatory
approvals. Columbian also granted to Cecil an option to
purchase up to 19.9% of Columbian's outstanding shares of common
stock upon the occurrence of certain events.
For more information, reference is made to the
Reorganization and Merger Agreement by and among Cecil and
Columbian, attached hereto as Exhibit 2.1, the Stock Option
Agreement between Cecil and Columbian, attached hereto as
Exhibit 2.2, the form of letter agreement attached hereto as
Exhibit 10.1 and the press release, attached hereto as Exhibit
99.1, all of which are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
The following exhibits are filed herewith.
(a) Exhibits.
2.1 Reorganization and Merger Agreement dated as of
May 29, 1998 (Schedules omitted. Cecil agrees
to supplementally furnish a copy of any omitted
schedules, upon request.)
2.2 Stock Option Agreement dated as of May 29, 1998
10.1 Form of letter agreement between Columbian
Directors and Cecil
99.1 Press Release dated May 29, 1998<PAGE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
CECIL BANCORP, INC.
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(Registrant)
By: /s/ Mary B. Halsey
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Mary B. Halsey
President
Date June 3, 1998
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REORGANIZATION AND MERGER AGREEMENT
By and Among
CECIL BANCORP, INC.
And
COLUMBIAN BANK, A FEDERAL SAVINGS BANK
Dated as of May 29, 1998
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REORGANIZATION AND MERGER AGREEMENT
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THIS REORGANIZATION AND MERGER AGREEMENT ("Agreement") is
dated as of May 29, 1998, by and among CECIL BANCORP, INC., a
Maryland corporation ("Cecil") and COLUMBIAN BANK, A FEDERAL
SAVINGS BANK, a federal savings bank ("Columbian").
BACKGROUND
The parties have determined that it would be desirable and
in their respective best interests, including the best interests
of their respective shareholders, for (i) Cecil to organize
Columbian Interim Federal Savings Bank ("NewSub") as a wholly
owned interim federal savings bank subsidiary of Cecil, to merge
with and into Columbian (the "Merger"), pursuant to which each
of the issued and outstanding shares of common stock of
Columbian ("Columbian common stock") shall automatically by
operation of law be converted into a number of shares of common
stock of Cecil and cash for fractional shares as set forth
herein (the "Merger Consideration") and the issued and
outstanding shares of NewSub common stock shall be converted by
operation of law into an equal number of newly issued shares of
Columbian common stock all of which shall be owned by Cecil, and
(ii) following the Merger, Columbian shall survive the Merger
and operate as a wholly-owned subsidiary of Cecil under its
present name and title with its own board of directors for a
period of at least three years thereafter.
The parties have determined that it would be in the best
interests of their respective stockholders to combine their
respective companies through a tax-free, stock-for-stock merger
so that their respective stockholders will have an equity
ownership in the combined entity.
It is intended that (i) for federal income tax purposes,
the Merger shall qualify as a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended
(the "Code") and this Agreement shall constitute a plan of
reorganization pursuant to Section 368 of the Code, and (ii) the
Merger shall qualify for pooling of interests accounting
treatment under generally accepted accounting principles.
Concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Cecil's
willingness to enter into this Agreement, each of the directors
of Columbian has entered into a voting agreement in the form
attached hereto as Exhibit A.
As a condition and as an inducement to Cecil's willingness
to enter into this Agreement, Cecil and Columbian are entering
into a stock option agreement (in the form attached hereto as
Exhibit B) pursuant to which Columbian is granting to Cecil an
option to purchase shares of Columbian common stock.
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NOW THEREFORE, in consideration of the premises and mutual
promises hereinafter set forth, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 Creation of NewSub. In order to effect the Merger
provided for herein, Cecil shall cause NewSub to be organized as
an interim federal savings bank under the laws of the United
States, all (except for directors' qualifying shares, if any) of
the issued and outstanding stock of which shall be owned by
Cecil. As soon as practical following its organization, Cecil
shall cause NewSub to approve and adopt a Plan of Merger with
respect to the Merger (which shall be in the form attached as
Exhibit 1.1 hereto).
1.2 The Merger. On the Effective Date (as defined in
Section 1.3 hereof), NewSub shall be merged with and into
Columbian. The Merger shall be effected in accordance with any
and all applicable provisions of federal law including the
rules and regulations of the Office of Thrift Supervision
("OTS"). At the Effective Date, the separate existence and
corporate organization of NewSub shall cease and Columbian shall
thereafter continue as the surviving corporate entity under the
laws of the United States under the name of "Columbian Bank, A
Federal Savings Bank." Columbian after the Effective Date is
sometimes referred to in this Agreement as the "Resulting
Association." At and after the Effective Date, (i) the
identity, existence, corporate organization, purposes, powers,
objects, franchises, privileges, rights and immunities of
Columbian shall continue in effect and be unimpaired by the
merger, (ii) the separate corporate existence of NewSub shall
cease, and (iii) Columbian shall succeed, without other
transfer, to all the rights and property of NewSub and shall be
subject to all the debts and liabilities of NewSub in the same
manner as if Columbian had itself incurred them. All rights of
creditors and all liens upon the property of each of Columbian
and NewSub shall be preserved unimpaired by the Merger, provided
that such liens upon property of NewSub shall be limited to the
property affected thereby immediately prior to the Effective
Date. Each savings account in Columbian at the Effective Date
will constitute a savings account in the Resulting Association
equivalent in withdrawable amount to the withdrawal value
thereof, and subject to the same terms and conditions as such
savings account in Columbian at the Effective Date. The
liquidation account of Columbian shall not be affected by the
Merger. From and after the Effective Date, any action or
proceeding by or against NewSub may be prosecuted to judgment,
which shall bind the Resulting Association, or the Resulting
Association may be proceeded against or substituted in its
place.
1.3 Effective Date of the Merger. Upon satisfaction or
waiver (in accordance with the provisions of this Agreement) of
each of the conditions set forth in Article V herein, Columbian
and NewSub shall execute and cause to be filed Articles of
Combination, and such certificates or further documents as shall
be required by the OTS, with the OTS and with such other federal
or state
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regulatory agencies as may be required in the opinion of legal
counsel for Cecil and Columbian under applicable law, rules and
regulations. Upon approval by the OTS and endorsement of such
Articles of Combination by the OTS, the Merger and other
transactions contemplated by this Agreement shall become
effective. The Effective Date for all purposes hereunder shall
be the date of such endorsement by the OTS. The Merger shall
not be effective unless and until it is approved by the OTS.
1.4 Charter and Bylaws. On the Effective Date, the
Charter and Bylaws of Columbian shall be and continue to be the
Charter and Bylaws of the Resulting Association unless and until
the same shall be amended in accordance with applicable law.
1.5 Conversion of Shares.
(a) (i) On the Effective Date, by virtue of the
Merger and without any action on the part of Cecil or Columbian
or the holders of shares of Cecil or Columbian common stock,
each outstanding share of Columbian common stock issued and
outstanding at the Effective Date (except for Dissenting Shares
(as such term is defined in paragraph (b) below) and shares
referred to in subparagraph (a)(ii) of this Section 1.5, but
including shares held in any 401(k) plan of Columbian or held by
Columbian in a fiduciary capacity) shall be converted into the
Merger Consideration and exchanged for the right to receive a
number of shares of Cecil common stock (the "Exchange Ratio") to
be determined as follows (subject to adjustment as set forth in
subparagraph (a)(v) of this Section 1.5):
(1) If the Cecil Trading Price (to be
determined as described below) is more than $29.375, the
Exchange Ratio shall be 1.5645;
(2) If the Cecil Trading Price is more
than $27.00 and equal to or less than $29.375, the Exchange
Ratio shall be determined by dividing $45.96 by the Cecil
Trading Price;
(3) If the Cecil Trading Price is
equal to or more than $20.00 and equal to or less than $27.00,
the Exchange Ratio shall be 1.7021;
(4) If the Cecil Trading Price is less
than $20.00, the Exchange Ratio shall be determined by dividing
$34.04 by the Cecil Trading Price.
For purposes of this Agreement, the "Cecil
Trading Price" shall be equal to the average of the closing
price of a share of Cecil common stock (as reported by the
"Bloomberg Business News" Service ) for the last five days on
which shares of Cecil common stock were traded prior to the date
of approval of the Merger by the OTS.
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(ii) Any shares of Columbian common stock
which are owned or held by Columbian (except shares held in any
401(k) plan of Columbian or held in a fiduciary capacity) or by
Cecil or any of Cecil's subsidiaries (other than in a fiduciary
capacity) at the Effective Date shall cease to exist, and the
certificates for such shares shall as promptly as practicable be
canceled and no shares of capital stock of Cecil shall be issued
or exchanged therefor.
(iii) Each share of common stock of NewSub
issued and outstanding immediately prior to the Effective Date
shall be canceled and converted into one share of common stock
of Columbian.
(iv) At the Effective Date, the holders of
certificates representing shares of Columbian common stock shall
cease to have any rights as stockholders of Columbian, except
the right to receive the Merger Consideration as provided
herein.
(v) If the holders of Cecil common stock
shall have received or shall have become entitled to receive,
without payment therefor, during the period commencing on the
date hereof and ending with the Effective Date, additional
shares of common stock or other securities for their stock by
way of a reorganization, recapitalization, stock split, stock
dividend, reverse stock split reclassification, combination of
shares or similar corporate rearrangement in the capitalization
of Cecil ("Stock Adjustment"), then the Exchange Ratio shall be
proportionately adjusted to take into account such Stock
Adjustment.
(b) Any shares of Columbian common stock held by a
holder who dissents from the Merger and becomes entitled to
obtain payment for the value of such shares of Columbian common
stock pursuant to the applicable provisions of the rules and
regulations of the OTS shall be herein called "Dissenting
Shares." Any Dissenting Shares shall not, after the Effective
Date, be entitled to vote for any purpose or receive any
dividends or other distributions and shall not be entitled to
receive the Merger Consideration; provided, however, that shares
of Columbian common stock held by a dissenting stockholder who
subsequently withdraws a demand for payment, fails to comply
fully with the requirements of the rules and regulations of the
OTS, or otherwise fails to establish the right of such
stockholder to be paid the value of such stockholders' shares
under the rules and regulations of the OTS shall be deemed to be
converted into the right to receive the Merger Consideration
pursuant to the terms and conditions referred to above.
(c) At the Effective Date, by virtue of the Merger
without any action on the part of any holder of any option, each
option to purchase or other right with respect to shares of
Columbian common stock pursuant to stock options, stock
appreciation rights or other rights, including stock awards
("Columbian Options") granted by Columbian under its stock
option plans, as set forth in Exhibit 1.5 hereto, and which are
outstanding at the Effective Date, whether or not exercisable,
shall be converted into and become rights with respect to Cecil
common stock, and Cecil shall assume each Columbian Option, in
accordance with the terms of the plan under which it was issued
and the stock option or other agreement by which it is
evidenced, except that from and after the Effective Date, (i)
each Columbian Option assumed by Cecil may be exercised solely
for shares
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of Cecil common stock (or cash in the case of stock appreciation
rights), (ii) the number of shares of Cecil common stock subject
to such Columbian Option shall be equal to the number of shares
of Columbian common stock subject to such Columbian Option
immediately prior to the Effective Date multiplied by the
Exchange Ratio provided that any fractional shares so resulting
shall be rounded down to the nearest whole share, and (iii) the
per share exercise price under each such Columbian Option shall
be adjusted by dividing the per share exercise price under each
such Columbian Option by the Exchange Ratio and rounding up to
the nearest cent. In addition, notwithstanding the clauses (ii)
and (iii) of the first sentence of this Section 1.5(c), each
Columbian 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 not to constitute a
modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Code. Cecil and Columbian
agree to take all necessary steps to effectuate the foregoing
provisions of this 1.5(c) including, on the part of Cecil,
reserving a sufficient number of shares of Cecil common stock
for issuance pursuant to the exercise of stock options as
contemplated herein and filing an appropriate registration
statement with the Securities and Exchange Commission ("SEC")
not later than the Effective Date with respect to the shares of
Cecil common stock subject to such options and to make such
other filings required under federal and state securities laws
not later than the Effective Time to permit the exercise of such
options and the sale of shares received thereunder after the
Effective Time, and Cecil shall continue to make such filings
thereafter as may be necessary to permit the continued exercise
of options and sale of shares.
(d) In approving this Agreement, Columbian and the
Stock Option Committee appointed by the Board of Directors of
Columbian in accordance with paragraph 5(a) of the Columbian
1994 Stock Option and Incentive Plan agree not to permit the
holders of options outstanding under such plan to receive cash
upon the "Change in Control" of Columbian in an amount equal to
the excess of the "Market Value" of the Columbian common stock
subject to such option over the "Exercise Price" of the shares
subject to such option in accordance with Section 12 of the 1994
Stock Option and Incentive Plan.
1.6 Directors and Officers. The directors of the
Resulting Association, who shall hold office until their
resignation or removal or until their successors have been
elected and qualified in accordance with law and the Resulting
Association's Charter and Bylaws, shall be eight in number and
shall include the seven directors of Columbian as of the
Effective Date and Mary B. Halsey, who shall be appointed as a
Director of the Resulting Association, and shall be compensated
for service as a Director of the Resulting Association in
accordance with the compensation arrangement for all other
Resulting Association Directors. The officers of Columbian as
of the Effective Date, shall be the initial officers of the
Resulting Association after the Effective Date. The names,
residence addresses and terms of the initial Directors of the
Resulting Association are set forth in Exhibit 1.6 hereto.
Notwithstanding anything to the contrary herein, the Bylaws of
Columbian shall be amended prior to the Effective Date to
increase the number of directors of Columbian to eight, which
shall be effective on the Effective Date, upon the filing of
amended bylaws with the OTS.
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1.7 Offices of the Resulting Association. Immediately
after the Effective Date, the Resulting Association shall
continue its business at the office location(s) identified in
Exhibit 1.7 hereto.
1.8 Authorization for Issuance of Cecil Common Stock;
Exchange of Certificates.
(a) Cecil shall reserve for issuance a sufficient
number of shares of its common stock for the purpose of issuing
its shares to Columbian's shareholders in accordance with this
Article I. Immediately prior to the Effective Date, Cecil shall
make available for exchange or conversion, by transferring to an
exchange agent appointed by Cecil (the "Exchange Agent") for the
benefit of the holders of Columbian common stock: (i) such
number of whole shares of Cecil common stock as shall be
issuable in connection with the payment of the aggregate Merger
Consideration (as computed pursuant to Section 1.5 herein, and
as may be evidenced by a certificate therefor), and (ii) such
funds as may be payable in lieu of fractional shares of Cecil
common stock (as provided in Section 1.9 herein).
(b) After the Effective Date, holders of
certificates theretofore evidencing outstanding shares of
Columbian common stock (other than Dissenting Shares and as
provided in Section 1.5(a)(ii)), upon surrender of such
certificates to the Exchange Agent, shall be entitled to receive
certificates representing the number of whole shares of Cecil
common stock into which shares of Columbian common stock
theretofore represented by the certificates so surrendered shall
have been converted, as provided in Section 1.5 hereof, and cash
payments in lieu of fractional shares as provided in Section 1.9
hereof. As soon as practicable after the Effective Date, the
Exchange Agent will send a notice and transmittal form to each
Columbian shareholder of record at the Effective Date whose
Columbian stock shall have been converted into Cecil common
stock advising such shareholder of the effectiveness of the
Merger and the procedure for surrendering to the Exchange Agent
outstanding certificates formerly evidencing Columbian common
stock in exchange for new certificates for Cecil common stock
and for cash payable in lieu of any fractional interest. Upon
surrender, each certificate evidencing Columbian common stock
and cash for fractional shares, if any, shall be canceled. The
Exchange Agent shall make such cancellation and exchanges of
Columbian common stock for Cecil common stock (and cash, as
appropriate) for a period of one year from the Effective Date.
(c) Until surrendered as provided in this Section
1.8 hereof, each outstanding certificate which, prior to the
Effective Date, represented Columbian common stock (other than
Dissenting Shares and shares canceled at the Effective Date
pursuant to Section 1.5(a)(ii) hereof) will be deemed for all
corporate purposes to evidence ownership of the number of whole
shares of Cecil common stock into which the shares of Columbian
common stock formerly represented thereby were converted and the
right to receive cash in lieu of any fractional interest.
However, until such outstanding certificates formerly
representing Columbian common stock are so surrendered, no
dividend or distribution payable to holders of record of Cecil
common stock shall be paid to any holder of such outstanding
certificates, but upon surrender of such outstanding
certificates by such holder there shall be paid to such holder
the amount of any dividends or distribution, without
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interest, theretofore paid with respect to such whole shares of
Cecil common stock, but not paid to such holder, and which
dividends or distribution had a record date occurring on or
subsequent to the Effective Date and the amount of any cash,
without interest, payable to such holder in lieu of fractional
shares pursuant to Section 1.9 hereof. After the Effective
Date, there shall be no further registration of transfers on the
records of Columbian of outstanding certificates formerly
representing shares of Columbian common stock and, if a
certificate formerly representing such shares is presented to
Cecil, it shall be forwarded to the Exchange Agent for
cancellation and exchange for certificates representing shares
of Cecil common stock, and cash for fractional shares as herein
provided. The Exchange Agent shall make such cancellation and
exchanges of Columbian Common Stock (and cash, as appropriate)
for a period of one year from the Effective Date.
(d) All shares of Cecil common stock and cash in
lieu of any fractional share issued and paid upon the surrender
for exchange of Columbian common stock in accordance with the
above terms and conditions shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of
Columbian common stock.
(e) If any new certificate for Cecil common stock
is to be issued in the name other than that in which the
certificate surrendered in exchange thereof is registered, it
shall be a condition of the issuance therefor that the
certificate surrendered in exchange shall be properly endorsed
and otherwise in proper form for transfer and that the person
requesting such transfer pay to the Exchange Agent any transfer
or other taxes required by reason of the issuance of a new
certificate for shares of Cecil common stock in any name other
than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(f) In the event any certificate for Columbian
common stock shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of that
fact by the holder thereof, such shares of Cecil common stock
and cash in lieu of fractional shares, if any, as may be
required pursuant hereto; provided, however, that Cecil may, in
its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
certificate to deliver a bond in such sum as it may direct as
indemnity against any claim that may be made against Cecil,
Columbian, the Exchange Agent or any other party with respect to
the certificate alleged to have been lost, stolen or destroyed.
1.9 No Fractional Shares. Notwithstanding any term or
provision hereof, no fractional shares of Cecil common stock,
and no certificates or scrip therefor, or other evidence of
ownership thereof, will be issued in exchange for any shares of
Columbian common stock; no dividend or distribution with respect
to Cecil common stock shall be payable on or with respect to any
fractional share interests; and no such fractional share
interest shall entitle the owner thereof to vote or to any other
rights of a shareholder of Cecil. In lieu of such fractional
share interest, any holder of Colombian common stock who would
otherwise be entitled to a fractional share of Cecil common
stock will, upon surrender of his certificate or certificates
representing Columbian common stock
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outstanding immediately prior to the Effective Date, be paid the
applicable cash value of such fractional share interest, which
shall be equal to the product of the fraction of the share to
which such holder would otherwise be entitled, multiplied by the
Cecil Trading Price as determined pursuant to Section 1.5(a) of
this Agreement. For the purposes of determining any such
fractional share interests, all shares of Cecil common stock
received by the holders of Columbian common stock shall be
combined so as to calculate the maximum number of whole shares
of Cecil common stock issuable to such Columbian shareholder in
the Merger.
1.10 Shareholders' Approval. The Board of Directors of
Columbian shall, within 45 days of the effective date of the
Registration Statement, submit the Merger to its shareholders
for approval (the "Shareholders Approval"). The affirmative
approval of the holders of at least two-thirds of the issued and
outstanding shares of Columbian common stock entitled to vote
shall be required for such approval.
1.11 Registration Statement; Prospectus/Proxy Statement.
(a) For the purposes (i) of registering the Cecil
common stock to be issued to holders of Columbian common stock
in connection with the Merger with the SEC and with applicable
state securities authorities, (ii) of submitting the Merger to
its shareholders for the Shareholders Approval, and (iii) of
preparing for filing with the OTS the proxy materials for
consideration of the Merger by Columbian stockholders, the
parties hereto shall cooperate in the preparation of an
appropriate registration statement (such registration statement,
together with all and any amendments and supplements thereto,
being herein referred to as the "Registration Statement"),
including the prospectus/proxy statement satisfying all
applicable requirements of applicable state laws, and of the
Securities Act of 1933 (the "1933 Act") and the Securities
Exchange Act of 1934 (the "1934 Act") and the rules and
regulations thereunder (such prospectus/proxy statement or
information statement, together with any and all amendments or
supplements thereto, being herein referred to as the
"Prospectus/Proxy Statement").
(b) Cecil shall furnish such information
concerning Cecil and the Cecil Subsidiaries (as defined in
Section 3.1 hereof) as is necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to such
corporations, to comply with Section 1.11(a) hereof. Cecil
agrees to promptly advise Columbian if at any time prior to the
Columbian shareholders meeting any information provided by Cecil
in the Prospectus/Proxy Statement becomes incorrect or
incomplete in any material respect and to provide the
information needed to correct such inaccuracy or omission.
Cecil shall promptly file with the SEC, and furnish to Columbian
for filing with the OTS and for distribution to shareholders of
Columbian, such supplemental information as may be necessary in
order to cause such Prospectus/Proxy Statement, insofar as it
relates to Cecil and the Cecil Subsidiaries, to comply with
Section 1.11(a).
(c) Columbian shall furnish Cecil with such
information concerning Columbian as is necessary in order to
cause the Prospectus/Proxy Statement, insofar as it relates to
Columbian, to comply with Section 1.11(a) hereof. Columbian
agrees to promptly advise Cecil if at any time
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prior to the Columbian shareholders meeting any information
provided by Cecil with the Prospectus/Proxy Statement becomes
incorrect or incomplete in any material respect and to provide
Cecil with the information needed to correct such inaccuracy or
omission. Columbian shall furnish Cecil with such supplemental
information as may be necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to Columbian,
to comply with Section 1.11(a).
(d) Cecil shall as expeditiously as possible file
the Registration Statement with the SEC and applicable state
securities agencies. Cecil shall use all reasonable efforts to
cause the Registration Statement to become effective under the
1933 Act and applicable state securities laws at the earliest
practicable date. Columbian authorizes Cecil to utilize in the
Registration Statement the information concerning Columbian
provided to Cecil for the purpose of inclusion in the
Prospectus/Proxy Statement. Columbian shall have the right to
review and comment on the form of proxy statement included in
the Registration Statement as well as those portions containing
or describing information concerning Columbian. Cecil shall
advise Columbian promptly when the Registration Statement has
become effective and of any supplements or amendments thereto,
and Cecil shall furnish Columbian with copies of all such
documents. Prior to the Effective Date or the termination of
this Agreement, each party shall consult with the other with
respect to any material (other than the Prospectus/Proxy
Statement) that might constitute a "prospectus" relating to the
Merger within the meaning of the 1933 Act.
(e) Columbian and Cecil shall consult with each
other in order to determine whether any directors, officers or
shareholders of Columbian may be deemed to be "affiliates" of
Columbian or Cecil ("affiliated persons") within the meaning of
Rule 145 of the SEC promulgated under the 1933 Act. All shares
of Cecil common stock issued to such Columbian affiliated
persons in connection with the Merger shall bear a legend upon
the face thereof stating that transfer of the securities is or
may be restricted by the provisions of the 1933 Act and/or
pooling of interests accounting requirements, and notice shall
be given to Cecil's transfer agent of such restriction, provided
that such legend shall be removed by delivery of a substitute
certificate without such legend if such Columbian affiliated
person shall have delivered to Cecil a copy of a letter from the
staff of the SEC or an opinion of counsel, in form and substance
satisfactory to Cecil, to the effect that such legend is not
required for purposes of the 1933 Act, and, in any event, at any
time after the expiration of two years from the Effective Date
unless, in the opinion of counsel for Cecil, such person was an
"affiliate" of Cecil within the meaning of Rule 145 within three
months prior to the expiration of such two year period. So long
as shares of such Cecil common stock bear such legend, no
transfer of such Cecil common stock shall be allowed unless and
until the transfer agent is provided with such information as
may reasonably be requested by counsel for Cecil to assure that
such transfer will not violate applicable provisions of the 1933
Act, or rules, regulations or policies of the SEC and the SEC's
rules relating to pooling of interests accounting treatment.
Notwithstanding anything to the contrary herein, if the Merger
qualifies for pooling of interests accounting treatment shares
of Cecil common stock issued to such affiliates of Columbian and
shares of Cecil common stock held by persons who are affiliates
of Cecil immediately prior to the Effective Time shall not be
transferable until such time as financial results covering at
least 30 days of combined operations of
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Cecil and Columbian have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting
Policies.
1.12 Cooperation; Regulatory Approvals. The parties
shall cooperate and use reasonable best efforts to complete the
transactions contemplated hereunder at the earliest practicable
date. Each party shall use their best efforts to cause each of
their affiliates and subsidiaries to cooperate, in the
preparation and submission by them, as promptly as reasonably
practicable, of such applications, petitions, and other
documents and materials as any of them may reasonably deem
necessary or desirable to the OTS, Federal Trade Commission
("FTC"), Department of Justice ("DOJ"), SEC, other regulatory
authorities, holders of the voting shares of common stock of
Columbian, and any other persons for the purpose of obtaining
any approvals or consents necessary to consummate the
transactions contemplated by this Agreement. At the date
hereof, none of the parties is aware of any reason that the
regulatory approvals required to be obtained by it would not be
obtained.
1.13 Closing. If (i) this Agreement has been duly
approved by the shareholders of Columbian, and (ii) all relevant
conditions of this Agreement have been satisfied or waived, a
closing (the "Closing") shall take place as promptly as
practicable thereafter at the principal office of Cecil, or at
such other place as the parties may agree, at which the parties
hereto will exchange certificates, opinions, letters and other
documents as required hereby and will make the filing described
in Section 1.3 hereof. Such Closing will take place as soon as
practicable as agreed by the parties, provided, however, that
the Closing shall be no more than thirty (30) days after the
satisfaction or waiver of all conditions and/or obligations
contained in Article V of this Agreement.
1.14 Closing of Transfer Books. At the Effective Date,
the transfer books for Columbian common stock shall be closed,
and no transfer of shares of Columbian common stock shall
thereafter be made on such books.
1.15 Possible Alternative Structures. Notwithstanding
anything to the contrary contained in the Agreement, Cecil shall
be entitled to revise the structure of the transactions
contemplated herein, provided, however, that no such change
shall (A) alter or change the amount or kind of consideration to
be issued to holders of Columbian common stock as provided for
in this Agreement, (B) adversely affect the tax treatment to
Columbian shareholders, (C) adversely affect the qualification
of the Merger as a pooling of interests for accounting and
financial reporting purposes, (D) affect the ability of
Columbian to continue as a separate entity for at least a three-
year period following the Effective Date or (E) materially
impede or delay consummation of the transactions contemplated
herein.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COLUMBIAN
Columbian represents and warrants to Cecil that, except as
disclosed in Schedule I delivered by Columbian to Cecil
concurrently with or prior to the date of execution of this
Agreement:
2.1 Organization, Good Standing, Authority, Insurance,
Etc. Columbian is a savings association duly organized, validly
existing and in good standing under the laws of the United
States. Columbian does not have any equity or other interest in
any "subsidiary" within the meaning of Section 10(a)(1)(G) of
the Home Owners' Loan Act ("HOLA") or in any other company,
entity, partnership, joint venture or similar organization.
Columbian has all requisite power and authority and is duly
qualified and licensed to own, lease and operate its properties
and conduct its business as it is now being conducted.
Columbian has delivered to Cecil a true, complete and correct
copy of the charter and the bylaws of Columbian. Columbian is
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which qualification is
necessary under applicable law, except to the extent that any
failure to so qualify would not, in the aggregate, have a
material adverse effect on the business, financial condition or
results of operations of Columbian. Columbian is a member in
good standing of the Federal Home Loan Bank of Atlanta and all
eligible accounts issued by Columbian are insured by the Savings
Association Insurance Fund ("SAIF") to the maximum extent
permitted under applicable law. Columbian is a "qualified
thrift lender" as defined in Section 10(m) of the HOLA and the
rules and regulations thereunder.
The minute books of Columbian contain complete and
accurate records of all meetings and other corporate actions
held or taken of its shareholders and Boards of Directors
(including the committees of such Boards).
2.2 Capitalization. The authorized capital stock of
Columbian consists of (i) 1,500,000 shares of common stock, par
value $1.00 per share, of which 75,343 shares were issued and
outstanding as of the date of this Agreement, and (ii) 500,000
shares of preferred stock, par value $1.00 per share, of which
no shares were issued and outstanding as of the date of this
Agreement. All outstanding shares of Columbian common stock are
duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. Except for outstanding options under
the 1994 Stock Option and Incentive Plan ("Stock Option Plan")
(the number of which are as set forth in Section 2.2 of Schedule
I) and such option granted by Columbian to Cecil pursuant to
this Agreement and under the terms and conditions set forth in
the related agreement appended hereto as Exhibit B, there are no
options, convertible securities, warrants, or other rights
(preemptive or otherwise) to purchase or acquire any of
Columbian's capital stock and no oral or written agreement,
contract, arrangement, understanding, plan or instrument of any
kind (collectively, "Contract") to which Columbian or any of its
affiliates is subject with respect to the issuance, voting or
sale of issued or unissued shares of Columbian's capital stock.
A true and complete copy of the Stock Option Plan, as in effect
on the date of this Agreement, is attached as Section 2.2 of
Schedule I.
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2.3 Financial Statements and Regulatory Reports.
(a) Columbian has delivered to Cecil: (i)
Statements of Financial Condition, Statements of Operations,
Statements of Stockholders' Equity and Statements of Cash Flows
of Columbian as of and for the years ended December 31, 1997 and
1996, certified by Anderson Associates, LLP; and (ii) a
statement of condition, statement of operations, statement of
stockholders' equity and statement of cash flows of Columbian
for the three-month period ended March 31, 1998. Each of the
foregoing financial statements fairly presents the consolidated
financial condition, assets, liabilities and results of
operations of Columbian, at their respective dates and for the
respective periods then ended and has been prepared in
accordance with generally accepted accounting principles
consistently applied, except as otherwise noted in a footnote
thereto and subject, in the case of interim financial
statements, to normal recurring year-end adjustments, which are
not material in any case or in the aggregate and the absence of
notes.
(b) Columbian previously delivered, or will
deliver, to Cecil the Columbian regulatory reports, consisting
of the thrift financial reports, consolidated reports of
condition and income, and accompanying schedules, filed by
Columbian with the OTS for each calendar quarter, beginning with
the quarter ended December 31, 1994, through the Effective Date
("Regulatory Reports"). The Regulatory Reports have been, or
will be, prepared in accordance with applicable accounting
principles and practices, and were true and correct in all
material respects.
2.4 Absence of Undisclosed Liabilities. Except (i) as
disclosed in Section 2.4 of Schedule I, (ii) as reflected, noted
or adequately reserved against in the financial statements
referred to in Section 2.3(a) herein, or (iii) for deposits
incurred in the ordinary course of business consistent with past
practice, Columbian does not have any material liabilities
(whether accrued, absolute, contingent or otherwise) of specific
application to Columbian.
2.5 Absence of Changes. Since December 31, 1997,
Columbian has conducted its business in the ordinary course of
business and, except as disclosed in Section 2.5 of Schedule I,
Columbian has not undergone any change in condition (financial
or otherwise), assets, liabilities, business or operations,
other than changes in the ordinary course of business which have
not been, either in any case or in the aggregate, materially
adverse. Without limiting the foregoing, except as disclosed in
Section 2.5 of Schedule I, since December 31, 1997:
(i) Columbian has not issued, sold, granted,
conferred or awarded (or agreed to issue, sell, grant,
confer or award) any of its equity securities (except
shares of Columbian common stock issued pursuant to
exercise of options previously granted under the Columbian
Stock Option Plan), or options to acquire its equity
securities, or any corporate debt securities which would
be classified under generally accepted accounting
principles as long-term debt on the balance sheets of
Columbian; (ii) Columbian has not effected any stock split
or adjusted, combined, reclassified or otherwise changed
its capitalization; (iii) Columbian has not discharged or
satisfied any material lien or paid any material
obligation or liability (absolute or contingent), other
than in the ordinary course of business; (iv)
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Columbian has not sold, assigned, transferred, leased,
exchanged, or otherwise disposed of any of its material
properties or assets; (v) except as required by contract or
law, Columbian has not (A) increased the rate of
compensation of, or paid any bonus to, any of its
directors, officers, or other employees, (B) entered into
any new, or amended or supplemented any existing,
employment, management, consulting, deferred compensation,
severance, or other similar contract, (C) entered into,
terminated, or substantially modified any of the Employee
Plans (as defined in Section 2.15 hereafter) or (D) agreed
to do any of the foregoing; (vi) Columbian has not suffered
any material damage, destruction, or loss, whether as a
result of misappropriation, theft, fire, explosion,
earthquake, accident, casualty, labor trouble, requisition,
or taking of property by any regulatory authority, flood,
windstorm, embargo, riot, or other casualty or event, and
whether or not covered by insurance; and (vii) Columbian
has not canceled or compromised any debt, except for debts
of $5,000 or less, individually or in the aggregate,
charged off or compromised in accordance with the past
practice of Columbian.
2.6 Dividends, Distributions and Stock Purchases and
Sales. Except as disclosed in Section 2.6 of Schedule I, since
December 31, 1997, Columbian has not declared, set aside, made
or paid any dividend or other distribution in respect of
Columbian common stock, or purchased, issued or sold any shares
of Columbian common stock.
2.7 Prospectus/Proxy Statement. At the time the
Prospectus/Proxy Statement is mailed to the shareholders of
Columbian for the solicitation of proxies for the approval of
the Merger and at all times subsequent to such mailing up to and
including the time of such approval, such Prospectus/Proxy
Statement (including any supplements thereto), with respect to
all information set forth therein relating to Columbian
shareholders, Columbian common stock, this Agreement, the Merger
and all other transactions contemplated hereby, will:
(a) Comply in all material respects with
applicable provisions of the 1933 Act, the 1934 Act and the
rules and regulations under the 1933 Act and the 1934 Act; and
(b) Not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements contained
therein, in light of the circumstances under which they are
made, not misleading.
2.8 No Broker's or Finder's Fees. Except as set forth
in Section 2.8 of Schedule I, no agent, broker, investment
banker, person or firm acting on behalf or under authority of
Columbian is or will be entitled to any broker's or finder's fee
or any other commission or similar fee directly or indirectly in
connection with the Merger or any other transaction contemplated
hereby.
2.9 Contracts. Each written or oral contract entered
into by Columbian (other than deposit and loan contracts with
customers entered into by Columbian in the ordinary course of
business) which involves aggregate payments or receipts in
excess of $5,000 per year or which cannot be fully performed
within six months from the date hereof, including without
limitation every
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agreement, lease, license, indenture, mortgage and other
commitment to which Columbian is a party or by which it or any
of its properties may be bound (all such contracts involving
annual payments in excess of $5,000, or which cannot be fully
preformed within such six month period, are being collectively
referred to herein as "Material Contracts") is identified in
Section 2.9 of Schedule I. Except as disclosed in Section 2.9
of Schedule I, all Material Contracts are valid and in full
force and effect.
2.10 Litigation. Except as disclosed in Section 2.10 of
Schedule I: (i) there is no litigation, investigation or
proceeding pending or, to the knowledge of the senior officers
of Columbian, threatened that involves Columbian or any of its
properties; (ii) there are no outstanding orders, writs,
injunctions, judgments, decrees, regulations, directives,
consent agreements or memoranda of understanding issued by any
federal, state or local court or governmental authority or
arbitration tribunal issued against or with the consent of
Columbian.
2.11 Compliance with Law. Columbian is in compliance in
all material respects with all laws and regulations applicable
to its operations or with respect to which compliance is a
condition of engaging in the business thereof, except for
failures to comply, which, in the aggregate, would not have a
material adverse effect on the business, financial condition or
results of operations of Columbian, and Columbian has not
received notice from any federal, state or local government or
governmental agency of any material violation of any of the
above.
2.12 Corporate Actions.
(a) The Board of Directors of Columbian has duly
approved and authorized its officers to execute and deliver this
Agreement, the Plan of Merger and the Stock Option Agreement and
to take all action necessary to consummate the Merger and the
other transactions contemplated hereby and thereby.
(b) The Board of Directors of Columbian has taken
all necessary action to exempt this Agreement, the Plan of
Merger and the Stock Option Agreement and the transactions
contemplated hereby and thereby from, and this Agreement, the
Plan of Merger and the Stock Option Agreement and the
transactions contemplated hereby and thereby are exempt from (i)
any applicable state takeover laws, (ii) any state laws limiting
or restricting the voting rights of stockholders, (iii) any
state laws requiring a stockholder approval vote in excess of
the vote normally required in transactions of similar type not
involving a "related person," "interested stockholder" or person
or entity of similar type and (iv) any provision in its charter
or bylaws (A) restricting or limiting stock ownership or the
voting rights of stockholders or (B) requiring a stockholder
approval vote in excess of the vote normally required in
transactions of similar type not involving a "related person,"
"interested stockholder" or person or entity of similar type.
2.13 Authority. Except as set forth in Section 2.13 of
Schedule I, the execution, delivery and performance of this
Agreement by Columbian does not violate any of the provisions
of, or constitute a breach or default under or give any person
the right to terminate or accelerate payment
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or performance under the charter or bylaws of Columbian, any
regulatory restraint on the acquisition of Columbian or control
thereof (subject to receipt of all required regulatory
approvals), or any contract, agreement, lease, note, bond,
mortgage, indenture, deed, license or other instrument or
obligation to which Columbian is a party or is subject or by
which any of its properties or assets is bound. Columbian has
all requisite corporate power and authority to enter into this
Agreement and the Plan of Merger, and to perform its obligations
hereunder and thereunder, subject to the receipt of the approval
of Columbian's shareholders required under applicable law and
regulations and subject to receipt of all required regulatory
approvals. This Agreement constitutes the valid and binding
obligation of Columbian and is enforceable in accordance with
its terms, except as enforceability may be limited by applicable
laws relating to bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights
generally and general principles of equity.
2.14 Labor Relations and Employment Agreements.
Columbian is not a party to or bound by any collective
bargaining agreement. To the knowledge of Columbian's senior
officers, Columbian is not the subject of a proceeding asserting
that it has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to
compel Columbian to bargain with any labor organization as to
wages or conditions of employment, nor are there any labor
disputes pending, or to the knowledge of the senior officers of
Columbian threatened, that might materially and adversely affect
the condition (financial or otherwise), assets, liabilities,
business or operations of Columbian. Except as disclosed in
Section 2.14 of Schedule I, Columbian does not have any
employment contract, severance agreement, deferred compensation
agreement, consulting agreement or similar obligation
("Employment Obligation") with any director, officer, employee,
consultant or agent. Except as disclosed in Section 2.14 of
Schedule I, Columbian does not have any contract, plan or
arrangement which provides for payments or benefits in certain
circumstances which, together with other payments or benefits
payable to any participant therein or party thereto, might
render any portion of any such payments or benefits subject to
disallowance of deduction therefor as a result of the
application of Section 162, 280G or any other section of the
Code.
2.15 Employee Benefits.
(a) Columbian does not maintain any funded
deferred compensation plans (including profit sharing, pension,
savings or stock bonus plans), unfunded deferred compensation
arrangements or employee benefit plans as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (collectively, the "Employee Plans"), other
than any plans set forth in Section 2.15 of Schedule I.
Columbian has not incurred or reasonably expects to incur any
liability to the Pension Benefit Guaranty Corporation except for
required premium payments which, to the extent due and payable,
have been paid. To the knowledge of Columbian, the Employee
Plans intended to be qualified under Section 401(a) of the Code
are so qualified, and Columbian is not aware of any fact which
would adversely affect the qualified status of such plans.
Except as set forth in Section 2.15 of Schedule I, Columbian
does not (a) provide health, medical, death or survivor benefits
to any former employee or beneficiary thereof, or (b) maintain
any form of current (exclusive of base salary and base wages) or
deferred compensation,
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bonus, stock option, stock appreciation right, benefit,
severance pay, retirement, incentive, group or individual health
insurance, welfare or similar plan or arrangement for the
benefit of any single or class of directors, officers or
employees, whether active or retired (collectively "Benefit
Arrangements").
(b) To the knowledge of Columbian, (i) no
condition exists that could constitute grounds for the
termination of any Employee Plan under Section 4042 of ERISA;
(ii) no "prohibited transaction," as defined in Section 406 of
ERISA and Section 4975 of the Code, has occurred with respect to
any Employee Plan, or any other employee benefit plan maintained
by Columbian; and (iii) Columbian has not incurred or does not
expect to incur, directly or indirectly, any liability under
Title IV of ERISA arising in connection with the termination of,
or a complete or partial withdrawal from, any plan covered or
previously covered by Title IV of ERISA.
2.16 Property and Assets. Columbian has good and
marketable title to all of its real property reflected in the
financial statements at December 31, 1997, referred to in
Section 2.3 herein, or acquired subsequent thereto, free and
clear of any lien, claim, charge, restriction or encumbrance
(collectively, "Encumbrance"), except for (a) such items shown
in such financial statements or in the notes thereto, (b) liens
for current real estate taxes not yet delinquent, (c) customary
title exceptions that have no material adverse effect upon the
value of such property, (d) property sold or transferred in the
ordinary course of business since the date of such financial
statements, (e) pledges or liens incurred in the ordinary course
of business and (f) as otherwise specifically indicated in
Section 2.16 of Schedule I. Columbian enjoys peaceful and
undisturbed possession under all material leases for the use of
real property under which it is the lessee; all of such leases
are valid and binding and in full force and effect, and
Columbian is not in default in any material respect under any
such lease. All property and assets material to its business
and currently used by Columbian are, in all material respects,
in good operating condition and repair, normal wear and tear
excepted.
2.17 Tax Matters.
(a) Except as set forth in Section 2.17 of
Schedule I, Columbian has duly and properly filed all federal,
state, local and other tax returns required to be filed by it
and has made timely payments of all taxes due and payable,
whether disputed or not; the current status of audits of such
returns by the Internal Revenue Service ("IRS") and other
applicable agencies is as set forth in Section 2.17 of Schedule
I; and, except as set forth in Section 2.17 of Schedule I, there
is no agreement by Columbian for the extension of time or for
the assessment or payment of any taxes payable. Except as set
forth in Section 2.17 of Schedule I, neither the IRS nor any
other taxing authority is now asserting or, to the best
knowledge of Columbian, threatening to assert any deficiency or
claim for additional taxes (or interest thereon or penalties in
connection therewith), nor is Columbian aware of any basis for
any such assertion or claim.
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(b) Adequate provision for any federal, state,
local, or foreign taxes due or to become due for Columbian for
any period or periods through and including December 31, 1997,
has been made and is reflected on the December 31, 1997
Columbian financial statements and has been or will be made with
respect to periods ending after December 31, 1997.
2.18 Environmental Matters. Except as set forth in
Section 2.18 of Schedule I, none of the assets of Columbian
(defined for purposes of this subsection as the real property
and tangible personal property owned or leased by Columbian as
of the date of this Agreement and as of the Effective Date)
contain any hazardous materials (defined as any substance whose
nature and/or quantity or existence, use, manufacture or effect
render it subject to federal, state or local regulation as
potentially injurious to public health or welfare, including,
without limitation, friable asbestos or PCBs ("Hazardous
Materials")), and Columbian shall provide, as part of Section
2.18 of Schedule I, any and all documentation regarding
hazardous materials and any of its assets or properties. Except
as set forth in Section 2.18 of Schedule I, to Columbian's best
knowledge without inquiry, no collateral securing any loan made
by Columbian contains any Hazardous Materials , and Columbian
shall provide, as part of Section 2.18 of Schedule I, any
documentation regarding hazardous materials and any of its
loans. Except as set forth in Section 2.18 of Schedule I,
Columbian is not aware of, nor has Columbian received written
notice from any governmental or regulatory body of, any past,
present or future conditions, activities, practices or incidents
which may interfere with or prevent compliance or continued
compliance with hazardous substance laws or any regulation,
order, decree, judgment or injunction, issued, entered,
promulgated or approved thereunder, or which may give rise to
any common law or legal liability, or otherwise form the basis
of any claim, action, suit, proceeding, hearing or investigation
based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant or
chemical, or industrial, toxic or hazardous substance or waste.
There is no civil, criminal or administrative claim, action,
suit, proceeding, hearing or investigation pending or, to the
knowledge of Columbian's senior officers, threatened against
Columbian relating in any way to such hazardous substance laws
or any regulation, order, decree, judgment or injunction issued,
entered, promulgated or approved thereunder.
2.19 Governmental Approvals and Other Conditions.
Columbian is not aware of any reason why (i) the regulatory
approvals that are required to be obtained by Cecil in
connection with the transactions contemplated herein should not
be granted, or (ii) such regulatory approvals should be
conditioned on any requirement restricting or limiting Cecil's
future ability to carry on its business and that of its banking
subsidiaries (including Columbian), or (iii) any of the
conditions precedent as specified in Article V to consummate the
transactions contemplated herein are unlikely to be fulfilled
within the applicable time period or periods required for
satisfaction of such condition or conditions.
2.20 SEC Filings. No registration statement, prospectus,
proxy statement, schedule or report (taken together with any
amendments thereto) filed and not withdrawn since January 1,
1996 by Columbian with the SEC under the 1933 Act or the 1934
Act, on the date of effectiveness (in the
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case of such registration statements or prospectuses) or on the
date of filing (in the case of such reports or schedules) or on
the date of mailing (in the case of such proxy statements),
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary in order to make the statements therein, (in the case
of any prospectus in light of the circumstances under which they
were made) not misleading.
2.21 Asset Classification.
(a) Section 2.21(a) of Schedule I sets forth a
list, accurate and complete in all material respects, of each
loan, extension of credit and other asset of Columbian that has
been adversely designated, criticized or classified by Columbian
or any regulatory authority as of March 31, 1998, separated by
category of classification or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit
or other assets that have been adversely designated, classified
or criticized through the date hereof by any representative of
any government entity as "Special Mention," "Substandard,"
"Doubtful," "Loss" or words of similar import are excluded from
the amounts disclosed in the Asset Classification, other than
amounts of loans, extensions of credit or other assets that were
charged off by Columbian before the date hereof.
(b) All evidences of indebtedness reflected as
assets in the balance sheet of Columbian as of December 31,
1997, or acquired since such date, are (except with respect to
those assets which are no longer assets of Columbian) binding
obligations of the respective obligors named therein except as
enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors rights
generally, and except that the availability of equitable
remedies, including specific performance, is subject to the
discretion of the court before which any proceeding may be
brought, and the payment of no material amount thereof (either
individually or in the aggregate with other evidences of
indebtedness) is subject to any defenses which have been
threatened or asserted against Columbian. All such indebtedness
which is secured by an interest in real property is secured by a
valid and perfected mortgage lien having the priority specified
in the loan documents. Except as set forth in Section 2.21(b)
of Schedule I, all loans originated or purchased by Columbian
were at the time entered into and at all times since in
compliance in all material respects with all applicable laws
(including, without limitation, all consumer protection laws)
and regulations. Columbian administers its loan and investment
portfolios (including, but not limited to, adjustments to
adjustable mortgage loans) in accordance with all applicable
laws and regulations and the terms of applicable instruments.
The records of Columbian regarding all loans outstanding on its
books are accurate in all material respects and the risk
classification system has been established in accordance with
the applicable regulatory requirements.
2.22 Community Reinvestment Act. Columbian's rating
pursuant to its most recent examination by federal regulatory
authorities pursuant to the provisions of the Community
Reinvestment Act was a "satisfactory" or better. Columbian has
not received any comment letters relating to its Community
Reinvestment Act Statement or is otherwise aware of any adverse
reaction to such statement.
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2.23 Loan Portfolio. The allowance for loan losses
reflected and shown, or to be shown, on the balance sheets
contained in the financial statements provided for in Section
2.3(a) hereof are and will be with respect to financial
statements dated after the date hereof adequate to provide for
all known and reasonably anticipated possible losses, net of
recoveries relating to loans previously charged off, on loans
and leases outstanding and accrued interest receivable on non-
performing loans as of the date of such balance sheet, in
accordance with the requirements of generally accepted
accounting principles. No regulatory authority has requested
Columbian to increase the allowance for loan losses during or
since 1996 that has not been responded to in a manner
satisfactory to such regulatory authority.
2.24 Pooling of Interests and Tax Free Reorganization.
Columbian knows of no reason relating to it why the Merger would
not qualify as a pooling of interests for accounting purposes or
as a tax-free reorganization under the Code.
2.25 Exceptions to Representations and Warranties. On or
before the date hereof, Columbian has delivered to Cecil its
disclosure schedules contained in Schedule I, setting forth,
among other things, exceptions to any and all of its
representations and warranties in this Article II, provided that
the mere inclusion of an exception in Schedule I shall not be
deemed an admission by Columbian that such an exception
represents a material fact, event or circumstance or would
result in a material adverse effect or material adverse change.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CECIL
Cecil represent and warrant to Columbian that, except as
disclosed in Schedule II delivered by Cecil to Columbian
concurrently with or prior to the date of execution of this
Agreement:
3.1 Organization, Good Standing, Authority, Insurance,
Etc. Cecil is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Maryland and
is duly registered as a "savings and loan holding company" under
the HOLA. Section 3.1 of Schedule II lists each "subsidiary" of
Cecil within the meaning of Section 10(a)(1)(G) of HOLA
(individually a "Cecil Subsidiary" and collectively the "Cecil
Subsidiaries"). Each of the Cecil Subsidiaries is duly
organized, validly existing, and in good standing under the laws
of the respective jurisdiction under which it is organized.
Cecil and each Cecil Subsidiary have all requisite power and
authority and are duly qualified and licensed to own, lease and
operate its properties and conduct its business as it is now
being conducted. Cecil and each Cecil Subsidiary is qualified
to do business as a foreign corporation and is in good standing
in each jurisdiction in which qualification is necessary under
applicable law, except to the extent that any failures to so
qualify would not, in the aggregate, have a material adverse
effect on the business, financial condition or results of
operations of the Cecil and the Cecil Subsidiaries, taken as a
whole. Each Cecil Subsidiary that is a federally insured
savings institution ("Bank Subsidiary") is a member in good
standing of its applicable Federal Home Loan
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Bank, and all eligible accounts issued by such institution are
insured by the Savings Association Insurance Fund to the maximum
extent permitted under applicable law. Each Bank Subsidiary is
a "domestic building and loan association" as defined in Section
7701(a)(19) of the Code and is a "qualified thrift lender" as
defined in Section 10(m) of the HOLA and the rules and
regulations thereunder.
3.2 Capitalization. The authorized capital stock of
Cecil consists of (i) 4,000,000 shares of common stock, par
value $0.01 per share, of which 470,182 shares were issued and
outstanding as of the date of this Agreement, and (ii) 1,000,000
shares of preferred stock, par value $0.01 per share, of which
no shares were issued and outstanding as of the date of this
Agreement. All outstanding shares of Cecil common stock are
duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. All shares of Cecil common stock to
be issued upon the Merger will be, when issued, duly authorized,
validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in Section 3.2 of Schedule II,
there are no options, convertible securities, warrants or other
rights (preemptive or otherwise) to purchase or acquire any of
Cecil's capital stock and no oral or written agreement,
arrangement, understanding, plan or instrument of any kind
(collectively, "Cecil Contract") to which Cecil or any of its
affiliates is subject with respect to the issuance, voting or
sale of issued and unissued shares of Cecil's capital stock.
3.3 Ownership of Subsidiaries. All the outstanding
shares of the capital stock of the Cecil Subsidiaries are
validly issued, fully paid, nonassessable and owned beneficially
and of record by Cecil or a Cecil Subsidiary free and clear of
any Encumbrance. There are no options, convertible securities,
warrants, or other rights (preemptive or otherwise) to purchase
or acquire any capital stock of any Cecil Subsidiary and no
Contracts to which Cecil or any of its affiliates is subject
with respect to the issuance, voting or sale of issued or
unissued shares of the capital stock of any of the Cecil
Subsidiaries.
3.4 Financial Statements. Cecil has delivered to
Columbian: (i) Consolidated Statements of Financial Condition,
Consolidated Statements of Income, Consolidated Statement of
Changes in Stockholders' Equity, and Consolidated Statements of
Cash Flows of Cecil and the Cecil Subsidiaries as of and for the
years ended December 31, 1997 and 1996, certified by Simon
Master & Sidlow, P.A. and (ii) Consolidated Statements of
Financial Condition, Consolidated Statements of Income,
Consolidated Statements of Changes in Stockholders' Equity and
Consolidated Statements of Cash Flows of Cecil and the Cecil
Subsidiaries as of and for the three-month period ended March
31, 1998. Each of the foregoing financial statements fairly
presents the consolidated financial position, assets,
liabilities and results of operations of Cecil and the Cecil
Subsidiaries at their respective dates and for the respective
periods then ended and has been prepared in accordance with
generally accepted accounting principles consistently applied,
except as otherwise noted in a footnote thereto and subject, in
the case of the interim financial statements, to normal
recurring year-end adjustments, which are not material in any
case or in the aggregate and the absence of notes.
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3.5 Absence of Undisclosed Liabilities. Except (i) as
disclosed in Section 3.5 of Schedule II, (ii) as reflected,
noted or adequately reserved against in the financial statements
referred to in Section 3.4 herein, or (iii) for deposits
incurred in the ordinary course of business consistent with past
practice, Cecil and the Cecil Subsidiaries do not have any
material liabilities (whether accrued, absolute, contingent or
otherwise) of specific application to Cecil or the Cecil
Subsidiaries.
3.6 Absence of Changes. Since December 31, 1997, Cecil
and the Cecil Subsidiaries have conducted their respective
businesses in the ordinary course of business and, except as
disclosed in Section 3.6 of Schedule II, Cecil and the Cecil
Subsidiaries have not undergone any change in condition
(financial or otherwise), assets, liabilities, business or
operations, other than changes in the ordinary course of
business which have not been, either in any case or in the
aggregate, materially adverse on a consolidated basis.
3.7 Prospectus/Proxy Statement. At the time the
Prospectus/Proxy Statement is mailed to the shareholders of
Columbian for the solicitation of proxies for the approval of
the Merger and at all times subsequent to such mailing up to and
including the time of such approval, such Prospectus/Proxy
Statement (including any supplements thereto), with respect to
all information set forth therein relating to Cecil (including
the Cecil Subsidiaries) and its shareholders, Cecil common
stock, this Agreement, the Merger and all other transactions
contemplated hereby, will:
(a) Comply in all material respects with
applicable provisions of the 1933 Act, the 1934 Act and the
rules and regulations under the 1933 Act and the 1934 Act; and
(b) Not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements contained
therein, in light of the circumstances under which they are
made, not misleading.
3.8 Litigation. Except as disclosed in Section 3.8 of
Schedule II: (i) there is no litigation, investigation or
proceeding pending or, to the knowledge of the senior officers
of Cecil, threatened, that involves Cecil or any Cecil
Subsidiary or any of their respective properties and that, if
determined adversely, would materially and adversely affect the
condition (financial or otherwise), assets, liabilities,
business or operations of Cecil or any of its Subsidiaries; or
(ii) there are no outstanding orders, writs, injunctions,
decrees, consent agreements, memoranda of understanding or other
directives of any federal, state or local court or governmental
authority or of any arbitration tribunal against or with the
consent of Cecil or any Cecil Subsidiary that materially and
adversely affect the condition (financial or otherwise), assets,
liabilities, business or operations of Cecil and the Cecil
Subsidiaries, taken as a whole, or restrict in any material
manner the right of Cecil or any Cecil Subsidiary to conduct its
business as presently conducted.
3.9 No Broker's or Finder's Fees. Except as set forth
in Section 3.9 of Schedule II, no agent, broker, investment
banker, person or firm acting on behalf or under authority of
Cecil or any of the Cecil Subsidiaries is or will be entitled to
any broker's or finder's fee or any other commission
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or similar fee directly or indirectly in connection with the
Merger or any other transaction contemplated hereby.
3.10 Compliance With Law. Cecil and the Cecil
Subsidiaries are in compliance in all material respects with all
laws and regulations applicable to their respective operations
or with respect to which compliance is a condition of engaging
in the business thereof, except for failures to comply, which,
in the aggregate, would not have a material adverse effect on
the business, financial condition or results of operations of
Cecil and the Cecil Subsidiaries, taken as a whole, and Cecil
has not received notice from any federal, state or local
government or governmental agency of any material violation of
any of the above.
3.11 Corporate Actions. The Board of Directors of Cecil
has duly authorized its officers to execute and deliver this
Agreement, the Stock Option Agreement and the Plan of Merger and
approve the Plan of Merger and to take all action necessary to
consummate the Merger and the other transactions contemplated
hereby and thereby. The shareholders of Cecil are not required
to approve the Merger or any of the other transactions
contemplated by this Agreement. In its capacity as sole
shareholder of NewSub, Cecil will approve the Merger. All
corporate authorizations by the Board of Directors of Cecil
required for the consummation of the Merger and the transactions
contemplated hereby have been obtained.
3.12 Authority. Except as set forth in Section 3.12 of
Schedule II, the execution, delivery and performance of this
Agreement by Cecil and the Plan of Merger by NewSub does not
violate any of the provisions of, or constitute a breach or
default under or give any person the right to accelerate payment
or performance under the articles of incorporation or bylaws of
Cecil or the articles of incorporation, charter or bylaws of any
other Cecil Subsidiary. Cecil and NewSub have all requisite
corporate power and authority to enter into this Agreement and,
with respect to NewSub, the Plan of Merger, and to perform their
obligations hereunder and thereunder, subject to receipt of all
required regulatory approvals. This Agreement constitutes the
valid and binding obligation of Cecil and NewSub, and is
enforceable in accordance with its terms, except as
enforceability may be limited by applicable laws relating to
bankruptcy, insolvency or creditors' rights generally and
general principles of equity.
3.13 Property and Assets. Cecil and the Cecil
Subsidiaries have good and marketable title to all of their real
property reflected in the financial statements at December 31,
1997, referred to in Section 3.4 herein, or acquired subsequent
thereto, free and clear of all Encumbrances, except for (a) such
items shown in such financial statements or in the notes
thereto, (b) liens for current real estate taxes not yet
delinquent, (c) customary title exceptions that have no material
adverse effect upon the value of such property, (d) property
sold or transferred in the ordinary course of business since the
date of such financial statements, (e) pledges or liens incurred
in the ordinary course of business and (f) as otherwise
specifically indicated in Section 3.13 of Schedule II. Cecil
and the Cecil Subsidiaries enjoy peaceful and undisturbed
possession under all material leases for the use of real
property under which they are the lessee; all of such leases are
valid and binding and in full force and effect, and neither
Cecil nor any Cecil Subsidiary is in default in any material
respect under
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any such lease. All property and assets material to their
business and currently used by Cecil and the Cecil Subsidiaries
are, in all material respects, in good operating condition and
repair, normal wear and tear excepted.
3.14 Tax Matters.
(a) Except as set forth in Section 3.14 of
Schedule II, Cecil and each of the Cecil Subsidiaries have duly
and properly filed all federal, state, local and other tax
returns required to be filed by them and have made timely
payments of all taxes due and payable, whether disputed or not;
the current status of audits of such returns by the IRS and
other applicable agencies is as set forth in Section 3.14 of
Schedule II; and, except as set forth in Section 3.14 of
Schedule II, there is no agreement by Cecil or any Cecil
Subsidiary for the extension of time or for the assessment or
payment of any taxes payable. Except as set forth in Section
3.14 of Schedule II, neither the IRS nor any other taxing
authority is now asserting or, to the best knowledge of Cecil,
threatening to assert any deficiency or claim for additional
taxes (or interest thereon or penalties in connection
therewith), nor is Cecil aware of any basis for any such asser-
tion or claim.
(b) Adequate provision for any federal, state,
local or foreign taxes due or to become due for Cecil or any of
the Cecil Subsidiaries for any period or periods through and
including December 31, 1997 has been made and is reflected on
the December 31, 1997 Cecil consolidated financial statements.
3.15 Environmental Matters. Except as set forth in
Section 3.15 of Schedule II, none of the assets of Cecil and the
Cecil Subsidiaries (defined for purposes of this subsection as
the real property and tangible personal property owned or leased
by Cecil or any Cecil Subsidiary as of the date of this
Agreement and as of the Effective Date) contain any Hazardous
Materials, and Cecil and the Cecil Subsidiaries shall provide,
as part of Section 3.15 of Schedule II, any documentation
regarding hazardous materials and any of its assets or
properties. Except as set forth in Section 3.15 of Schedule II,
to Cecil's best knowledge without inquiry, no collateral
securing any loan made by Cecil or any Cecil Subsidiary contains
any Hazardous Materials and Cecil and the Cecil Subsidiaries
shall provide, as part of Section 3.15 of Schedule II, any
documentation regarding hazardous materials and any of its
loans. Neither of Cecil nor any Cecil Subsidiary is aware of,
nor has Cecil or any Cecil Subsidiary received written notice
from any governmental or regulatory body of any past, present or
future conditions, activities, practices or incidents which may
interfere with or prevent compliance or continued compliance
with hazardous substance laws or any regulation, order, decree,
judgment or injunction, issued, entered, promulgated or approved
thereunder, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action,
suit, proceeding, hearing or investigation based on or related
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment,
of any pollutant, contaminant or chemical, or industrial, toxic
or hazardous substance or waste. There is no civil, criminal or
administrative claim, action, suit, proceeding, hearing or
investigation pending or, to the knowledge of Cecil's senior
officers, threatened against Cecil or any Cecil Subsidiary
relating in any way to such hazardous substance
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laws or any regulation, order, decree, judgment or injunction
issued, entered, promulgated or approved thereunder.
3.16 SEC Filings. No registration statement, prospectus,
proxy statement, schedule or report (taken together with any
amendments thereto) filed and not withdrawn since January 1,
1996 by Cecil with the SEC under the 1933 Act or the 1934 Act,
on the date of effectiveness (in the case of such registration
statements or prospectuses) or on the date of filing (in the
case of such reports or schedules) or on the date of mailing (in
the case of such proxy statements), contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make
the statements therein (in the case of any prospectus in light
of the circumstances under which they were made), not
misleading.
3.17 Governmental Approvals and Other Conditions. Cecil
is not aware any reason why (i) the regulatory approvals that
are required to be obtained by it in connection with the
transactions contemplated herein should not be granted, or (ii)
such regulatory approvals should be conditioned on any
requirement that would present a significant impediment to its
future ability to carry on business and that of its banking
subsidiaries, or (iii) any of the conditions precedent as
specified in Article V to the obligations to consummate the
transactions contemplated herein are unlikely to be fulfilled
within the applicable time period or periods required for
satisfaction of such condition or conditions.
3.18 Community Reinvestment Act. The rating of Cecil
Federal Savings Bank pursuant to its most recent examination by
federal regulatory authorities pursuant to the provisions of the
Community Reinvestment Act was a "satisfactory" or better.
Neither Cecil nor Cecil Federal Savings Bank has received any
comment letters relating to its Community Reinvestment Act
Statement or is otherwise aware of any adverse reaction to such
statement.
3.19 Pooling of Interests and Tax Free Reorganization.
Cecil knows of no reason relating to it why the Merger would not
qualify as a pooling of interests for accounting purposes or as
a tax-free reorganization under the Code.
3.20 Dividends, Distributions and Stock Purchases and
Sales. Except as disclosed in Section 3.20 of Schedule II,
since December 31, 1997, Cecil has not declared, set aside, made
or paid any dividend or other distribution in respect of Cecil
common stock, or purchased, issued or sold any shares of Cecil
common stock.
3.21 Litigation. Except as disclosed in Section 3.21 of
Schedule II: (i) there is no litigation, investigation or
proceeding pending or, to the knowledge of the senior officers
of Cecil threatened that involves Cecil or any of its
properties: (ii) there are no outstanding orders, writs,
injunctions, judgments, decrees, regulations, directives,
consent agreements or memoranda of understanding issued by any
federal, state or local court or governmental authority or
arbitration tribunal issued against or with the consent of
Cecil.
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3.22 Loan Portfolio. The allowance for loan losses
reflected and shown, or to be shown, on the balance sheets
contained in the financial statements provided for in Section
3.4 hereof, are and will be with respect to financial statements
dated after the date hereof adequate to provide for all known
and reasonably anticipated possible losses, net of recoveries
relating to loans previously charged off, on loans and leases
outstanding and accrued interest receivable on non-performing
loans as of the date of such balance sheet, in accordance with
the requirements of generally accepted accounting principles.
No regulatory authority has requested Cecil to increase the
allowance for loan losses during or since 1996 that has not been
responded to in a manner satisfactory to such regulatory
authority.
3.23 Asset Classification. Section 3.23 of Schedule II
sets forth a list, accurate and complete in all material
respects, of each loan, extension of credit and other asset of
Cecil Federal Savings Bank that has been adversely designated,
criticized or classified by Cecil Federal Savings Bank or any
regulatory authority as of March 31, 1998, separated by category
of classification or criticism (the "Asset Classification"); and
no amounts of loans, extensions of credit or other assets that
have been adversely designated, classified or criticized through
the date hereof by any representative of any government entity
as "Special Mention," "Substandard," "Doubtful," "Loss" or words
of similar import are excluded from the amounts disclosed in the
Asset Classification, other than amounts of loans, extensions of
credit or other assets that were charged off by Cecil Federal
Savings Bank before the date hereof.
3.24 Year 2000. Cecil or a Cecil Subsidiary has
developed and implemented a program to address, on a timely
basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company may be unable to recognize and
perform properly date sensitive functions involving certain
dates prior to and any date after December 31, 1999) and
reasonably anticipates that it will, on a timely basis,
successfully resolve the Year 2000 Problem for all material
computer applications used by Cecil. Expenses associated with
resolving Year 2000 Problem technology issues are not expected
to have a material adverse effect on the financial condition or
results of operations of Cecil and the Cecil Subsidiaries, taken
as a whole.
3.25 Exceptions to Representations and Warranties. On or
before the date hereof, Cecil has delivered to Columbian its
disclosure schedules contained in Schedule II, setting forth,
among other things, exceptions to any and all of its
representations and warranties in this Article III, provided
that the mere inclusion of an exception in Schedule II shall not
be deemed an admission by Cecil that such an exception
represents a material fact, event or circumstance or would
result in a material adverse effect or material adverse change.
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ARTICLE IV
COVENANTS
4.1 Investigations; Access and Copies; Notification of
Event or Developments; Between the date of this Agreement and
the Effective Date, Columbian agrees to give to Cecil and its
representatives and agents, and Cecil agrees to give to
Columbian and its representatives and agents, full access (to
the extent lawful) to all of the premises, books, records and
employees of Columbian or Cecil, respectively, at all reasonable
times, and to furnish the other party its agents or
representatives access to and true and complete copies of such
financial and operating data, all documents with respect to
matters to which reference is made in Article II (by Columbian)
or Article III (by Cecil) of this Agreement or on any list,
schedule or certificate delivered or to be delivered in
connection therewith, and such other documents, records, or
information with respect to the business and properties of it as
Columbian or Cecil, respectively, shall from time to time
reasonably request; provided, however, that any such inspection
(a) shall be conducted in such manner as not to interfere
unreasonably with the operation of the business of the entity
inspected and (b) shall not affect any of the representations
and warranties hereunder. Cecil and Columbian will give prompt
written notice to the other party of any event or development
(x) which, had it existed or been known on the date of this
Agreement, would have been required to be disclosed under this
Agreement, (y) which would cause any of its representations and
warranties contained herein to be inaccurate or otherwise
materially misleading, or (z) which materially relate to the
satisfaction of the conditions set forth in Article V of this
Agreement.
4.2 Conduct of Business of Columbian. Between the date
of this Agreement and the Effective Date, and except as
otherwise consented to by Cecil in writing, which consent shall
not be unreasonably withheld, Columbian agrees:
(a) That, except as otherwise set forth in Section
4.2 hereof, Columbian shall conduct its business only in the
ordinary course, and maintain its books and records in
accordance with past practices and not take any action that
would materially (i) adversely affect or delay the ability to
obtain the Governmental Approvals (as defined in Section 5.1(c)
hereof), (ii) adversely affect Columbian's ability to perform
its obligations hereunder or (iii) adversely affect the Merger
from being accounted for as a pooling of interests or
constituting a tax-free reorganization;
(b) That Columbian shall not, without the prior
written consent of Cecil (i) declare, set aside or pay any
dividend or make any other distribution with respect to
Columbian's capital stock or reacquire any of Columbian's
outstanding shares, except that up to the Effective Date,
Columbian shall be allowed to pay its regular semi-annual cash
dividend totaling not more than $16,000 through the remainder of
1998; (ii) issue or sell or buy any shares of capital stock of
Columbian, except shares of Columbian common stock issued
pursuant to exercise of options outstanding as of the date of
this Agreement pursuant to the Stock Option Plan or pursuant to
the terms of the Stock Option Agreement; (iii) effect any stock
split, stock dividend or other reclassification of Columbian's
common stock; or (iv) grant any options or issue any warrants
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exercisable for or securities convertible or exchangeable into
capital stock of Columbian or grant any stock appreciation or
other rights with respect to shares of capital stock of
Columbian;
(c) That Columbian shall not, without the prior
written consent of Cecil (which consent shall not be
unreasonably withheld): (i) sell or dispose of any assets of
Columbian other than the sale of single-family residential
mortgage loans in the ordinary course; (ii) change or waive any
provision of its charter or bylaws, except as set forth in
Section 1.6; (iii) grant to any employee of Columbian an
increase in compensation, bonus or benefits except increases in
compensation, bonus or benefits in the ordinary course of
business to non-officer employees consistent with their past
practice; (iv) adopt any new or amend or terminate any existing
Employment Obligation, Employee Plans or Benefit Arrangements of
any type, (v) authorize severance pay or other benefits for any
employee of Columbian; (vi) incur any material obligation or
enter into, amend or extend any Material Contract, except as may
be necessary for Columbian to invest in government-backed
securities, in accordance with past practice; (vii) engage in
any lending activities not in the ordinary course consistent
with past practice; (viii) form any new subsidiary; (ix)
purchase any equity securities other than Federal Home Loan Bank
stock; (x) make any investment which would cause Columbian to
not be a qualified thrift lender under Section 10(m) of the
HOLA; (xi) borrow or agree to borrow any amount of funds; (xii)
hire any new permanent employees except as may be consistent
with past practice; (xiii) make any capital expenditures
exceeding $20,000 in the aggregate except that Columbian shall
be permitted to apply for and establish a branch office at Route
40 in Havre de Grace, Maryland; (xiv) establish interest and fee
schedules related to Columbian's deposit products or lending
products which materially differ from Columbian's past practice;
(xv) merge into, consolidate with, affiliate with, or be
purchased or acquired by, any other person or entity, or permit
any other person or entity to be merged, consolidated or
affiliated with it or be purchased or acquired by it; (xvi) make
any material change in its accounting methods or practices,
except changes as may be required by generally accepted
accounting principles or by regulatory requirements; or (xvii)
take or cause to be taken any action which would disqualify the
Merger as a pooling of interests for accounting purposes or as a
tax free reorganization under Section 368 of the Code.
4.3 No Solicitation. Columbian will not authorize or
permit any officer, director, employee, investment banker,
financial consultant, attorney, accountant or other
representative of Columbian, directly or indirectly, to initiate
contact with any person or entity in an effort to solicit,
initiate or encourage, or otherwise initiate, encourage or
solicit any "Takeover Proposal" (as such term is defined below).
Except as Columbian's Board of Directors' fiduciary duties may
otherwise require, Columbian will not authorize or permit any
officer, director, employee, investment banker, financial
consultant, attorney, accountant or other representative of
Columbian, directly or indirectly, (A) to cooperate with, or
furnish or cause to be furnished any non-public information
concerning its business, properties or assets to, any person or
entity in connection with any Takeover Proposal; (B) to
negotiate any Takeover Proposal with any person or entity; or
(C) to enter into any agreement, letter of intent or agreement
in principle as to any Takeover Proposal. As used in this
Agreement with respect to Columbian, "Takeover Proposal" shall
mean any proposal, other than as contemplated by this Agreement,
for a merger or other business combination involving Columbian
or for the acquisition of a ten percent (10%) or greater equity
interest in Columbian, or for the
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acquisition of ten percent (10%) or more of the assets of
Columbian. Columbian shall notify Cecil immediately upon it or
any officer, director, employee, investment banker, financial
consultant, attorney, accountant or other representative of it
receiving, or it becoming aware of the possible receipt of a
Takeover Proposal or having contact initiated with it by any
party other than the Cecil regarding a Takeover Proposal.
4.4 Shareholder Approval. Columbian shall call the
meeting of its shareholders to be held for the purpose of voting
upon the Merger and related matters, as soon as practicable. In
connection with such meeting, Columbian's Board of Directors
shall recommend approval of the Merger, subject to their
fiduciary duties, and the recommendation of Columbian's Board of
Directors shall be reflected in the Prospectus/Proxy Statement.
Columbian shall take all reasonable action to solicit from its
shareholders proxies in favor of approval. In exercising its
fiduciary duties, Columbian's Board of Directors may consider
whether Columbian has received an opinion of RP Financial, LC
dated within five days of mailing of the Proxy
Statement/Prospectus to Columbian shareholders stating that the
Merger Consideration is fair to Columbian shareholders from a
financial point view (Columbian hereby agreeing that it shall
use all commercially reasonable efforts to obtain such opinion
from RP Financial, LC and, if not forthcoming therefrom within a
reasonable period of time following a request made therefor, to
obtain such opinion from at least one such other reasonably
acceptable investment banking firm); provided, further, however,
that the Columbian Board of Directors shall not be required to
make such recommendation if it reasonably determines in good
faith not to so recommend, because to so recommend would
constitute a violation of the Board's fiduciary duties under
applicable law, as determined by the Board of Directors with the
assistance of counsel, Kutak Rock, Washington, D.C.
4.5 Filing of Regulatory Applications. Cecil shall
prepare and file as soon as practicable after the date hereof
all required applications for regulatory approval of the Merger
and the other transactions contemplated herein. Cecil shall
provide copies of each such application to Columbian for review
by Columbian and its counsel prior to the proposed date of
filing. Cecil shall use all reasonable efforts to obtain prompt
approval of each required application.
4.6 Publicity. Neither Cecil nor Columbian shall,
without the prior approval of the other, issue or make, or
permit any of its directors, employees, officers or agents to
issue or make, any press release, disclosure or statement to the
press or any third party with respect to the Merger or the other
transactions contemplated hereby, except as required by law.
The parties shall cooperate when issuing or making any press
release, disclosure or statement with respect to the Merger or
the other transactions contemplated hereby.
4.7 Cooperation Generally. If, at any time after the
Effective Date, Cecil or the Resulting Association shall
consider or be advised that any further deeds, assignments or
assurances or any other acts are necessary or desirable to vest,
perfect or confirm, of record or otherwise, in the Resulting
Association its right, title or interest in, to or under any of
the rights, properties or assets of Columbian or otherwise carry
out the purposes of this Agreement, Columbian and its officers
and directors shall be deemed to have granted to the Cecil and
the Resulting Association an irrevocable
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power of attorney (in their respective corporate capacities) to
execute and deliver all such deeds, assignments or assurances
and to do all acts necessary or desirable to vest, perfect or
confirm title and possession to such rights, properties or
assets in the Resulting Association and otherwise to carry out
the purposes of this Agreement, and the officers and directors
of the Resulting Association and Cecil are authorized in the
name of Columbian or otherwise to take any and all such action.
4.8 Additional Financial Statements and Reports. As
soon as reasonably practicable after they become publicly
available, Columbian shall furnish to Cecil its financial
statements as contemplated in Section 2.3 herein, and Cecil
shall furnish to Columbian Cecil's consolidated financial
statements as contemplated in Section 3.4 herein, in each case,
for all periods prior to the Effective Date. Such financial
statements will be prepared in conformity with generally
accepted accounting principles applied on a consistent basis and
fairly present the financial condition, results of operations
and cash flows of Columbian and Cecil, respectively, subject, in
the case of unaudited financial statements, to (a) normal year-
end audit adjustments, (b) any other adjustments described
therein and (c) the absence of notes which, if presented, would
not differ materially from those included in its most recent
audited consolidated balance sheet.
4.9 Consents of Third Parties. Each of Columbian and
Cecil shall use all reasonable efforts to obtain as soon as
practicable all consents and approvals of any third parties
necessary or desirable for consummation of the Merger and other
transactions contemplated by this Agreement.
4.10 NewSub. Prior to the Effective Date, Cecil will
take such necessary action to cause (i) NewSub to be organized
as an interim Federal savings institution under the laws and
regulations of the United States of America, and to ensure that
NewSub, after its organization and prior to the Effective Date
has not, and will not engage in any activities other than in
connection with, or as contemplated by this Agreement, (ii)
NewSub to become a wholly-owned subsidiary of Cecil, (iii) the
directors and stockholder of NewSub to approve the transactions
contemplated by this Agreement; (iv) NewSub to become a party to
the Plan of Merger; and (v) NewSub to have all corporate power
and authority to consummate the transactions contemplated
hereunder and to carry out all of its obligations with respect
to such transactions.
4.11 Affiliates Agreements. Columbian and Cecil shall
use all reasonable efforts to cause each affiliated person of
Columbian and Cecil for purposes of SEC Rule 145 and for
purposes of qualifying the Merger for "pooling of interests"
accounting treatment to deliver to Cecil, as soon as practicable
after the date of this Agreement, and prior to the date of the
shareholders meeting called by Columbian to approve this
Agreement, a written agreement, in the form of Exhibit 4.11
hereto, providing that such person will not sell, pledge,
transfer or otherwise dispose of any shares of Cecil common
stock or Columbian common stock now or hereafter held by such
affiliated person, including, without limitation, the shares of
Cecil common stock to be received by such affiliated person, in
the Merger: (1) otherwise than in compliance with the applicable
provisions of the 1933 Act and the rules and regulations
thereunder or (2) during the period commencing 30 days prior to
the consummation of the Merger and ending at the time of the
publication of financial results covering at least 30 days of
combined operations of Cecil and Columbian.
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4.12 Forbearances of Cecil. Between the date of this
Agreement and the Effective Date, Cecil shall not take any
action that would (i) adversely affect or delay the ability to
obtain the Governmental Approvals (as defined in Section 5.1(c)
hereof), (ii) adversely affect Cecil's ability to perform its
obligations hereunder or (iii) adversely affect the Merger from
being accounted for as a pooling of interests or constituting a
tax-free reorganization under Section 368 of the Code.
4.13 Update Disclosures. Five business days prior to the
Effective Date, Columbian and Cecil shall update Schedule I and
Schedule II, respectively, hereto by notice to Cecil and
Columbian, respectively, to reflect any matters which have
occurred from and after the date hereof which, if existing on
the date hereof, would have been required to be described
therein; provided, however, that no such update shall affect the
conditions to the obligations of Columbian and Cecil to
consummate the transactions contemplated hereby, and any and all
changes reflected in any such update shall be considered in
determining whether such conditions have been satisfied.
ARTICLE V
CONDITIONS OF THE MERGER;
TERMINATION OF AGREEMENT
5.1 General Conditions. The obligations of Cecil and
Columbian to effect the Merger shall be subject to the following
conditions:
(a) Stockholder Approval. The holders of the
outstanding shares of Columbian common stock shall have approved
this Agreement, the Plan of Merger and the Merger by the vote of
at least two-thirds of the outstanding Columbian common stock.
(b) No Proceedings. No order shall have been
entered and remain in force restraining or prohibiting the
Merger in any legal, administrative, arbitration, investigatory
or other proceedings (collectively, "Proceedings") by any
governmental or judicial or other authority.
(c) Government Approvals. To the extent required
by applicable law or regulation, all approvals of or filings
with any governmental authority (collectively, "Governmental
Approvals"), including without limitation those of the OTS, the
Federal Trade Commission, the U.S. Department of Justice, the
Securities and Exchange Commission, and any state securities or
blue sky authorities, shall have been obtained or made and any
waiting periods shall have expired in connection with the
consummation of the Merger. All other statutory or regulatory
requirements for the valid consummation of the Merger and
related transactions shall have been satisfied.
(d) Registration Statement. The Registration
Statement shall have been declared effective and shall not be
subject to a stop order of the SEC and, if the offer and sale of
Cecil's common stock in the Merger pursuant to this Agreement is
subject to the Blue Sky laws of any state, shall not be subject
to a stop order of any state securities commissioner.
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(e) Federal Tax Opinion. Receipt of an opinion of
Housley Kantarian & Bronstein to both Cecil and Columbian, in a
form and content reasonably satisfactory to Cecil and Columbian,
to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code,
(ii) the exchange in the Merger of Columbian common stock for
Cecil common stock will not give rise to gain or loss to
shareholders of Columbian with respect to such exchange (except
to the extent of any cash received for fractional shares
redeemed, or shares of dissenting stockholders), and (iii)
neither Columbian nor Cecil will recognize gain or loss as a
consequence of the Merger. Each of Cecil and Columbian shall
provide a letter setting forth the facts, assumptions and
representations on which such counsel may rely in rendering its
opinion.
(f) Accountants' Pooling Letter. Each party shall
have received a letter, dated as of the Closing, from its
independent auditors to the effect that the Merger will qualify
for pooling-of-interests accounting treatment under the
Accounting Principles Board Opinion No. 16 and SEC Accounting
Series Releases No. 130 and No. 135, as amended, if consummated
in accordance with this Agreement.
5.2 Conditions to Obligations of Cecil. The obligations
of Cecil to effect the Merger and the other transactions
contemplated herein shall be subject to the following additional
conditions:
(a) No Material Adverse Change. Between the date
of this Agreement and the Effective Date, there shall not have
occurred any material adverse change in the financial condition,
business or results of operations of Columbian other than any
such change attributable to or resulting from changes in law,
regulation or generally accepted accounting principles or
interpretations thereof of general application to the banking
and thrift industries.
(b) Representations and Warranties to be True;
Fulfillment of Covenants and Conditions. The representations
and warranties of Columbian shall be true in all material
respects at the Effective Date with the same effect as though
made at the Effective Date (or on the date when made in the case
of any representation or warranty which specifically relates to
an earlier date); except (1) as contemplated by this Agreement,
(2) as consented to in writing by Cecil or (3) for breaches of
representations and warranties which would not have, or would
not reasonably be expected to have, a material adverse effect on
the financial condition, business or operations of Columbian;
Columbian shall have performed all obligations and complied with
each covenant, in all material respects, under this Agreement on
its part to be performed or complied with at or prior to the
Effective Date except for failures to perform or comply with
such obligations and covenants which would not have, or would
not reasonably be expected to have, any material adverse effect
on the financial condition, business or operations of Columbian;
and Columbian shall have delivered to Cecil a certificate, dated
the Effective Date and signed by its chief executive officer and
chief financial officer, to such effect.
(c) Acceptance of Legal Matters. The form and
substance of all legal matters contemplated hereby and all
papers delivered hereunder shall be reasonably acceptable to
counsel to Cecil.
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(d) Consents Under Agreements. Columbian shall
have obtained the consent or approval of each person (other than
the Governmental Approvals) whose consent or approval shall be
required in order to permit consummation of the Merger under any
loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse effect
on Columbian or upon the consummation of the transactions
contemplated hereby.
(e) Dissenters Rights. No greater than six
percent (6.0%) of the outstanding Columbian common stock
entitled to vote at the meeting of Columbian's stockholders to
be held for the purpose of voting upon the Merger and related
matters, shall have delivered the written notice of intent to
demand payment and become Dissenting Shares pursuant to the
applicable provisions of the OTS rules and regulations.
(f) No Litigation. Columbian shall not be a party
to any pending litigation, reasonably probable of being
determined adversely to Columbian, which would have a material
adverse effect on the business, financial condition or results
of operations of Columbian.
(g) Regulatory Approval. All Governmental
Approvals required hereunder to consummate the transactions
contemplated hereby shall have been obtained without the
imposition of any conditions which Cecil reasonably and in good
faith determines to be unduly burdensome upon the conduct of the
business of Cecil.
(h) Affiliate Letters. Cecil shall have received
the letter agreements from all affiliated persons of Columbian
as contemplated in Section 4.11 herein.
(i) Opinion of Counsel. Cecil shall have received
from counsel to Columbian an opinion dated as of the Effective
Date covering the following matters:
(i) Columbian is a federal saving bank,
validly existing, and in good standing
under the laws of the United States of
America;
(ii) This Agreement has been duly authorized,
executed and delivered by Columbian and
(assuming this Agreement is a binding
obligation of Cecil) constitutes a valid
and binding obligation of Columbian
enforceable in accordance with its
terms, subject as to enforceability to
applicable bankruptcy, insolvency,
reorganization, moratorium or similar
laws affecting the enforcement of
creditors' rights generally and to the
application of equitable principles and
judicial discretion; and
(iii) To the actual knowledge of such counsel,
no consent or approval, which has not
already been obtained from any governmental
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authority, is required for execution and
delivery by Columbian of this Agreement or
consummation of the Merger.
Such opinion may (i) expressly rely as to matters of fact
upon certificates furnished by appropriate officers of
Columbian or appropriate government officials; (ii) may be
limited to federal law and the laws of the State of
Maryland and (iii) incorporate, be guided by, and be
interpreted in accordance with, the Legal Opinion Accord
of the ABA Section of Business Law (1991).
5.3 Conditions to Obligations of Columbian. The
obligations of Columbian to effect the Merger and the other
transactions contemplated herein shall be subject to the
following additional conditions:
(a) No Material Adverse Change. Between the date
of this Agreement and the Effective Date, there shall not have
occurred any material adverse change in the financial condition,
business or results of operations of Cecil and the Cecil
Subsidiaries, taken as a whole, other than any such change
attributable to or resulting from changes in law, regulation or
generally accepted accounting principles or interpretations
thereof of general application to the banking and thrift
industries.
(b) Representations and Warranties to be True;
Fulfillment of Covenants and Conditions. The representations
and warranties of Cecil shall be true in all material respects
at the Effective Date with the same effect as though made at the
Effective Date (or on the date when made in the case of any
representation or warranty which specifically relates to an
earlier date) except (i) as contemplated by this Agreement, (2)
as consented to in writing by Columbian or (3) for breaches of
representations and warranties which would not have, or would
not reasonably be expected to have, a material adverse effect on
the financial condition, business or operations of Cecil; Cecil
shall have performed all obligations and complied with each
covenant, in all material respects, and all conditions under
this Agreement on its part to be performed or complied with at
or prior to the Effective Date except for failure to perform or
comply with such obligations and covenants which would not have,
or would not reasonably be expected to have, any material
adverse effect on the financial condition, business or
operations of Cecil and the Cecil Subsidiaries, taken as a
whole; and Cecil shall have delivered to Columbian a
certificate, dated the Effective Date and signed by its chief
executive officer and chief financial officer, to such effect.
(c) Acceptance of Legal Matters. The form and
substance of all legal matters contemplated hereby and all
papers delivered hereunder shall be reasonably acceptable to
counsel to Columbian.
(d) No Litigation. Cecil shall not be a party to
any pending litigation, reasonably probable of being determined
adversely to Cecil, which would have a material adverse effect
on the business, financial condition or results of operations of
Cecil and the Cecil subsidiaries, taken as a whole.
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(e) Affiliate Letters. Cecil shall have obtained
from its affiliates the letter agreements from all affiliated
persons of Cecil as contemplated in Section 4.11 herein.
(f) Receipt of Consideration. The Exchange Agent
in its fiduciary capacity shall have acknowledged in writing to
Columbian receipt of the aggregate Merger Consideration
(including a reasonable estimate of the amount of cash required
to pay for fractional shares) for all shares of Columbian common
stock to be acquired hereunder.
(g) Opinion of Counsel. Columbian shall have
received from counsel to Cecil, an opinion dated as of Effective
Date covering the following matters:
(i) Cecil is a Maryland corporation, validly
existing and in good standing under the
laws of the State of Maryland;
(ii) This Agreement has been duly authorized,
executed and delivered by Cecil and
(assuming this Agreement is a binding
obligation of Columbian) constitutes a
valid and binding obligation of Cecil
enforceable in accordance with its
terms, subject as to enforceability to
applicable bankruptcy, insolvency,
reorganization, moratorium or similar
laws affecting the enforcement of
creditors' rights generally and to the
application of equitable principles and
judicial discretion;
(iii) To the actual knowledge of such counsel,
no consent or approval, which has not
already been obtained from any
governmental authority, is required for
execution and delivery by Cecil of this
Agreement or consummation of the Merger;
and
(iv) The shares of Cecil common stock to be
issued to the Columbian stockholders and
delivered in exchange for their
Columbian common stock will be, upon
consummation of the Merger in accordance
with the terms of this Agreement, duly
authorized, validly issued, fully paid
and nonassessable.
Such opinions may (i) expressly rely as to matters of fact
upon certificates furnished by appropriate officers of
Cecil or appropriate government officials; (ii) may be
limited to federal law and the laws of the State of
Maryland and (iii) incorporate, be guided by, and be
interpreted in accordance with, the Legal Opinion Accord
of the ABA Section of Business Law (1991).
5.4 Termination of Agreement and Abandonment of Merger.
This Agreement may be terminated at any time before the
Effective Date, whether before or after approval thereof by
shareholders of Columbian, as provided below:
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(a) Mutual Consent. By mutual consent of the
parties, evidenced by their written agreement.
(b) Breach. At any time prior to the Effective
Time, by Cecil or Columbian, if its Board of Directors so
determines by a majority of the members of its entire Board, in
the event of either (i) a breach by the other party of any
representation, warranty or covenant contained herein which
breach results in a material and adverse change as to the
breaching party which would have a material adverse effect on
the financial condition, business or operations of the breaching
party (and its subsidiaries taken as a whole, if applicable) and
which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of
such breach.
(c) Closing Delay. At the election of either
party, evidenced by written notice, if the Closing shall not
have occurred on or before December 31, 1998, or such later date
as shall have been agreed to in writing by the parties;
provided, however, that the right to terminate under this
Section 5.4(b) shall not be available to any party whose failure
to perform an obligation hereunder has been the cause of, or has
resulted in, the failure of the Closing to occur on or before
the date of such written notice.
(d) Conditions to Cecil's Performance Not Met. By
Cecil upon delivery of written notice of termination to
Columbian if any event occurs which renders impossible of
satisfaction in any material respect one or more of the
conditions to the obligations of Cecil to effect the Merger set
forth in Sections 5.1 and 5.2 and noncompliance is not waived by
Cecil; provided, however, that the right to terminate under this
paragraph shall not be available to Cecil where its failure to
perform an obligation hereunder has been the cause of, or has
resulted in, the failure of the Closing to occur on or before
the date of such written notice.
(e) Conditions to Columbian's Performance Not Met.
By Columbian upon delivery of written notice of termination to
Cecil if any event occurs which renders impossible of
satisfaction in any material respect one or more of the
conditions to the obligations of Columbian to effect the Merger
set forth in Sections 5.1 and 5.3 and noncompliance is not
waived by Columbian; provided, however, that the right to
terminate under this paragraph shall not be available to
Columbian where its failure to perform an obligation hereunder
has been the cause of, or has resulted in, the failure of the
Closing to occur on or before the date of such written notice.
(f) Cecil Trading Price. By Cecil or Columbian if
the Cecil Trading Price as determined pursuant to Section 1.5(a)
of this Agreement, is less than $17.625.
ARTICLE VI
TERMINATION OF OBLIGATIONS; PAYMENT OF EXPENSES;
THIRD PARTY BENEFICIARIES
6.1 Termination; Lack of Survival of Representations and
Warranties. In the event of the termination and abandonment of
this Agreement pursuant to Section 5.4 of this Agreement, this
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Agreement shall become void and have no effect, except that (i)
the provisions of Sections 2.8 and 3.9 (Brokers and Finders),
4.6 (Publicity), 6.2 (Expenses) and 8.2 (Confidentiality) of
this Agreement shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 5.4(c),
5.4(d) or 5.4(e) of this Agreement shall not relieve the
breaching party from liability for an uncured willful breach of
a representation, warranty, covenant, or agreement giving rise
to such termination.
The representations, warranties and agreements of the
parties set forth in this Agreement shall not survive the
Effective Date, and shall be terminated and extinguished at the
Effective Date, and from and after the Effective Date none of
the parties hereto shall have any liability to any other party
on account of any breach or failure of any of those
representations, warranties and agreements; provided, however,
that the foregoing clause shall not (i) apply to agreements of
the parties which by their terms are intended to be performed
after the Effective Date, and (ii) shall not relieve any person
for liability for fraud, deception or intentional
misrepresentation.
6.2 Payment of Expenses. 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.
6.3 Third Party Beneficiaries. This Agreement is not
intended to confer nor does it confer upon any person other than
the parties hereto any rights or remedies hereunder, except with
respect to the Merger Consideration upon consummation of the
Merger and except as contemplated in Sections 7.1 and 7.2 herein
(each of which shall be enforceable by the party intended to be
benefitted thereby).
ARTICLE VII
CERTAIN FURTHER AGREEMENTS
7.1 Employees and Benefits.
(a) (i) Cecil shall on and after the Effective
Date, subject to the exercise of its business judgment in its
sole discretion, use reasonable efforts to continue the
employment of the employees of Columbian as of the Effective
Date.
(ii) No later than one year after the
Effective Date, the continuing employees of Columbian shall be
eligible to receive medical, group hospitalization, dental, life
and disability insurance benefits, as well as other employee
benefits, under Cecil's employee benefit plans. Except with
respect to the Employee Stock Ownership Plan of Cecil (which is
the subject of Section 7.1(a)(iv) below), the continuing
employees of Columbian, no later than one year after the
Effective Date, shall be entitled to participate in all employee
benefit plans sponsored by Cecil or any of the Cecil
Subsidiaries to the same extent as other employees of Cecil
holding comparable positions and such employees shall receive
credit for their prior period of service to Columbian for
purposes of determining eligibility, participation and vesting
in all Cecil or Cecil Subsidiaries
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employee benefit plans and for receiving other employee
benefits. Until continuing employees of Columbian become
participants in the Cecil employee benefit plans, as described
above, Columbian's medical, group hospitalization, dental, life
and disability insurance and other employee benefit plans shall
remain in effect.
(iii) For a period of one year after the
Effective Date, the continuing employees of Columbian shall be
entitled to participate in Columbian's profit sharing plan,
which Plan (and the benefits or assets held thereby), upon its
termination, shall be for the benefit of the continuing
employees of Columbian. Such Columbian profit sharing plan
shall terminate upon the participation of the continuing
employees of Columbian in Cecil's retirement plan. In addition,
the Rabbi Trust maintained by Columbian for the benefit of
Margaret Waldren, shall be honored in accordance with its terms.
(iv) Upon the Effective Date, the continuing
employees of Columbian shall be entitled to participate in the
Cecil Employee Stock Ownership Plan ("ESOP") as employees of the
Resulting Association, a subsidiary of Cecil, provided however,
that for purposes of determining eligibility for, and vesting of
benefits under the ESOP, service with Columbian prior to the
Effective Date shall not be treated as service with Cecil as
employer, and service with the Resulting Association as
continuing employees after the Effective Date, shall be treated
as service with Cecil as employer.
(v) Two persons presently serving on the
Board of Directors of Columbian, Donald F. Angert and Robert L.
Johnson, shall be appointed to the Board of Directors of Cecil.
Such persons will be compensated for serving as directors of
Cecil in accordance with compensation arrangements for all other
Cecil directors.
(vi) Mr. Donald F. Angert shall be appointed
to the Board of Directors of Cecil Federal Savings Bank and he
shall be compensated for service as a director of Cecil Federal
Savings Bank in accordance with the compensation arrangements
for all other Cecil Federal Savings Bank directors.
(vii) Ms. Kathleen G. Guzzo shall be offered
an employment agreement with Columbian, to be effective upon the
Effective Date, in the form attached as Exhibit 7.1 hereto; and
Mr. Donald F. Angert shall be allowed to continue to defer his
income under his deferred compensation agreement with Columbian,
and the Rabbi Trust established for the benefit of Mr. Angert
shall be honored in accordance with its terms.
7.2 Indemnification and Insurance.
(a) From and after the Effective Date, Columbian
(including any successor thereto) shall indemnify, defend and
hold harmless each person who is now, or has been at any time
prior to the date hereof or who becomes prior to the Effective
Date, an officer or director of Columbian (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses
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(including attorney's fees), liabilities, judgments or amounts
that are paid in settlement of (which settlement shall require
the prior written consent of Cecil and Columbian, which consent
shall not be unreasonably withheld) or in connection with any
claim, action, suit, proceeding or investigation whether
criminal, civil or administrative (each a "Claim") in which an
Indemnified Party is, or is threatened to be made, a party or a
witness based in whole or in part on or arising in whole or in
part out of the fact that such person is or was a director or
officer of Columbian if such Claim pertains to any matter or
fact arising, existing or occurring prior to the Effective Date
(including, without limitation, the Merger and other
transactions contemplated by this Agreement), regardless of
whether such Claim is asserted or claimed prior to, or at or
after, the Effective Date (the "Indemnified Liabilities") to the
full extent permitted under (i) applicable federal law in effect
as of the date hereof or as amended applicable to a time prior
to the Effective Date or (ii) under Columbian's Charter and
Bylaws. Columbian shall pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified
Party to the full extent permitted by federal law in effect as
of the date hereof or as amended applicable to a time prior to
the Effective Date upon receipt of any undertaking required by
applicable law. Any Indemnified Party wishing to claim
indemnification hereunder upon learning of any Claim, shall
notify Cecil and Columbian promptly after learning of any Claim
(but the failure so to notify Cecil and Columbian shall not
relieve them from any liability which they may have under this
Section 7.2(a) except to the extent such failure materially
prejudices Cecil or Columbian) and shall deliver to Columbian
the undertaking, if any, required by applicable law.
(b) From and after the Effective Date, the
continuing directors and officers of Columbian, (i) shall also
have indemnification rights having prospective application in
accordance with applicable Federal law and (ii) shall be covered
by the directors and officers liability insurance policy of
Cecil and its subsidiaries on a basis at least equal to the
coverage provided to persons in similar positions with Cecil or
any of the Cecil Subsidiaries.
(c) The obligations of Cecil and Columbian
provided under paragraphs (a) and (b) of this Section 7.2 are
intended to be the joint and several obligations of Cecil and
Columbian and to benefit, and be enforceable against Cecil and
Columbian directly by, the Indemnified Parties, and shall be
binding on all respective successors and permitted assigns of
Cecil and Columbian.
(d) Subject to availability and a cost of no
greater than $20,000, Cecil shall permit Columbian to purchase
and keep in force for a period of at least three years following
the Effective Date, directors' and officers' liability insurance
to provide coverage for acts or omissions of the type and in the
amount currently covered by Columbian's existing directors' and
officers' liability insurance for acts or omissions occurring on
or prior to the Effective Date or Cecil, at its sole election,
will procure such coverage pursuant to the existing liability
insurance policy of Cecil subject to the cost limitation set
forth herein.
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ARTICLE VIII
GENERAL
8.1 Amendments. Subject to applicable law, this
Agreement may be amended, whether before or after any relevant
approval of shareholders, by an agreement in writing executed in
the same manner as this Agreement and authorized or ratified by
the Boards of Directors of the parties hereto, provided that,
after the adoption of the Agreement by the shareholders of
Columbian, no such amendment without further shareholder
approval may change the amount or form of the consideration to
be received by Columbian shareholders in the Merger.
8.2 Confidentiality. All information disclosed
hereafter by any party to this Agreement to any other party to
this Agreement, including, without limitation, any information
obtained pursuant to Section 4.1 hereof, shall be kept
confidential by such other party and shall not be used by such
other party otherwise than as herein contemplated, all in
accordance with the terms of the existing confidentiality
agreements between the parties (collectively, the
"Confidentiality Agreements"). In the event of the termination
of this Agreement, each party shall return upon request to the
other party all documents (and reproductions thereof) received
from such other party (and, in the case of reproductions, all
such reproductions made by the receiving party) that include
information subject to the confidentiality requirement set forth
above.
8.3 Governing Law. This Agreement and the legal
relations between the parties shall be governed by and construed
in accordance with the laws of the State of Maryland without
taking into account any provision regarding choice of law,
except to the extent certain matters may be governed by federal
law by reason of preemption.
8.4 Notices. Any notices or other communications
required or permitted hereunder shall be sufficiently given if
sent by registered mail or certified mail, postage prepaid,
addressed, if to Cecil or Columbian, to
Cecil Cecil Bancorp, Inc.
127 North Street
Elkton, Maryland 21921
Attn: Mary B. Halsey, President
with copy to: Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Attn: Howard S. Parris, Esquire
Columbian Columbian Bank, A Federal Savings Bank
303-307 St. John Street
Havre de Grace, Maryland 21078
Attn: Donald F. Angert, President
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with copy to: Kutak Rock
1101 Connecticut Avenue, N.W.,
Suite 1000
Washington, D.C. 20036
Attn: Paul D. Borja, Esquire
or such other address as shall be furnished in writing by any
such party, and any such notice or communication shall be deemed
to have been given two business days after the date of such
mailing (except that the notice of change of address shall not
be deemed to have been given until received by the addressee).
Notices may also be sent by telegram, telex, facsimile
transmission or hand delivery and in such event shall be deemed
to have been given as of the date received.
8.5 No Assignment. This Agreement may not be assigned
by any of the parties hereto, by operation of law or otherwise,
except as contemplated hereby.
8.6 Headings. The description heading of the several
Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
8.7 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties hereto and
delivered to each of the other parties hereto.
8.8 Construction and Interpretation. Except as the
context otherwise requires, (a) all references herein to any
state or federal regulatory agency shall also be deemed to refer
to any predecessor or successor agency, and (b) all references
to state and federal statutes or regulations shall also be
deemed to refer to any successor statute or regulation.
8.9 Entire Agreement. This Agreement, together with the
schedules, lists, exhibits and certificates required to be
delivered hereunder, and any amendment hereafter executed and
delivered in accordance with Section 8.1, constitutes the entire
agreement of the parties, and supersedes any prior written or
oral agreement or understanding among any of the parties hereto
pertaining to the Merger, except that the Confidentiality
Agreements shall remain in full force and effect as contemplated
in Section 8.2 herein and except with respect to the Stock
Option Agreement. This Agreement is not intended to confer upon
any other persons any rights or remedies hereunder except as
expressly set forth herein.
8.10 Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
the Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers
thereunder duly authorized, all as of the date set forth above.
CECIL BANCORP, INC. COLUMBIAN BANK, A FEDERAL
SAVINGS BANK
By: /s/ Mary Beyer Halsey By: /s/ Donald F. Angert
---------------------- -------------------------
Name: Mary Beyer Halsey Name: Donald F. Angert
Title: President Title: President
<PAGE>
<PAGE>
EXHIBIT A
VOTING AGREEMENT
May 29, 1998
Cecil Bancorp, Inc.
127 North Street
Elkton, Maryland 21921
Ladies and Gentlemen:
The undersigned is a director of Columbian Bank, A Federal
Savings Bank ("Columbian") and is the beneficial holder of
shares of common stock of Columbian ("Columbian Common Stock").
Columbian and Cecil Bancorp, Inc. ("Cecil") are considering
the execution of a Reorganization and Merger Agreement
("Agreement") contemplating that Cecil will organize a
wholly owned interim federal savings bank subsidiary of Cecil
("Subsidiary"), to merge with and into Columbian (the "Merger"),
pursuant to which each of the issued and outstanding shares of
Columbian Common Stock shall automatically by operation of law
be converted into a number of shares of common stock of Cecil as
set forth in the Agreement and the issued and outstanding shares
of Subsidiary Common Stock shall be converted by operation of
law into an equal number of newly issued shares of Columbian
common stock all of which shall be owned by Cecil, and following
the Merger, Columbian shall survive the Merger and operate as a
wholly owned subsidiary of Cecil under its present name and
title. The execution of the Agreement is subject in the case of
Cecil to the execution and delivery of this letter agreement
("letter agreement"). In consideration of the substantial
expenses that Cecil will incur in connection with the
transactions contemplated by the Agreement and in order to
induce Cecil to execute the Agreement and to proceed to incur
such expenses, the undersigned agrees and undertakes, in his
capacity as a shareholder of Columbian and not in his capacity
as a director of Columbian (in which capacity as a director his
fiduciary duties shall apply), as follows:
1. The undersigned, while this letter agreement is in
effect, shall vote or cause to be voted all of the shares of
Columbian Common Stock that the undersigned shall be entitled to
so vote, whether such shares are beneficially owned by the
undersigned on the date of this letter agreement or are
subsequently acquired, whether pursuant to the exercise of stock
options or otherwise, at the Special Meeting of Columbian's
stockholders to be called and held following the date hereof,
for the approval of the Agreement and the Merger.
2. The undersigned acknowledges and agrees that any
remedy at law for breach of the foregoing provisions shall be
inadequate and that, in addition to any other relief which may
be available, Cecil shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual
damages.
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3. The foregoing restrictions shall not apply to shares
with respect to which the undersigned may have voting power as a
fiduciary for others. In addition, this letter agreement shall
only apply to actions taken by the undersigned in his capacity
as a shareholder of Columbian and shall not in any way limit or
affect actions the undersigned may take in his capacity as a
director of Columbian.
4. This letter agreement shall automatically terminate
upon termination of the Agreement in accordance with its terms.
IN WITNESS WHEREOF, the undersigned has executed this
Agreement as of the date first above written.
Very truly yours,
_________________________
Signature
_________________________
Name (please print)
Accepted and agreed to as of
the date first above written:
CECIL BANCORP, INC.
By: ________________________
Its
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EXHIBIT B
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 29, 1998 (the
"Agreement"), by and between Cecil Bancorp, Inc. ("Grantee") ,
and Columbian Bank, A Federal Savings Bank ("Issuer").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into a
Reorganization and Merger Agreement dated as of May 29, 1998
(the "Merger Agreement"), providing for, among other things, the
merger of Issuer with a to-be-formed subsidiary of Grantee (the
"Merger"); 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 hereinafter defined); and
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein and in the Merger Agreement, and intending to
be legally bound hereby, Issuer and Grantee agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but
not defined herein shall have the meanings ascribed to such
terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions
set forth herein, Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase up to 14,993 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 Common Stock, par value $1.00 per share
("Issuer Common Stock"), of Issuer at a purchase price per
Option Share (the "Purchase Price") of $29.50 provided, however,
that in no event shall the number of Option Shares for which the
Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any
shares subject to or issued pursuant to the Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the
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, but only if both a Preliminary
Purchase Event (as hereinafter defined) and a Purchase Event (as
hereinafter defined) shall have
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occurred; provided, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of:
(A) the Effective Date of the Merger;
(B) 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 Agreement by Grantee
based upon a willful breach by Issuer of any of
its representations, warranties, covenants or
agreements set forth in the Merger Agreement (a
"Default Termination"),
(C) 12 months after the termination of the Merger
Agreement by Grantee pursuant to a Default
Termination; and
(D) 12 months after termination of the Merger
Agreement (other than pursuant to a Default
Termination) following the occurrence of a
Purchase Event or a Preliminary Purchase Event;
provided further, that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this
Section 3) within six (6) months following such Purchase Event;
and provided, further, that any purchase of shares upon exercise
of the Option shall be subject to compliance with applicable
laws, including without limitation the Home Owners Loan Act, as
amended ("HOLA"), and the Bank Merger Act, as amended ("Bank
Merger Act"). The term "Holder" shall mean the holder or
holders of the Option from time to time. The Grantee is the
initial Holder. 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 above.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) 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, any "group" (as such term is defined in
Section 13(d) (3) of the Exchange Act) 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.
(ii) the occurrence of the Preliminary Purchase Event
described in clause (i) of subsection (c) of this Section
2, except that the percentage referred to in clause (C)
thereof shall be 15%.
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(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) without Grantee's prior written consent, Issuer
shall have authorized, recommended or 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 (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the
disposition, by sale, lease, exchange or otherwise, of
assets of Issuer or any of its subsidiaries representing
in either case 10% or more of the consolidated assets of
Issuer and its subsidiaries, or (C) the issuance, sale or
other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of
Issuer or any of its subsidiaries (any of the foregoing an
"Acquisition Transaction"); or
(ii) any person (other than the Grantee or a Grantee
Subsidiary) 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, any "group" (as such term is defined in
Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire
beneficial ownership of 10% or more of the then-
outstanding shares of Issuer Common Stock.
(iii) any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined
in Rule 14d-2 under the Exchange Act), or shall have filed
a registration statement under the Securities Act 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" and an "Exchange Offer,"
respectively); or
(iv) (A) the holders of Issuer Common Stock shall not
have approved the Merger Agreement at the meeting of such
stockholders held for the purpose of voting on the Merger
Agreement, (B) such meeting shall not have been held or
shall have been canceled prior to termination of the
Merger Agreement or (C) 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 it
shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (x)
made, or disclosed an intention to make, a proposal to
engage in an Acquisition Transaction, (y) commenced a
Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z)
filed an application (or given notice), whether in draft
or final form, under the HOLA, the Bank Merger Act or the
Change in Bank Control Act of 1978, as amended, for
approval to engage in an Acquisition Transaction; or
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(v) Issuer shall have intentionally and knowingly
breached any representation, warranty, covenant or
agreement contained in the Merger Agreement and such
breach would entitle Grantee to terminate the Merger
Agreement pursuant to Subsection5.4(b) of the Merger
Agreement after (x) a bona fide proposal is made by any
person (other than Grantee or any subsidiary of Grantee) to
Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any
Subsidiary of Grantee) states its intention to Issuer or
its stockholders to make a proposal to engage in an
Acquisition Transaction if the Merger Agreement terminates
or (z) any person (other than Grantee or any subsidiary of
Grantee) shall have filed an application or notice with
any governmental entity to engage in an Acquisition
Transaction.
As used in this Agreement, "person" shall have the meaning
specified in Section 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Preliminary Purchase Event or Purchase
Event, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Holder to
exercise the Option.
(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 notification to or approval of
the Office of Thrift Supervision ("OTS"), the Federal Deposit
Insurance Corporation, or any other governmental entity is
required in connection with such purchase, Issuer shall
cooperate with Grantee in the filing of the required notice of
application for approval and the obtaining of such approval and
the Closing shall occur immediately following such regulatory
approvals (and any mandatory waiting periods).
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 Issuer at the address of Issuer specified 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), (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 shares of Issuer Common Stock
purchasable hereunder, and (ii) Holder shall deliver to
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Issuer a letter agreeing that Holder shall not offer to 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 MAY
29, 1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY
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.
(d) Upon the giving by Holder to Issuer of the written
notice of exercise of the Option provided for under Section
3(e), the tender of the applicable purchase price in immediately
available funds and the tender of this Agreement to Issuer,
Holder shall be deemed to be the holder of record of the shares
of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of
Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Issuer Common Stock so that the
Option may be exercised without additional authorization of
Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase
Issuer Common Stock, (ii) that it will not, by charter amendment
or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder
by Issuer, (iii) promptly to take all action as may from time to
time be required (including (A) complying with all premerger
notification, reporting and waiting period requirements and (B)
in the event prior approval of or notice to any governmental
entity is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or
notices and providing such information to such governmental
entity as it may require) in order to permit Holder to exercise
the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take
all action provided herein to protect the rights of Holder
against dilution.
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5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer
hereby represents and warrants to Grantee (and Holder, if
different that Grantee) as follows:
(a) DUE AUTHORIZATION. Issuer has a requisite corporate
power and authority to enter into this Agreement, and subject to
any approvals 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, and this Agreement has been duly
executed and delivered by Issuer.
(b) NO VIOLATIONS. The execution and delivery of this
Agreement, the consummation of the transactions contemplated
hereby and compliance by Issuer with any of the provisions
hereof will not (i) conflict with or result in a breach of any
provision of its Charter or Bylaws or a default (or give rise to
any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond,
debenture, mortgage, indenture, license, material agreement or
other material instrument or obligations to which Issuer is a
party, or by which it or any of its properties or assets may be
bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its
properties or assets.
(c) AUTHORIZED STOCK. Issuer has taken all necessary
corporate and other action to authorize and reserve and to
permit it to issue, and at all times from the date 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 that number of shares of Issuer Common
Stock equal to the maximum number of shares of Issuer Common
Stock at any time and from time to time purchasable upon
exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully
paid and nonassessable, and will delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature
whatsoever and not subject to any preemptive rights.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee
hereby represents and warrants to Issuer that Grantee has all
requisite corporate power and authority to enter into this
Agreement and, subject to 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, and
this Agreement has been duly executed and delivered by Grantee.
7. ADJUSTMENT UPON CHANGES IN ISSUER 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 transactions 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 in respect of Issuer Common Stock
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if the Option has 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, together
with any 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: (i) to consolidate with or merge into any person,
other than Grantee or one of its subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities
of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior
to such merger shall after such merger represent less than 50%
of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than
Grantee or one of its subsidiaries, then, and in each such case,
the agreement governing such transactions shall make proper
provisions so that the Option shall, upon the consummation of
any such transaction and upon the terms and condition set forth
herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Holder, of any of (x)
the Acquiring Corporation (as hereinafter defined), (y) any
person that controls the Acquiring Corporation or (z) in the
case of a merger described in clause (ii), Issuer (such person
being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as
the Option, provided that, if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less
advantageous to Holder. Substitute Option Issuer also shall
enter into an agreement with Holder in substantially the same
form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock (as hereinafter
defined) as is equal to the Assigned Value (as hereinafter
defined) multiplied by the number of shares of Issuer Common
Stock for which the Option was theretofore exercisable, divided
by the Average Price (as hereinafter defined). The exercise
price of Substitute Option per share of Substitute Common Stock
(the "Substitute Option Price") shall then be equal to the
Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the
Option was theretofore exercisable and the denominator is the
number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
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(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person, or (iii) the transferee of all or substantially
all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the
greatest voting power in respect of the election of
directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute
Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the
price per share of Issuer Common Stock at which a Tender
Offer or an Exchange Offer therefor has been made, (x) the
price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares of Issuer Common Stock
within the six-month period immediately preceding the
consolidation, merger or sale in question and (z) in the
event of a sale of all or substantially all of Issuer's
assets or deposits, an amount equal to (i) the sum of the
price paid in such sale for such assets (and/or deposits)
and the current market value of the remaining assets of
Issuer, as determined by a nationally-recognized
investment banking firm selected by Holder, divided by
(ii) the number of shares of Issuer Common Stock
outstanding at such time. In the event that a Tender
Offer or an Exchange Offer is made for Issuer Common Stock
or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the
value of securities or other property issuable or
deliverable in exchange for Issuer Common Stock shall be
determined by a nationally-recognized investment banking
firm selected by Holder.
(4) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one
year immediately preceding the consolidation, merger or
sale in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided
that if Issuer is the Issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into
Issuer or by any company which controls such person, as
Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the aggregate of the shares of Substitute Common
Stock outstanding prior to exercise of the Substitute Option.
(g) Issuer shall not enter into any transaction
described in Section 7(b) 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 limitations, any action that may
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be necessary so that the holders of the other shares of common
stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the
Substitute Option and the shares of Substitute Common Stock are
otherwise in no way distinguishable from or have lesser economic
value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted
securities, as defined in Rule 144 under the Securities Act or
any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), 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 (i) the Option and (ii) 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
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 10 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 Option and the
certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Holder then has
beneficial ownership, and shall warrant that it has sole record
and beneficial ownership of such shares and that the same are
then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval
of the OTS, the Federal Deposit Insurance Corporation or any
other governmental entity is required in connection with the
payment of all or any portion of the Section
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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). If the OTS, the Federal
Deposit Insurance Corporation or any other governmental entity
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 the OTS, the Federal Deposit Insurance
Corporation or any other governmental entity 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 the OTS, the Federal Deposit Insurance Corporation
or other governmental entity, 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
Grantee's rights under this Section 8 shall terminate on the
date of termination of the Option pursuant to Section 3(a).
(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), (ii) the price per share of
Issuer Common Stock received by holders of Issuer Common Stock
in connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii),
or (iii) the highest sales price per share of Issuer Common
Stock during the year preceding the Request Date; provided,
however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the
price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a
nationally-recognized investment banking firm selected by
Holder, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. If the consideration to
be offered, paid or received pursuant to either of the foregoing
clauses (i) or (ii) shall be other than in cash, the value of
such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership of (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), or
the right to acquire beneficial ownership of, or any "group" (as
such term is defined in Section 13(d)(3) of the Exchange Act)
shall have been formed which beneficially owns or has the right
to acquire beneficial ownership of, 50% or more of
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the then outstanding shares of Issuer Common Stock, or (ii) any
of the transactions described in Section 7(b)(i), Section
7(b)(ii) or Section 7(b)(iii) shall be consummated.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject
to conditions of Section 9(c), if requested by any Holder, as
expeditiously as possible prepare and file a registration
statement under the Securities Act if such registration is
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 Holder upon
exercise of the Option in accordance with the intended method of
sale or other disposition stated by 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) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any
time after the exercise of the Option proposes to register any
shares of Issuer Common Stock under the Securities Act 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 Holder), Issuer will cause all such shares for which
a Holder shall have requested participation in such registration
to be so registered and included in such underwritten public
offering; provided, however, that Issuer may elect to not cause
any such shares to be so registered (i) if the underwriters in
good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit
plan or a registration filed on Form S-4 under the Securities
Act or any successor form; provided, further, however, that such
election pursuant to clause (i) may only be made on 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 Section 9(b) shall be excluded from such
registration, Issuer shall make appropriate allocation of shares
to be registered among Holders 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 such Holder bears to
the total number of shares requested to be registered by all
such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall
use all reasonable efforts to cause each registration statement
referred to in Section 9(a) 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, however, that Issuer may delay any registration or
Option Shares required pursuant to Section 9(a) for a period not
exceeding 90 days if 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 Act pursuant to Section 9(a):
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(i) prior to the earliest of (A) termination of
the Merger Agreement pursuant to the terms thereof,
and (B) a Purchase Event or a Preliminary Purchase
Event;
(ii) on more than one occasion during any
calendar year and on more than two occasions in
total;
(iii) within 90 days after the effective date of
a registration referred to in Section 9(b) pursuant
to which the Holder or Holders concerned were
afforded the opportunity to register such shares
under the Securities Act and such shares were
registered as requested; and
(iv) unless a request therefor is made to Issuer
by the Holder or Holders of at least 25% or more of
the aggregate number of Option Shares (including
shares of Issuer Common Stock issuable upon exercise
of the Option) 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, however, that Issuer
shall not be required to consent to general jurisdiction or to
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) EXPENSES. Issuer will pay all expenses (including
without limitation registration fees, qualification fees, blue
sky fees and expenses, accounting expenses, legal expenses and
printing expenses incurred by it) in connection with each
registration pursuant to Section 9(a) or (b) and all other
qualifications, notification or exemptions pursuant to Section
9(a) or (b). Underwriting discounts and commissions relating to
Option Shares, fees and disbursements of counsel to the
Holder(s) of Option Shares being registered and any other
expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) INDEMNIFICATION. In connection with any registration
under Section 9(a) or (b), Issuer hereby indemnifies each
Holder, 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, or
alleged 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, or
alleged 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 that was
included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any
amendments or supplements thereto)
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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 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 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
Section 9(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 Section 9(e), such indemnified party shall notify the
indemnifying party in writing of the commencement of such
action, but, except to the extent of any actual prejudice to the
indemnifying party, the failure to so notify the indemnifying
party shall not relieve it of any liability which it may
otherwise have to any indemnified party under this Section 9(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 reasonably 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 the same, (ii) the indemnifying
party fails to assume the defense of such action with counsel
reasonably 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
wich case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligations 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 Section 9(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
appropriate to reflect the relative benefits received by Issuer,
the selling Holders and the underwriters from the offering of
the securities and also the relative fault of Issuer, the
selling Holders and the underwriters in connection with the
statement or omissions which results 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, however, that in
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no case shall the selling Holders 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(g) 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 Section
9(a) or (b) above, Issuer and each selling Holder (other than
Grantee) shall enter into an agreement containing the
indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. 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 Holder(s) in accordance with and to the
extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission
from time to time, including, without limitation, Rule 144A.
Issuer shall at its expense provide the Holder 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 Act or the Exchange Act, or required
pursuant to any state securities laws or the rules of any stock
exchange.
(g) ISSUER TAXES. 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
any 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
NASDAQ/NMS or any securities exchange, Issuer, upon the request
of Holder, 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 NASDAQ/NMS or such other securities
exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. DIVISION OF OPTION. Upon the occurrence of a
Purchase Event or a Preliminary Purchase Event, this Agreement
(and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and
surrender of this Agreement at the principal office of the
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) maybe
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor
and date. Any such new Agreement executed and
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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 in Section
9, 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 BENEFICIARIES;
SEVERABILITY. This Agreement, together with the Merger
Agreement and the other documents and instruments referred to
herein and therein, between Grantee and Issuer (i) 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 (ii) is not intended
to confer upon any person other than the parties hereto (other
than the indemnified parties under Section 9(e) and any
transferee of the Option Shares or any permitted transferee of
this Agreement pursuant to Section 12(h)) 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 regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency
determines that the Option does not permit 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 (as
adjusted pursuant to Section 7), 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 and
construed in accordance with the laws of the State of Maryland
without regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(f) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or sent by
overnight mail service or mailed by registered or certified mail
(return receipt requested) postage prepaid, to the parties at
the following address (or at such other address for a party as
shall be specified by like notice):
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If to Grantee: Cecil Bancorp, Inc.
127 North Street
Elkton, Maryland 21921
Attn: Mary B. Halsey, President
With a required copy to: Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Attn: Howard S. Parris, Esquire
If to Issuer: Columbian Bank, A Federal Savings Bank
303-307 St. John Street
Havre de Grace, Maryland 21078
Attn: Donald F. Angert, President
With a required copy to: Kutak Rock
1101 Connecticut Avenue, N.W.,
Suite 1000
Washington, D.C. 20036
Attn: Paul D. Borja, Esquire
(g) COUNTERPARTS. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed, it being
understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent
of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a
Purchase Event. 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 successor 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.
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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.
CECIL BANCORP, INC.
By: _________________________
Mary Beyer Halsey
President
COLUMBIAN BANK, A FEDERAL
SAVINGS BANK
By: _________________________
Donald F. Angert
President
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Exhibit 1.1
PLAN OF MERGER
OF
COLUMBIAN INTERIM FEDERAL SAVINGS BANK
INTO
COLUMBIAN BANK, A FEDERAL SAVINGS BANK
PLAN OF MERGER, dated as of the ___ day of ______, 1998 by
and between Columbian Bank, A Federal Savings Bank, a savings
bank chartered under the laws of the United States of America
(the "Bank" or the "Resulting Bank"), and Columbian Interim
Federal Savings Bank, an interim savings bank chartered under
the laws of the United States of America ("NewSub") and Cecil
Bancorp, Inc., a Maryland Corporation ("Cecil"), on the basis of
the following facts:
1. The authorized capital stock of Columbian consists
of ______ shares of common stock, par value $1.00 per share,
("Common Stock"), of which ______ shares are issued and
outstanding and ______ shares of preferred stock, par value
$______ per share, of which no shares are issued and
outstanding; and
2. The authorized capital stock of NewSub, which is
wholly owned by Cecil, consists of 1,000 shares of common stock,
par value $1.00, (hereinafter called "NewSub Common Stock"), of
which 1,000 shares are issued and outstanding; and
3. Cecil and the Bank have entered into that certain
Reorganization and Merger Agreement dated ________ ___, 1998
(the "Agreement"); and
4. The boards of directors of the Bank and NewSub (such
corporations being hereinafter sometimes called the "Constituent
Corporations") deem it advisable for the mutual benefit of the
parties hereto and their respective stockholders that NewSub be
merged into and with the Bank upon the terms and conditions set
forth in the Agreement and this Plan of Merger (the "Merger"),
and the Agreement and this Plan of Merger have been approved by
a two-thirds (2/3) vote of the respective entire boards of
directors of the Bank and NewSub:
THEREFORE, in consideration of the mutual promises and
covenants in the Agreement and the Plan of Merger, the parties
hereby agree that NewSub be merged into and with the Bank
(hereinafter sometimes referred to as the "Resulting Bank"),
which shall survive the Merger and continue to operate under the
name "Columbian Bank, A Federal Savings Bank", and that the
terms and conditions of the Merger, including the manner and
basis of making distribution to the stockholders of the
Constituent Corporations in extinguishment of and in
substitution for shares of the Constituent Corporations shall be
as follows:
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ARTICLE I
The Merger shall be affected in accordance with and have
the effect of any and all applicable provisions of federal law.
At and after the Effective Date (as defined in Article IV of
this Plan of Merger): (i) NewSub shall be merged into and with
the Bank, (ii) the identity, existence, corporate organization,
purposes, powers, objects, franchises, privileges, rights and
immunities of the Bank shall continue in effect and be
unimpaired by the Merger; (iii) the separate corporate
existence of NewSub shall cease; and (iv) the Resulting Bank
shall succeed, without other transfer, to all the rights and
property of NewSub and shall be subject to all the debts and
liabilities of NewSub in the same manner as if the Resulting
Bank had itself incurred them. Each savings account in the Bank
at the Effective Date of the Merger will constitute a savings
account in the Resulting Bank equivalent in withdrawable amount
to the withdrawal value, and subject to the same terms and
conditions as such savings account in the Bank at the Effective
Date. The liquidation account of the Bank shall not be affected
by the Merger.
All rights of creditors and all liens upon the property of
each of Columbian and NewSub shall be preserved unimpaired by
the Merger, provided that such liens upon property of NewSub
shall be limited to the property affected thereby immediately
prior to the Effective Date. From and after the Effective Date,
any action or proceeding by or against NewSub may be prosecuted
to judgment, which shall bind the Resulting Bank, or the
Resulting Bank may be proceeded against or substituted in its
place.
ARTICLE II
The location of the home office of the Resulting Bank
shall be:
303-307 St. John Street
Havre de Grace, Maryland 21078
The location of the branch office(s) of the Resulting Bank
shall be as provided in Exhibit A hereto.
ARTICLE III
The directors of the Resulting Bank, who shall hold office
until their resignation or removal or until their successors
have been elected and qualified in accordance with law and the
Resulting Bank's Charter and Bylaws, shall be eight in number
and shall include the seven directors of the Bank as of the
Effective Date and an additional person appointed by Cecil. The
names, residence addresses and terms of such directors are set
forth in Exhibit B hereto.
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ARTICLE IV
The Merger shall become effective (the "Effective Date")
upon the date of endorsement of the Articles of Combination by
the Office of Thrift Supervision ("OTS"). The Merger shall not
be effective unless and until approved by OTS.
ARTICLE V
The Charter and Bylaws of the Bank, as in effect
immediately prior to the Effective Date, shall be the Charter
and Bylaws of the Resulting Bank until altered, amended or
repealed as provided by law.
ARTICLE VI
The manner and basis of making distribution to the
stockholders of the Constituent Corporations in extinguishment
of and in substitution for shares of the Constituent
Corporations shall be as follows:
(a) (i) On the Effective Date, by virtue of the Merger
and without any action on the part of the Bank, NewSub or Cecil
or the holders of shares of Cecil, NewSub or the Bank common
stock, each outstanding share of the Bank common stock issued
and outstanding at the Effective Date (except for Dissenting
Shares (as such term is defined in paragraph (b) below) and
shares referred to in subparagraph (a)(ii) of this Article VI)
shall be converted into and exchanged for the right to receive
1.7201 shares of Cecil common stock (the "Exchange Ratio"),
subject to adjustment as set forth in subparagraph (a)(v) of
this Article VI.
(ii) Any shares of Bank common stock which are
owned or held by the Bank (except shares held in any 401(k) plan
of the Bank or held in a fiduciary capacity) or by Cecil or any
of Cecil's subsidiaries (other than in a fiduciary capacity) at
the Effective Date shall cease to exist, and the certificates
for such shares shall as promptly as practicable be canceled and
no shares of capital stock of Cecil shall be issued or exchanged
therefor.
(iii) Each share of common stock of NewSub issued
and outstanding immediately prior to the Effective Date shall be
canceled and converted into one share of common stock of the
Resulting Bank.
(iv) At the Effective Date, the holders of
certificates representing shares of Bank common stock shall
cease to have any rights as stockholders of the Bank, except the
right to receive shares of Cecil common stock and cash for
fractional shares as provided herein.
(v) If the holders of Cecil common stock shall have
received or shall have become entitled to receive, without
payment therefor, during the period commencing on the date of
the Agreement and ending with the Effective Date, additional
shares of common stock or other securities
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for their stock by way of a stock split, stock dividend,
reclassification, combination of shares or similar corporate
rearrangement ("Stock Adjustment"), then the Exchange Ratio
shall be proportionately adjusted to take into account such
Stock Adjustment.
(b) Any shares of Bank common stock held by a holder who
dissents from the Merger and becomes entitled to obtain payment
for the value of such shares of Bank common stock pursuant to
the applicable provisions of the rules and regulations of the
OTS shall be herein called "Dissenting Shares." Any Dissenting
Shares shall not, after the Effective Date, be entitled to vote
for any purpose or receive any dividends or other distributions
and shall not be entitled to receive shares of Cecil common
stock as provided herein, provided, however, that shares of Bank
common stock held by a dissenting stockholder who subsequently
withdraws a demand for payment, fails to comply fully with the
requirements of the rules and regulations of the OTS, or
otherwise fails to establish the right of such stockholder to be
paid the value of such stockholders' shares under the rules and
regulations of the OTS shall be deemed to be converted into the
right to receive shares of Cecil common stock pursuant to the
terms and conditions referred to above.
(c) At the Effective Date, each option to purchase or
other right with respect to shares of Bank common stock pursuant
to stock options, stock appreciation rights or other rights,
including stock awards ("Bank Options") granted by the Bank
under its stock option plans, which are outstanding at the
Effective Date, whether or not exercisable, shall be converted
into and become rights with respect to Cecil common stock, and
Cecil shall assume each Bank Option, in accordance with the
terms of the plan under which it was issued and the stock option
or other agreement by which it is evidenced, except that from
and after the Effective Date, (i) each Bank Option assumed by
Cecil may be exercised solely for shares of Cecil common stock
(or cash in the case of stock appreciation rights), (ii) the
number of shares of Cecil common stock subject to such Bank
Option shall be equal to the number of shares of Bank common
stock subject to such Bank Option immediately prior to the
Effective Date multiplied by the Exchange Ratio, provided that
any fractional shares so resulting shall be rounded down to the
nearest whole share, and (iii) the per share exercise price
under each such Bank Option shall be adjusted by dividing the
per share exercise price under each such Bank Option by the
Exchange Ratio and rounding up to the nearest cent. In
addition, notwithstanding the clauses (ii) and (iii) of the
first sentence of this paragraph (c) of Article VI, each Bank
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 not to constitute a modification, extension or
renewal of the option, within the meaning of Section 424(h) of
the Code. Cecil and the Bank agree to take all necessary steps
to effectuate the foregoing provisions of this paragraph (c) of
Article VI.
(d) After the Effective Date, holders of certificates
theretofore evidencing outstanding shares of Bank common stock
(other than Dissenting Shares and as provided in paragraph
(a)(ii) of this Article VI), upon surrender of such certificates
to the Exchange Agent, shall be entitled to receive certificates
representing the number of whole shares of Cecil common stock
into which shares of Bank common stock theretofore represented
by the certificates so surrendered shall have been converted, as
provided in this Article VI and cash payments in lieu of
fractional shares as
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provided in paragraph (i) of this Article VI. As soon as
practicable after the Effective Date, the Exchange Agent will
send a notice and transmittal form to each Bank shareholder of
record at the Effective Date whose Bank stock shall have been
converted into Cecil common stock advising such shareholder of
the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates
formerly evidencing Bank common stock in exchange for new
certificates for Cecil common stock and for cash payable
in lieu of any fractional interest. Upon surrender, each
certificate evidencing Bank common stock shall be canceled.
(e) Until surrendered as provided in this Article VI,
each outstanding certificate which, prior to the Effective Date,
represented Bank common stock (other than Dissenting Shares and
shares canceled at the Effective Date pursuant to paragraph
(a)(ii) of this Article VI) will be deemed for all corporate
purposes to evidence ownership of the number of whole shares of
Cecil common stock into which the shares of Bank common stock
formerly represented thereby were converted and the right to
receive cash in lieu of any fractional interest. However, until
such outstanding certificates formerly representing Bank common
stock are so surrendered, no dividend or distribution payable to
holders of record of Cecil common stock shall be paid to any
holder of such outstanding certificates, but upon surrender of
such outstanding certificates by such holder there shall be paid
to such holder the amount of any dividends or distribution,
without interest, theretofore paid with respect to such whole
shares of Cecil common stock, but not paid to such holder, and
which dividends or distribution had a record date occurring on
or subsequent to the Effective Date and the amount of any cash,
without interest, payable to such holder in lieu of fractional
shares. After the Effective Date, there shall be no further
registration of transfers on the records of the Bank of
outstanding certificates formerly representing shares of Bank
common stock and, if a certificate formerly representing such
shares is presented to Cecil, it shall be forwarded to the
Exchange Agent for cancellation and exchange for certificates
representing shares of Cecil common stock as herein provided.
(f) All shares of Cecil common stock and cash in lieu of
any fractional share issued and paid upon the surrender for
exchange of Bank common stock in accordance with the above terms
and conditions shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Bank
common stock.
(g) If any new certificate for Cecil common stock is to
be issued in the name other than that in which the certificate
surrendered in exchange thereof is registered, it shall be a
condition of the issuance therefor that the certificate
surrendered in exchange shall be properly endorsed and otherwise
in proper form for transfer and that the person requesting such
transfer pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of a new certificate for
shares of Cecil common stock in any name other than that of the
registered holder of the certificate surrendered, or establish
to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(h) In the event any certificate for Bank common stock
shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed
certificate,
5<PAGE>
<PAGE>
upon the making of an affidavit of that fact by the holder
thereof, such shares of Cecil common stock and cash in lieu of
fractional shares, if any, as may be required pursuant hereto;
provided, however, that Cecil may, in its discretion and as a
condition precedent to the issuance thereof, require the owner
of such lost, stolen or destroyed certificate to deliver a bond
in such sum as it may direct as indemnity against any claim that
may be made against Cecil, the Bank, the Exchange Agent or any
other party with respect to the certificate alleged to have been
lost, stolen or destroyed.
(i) Notwithstanding any term or provision hereof, no
fractional shares of Cecil common stock, and no certificates or
scrip therefor, or other evidence of ownership thereof, will be
issued in exchange for any shares of Bank common stock; no
dividend or distribution with respect to Cecil common stock
shall be payable on or with respect to any fractional share
interests; and no such fractional share interest shall entitle
the owner thereof to vote or to any other rights of a
shareholder of Cecil. In lieu of such fractional share
interest, any holder of Bank common stock who would otherwise be
entitled to a fractional share of Cecil common stock will, upon
surrender of his certificate or certificates representing Bank
common stock outstanding immediately prior to the Effective
Date, be paid the applicable cash value of such fractional share
interest, which shall be equal to the product of the fraction
multiplied by the Cecil Trading Price. For the purposes of
determining any such fractional share interests, all shares of
Cecil common stock received by the holders of Bank common stock
shall be combined so as to calculate the maximum number of whole
shares of Cecil common stock issuable to such the Bank
shareholder in the Merger.
(j) At the Effective Date, the transfer books for the
Bank common stock shall be closed, and no transfer of shares of
Bank common stock shall thereafter be made on such books.
ARTICLE VII
This Plan of Merger shall be subject to all those
conditions contained in the Agreement including, but not limited
to, approval of the Agreement, this Plan of Merger and the
Merger by the OTS and by the requisite vote of the Bank's
shareholders.
ARTICLE VIII
This Plan of Merger shall terminate automatically upon the
termination of the Agreement.
ARTICLE IX
This Plan of Merger may be executed in counterparts, each
of which shall be deemed an original and all of which shall
constitute one and the same instrument.
ARTICLE X
This Plan of Merger may be amended at any time by a
written instrument signed by the parties hereto.
6<PAGE>
<PAGE>
ARTICLE XI
This Plan of Merger shall be governed by and construed in
accordance with the laws of the State of Maryland, without
taking into account any provision regarding choice of law,
except to the extent certain matters may be governed by federal
law by reason of preemption.
IN WITNESS WHEREOF, the parties hereto have executed this
Plan of Merger on the date above written.
COLUMBIAN BANK,
A FEDERAL SAVINGS BANK
By ____________________________
Donald F. Angert, President
By ____________________________
Robert L. Johnson, Secretary
COLUMBIAN INTERIM FEDERAL
SAVINGS BANK
By ____________________________
Donald F. Angert, President
By ____________________________
Robert L. Johnson, Secretary
CECIL BANCORP, INC.
By ____________________________
Mary B. Halsey, President
By ____________________________
Thomas L. Foard, Secretary
7<PAGE>
<PAGE>
EXHIBIT A
TO
PLAN OF MERGER
OFFICE LOCATIONS
1. Main Office: 303-305 St. John Street
Havre De Grace, Maryland 21078
2. Branch Office: Route 40,
Havre De Grace, Maryland 21078
<PAGE>
<PAGE>
EXHIBIT B
TO
PLAN OF MERGER
DIRECTORS
Name Residence Address Term to Expire
- ---- ----------------- --------------
Donald F. Angert
Kathleen G. Guzzo
Robert Johnson
Arthur L. Gilbert
William K. Brendle
Wilbur Pearce
Laurie Thoner
Mary B. Halsey<PAGE>
<PAGE>
Exhibit 1.6
DIRECTORS OF RESULTING ASSOCIATION
Name Residence Address Term to Expire
- ---- ----------------- --------------
Donald F. Angert
Kathleen G. Guzzo
Robert Johnson
Arthur L. Gilbert
William K. Brendle
Wilbur Pearce
Laurie Thoner
Mary B. Halsey<PAGE>
<PAGE>
Exhibit 1.7
OFFICES OF COLUMBIAN BANK
1. Main Office: 303-305 St. John Street
Havre De Grace, Maryland 21078
2. Branch Office: Route 40,
Havre De Grace, Maryland 21078
<PAGE>
<PAGE>
Exhibit 4.11
May 29, 1998
Cecil Bancorp, Inc.
127 North Street
Elkton, Maryland 21921
Gentlemen:
1. I have been advised that I might be considered to be
an "affiliate," as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145 ("Rule 145") promulgated by
the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"),
of either Cecil Bancorp, Inc., a Maryland corporation ("Cecil")
or Columbian Bank, A Federal Savings Bank ("Columbian").
2. Pursuant to the Reorganization and Merger Agreement
dated as of May 29, 1998 (the "Agreement"), by and among Cecil
and Columbian, it is contemplated that Cecil will organize a
wholly owned interim federal savings bank subsidiary
("Subsidiary"), to merge with and into Columbian (the "Merger"),
pursuant to which each of the issued and outstanding shares of
Columbian Common Stock shall automatically by operation of law
be converted into a number of shares of common stock of Cecil as
set forth in the Agreement and the issued and outstanding shares
of Subsidiary Common Stock shall be converted by operation of
law into an equal number of newly issued shares of Columbian
common stock all of which shall be owned by Cecil, and following
the Merger, Columbian shall survive the Merger and operate as a
wholly owned subsidiary of Cecil under its present name and
title, as set forth in the Agreement, and each outstanding
option under Columbian's Stock Option Plan will continue
outstanding as an option to purchase that number of shares of
Cecil Common Stock, as determined under the terms of the
Agreement. As an affiliate of Cecil, I own shares of Cecil
Common Stock, or as an affiliate of Columbian, in connection
with the Merger, I will receive my pro rata portion of the
shares of Cecil Common Stock upon distribution of the Cecil
Common Stock to the holders of Columbian Common Stock and
options to purchase Cecil Common Stock in accordance with the
terms of the Agreement.
<PAGE>
<PAGE>
Cecil Bancorp, Inc.
May 29, 1998
Page 2
3. I hereby agree as follows:
(i) I will not sell, transfer or otherwise dispose
of, or in any way reduce my risk relative to, any shares of the
Cecil Common Stock owned by me, issued to me pursuant to the
Merger or shares of Cecil Common Stock received by me upon the
exercise of the options received in the Merger for the period
commencing 30 days prior to consummation of the Merger and
ending on such date as financial results covering at least 30
days of post-Merger combined operations of Cecil and Columbian
have been published by Cecil.
(ii) During the term of this letter agreement, I
will not offer to sell, transfer or otherwise dispose of any of
the shares of Cecil Common Stock owned by me, distributed to me
pursuant to the Merger or shares of Cecil Common Stock received
by me upon the exercise of the options received in the Merger
except (a) in compliance with the applicable provisions of Rule
145, (b) in a transaction that is otherwise exempt from the
registration requirements of the Securities Act, or (c) in an
offering registered under the Securities Act.
4. I consent to the endorsement of the Cecil Common Stock
issued to me pursuant to the Merger (if any) or shares of Cecil
Common Stock received by me upon the exercise of the options
received in the Merger (if any) with a restrictive legend which
will read substantially as follows:
"The shares represented by this certificate were
issued in a transaction to which Rule 145
promulgated under the Securities Act of 1933, as
amended (the "Act"), applies, and may be sold or
otherwise transferred only in compliance with the
limitations of such Rule 145, or pursuant to an
exemption from registration under the Act, or
pursuant to a registration statement under the Act."
Cecil's transfer agent shall be given an appropriate stop
transfer order and shall not be required to register any
attempted transfer of the shares of the Cecil Common Stock
issued to me in the Merger or shares of Cecil Common Stock
received by me upon the exercise of the options received in the
Merger, unless the transfer has been effected in compliance with
the terms of this letter agreement.
5. It is understood and agreed that this letter agreement
shall terminate and be of no further force and effect and the
legend set forth in 4 above shall be removed by delivery of
substitute certificates without such legend, if (i) any such
shares of Cecil Common Stock issued to me in the Merger (if any)
or shares of Cecil Common Stock received by me upon the exercise
of the options received in the Merger (if any) shall have been
registered under the Securities Act for sale, transfer or other
disposition by me or on my behalf and are sold, transferred or
otherwise disposed of, or (ii) any such shares of Cecil Common
Stock issued to me in the Merger (if any) or shares of Cecil
Common Stock received by me upon the exercise of the options
received in the
<PAGE>
<PAGE>
Cecil Bancorp, Inc.
May 29, 1998
Page 3
Merger (if any) are sold in accordance with the provisions of
paragraphs (c), (e), (f), and (g) of Rule 144 promulgated under
the Securities Act, or (iii) I am not at this time an affiliate
of Cecil and have been the beneficial owner of the Cecil Common
Stock or the options for Cecil Common Stock issued to me in the
Merger for at least one year (or such other period as may be
prescribed by the Securities Act and the rules and regulations
promulgated thereunder) and Cecil has filed with the Commission
all of the reports it is required to file under the Securities
Exchange Act of 1934, as amended, during the preceding twelve
months, or (iv) I am not and have not been for at least three
months an affiliate of Cecil and have been the beneficial owner
of the Cecil Common Stock or the options for Cecil Common Stock
issued to me in the Merger for at least two years (or such
period as may be prescribed by the Securities Act and the rules
and regulations promulgated thereunder), or (v) Cecil shall have
received a letter from the staff of the Commission, or an
opinion of counsel reasonably acceptable to Cecil, to the effect
that the stock transfer restrictions and the legend are not
required. It is further understood and agreed that any stop
transfer restriction relating to, or arising from Section 3(i)
of this letter, shall be lifted upon publication of financial
results covering at least 30 days of post-Merger combined
operations.
6. I have carefully read this letter agreement and the
Agreement and am aware of and understand and have discussed
their requirements and other applicable limitations upon my
ability to offer to sell, transfer or otherwise dispose of
shares of the Cecil Common Stock owned by me, distributed to me
pursuant to the Merger or shares of Cecil Common Stock received
by me upon the exercise of the options received in the Merger.
Sincerely,
_________________________
Name
Agreed and accepted this
29th day of May, 1998
by CECIL BANCORP, INC.
By: ___________________________
<PAGE>
<PAGE>
Exhibit 7.1
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, entered into on this ____ day of _______,
1998 (the "Effective Date"), by and between Columbian Bank, A
Federal Savings Bank (the "Bank"), and Kathleen G. Guzzo (the
"Employee"), which is the same date as the Effective Date of the
merger between the Bank and a subsidiary of Cecil Bancorp, Inc.
("Cecil") pursuant to the Reorganization and Merger Agreement
between the Bank and Cecil dated May 29, 1998.
WHEREAS, the Employee has heretofore been employed by the
Bank as Vice President and is experienced in the business of the
Bank; and
WHEREAS, the parties desire by this writing to set forth
the continuing employment relationship of the Bank and the
Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. During the term of this Agreement, the
Employee shall be employed as Vice President of the Bank. The
Employee shall render such administrative and management
services for the Bank as are currently rendered and as are
customarily performed by persons situated in a similar executive
capacity. The Employee's other executive duties shall be such
as the Bank's President and Board of Directors (the "Board") may
from time to time reasonably direct, including normal duties as
an executive officer of the Bank.
2. Compensation.
(a) The Bank agrees to pay the Employee during
the term of this Agreement a salary at the rate of $49,000 per
annum, payable in cash not less frequently than monthly. The
Board shall review, not less often than annually, the rate of
the Employee's salary, and in its sole discretion may decide to
increase her salary.
(b) The Employee shall participate in an equitable
manner with all other employees of the Bank in discretionary
bonuses that the Board may award from time to time to the Bank's
employees. No other compensation provided for in this Agreement
shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
3. Participation in Retirement, Medical and Other Plans.
The Employee shall be eligible to participate in
any of the following plans or programs that the Bank may now or
in the future maintain; group hospitalization, disability,
health, dental, sick leave, life insurance, travel and/or
accident insurance, auto allowance/auto lease, retirement,
pension, and/or other present or future qualified or
nonqualified plans, generally which benefits, taken as a whole,
must be at least as favorable as those in effect on the
Effective Date (except that with respect to certain vacation
time and sick leave policies, the Board may from time to time
adopt and implement revised policies which may result in a
reduction of vacation time and sick leave benefits, which
policies shall be generally applicable to all Bank employees).
<PAGE>
<PAGE>
4. Term. The Bank hereby employs the Employee, and the
Employee hereby accepts such employment under this Agreement,
for the period commencing on the Effective Date and ending 12
months thereafter (or such earlier date as is determined in
accordance with Section 8 hereof). Additionally, on each annual
anniversary date from the Effective Date, the Employee's term of
employment may be extended for an additional one-year period
beyond the then effective expiration date, upon a determination
by the Board in a duly adopted resolution that the performance
of the Employee has met the Board's requirements and standards,
and that this Agreement shall be extended. Only those members
of the Board who have no personal interest in this Employment
Agreement shall discuss and vote on the approval and subsequent
review of this Agreement.
5. Loyalty; Noncompetition.
(a) Subject to Section 1 hereof, during the
period of her employment hereunder and except for illnesses,
reasonable vacation periods and reasonable leaves of absence,
the Employee shall devote all her full business time, attention,
skill and efforts to the faithful performance of her duties
hereunder. "Full business time" is hereby defined as that
amount of time usually devoted to like companies by similarly
situated executive officers. During the term of her employment
under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or
interests of the Bank, or be gainfully employed in any other
position or job.
(b) Nothing contained in this Paragraph 5 shall
be deemed to prevent or limit the Employee's right to invest in
the capital stock or other securities of any business dissimilar
from that of the Bank, or, solely as a passive or minority
investor, in any business.
6. Standards. The Employee shall perform her duties
under this Agreement in accordance with such reasonable
standards as the Board may establish from time to time.
7. Vacation and Sick Leave. The Employee shall be
entitled, without loss of pay, to absent herself voluntarily
from the performance of her employment under this Agreement, all
such voluntary absences to count as vacation time; provided
that:
(a) The Employee shall be entitled to an annual
vacation in accordance with the policies that the Board has
established for all employees of the Bank (as may be revised by
the Board in its discretion).
(b) The Employee shall be entitled to an annual
sick leave benefit as established by the Board to all employees
(as may be revised by the Board in its discretion).
2<PAGE>
<PAGE>
(c) The Employee shall not receive any additional
compensation on account of her failure to take a vacation or
sick leave, and the Employee shall not accumulate unused
vacation or sick leave from one fiscal year to the next, except
in either case to the extent authorized and approved by the
Board.
8. Termination and Termination Pay. The Employee's
employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this
Agreement shall terminate upon her death during the term of this
Agreement, in which event the Employee's estate shall be
entitled to receive the compensation due the Employee through
the last day of the calendar month in which her death occurred.
(b) Disability. The Bank may terminate the
Employee's employment after having established the Employee's
Disability. For purposes of this Agreement, "Disability" means
a physical or mental infirmity which impairs the Employee's
ability to substantially perform her duties under this Agreement
and which results in the Employee becoming eligible for long-
term disability benefits under the Bank's long-term disability
plan (or, if the Bank has no such plan in effect, which, in the
reasonable judgment of a physician or other healthcare
professional selected by the Board, impairs the Employee's
ability to substantially perform her duties under this Agreement
for a period of 180 consecutive days). The Employee shall be
entitled to the compensation and benefits provided for under
this Agreement for (i) any period during the term of this
Agreement and prior to the establishment of the Employee's
Disability during which the Employee is unable to work due to
the physical or mental infirmity, or (ii) any period of
Disability during the term of this Agreement which is prior to
the Employee's termination of employment pursuant to this
Section 8(b).
(c) Just Cause. The Board may, by written notice
to the Employee, immediately terminate her employment at any
time, for Just Cause. The Employee shall have no right to
receive compensation or other benefits for any period after
termination for Just Cause. Termination for "Just Cause" shall
mean termination because of, in the good faith determination of
the Board, the Employee's personal dishonesty, incompetence,
willful misconduct, breach of 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,
or material breach of any provision of this Agreement.
3<PAGE>
<PAGE>
(d) Without Just Cause. The Employee may
voluntarily terminate employment for Good Reason (as hereinafter
defined), or, the Board may by written notice to the Employee
immediately terminate her employment at any time for a reason
other than Just Cause provided that in either event the Employee
shall be entitled to receive the salary provided pursuant to
Section 2 hereof and the benefits provided in Section 3 hereof,
up to the date of termination of the term of this Agreement.
Said sum shall be paid in periodic payments over the remaining
term of this Agreement, as if the Employee's employment had not
been terminated. "Good Reason" is defined for the purposes of
this subparagraph as:
(1) the assignment to the Employee of any
duties inconsistent in any respect with the
Employee's position (including status,
offices, titles and reporting requirements),
authority, duties or responsibilities as
contemplated by Section 1 or any other action
by the Bank that results in a material
diminution in such position, authority,
duties or responsibilities, excluding for
this purpose any action not taken in bad
faith and which is remedied by the Bank
promptly after receipt of notice thereof
given by the Employee;
(2)(i) except in the event of a Bank-
wide change in benefits, the failure by the
Bank to continue in effect any benefit or
compensation plan, life insurance plan,
health and accident plan or disability plan
to which the Employee is entitled, or (ii)
the taking of any action by the Bank that
would adversely affect the Employee's
participation in, or materially reduce the
Employee's benefits under this Agreement.
(3) the Bank requiring the Employee to be
based at any office or location more than
thirty miles from Havre de Grace, Maryland.
(e) Termination or Suspension Under Federal Law.
(1) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an
order issued under Sections 8(e)(4) or 8(g)(1) of the Federal
Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) and
(g)(1)), all obligations of the Bank under this Agreement shall
terminate, as of the effective date of the order, but vested
rights of the parties shall not be affected.
(2) If the Bank is in default (as defined in
Section 3(x)(1) of FDIA), all obligations under this Agreement
shall terminate as of the date of default; however, this
Paragraph shall not affect the vested rights of the parties.
(3) If a notice served under Section 8(e)(3) or
(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends
and/or temporarily prohibits the Employee from participating in
the
4<PAGE>
<PAGE>
conduct of the Bank's affairs, the Bank's obligations under
this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Employee all or part of the compensation
withheld while its contract obligations were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which
were suspended.
(4) Any payments made to the Employee pursuant to
this Agreement, or otherwise, are subject to and conditioned
upon their compliance both 12 U.S.C. Section 1828(k) and any
regulations promulgated thereunder and Regulatory Bulletin 27A,
but only to the extent required thereunder on the date any
payment is required pursuant to this Agreement.
(f) Voluntary Termination by Employee. The
Employee may voluntarily terminate employment with the Bank
during the term of this Agreement, upon at least 60 days' prior
written notice to the Board, in which case the Employee shall
receive only her compensation, vested rights and employee
benefits up to the date of her termination. If the Employee's
employment terminates with the Bank for any reason other than
Just Cause, the Employee shall be entitled to purchase from the
Bank, at the Employee's own expense which shall not exceed
applicable COBRA rates, family medical insurance under any group
health plan that the Bank or the Company maintains for its
employees. This right shall be (i) in addition to, and not in
lieu of, any other rights that the Employee has under this
Agreement, and (ii) shall continue until the Employee first
becomes eligible for participation in Medicare.
(g) No Mitigation. In the event of termination
of the Employee's employment under this Agreement for a reason
other than Just Cause or by the Employee for Good Reason, the
Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment
provided for, in this Agreement, be reduced by any compensation
earned by the Employee as the result of employment by another
employer after the date of termination, or otherwise.
9. Successors and Assigns.
(a) This Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Bank
which shall acquire, directly or indirectly, by merger, con-
solidation, purchase or otherwise, all or substantially all of
the assets or stock of the Bank; provided that in the event that
any successor of the Bank is prohibited by state or federal law
from maintaining the Agreement, such successor will provide for
an equivalent arrangement with a company or institution
affiliated with the successor.
5<PAGE>
<PAGE>
(b) Since the Bank is contracting for the unique
and personal skills of the Employee, the Employee shall be
precluded from assigning or delegating her rights or duties
hereunder without first obtaining the written consent of the
Bank.
10. Amendments. No amendments or additions to this
Agreement shall be binding unless made in writing and signed by
both of the parties, except as herein otherwise specifically
provided.
11. Applicable Law. Except to the extent preempted by
Federal law, the laws of the State of Maryland shall govern this
Agreement in all respects, whether as to its validity, construc-
tion, capacity, performance or otherwise.
12. Severability. 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.
13. Entire Agreement. Together with any understanding
or modifications hereof as agreed to in writing by the parties,
this Agreement shall constitute the entire agreement between the
parties hereto, and shall supersede any and all preexisting
employment or severance agreements or insurance arrangements (if
any) between the Employee and the Bank.
6<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement on the day and year first hereinabove written.
ATTEST: COLUMBIAN BANK, A FEDERAL
SAVINGS BANK
__________________________ By:________________________
Attest Donald F. Angert
President
WITNESS:
_________________________ ________________________
Kathleen G. Guzzo
Employee
7
<PAGE>
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of May 29, 1998 (the
"Agreement"), by and between Cecil Bancorp, Inc. ("Grantee") ,
and Columbian Bank, A Federal Savings Bank ("Issuer").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into a
Reorganization and Merger Agreement dated as of May 29, 1998
(the "Merger Agreement"), providing for, among other things, the
merger of Issuer with a to-be-formed subsidiary of Grantee (the
"Merger"); 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 hereinafter defined); and
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein and in the Merger Agreement, and intending to
be legally bound hereby, Issuer and Grantee agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but
not defined herein shall have the meanings ascribed to such
terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions
set forth herein, Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase up to 14,993 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 Common Stock, par value $1.00 per share
("Issuer Common Stock"), of Issuer at a purchase price per
Option Share (the "Purchase Price") of $29.50 provided, however,
that in no event shall the number of Option Shares for which the
Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any
shares subject to or issued pursuant to the Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the
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, but only if both a Preliminary
Purchase Event (as hereinafter defined) and a Purchase Event (as
hereinafter defined) shall have
-1-<PAGE>
<PAGE>
occurred; provided, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of:
(A) the Effective Date of the Merger;
(B) 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 Agreement by Grantee
based upon a willful breach by Issuer of any of
its representations, warranties, covenants or
agreements set forth in the Merger Agreement (a
"Default Termination"),
(C) 12 months after the termination of the Merger
Agreement by Grantee pursuant to a Default
Termination; and
(D) 12 months after termination of the Merger
Agreement (other than pursuant to a Default
Termination) following the occurrence of a
Purchase Event or a Preliminary Purchase Event;
provided further, that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this
Section 3) within six (6) months following such Purchase Event;
and provided, further, that any purchase of shares upon exercise
of the Option shall be subject to compliance with applicable
laws, including without limitation the Home Owners Loan Act, as
amended ("HOLA"), and the Bank Merger Act, as amended ("Bank
Merger Act"). The term "Holder" shall mean the holder or
holders of the Option from time to time. The Grantee is the
initial Holder. 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 above.
(b) As used herein, a "Purchase Event" means any of the
following events:
(i) 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, any "group" (as such term is defined in
Section 13(d) (3) of the Exchange Act) 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.
(ii) the occurrence of the Preliminary Purchase Event
described in clause (i) of subsection (c) of this Section
2, except that the percentage referred to in clause (C)
thereof shall be 15%.
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(c) As used herein, a "Preliminary Purchase Event" means
any of the following events:
(i) without Grantee's prior written consent, Issuer
shall have authorized, recommended or 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 (A) a merger, consolidation or similar transaction
involving Issuer or any of its subsidiaries, (B) the
disposition, by sale, lease, exchange or otherwise, of
assets of Issuer or any of its subsidiaries representing
in either case 10% or more of the consolidated assets of
Issuer and its subsidiaries, or (C) the issuance, sale or
other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of
Issuer or any of its subsidiaries (any of the foregoing an
"Acquisition Transaction"); or
(ii) any person (other than the Grantee or a Grantee
Subsidiary) 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, any "group" (as such term is defined in
Section 13(d)(3) of the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire
beneficial ownership of 10% or more of the then-
outstanding shares of Issuer Common Stock.
(iii) any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined
in Rule 14d-2 under the Exchange Act), or shall have filed
a registration statement under the Securities Act 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" and an "Exchange Offer,"
respectively); or
(iv) (A) the holders of Issuer Common Stock shall not
have approved the Merger Agreement at the meeting of such
stockholders held for the purpose of voting on the Merger
Agreement, (B) such meeting shall not have been held or
shall have been canceled prior to termination of the
Merger Agreement or (C) 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 it
shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (x)
made, or disclosed an intention to make, a proposal to
engage in an Acquisition Transaction, (y) commenced a
Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z)
filed an application (or given notice), whether in draft
or final form, under the HOLA, the Bank Merger Act or the
Change in Bank Control Act of 1978, as amended, for
approval to engage in an Acquisition Transaction; or
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(v) Issuer shall have intentionally and knowingly
breached any representation, warranty, covenant or
agreement contained in the Merger Agreement and such
breach would entitle Grantee to terminate the Merger
Agreement pursuant to Subsection5.4(b) of the Merger
Agreement after (x) a bona fide proposal is made by any
person (other than Grantee or any subsidiary of Grantee) to
Issuer or its stockholders to engage in an Acquisition
Transaction, (y) any person (other than Grantee or any
Subsidiary of Grantee) states its intention to Issuer or
its stockholders to make a proposal to engage in an
Acquisition Transaction if the Merger Agreement terminates
or (z) any person (other than Grantee or any subsidiary of
Grantee) shall have filed an application or notice with
any governmental entity to engage in an Acquisition
Transaction.
As used in this Agreement, "person" shall have the meaning
specified in Section 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Preliminary Purchase Event or Purchase
Event, it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Holder to
exercise the Option.
(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 notification to or approval of
the Office of Thrift Supervision ("OTS"), the Federal Deposit
Insurance Corporation, or any other governmental entity is
required in connection with such purchase, Issuer shall
cooperate with Grantee in the filing of the required notice of
application for approval and the obtaining of such approval and
the Closing shall occur immediately following such regulatory
approvals (and any mandatory waiting periods).
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 Issuer at the address of Issuer specified 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), (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 shares of Issuer Common Stock
purchasable hereunder, and (ii) Holder shall deliver to
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Issuer a letter agreeing that Holder shall not offer to 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 MAY
29, 1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY
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.
(d) Upon the giving by Holder to Issuer of the written
notice of exercise of the Option provided for under Section
3(e), the tender of the applicable purchase price in immediately
available funds and the tender of this Agreement to Issuer,
Holder shall be deemed to be the holder of record of the shares
of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of
Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Issuer Common Stock so that the
Option may be exercised without additional authorization of
Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase
Issuer Common Stock, (ii) that it will not, by charter amendment
or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder
by Issuer, (iii) promptly to take all action as may from time to
time be required (including (A) complying with all premerger
notification, reporting and waiting period requirements and (B)
in the event prior approval of or notice to any governmental
entity is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or
notices and providing such information to such governmental
entity as it may require) in order to permit Holder to exercise
the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take
all action provided herein to protect the rights of Holder
against dilution.
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5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer
hereby represents and warrants to Grantee (and Holder, if
different that Grantee) as follows:
(a) DUE AUTHORIZATION. Issuer has a requisite corporate
power and authority to enter into this Agreement, and subject to
any approvals 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, and this Agreement has been duly
executed and delivered by Issuer.
(b) NO VIOLATIONS. The execution and delivery of this
Agreement, the consummation of the transactions contemplated
hereby and compliance by Issuer with any of the provisions
hereof will not (i) conflict with or result in a breach of any
provision of its Charter or Bylaws or a default (or give rise to
any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond,
debenture, mortgage, indenture, license, material agreement or
other material instrument or obligations to which Issuer is a
party, or by which it or any of its properties or assets may be
bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its
properties or assets.
(c) AUTHORIZED STOCK. Issuer has taken all necessary
corporate and other action to authorize and reserve and to
permit it to issue, and at all times from the date 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 that number of shares of Issuer Common
Stock equal to the maximum number of shares of Issuer Common
Stock at any time and from time to time purchasable upon
exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully
paid and nonassessable, and will delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature
whatsoever and not subject to any preemptive rights.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee
hereby represents and warrants to Issuer that Grantee has all
requisite corporate power and authority to enter into this
Agreement and, subject to 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, and
this Agreement has been duly executed and delivered by Grantee.
7. ADJUSTMENT UPON CHANGES IN ISSUER 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 transactions 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 in respect of Issuer Common Stock
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if the Option has 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, together
with any 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: (i) to consolidate with or merge into any person,
other than Grantee or one of its subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities
of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior
to such merger shall after such merger represent less than 50%
of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than
Grantee or one of its subsidiaries, then, and in each such case,
the agreement governing such transactions shall make proper
provisions so that the Option shall, upon the consummation of
any such transaction and upon the terms and condition set forth
herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Holder, of any of (x)
the Acquiring Corporation (as hereinafter defined), (y) any
person that controls the Acquiring Corporation or (z) in the
case of a merger described in clause (ii), Issuer (such person
being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as
the Option, provided that, if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less
advantageous to Holder. Substitute Option Issuer also shall
enter into an agreement with Holder in substantially the same
form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock (as hereinafter
defined) as is equal to the Assigned Value (as hereinafter
defined) multiplied by the number of shares of Issuer Common
Stock for which the Option was theretofore exercisable, divided
by the Average Price (as hereinafter defined). The exercise
price of Substitute Option per share of Substitute Common Stock
(the "Substitute Option Price") shall then be equal to the
Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the
Option was theretofore exercisable and the denominator is the
number of shares of the Substitute Common Stock for which the
Substitute Option is exercisable.
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(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person, or (iii) the transferee of all or substantially
all of Issuer's assets (or a substantial part of the
assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the
greatest voting power in respect of the election of
directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute
Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the
price per share of Issuer Common Stock at which a Tender
Offer or an Exchange Offer therefor has been made, (x) the
price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares of Issuer Common Stock
within the six-month period immediately preceding the
consolidation, merger or sale in question and (z) in the
event of a sale of all or substantially all of Issuer's
assets or deposits, an amount equal to (i) the sum of the
price paid in such sale for such assets (and/or deposits)
and the current market value of the remaining assets of
Issuer, as determined by a nationally-recognized
investment banking firm selected by Holder, divided by
(ii) the number of shares of Issuer Common Stock
outstanding at such time. In the event that a Tender
Offer or an Exchange Offer is made for Issuer Common Stock
or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the
value of securities or other property issuable or
deliverable in exchange for Issuer Common Stock shall be
determined by a nationally-recognized investment banking
firm selected by Holder.
(4) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one
year immediately preceding the consolidation, merger or
sale in question, but in no event higher than the closing
price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided
that if Issuer is the Issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into
Issuer or by any company which controls such person, as
Holder may elect.
(f) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the aggregate of the shares of Substitute Common
Stock outstanding prior to exercise of the Substitute Option.
(g) Issuer shall not enter into any transaction
described in Section 7(b) 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 limitations, any action that may
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be necessary so that the holders of the other shares of common
stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the
Substitute Option and the shares of Substitute Common Stock are
otherwise in no way distinguishable from or have lesser economic
value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted
securities, as defined in Rule 144 under the Securities Act or
any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), 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 (i) the Option and (ii) 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
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 10 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 Option and the
certificates evidencing the shares of Issuer Common Stock
purchased thereunder with respect to which Holder then has
beneficial ownership, and shall warrant that it has sole record
and beneficial ownership of such shares and that the same are
then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval
of the OTS, the Federal Deposit Insurance Corporation or any
other governmental entity is required in connection with the
payment of all or any portion of the Section
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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). If the OTS, the Federal
Deposit Insurance Corporation or any other governmental entity
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 the OTS, the Federal Deposit Insurance
Corporation or any other governmental entity 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 the OTS, the Federal Deposit Insurance Corporation
or other governmental entity, 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
Grantee's rights under this Section 8 shall terminate on the
date of termination of the Option pursuant to Section 3(a).
(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), (ii) the price per share of
Issuer Common Stock received by holders of Issuer Common Stock
in connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii),
or (iii) the highest sales price per share of Issuer Common
Stock during the year preceding the Request Date; provided,
however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the
price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a
nationally-recognized investment banking firm selected by
Holder, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. If the consideration to
be offered, paid or received pursuant to either of the foregoing
clauses (i) or (ii) shall be other than in cash, the value of
such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm
selected by Holder and reasonably acceptable to Issuer, which
determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, a "Repurchase Event" shall occur if
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership of (as such term is
defined in Rule 13d-3 promulgated under the Exchange Act), or
the right to acquire beneficial ownership of, or any "group" (as
such term is defined in Section 13(d)(3) of the Exchange Act)
shall have been formed which beneficially owns or has the right
to acquire beneficial ownership of, 50% or more of
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the then outstanding shares of Issuer Common Stock, or (ii) any
of the transactions described in Section 7(b)(i), Section
7(b)(ii) or Section 7(b)(iii) shall be consummated.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject
to conditions of Section 9(c), if requested by any Holder, as
expeditiously as possible prepare and file a registration
statement under the Securities Act if such registration is
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 Holder upon
exercise of the Option in accordance with the intended method of
sale or other disposition stated by 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) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any
time after the exercise of the Option proposes to register any
shares of Issuer Common Stock under the Securities Act 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 Holder), Issuer will cause all such shares for which
a Holder shall have requested participation in such registration
to be so registered and included in such underwritten public
offering; provided, however, that Issuer may elect to not cause
any such shares to be so registered (i) if the underwriters in
good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit
plan or a registration filed on Form S-4 under the Securities
Act or any successor form; provided, further, however, that such
election pursuant to clause (i) may only be made on 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 Section 9(b) shall be excluded from such
registration, Issuer shall make appropriate allocation of shares
to be registered among Holders 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 such Holder bears to
the total number of shares requested to be registered by all
such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall
use all reasonable efforts to cause each registration statement
referred to in Section 9(a) 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, however, that Issuer may delay any registration or
Option Shares required pursuant to Section 9(a) for a period not
exceeding 90 days if 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 Act pursuant to Section 9(a):
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(i) prior to the earliest of (A) termination of
the Merger Agreement pursuant to the terms thereof,
and (B) a Purchase Event or a Preliminary Purchase
Event;
(ii) on more than one occasion during any
calendar year and on more than two occasions in
total;
(iii) within 90 days after the effective date of
a registration referred to in Section 9(b) pursuant
to which the Holder or Holders concerned were
afforded the opportunity to register such shares
under the Securities Act and such shares were
registered as requested; and
(iv) unless a request therefor is made to Issuer
by the Holder or Holders of at least 25% or more of
the aggregate number of Option Shares (including
shares of Issuer Common Stock issuable upon exercise
of the Option) 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, however, that Issuer
shall not be required to consent to general jurisdiction or to
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) EXPENSES. Issuer will pay all expenses (including
without limitation registration fees, qualification fees, blue
sky fees and expenses, accounting expenses, legal expenses and
printing expenses incurred by it) in connection with each
registration pursuant to Section 9(a) or (b) and all other
qualifications, notification or exemptions pursuant to Section
9(a) or (b). Underwriting discounts and commissions relating to
Option Shares, fees and disbursements of counsel to the
Holder(s) of Option Shares being registered and any other
expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) INDEMNIFICATION. In connection with any registration
under Section 9(a) or (b), Issuer hereby indemnifies each
Holder, 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, or
alleged 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, or
alleged 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 that was
included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any
amendments or supplements thereto)
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<PAGE>
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 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 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
Section 9(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 Section 9(e), such indemnified party shall notify the
indemnifying party in writing of the commencement of such
action, but, except to the extent of any actual prejudice to the
indemnifying party, the failure to so notify the indemnifying
party shall not relieve it of any liability which it may
otherwise have to any indemnified party under this Section 9(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 reasonably 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 the same, (ii) the indemnifying
party fails to assume the defense of such action with counsel
reasonably 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
wich case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligations 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 Section 9(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
appropriate to reflect the relative benefits received by Issuer,
the selling Holders and the underwriters from the offering of
the securities and also the relative fault of Issuer, the
selling Holders and the underwriters in connection with the
statement or omissions which results 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, however, that in
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<PAGE>
no case shall the selling Holders 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(g) 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 Section
9(a) or (b) above, Issuer and each selling Holder (other than
Grantee) shall enter into an agreement containing the
indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. 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 Holder(s) in accordance with and to the
extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission
from time to time, including, without limitation, Rule 144A.
Issuer shall at its expense provide the Holder 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 Act or the Exchange Act, or required
pursuant to any state securities laws or the rules of any stock
exchange.
(g) ISSUER TAXES. 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
any 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
NASDAQ/NMS or any securities exchange, Issuer, upon the request
of Holder, 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 NASDAQ/NMS or such other securities
exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. DIVISION OF OPTION. Upon the occurrence of a
Purchase Event or a Preliminary Purchase Event, this Agreement
(and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and
surrender of this Agreement at the principal office of the
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) maybe
exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor
and date. Any such new Agreement executed and
-14-<PAGE>
<PAGE>
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 in Section
9, 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 BENEFICIARIES;
SEVERABILITY. This Agreement, together with the Merger
Agreement and the other documents and instruments referred to
herein and therein, between Grantee and Issuer (i) 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 (ii) is not intended
to confer upon any person other than the parties hereto (other
than the indemnified parties under Section 9(e) and any
transferee of the Option Shares or any permitted transferee of
this Agreement pursuant to Section 12(h)) 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 regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency
determines that the Option does not permit 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 (as
adjusted pursuant to Section 7), 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 and
construed in accordance with the laws of the State of Maryland
without regard to any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(f) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or sent by
overnight mail service or mailed by registered or certified mail
(return receipt requested) postage prepaid, to the parties at
the following address (or at such other address for a party as
shall be specified by like notice):
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<PAGE>
If to Grantee: Cecil Bancorp, Inc.
127 North Street
Elkton, Maryland 21921
Attn: Mary B. Halsey, President
With a required copy to: Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Attn: Howard S. Parris, Esquire
If to Issuer: Columbian Bank, A Federal Savings Bank
303-307 St. John Street
Havre de Grace, Maryland 21078
Attn: Donald F. Angert, President
With a required copy to: Kutak Rock
1101 Connecticut Avenue, N.W.,
Suite 1000
Washington, D.C. 20036
Attn: Paul D. Borja, Esquire
(g) COUNTERPARTS. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed, it being
understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent
of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a
Purchase Event. 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 successor 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.
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<PAGE>
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.
CECIL BANCORP, INC.
By: /s/ Mary Beyer Halsey
_________________________
Mary Beyer Halsey
President
COLUMBIAN BANK, A FEDERAL
SAVINGS BANK
By: /s/ Donald F. Angert
_________________________
Donald F. Angert
President
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<PAGE>
May 29, 1998
Cecil Bancorp, Inc.
127 North Street
Elkton, Maryland 21921
Gentlemen:
1. I have been advised that I might be considered to be
an "affiliate," as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145 ("Rule 145") promulgated by
the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"),
of either Cecil Bancorp, Inc., a Maryland corporation ("Cecil")
or Columbian Bank, A Federal Savings Bank ("Columbian").
2. Pursuant to the Reorganization and Merger Agreement
dated as of May 29, 1998 (the "Agreement"), by and among Cecil
and Columbian, it is contemplated that Cecil will organize a
wholly owned interim federal savings bank subsidiary
("Subsidiary"), to merge with and into Columbian (the "Merger"),
pursuant to which each of the issued and outstanding shares of
Columbian Common Stock shall automatically by operation of law
be converted into a number of shares of common stock of Cecil as
set forth in the Agreement and the issued and outstanding shares
of Subsidiary Common Stock shall be converted by operation of
law into an equal number of newly issued shares of Columbian
common stock all of which shall be owned by Cecil, and following
the Merger, Columbian shall survive the Merger and operate as a
wholly owned subsidiary of Cecil under its present name and
title, as set forth in the Agreement, and each outstanding
option under Columbian's Stock Option Plan will continue
outstanding as an option to purchase that number of shares of
Cecil Common Stock, as determined under the terms of the
Agreement. As an affiliate of Cecil, I own shares of Cecil
Common Stock, or as an affiliate of Columbian, in connection
with the Merger, I will receive my pro rata portion of the
shares of Cecil Common Stock upon distribution of the Cecil
Common Stock to the holders of Columbian Common Stock and
options to purchase Cecil Common Stock in accordance with the
terms of the Agreement.
<PAGE>
<PAGE>
Cecil Bancorp, Inc.
May 29, 1998
Page 2
3. I hereby agree as follows:
(i) I will not sell, transfer or otherwise dispose
of, or in any way reduce my risk relative to, any shares of the
Cecil Common Stock owned by me, issued to me pursuant to the
Merger or shares of Cecil Common Stock received by me upon the
exercise of the options received in the Merger for the period
commencing 30 days prior to consummation of the Merger and
ending on such date as financial results covering at least 30
days of post-Merger combined operations of Cecil and Columbian
have been published by Cecil.
(ii) During the term of this letter agreement, I
will not offer to sell, transfer or otherwise dispose of any of
the shares of Cecil Common Stock owned by me, distributed to me
pursuant to the Merger or shares of Cecil Common Stock received
by me upon the exercise of the options received in the Merger
except (a) in compliance with the applicable provisions of Rule
145, (b) in a transaction that is otherwise exempt from the
registration requirements of the Securities Act, or (c) in an
offering registered under the Securities Act.
4. I consent to the endorsement of the Cecil Common Stock
issued to me pursuant to the Merger (if any) or shares of Cecil
Common Stock received by me upon the exercise of the options
received in the Merger (if any) with a restrictive legend which
will read substantially as follows:
"The shares represented by this certificate were
issued in a transaction to which Rule 145
promulgated under the Securities Act of 1933, as
amended (the "Act"), applies, and may be sold or
otherwise transferred only in compliance with the
limitations of such Rule 145, or pursuant to an
exemption from registration under the Act, or
pursuant to a registration statement under the Act."
Cecil's transfer agent shall be given an appropriate stop
transfer order and shall not be required to register any
attempted transfer of the shares of the Cecil Common Stock
issued to me in the Merger or shares of Cecil Common Stock
received by me upon the exercise of the options received in the
Merger, unless the transfer has been effected in compliance with
the terms of this letter agreement.
5. It is understood and agreed that this letter agreement
shall terminate and be of no further force and effect and the
legend set forth in 4 above shall be removed by delivery of
substitute certificates without such legend, if (i) any such
shares of Cecil Common Stock issued to me in the Merger (if any)
or shares of Cecil Common Stock received by me upon the exercise
of the options received in the Merger (if any) shall have been
registered under the Securities Act for sale, transfer or other
disposition by me or on my behalf and are sold, transferred or
otherwise disposed of, or (ii) any such shares of Cecil Common
Stock issued to me in the Merger (if any) or shares of Cecil
Common Stock received by me upon the exercise of the options
received in the
<PAGE>
<PAGE>
Cecil Bancorp, Inc.
May 29, 1998
Page 3
Merger (if any) are sold in accordance with the provisions of
paragraphs (c), (e), (f), and (g) of Rule 144 promulgated under
the Securities Act, or (iii) I am not at this time an affiliate
of Cecil and have been the beneficial owner of the Cecil Common
Stock or the options for Cecil Common Stock issued to me in the
Merger for at least one year (or such other period as may be
prescribed by the Securities Act and the rules and regulations
promulgated thereunder) and Cecil has filed with the Commission
all of the reports it is required to file under the Securities
Exchange Act of 1934, as amended, during the preceding twelve
months, or (iv) I am not and have not been for at least three
months an affiliate of Cecil and have been the beneficial owner
of the Cecil Common Stock or the options for Cecil Common Stock
issued to me in the Merger for at least two years (or such
period as may be prescribed by the Securities Act and the rules
and regulations promulgated thereunder), or (v) Cecil shall have
received a letter from the staff of the Commission, or an
opinion of counsel reasonably acceptable to Cecil, to the effect
that the stock transfer restrictions and the legend are not
required. It is further understood and agreed that any stop
transfer restriction relating to, or arising from Section 3(i)
of this letter, shall be lifted upon publication of financial
results covering at least 30 days of post-Merger combined
operations.
6. I have carefully read this letter agreement and the
Agreement and am aware of and understand and have discussed
their requirements and other applicable limitations upon my
ability to offer to sell, transfer or otherwise dispose of
shares of the Cecil Common Stock owned by me, distributed to me
pursuant to the Merger or shares of Cecil Common Stock received
by me upon the exercise of the options received in the Merger.
Sincerely,
_________________________
Name
Agreed and accepted this
29th day of May, 1998
by CECIL BANCORP, INC.
By: ___________________________
PRESS RELEASE
May 29, 1998
Mary Beyer Halsey Donald F. Angert
President and CEO President and CEO
Cecil Bancorp, Inc. Columbian Bank, A Federal
410-398-1650 Savings Bank
410-939-2313
COLUMBIAN BANK, A FEDERAL SAVINGS BANK,
TO MERGE WITH CECIL BANCORP, INC.
Elkton, Maryland and Havre de Grace, Maryland; Cecil
Bancorp, Inc. (NASDAQ BB:CECB) and Columbian Bank, A Federal
Savings Bank, today jointly announced that they have signed an
Agreement pursuant to which Cecil Bancorp, Inc. will merge
Columbian Bank, a Federal Savings Bank, into Cecil Bancorp,
Inc., in a tax-free exchange of common stock, to be accounted
for on a "pooling of interests" basis. Columbian Bank has one
office, located in Havre de Grace, Maryland with total assets of
$30.2 million. Columbian Bank will remain a separate bank
subsidiary of Cecil Bancorp, Inc. and will continue to operate
under its current name.
Columbian Bank stockholders will receive Cecil common
stock valued at approximately $40 per share, or approximately
1.7 shares of Cecil Bancorp common stock in exchange for each
outstanding share of Columbian Bank stock, subject to a formula
which may adjust this exchange ratio based on the trading price
of Cecil common stock. The Columbian Bank Directors and all
Columbian employees will continue in their current capacities
following the acquisition, and two Columbian Directors will be
added to the Cecil Bancorp Board of Directors. Columbian Bank
also granted to Cecil Bancorp an option to purchase up to 19.9%
of Columbian's outstanding shares of common stock upon the
occurrence of certain events.
"Cecil Bancorp is very enthusiastic about welcoming
Columbian and its employees to the Cecil Bancorp family", stated
Mary B. Halsey, President of Cecil Bancorp, Inc. "By combing our
efforts under one company we will be able to introduce new
products and services by sharing management expertise, delivery
costs, and administrative infrastructure. We knew that a
strategic alliance made good business sense, but neither of us
was willing to sacrifice the ties to our communities that we
have built. We are excited about the growth potential that
Harford County holds and the opportunity to offer our existing
products to new customers."
<PAGE>
<PAGE>
Donald F. Angert, President of Columbian said "We believe
that affiliation with Cecil Bancorp will enable us to enhance
our product offerings and better serve our communities. Cecil
provides the same kind of personal service that has been our
foundation for over 105 years. We are confident that our
customers will benefit from this affiliation. In joining Cecil
Bancorp, Inc., we will be partnering with a community bank. We
have found a way to remain a strong financial service provider
for our customers while maintaining local decision making. We
are deeply tied to our communities and focus on personal service
which produces customer loyalty."
The acquisition would result in consolidated assets for
Cecil Bancorp, Inc. of approximately $97.2 million, consolidated
loans of approximately $72.6 million and consolidated deposits
of approximately $83.7 million based on March 31, 1998 financial
information. The acquisition is expected to be completed in the
fourth quarter of 1998 and is subject to various conditions,
including regulatory approvals and the approval of the
stockholders of Columbian Bank.
Cecil Bancorp, Inc. is the bank holding company for Cecil
Federal Savings Bank, and operates two offices in Cecil County,
Maryland, and at March 31, 1998 had total assets of $67.0
million, total loans of 54.0 million, total deposits of $56.1
million and stockholders' equity of $7.6 million.
