Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
by and between
F&M NATIONAL CORPORATION
and
ATLANTIC FINANCIAL CORP.
____________________________
July 5, 2000
____________________________
TABLE OF CONTENTS
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ARTICLE 1. THE MERGER AND RELATED MATTERS................................ 1
1.1 The Merger.................................................... 1
1.2 Conversion of AFC Stock....................................... 1
1.3 Board of Directors of AFC Subsidiaries; Officers and
Employees.................................................... 2
1.4 AFC Stock Options............................................. 2
1.5 Closing; The Effective Date................................... 3
1.6 Articles of Incorporation and Bylaws.......................... 3
1.7 Merger of Subsidiaries........................................ 3
1.8 Dissenting Shares............................................. 3
1.9 Definitions................................................... 4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF AFC......................... 4
2.1 Organization, Standing and Power of AFC....................... 4
2.2 Organization, Standing and Power of the AFC Subsidiaries...... 5
2.3 Authorized and Effective Agreements........................... 5
2.4 Capital Structure............................................. 6
2.5 Rights........................................................ 6
2.6 Financial Statements; Books and Records; Minute Books......... 6
2.7 Absence of Material Changes and Events........................ 7
2.8 Absence of Undisclosed Liabilities............................ 7
2.9 Legal Proceedings; Compliance with Laws....................... 7
2.10 Tax Matters................................................... 7
2.11 Property...................................................... 8
2.12 Employee Benefit Plans........................................ 8
2.13 Insurance..................................................... 9
2.14 Loans; Allowance for Loan Losses.............................. 10
2.15 Environmental Matters......................................... 10
2.16 Takeover Laws................................................. 12
2.17 Brokers....................................................... 12
2.18 Securities Reports............................................ 12
2.19 Tax Treatment; Accounting Treatment........................... 12
2.20 Statements True and Correct................................... 12
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF F&M......................... 13
3.1 Organization, Standing and Power.............................. 13
3.2 Organization, Standing and Power of F&M Subsidiaries.......... 13
3.3 Authorized and Effective Agreement............................ 13
3.4 Capital Structure............................................. 14
3.5 Financial Statements; Books and Records; Minute Books......... 14
3.6 Absence of Material Changes or Events......................... 15
3.7 Absence of Undisclosed Liabilities............................ 15
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3.8 Legal Proceedings; Compliance with Laws................... 15
3.9 Tax Matters............................................... 15
3.10 Employee Benefit Plans.................................... 16
3.11 Insurance................................................. 16
3.12 Allowance for Loan Losses................................. 16
3.13 Environmental Matters..................................... 16
3.14 Securities Reports........................................ 17
3.15 Tax Treatment; Accounting Treatment....................... 17
3.16 Statements True and Correct............................... 17
ARTICLE 4. COVENANTS AND AGREEMENTS.................................. 17
4.1 Reasonable Best Efforts................................... 17
Access to Information; Notice of Certain Matters,
4.2 Confidentiality........................................... 18
4.3 Registration Statement; Shareholder Approval.............. 18
4.4 Operation of the Business of AFC.......................... 19
4.5 Operation of the Business of F&M.......................... 20
4.6 Dividends................................................. 21
4.7 No Solicitation of Other Offers........................... 21
4.8 Regulatory Filings........................................ 21
4.9 Public Announcements...................................... 21
4.10 Accounting Treatment...................................... 22
4.11 Affiliate Agreements...................................... 22
4.12 Benefit Plans; Employment Agreements...................... 22
4.13 NYSE Listing.............................................. 22
4.14 Indemnification........................................... 22
4.15 Stock Option Agreement.................................... 23
ARTICLE 5 CONDITIONS TO THE MERGER.................................. 23
5.1 General Conditions........................................ 23
5.2 Conditions to Obligations of F&M.......................... 24
5.3 Conditions to Obligations of AFC.......................... 25
ARTICLE 6 TERMINATION............................................... 25
6.1 Termination............................................... 25
6.2 Effect of Termination..................................... 26
6.3 Survival of Representations, Warranties and Covenants..... 27
6.4 Fees and Expenses......................................... 27
ARTICLE 7 GENERAL PROVISIONS........................................ 28
7.1 Entire Agreement.......................................... 28
7.2 Binding Effect; No Third-Party Rights..................... 28
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7.3 Waiver and Amendment..................................... 28
7.4 Governing Law............................................ 28
7.5 Notices.................................................. 28
7.6 Counterparts............................................. 29
7.7 Severability............................................. 29
EXHIBIT A -- Plan of Merger
EXHIBIT B -- Stock Option Agreement
EXHIBIT C -- Affiliate Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of July 5, 2000, by and between F&M NATIONAL CORPORATION, a
Virginia corporation ("F&M"), and ATLANTIC FINANCIAL CORP., a Virginia
corporation ("AFC").
WITNESSETH:
WHEREAS, the respective Boards of Directors of F&M and AFC have approved
the affiliation of their companies through the merger of AFC with and into F&M
pursuant to and subject to the terms and conditions of this Agreement and the
Plan of Merger in the form attached hereto as Exhibit A (the "Plan of Merger");
and
WHEREAS, the parties desire to provide for certain conditions,
representations, warranties and agreements in connection with the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements set forth herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
The Merger and Related Matters
1.1 The Merger
At the Effective Date, as defined in Section 1.5 hereof, AFC shall be
merged with and into F&M pursuant to the Plan of Merger attached hereto as
Exhibit A and made a part hereof (the "Merger"). The separate corporate
existence of AFC shall thereupon cease, and F&M will survive and continue to
exist as a Virginia corporation. From and after the Effective Date, the Merger
shall have the effect set forth in Section 13.1-721 of the Virginia Stock
Corporation Act (the "VSCA").
1.2 Conversion of AFC Stock
(a) At the Effective Date, by virtue of the Merger and without any action
on the part of the holders thereof, each share of common stock, par value $5.00
per share, of AFC ("AFC Common Stock") issued and outstanding immediately prior
to the Effective Date (other than Dissenting Shares as defined in Section 1.8)
shall cease to be outstanding and shall be converted into and exchanged for
0.753 shares of common stock, par value $2.00 per share, of F&M ("F&M Common
Stock") pursuant to the terms and conditions set forth in this Agreement and the
Plan of Merger (the "Exchange Ratio").
(b) F&M will issue cash in lieu of fractional shares to the holders of AFC
Common Stock on the basis of the Average Closing Price of F&M Common Stock. As
used herein, "Average Closing Price" shall mean the average closing price of F&M
Common Stock as reported by the New York Stock Exchange (the "NYSE") Composite
Transactions reporting system for each of the ten consecutive NYSE trading days
ending on the fifth trading day prior to the Effective Date.
(c) In the event F&M changes (or establishes a record date for changing)
the number of shares of F&M Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend, recapitalization or
similar transaction with respect to the outstanding F&M Common Stock and the
record date therefor shall be prior to the Effective Date, appropriate and
proportional adjustments will be made to the Exchange Ratio .
1.3 Board of Directors of AFC Subsidiaries; Officers and Employees
(a) Upon consummation of the Merger, F&M shall cause one member of the
Board of Directors of AFC, designated by the Board of Directors of AFC prior to
the Effective Date and subject to the approval of F&M, to become a member of the
Board of Directors of F&M.
(b) At the Effective Date, the Board of Directors of the surviving
corporation in the merger of Peninsula Bank and Trust, Incorporated ("Peninsula
Trust") and United Community Bank ("UCB"), each a Virginia corporation and
subsidiary of AFC (as existing on and after the effective date of such merger,
the "Continuing Bank"), as contemplated by Section 1.7 hereof, shall consist of
all the current directors of AFC. All current directors of Peninsula Trust and
UCB as of the date hereof will be offered a position on the Continuing Bank's
Advisory Board.
(c) The officers and employees of the Continuing Bank will be approved by
F&M prior to the Merger.
1.4 AFC Stock Options
From and after the Effective Date, all employee stock options to purchase
shares of AFC Common Stock (each, a "AFC Stock Option"), that are then
outstanding and unexercised, shall be converted into and become options to
purchase shares of F&M Common Stock, and F&M shall assume each such AFC Stock
Option in accordance with the terms of the plan and agreement by which it is
evidenced; provided, however, that from and after the Effective Date (i) each
such AFC Stock Option assumed by F&M may be exercised solely to purchase shares
of F&M Common Stock, (ii) the number of shares of F&M Common Stock purchasable
upon exercise of such AFC Stock Option shall be equal to the number of shares of
AFC Common Stock that were purchasable under such AFC Stock Option immediately
prior to the Effective Date multiplied by the Exchange Ratio and
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rounding down to the nearest whole share, and (iii) the per share exercise price
under each such AFC Stock Option shall be adjusted by dividing the per share
exercise price of each such AFC Stock Option by the Exchange Ratio, and rounding
up to the nearest cent. The terms of each AFC Stock Option shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction with
respect to F&M Common Stock on or subsequent to the Effective Date.
Notwithstanding the foregoing, each AFC Stock Option which is intended to be an
"incentive stock option" (as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code")) shall be adjusted in accordance with the
requirements of Section 424 of the Code.
1.5 Closing; The Effective Date
The Merger shall become effective on the date and at the time shown on the
Certificate of Merger issued by the Virginia State Corporation Commission
effecting the Merger (the "Effective Date"). Subject to the satisfaction or
waiver of the conditions set forth in Article V, the parties shall use their
reasonable best efforts to cause the Effective Date to occur on or before
January 2, 2001 or on such other date as the parties may agree in writing. All
documents required by this Agreement to be delivered at or prior to the
Effective Date will exchanged by the parties at the closing of the Merger (the
"Merger Closing"), which shall be held on or before the Effective Date. At or
after the Merger Closing, F&M and AFC shall execute and deliver to the Virginia
State Corporation Commission Articles of Merger containing the Plan of Merger.
1.6 Articles of Incorporation and Bylaws
The articles of incorporation and by-laws of F&M immediately after the
Merger shall be those of F&M as in effect immediately prior to the Effective
Date.
1.7 Merger of Subsidiaries
AFC shall take such actions, and shall cause Peninsula Trust and UCB to
take such actions, as may be required in order to effect, prior to the Effective
Time, the merger of UCB with and into Peninsula Trust or, in the alternative,
Peninsula Trust with and into UCB. The name of the Continuing Bank will be "F&M
Bank-Atlantic". In the event that any such actions shall be taken and the
Merger shall not be consummated for any reason other than a breach of this
Agreement by AFC, F&M shall reimburse AFC for all legal and regulatory costs
incurred by AFC with respect to such actions.
1.8 Dissenting Shares
Shareholders of AFC shall have the right to demand and receive payment of
the fair value of their shares of AFC Common Stock pursuant to the provisions of
VSCA Section 13.1-729 et seq. (the "Dissenting Shares").
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1.9 Definitions
Any term defined in this Agreement and the Plan of Merger shall have the
meaning ascribed to it for purposes of this Agreement. In addition:
(a) The term "Knowledge" means the knowledge, after due inquiry, of any
"Executive Officer" of such party, as such term is defined in Regulation O (12
C.F.R. 215).
(b) The term "Material Adverse Effect" means, with respect to a party, any
effect that (i) has or is reasonably likely to have a material and adverse
effect upon the financial position, results of operations or business of the
party and its subsidiaries, taken as a whole, or (ii) would materially impair
the party's ability to perform its obligations under this Agreement or otherwise
materially threaten or materially impede the consummation of the Merger;
provided that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, or (b) changes in
generally accepted accounting principles or regulatory requirements applicable
to financial institutions.
(c) The term "Previously Disclosed" shall mean information set forth in a
schedule (a "Disclosure Schedule", which shall be arranged in sections
corresponding to the sections of this Agreement) from one party to the other
party delivered and dated not later than 5:00 p.m. on July 24, 2000, setting
forth, among other things, items the disclosure of which is necessary or
appropriate in relation to any or all of such party's representations and
warranties and covenants and agreements. Any matter included, whether aggregated
or not, in the AFC Financial Statements or the F&M Financial Statements, as the
case may be, shall be deemed to be Previously Disclosed.
ARTICLE 2
Representations and Warranties of AFC
AFC represents and warrants to F&M as follows:
2.1 Organization, Standing and Power of AFC
AFC is a Virginia corporation duly organized, validly existing and in good
standing under the laws of Virginia. AFC has the corporate power and authority
to carry on its business in Virginia as now conducted and to own and operate its
assets, properties and business; and AFC has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and the
Stock Option Agreement of even date herewith by and between AFC and F&M, a copy
of which is attached hereto as Exhibit B (the "Option Agreement"), and to
consummate the transactions contemplated hereby and
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thereby. AFC is duly registered as a bank holding company under the Bank Holding
Company Act of 1956.
2.2 Organization, Standing and Power of the AFC Subsidiaries
Each subsidiary of AFC is identified on its Disclosure Schedule (the "AFC
Subsidiaries" and, collectively with AFC, the "AFC Companies") is a duly
organized corporation, validly existing and in good standing under applicable
laws. Each AFC Subsidiary (i) has full corporate power and authority to carry
on its business as now conducted and (ii) is duly qualified to do business in
the states where its ownership or leasing of property or the conduct of its
business requires such qualification and where the failure to so qualify would
have a Material Adverse Effect on AFC on a consolidated basis. The outstanding
shares of capital stock of each of the AFC Subsidiaries are validly issued and
outstanding, fully paid and nonassessable and all such shares are directly or
indirectly owned by AFC free and clear of all liens, claims and encumbrances or
preemptive rights of any person.
2.3 Authorized and Effective Agreements
(a) Subject to receipt of the approval of the shareholders of AFC of this
Agreement and the Plan of Merger, this Agreement, the Plan of Merger and the
Option Agreement and the transactions contemplated hereby and thereby have been
authorized by all necessary corporate action on the part of AFC on or prior to
the date hereof. This Agreement, the Plan of Merger and the Option Agreement are
valid and legally binding obligations of AFC, enforceable against AFC in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws affecting the enforcement of rights of creditors or
by general principles of equity).
(b) Neither the execution and delivery of this Agreement, the Plan of
Merger and the Option Agreement, nor the consummation of the transactions
contemplated herein or therein, nor compliance by AFC with any of the provisions
hereof or thereof will: (i) conflict with or result in a breach of any provision
of the Articles of Incorporation or Bylaws of AFC; (ii) except as Previously
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Disclosed in its Disclosure Schedule, constitute or a default under, or give
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rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon, any property
or asset of AFC pursuant to any (A) note, bond, mortgage, indenture, or (B) any
material license, agreement or other instrument or obligation, to which AFC is a
party or by which it or any of its properties or assets may be bound, or (iii)
subject to the receipt of all required regulatory and shareholder approvals,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to AFC.
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2.4 Capital Structure
The authorized capital stock of AFC consists of 20,000,000 shares of common
stock, par value $5.00 per share, of which 4,168,185 shares are issued and
outstanding as of this date. All outstanding shares of AFC Common Stock have
been duly authorized and validly issued, are fully paid and nonassessable and
have not been issued in violation of the preemptive rights of any person. As of
the date hereof, there are options held by employees of AFC that represent
rights to purchase a total of 120,642 shares of AFC Common Stock.
2.5 Rights
As of the date of this Agreement, there are not any shares of capital stock
of AFC reserved for issuance, or any outstanding or authorized options,
warrants, rights, agreements, convertible or exchangeable securities, or other
commitments, contingent or otherwise, relating to its capital stock pursuant to
which AFC is or may become obligated to issue shares of capital stock or any
securities convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of its capital stock (collectively, "Rights"), except
as contemplated by the Option Agreement and as Previously Disclosed in its
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Disclosure Schedule (which shall include copies of the stock option plans and
individual stock option agreements pursuant to which employees of AFC may
exercise stock options).
2.6 Financial Statements; Books and Records; Minute Books
The AFC Financial Statements (as defined below) fairly present or will
fairly present, as the case may be, the consolidated financial position of AFC
as of the dates indicated and the consolidated results of operations, changes in
stockholders' equity and statements of cash flows for the periods or as of the
dates set forth therein (subject, in the case of unaudited interim statements,
to normal recurring audit adjustments that are not material in amount or effect)
in conformity with generally accepted accounting principles applicable to
financial institutions applied on a consistent basis. The books and records of
the AFC Companies fairly reflect in all material respects the transactions to
which they are a party or by which their properties are subject or bound. Such
books and records have been properly kept and maintained and are in compliance
in all material respects with all applicable legal and accounting requirements.
The minute books of the AFC Companies contain accurate records of all corporate
actions of their respective shareholders and Boards of Directors (including
committees of its Board of Directors). The AFC Financial Statements shall mean
(i) the consolidated balance sheets of AFC as of December 31, 1999 and 1998 and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years ended December 31, 1999, 1998 and 1997
(including related notes and schedules, if any) and (ii) the consolidated
balance sheets of AFC and related consolidated statements of income and
stockholders' equity (including related notes
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and schedules, if any) with respect to quarterly periods ended subsequent to
December 31, 1999.
2.7 Absence of Material Changes and Events
Since March 31, 2000 and except as Previously Disclosed in its Disclosure
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Schedule, there has not been any change in the financial condition or results of
operations of AFC or the AFC Subsidiaries which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect.
2.8 Absence of Undisclosed Liabilities
AFC has not incurred any liability (contingent or otherwise) that is
material to AFC on a consolidated basis or that, when combined with all similar
liabilities, would be material to AFC on a consolidated basis, except as
Previously Disclosed in its Disclosure Schedule or as disclosed in the AFC
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Financial Statements and except for liabilities incurred in the ordinary course
of business consistent with past practice since the date of the most recent AFC
Financial Statements.
2.9 Legal Proceedings; Compliance with Laws
Except as Previously Disclosed in its Disclosure Schedule, there are no
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actions, suits or proceedings instituted or pending or, to the Knowledge of AFC,
threatened against any of the AFC Companies or against any property, asset,
interest or right of the AFC Companies, or against any officer, director or
employee of the AFC Companies that would, if determined adversely to AFC or any
AFC Subsidiary, have a Material Adverse Effect on AFC on a consolidated basis.
To the Knowledge of AFC, the AFC Companies have complied in all material
respects with all laws, ordinances, requirements, regulations or orders
applicable to its business (including environmental laws, ordinances,
requirements, regulations or orders).
2.10 Tax Matters
The AFC Companies have filed all federal, state and local tax returns and
reports ("Tax Returns") required to be filed, and all such Tax Returns were
correct and complete in all material respects. All Taxes (as defined below)
owed by the AFC Companies have been paid, are reflected as a liability in the
AFC Financial Statements, or are being contested in good faith and have been
Previously Disclosed in its Disclosure Schedule. Except as Previously
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Disclosed, no tax return or report of the AFC Companies is under examination by
any taxing authority or the subject of any administrative or judicial
proceeding, and no unpaid tax deficiency has been asserted against the AFC
Companies by any taxing authority. As used herein, "Taxes" mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
income, gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding,
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payroll, employment, employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, custom duties, fees, assessments or
chargers of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority.
2.11 Property
Except as Previously Disclosed in its Disclosure Schedule or reserved
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against in the AFC Financial Statements, the AFC Companies have good and
marketable title free and clear of all material liens, encumbrances, charges,
defaults or equitable interests to all of the properties and assets, real and
personal, reflected in the balance sheet included in the AFC Financial
Statements as of March 31, 2000 or acquired after such date. To the Knowledge of
AFC, all buildings, and all fixtures, equipment, and other property and assets
that are material to its business, held under leases or subleases, are held
under valid instruments enforceable in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws.
To the Knowledge of AFC, the buildings, structures, and appurtenances owned,
leased, or occupied by the AFC Companies are in good operating condition and in
a state of good maintenance and repair and comply with applicable zoning and
other municipal laws and regulations, and there are no latent defects therein.
2.12 Employee Benefit Plans
(a) AFC has Previously Disclosed in its Disclosure Schedule all employee
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benefit plans and programs, including without limitation: (i) all retirement,
savings and other pension plans; (ii) all health, severance, insurance,
disability and other employee welfare plans; and (iii) all employment, vacation
and other similar plans, all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other employee
benefit plans, programs or arrangements, and all employment or compensation
arrangements, in each case for the benefit of or relating to current and former
employees of AFC (collectively, the "AFC Benefit Plans").
(b) None of the AFC Benefit Plans is a "multi-employer plan" as defined
in section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(c) Except as Previously Disclosed in its Disclosure Schedule, all AFC
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Benefit Plans are in compliance in all material respects with applicable laws
and regulations, and AFC has administered the AFC Benefit Plans in accordance
with applicable laws and regulations in all material respects.
(d) Each AFC Benefit Plan that is intended to be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code") has been
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determined by the Internal Revenue Service to be so qualified, as reflected in a
current favorable determination letter.
(e) AFC has made available to F&M copies of all AFC Benefit Plans and,
where applicable, summary plan descriptions, and annual reports required to be
filed within the last three years pursuant to ERISA or the Code with respect to
the AFC Benefit Plans.
(f) To the knowledge of AFC, AFC has not engaged in any prohibited
transactions, as defined in Code section 4975 or ERISA section 406, with respect
to any AFC Employee Benefit Plan that is a pension plan as defined in Section
3(2) of ERISA.
(g) There are no actions, suits, investigations or claims pending,
threatened or anticipated (other than routine claims for benefits) with respect
to any AFC Benefit Plans.
(h) No compensation or benefit that is or will be payable in connection
with the transactions contemplated by this Agreement will be characterized as an
"excess parachute payment" within the meaning of Code section 280G. Except as
Previously Disclosed in its Disclosure Schedule, no AFC Benefit Plan contains
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any provision which would give rise to any severance, termination or other
payments or liabilities as a result of the transactions contemplated by this
Agreement.
(i) AFC has not established and does not maintain a welfare plan, as
defined in ERISA section 3(1), that provides benefits to an employee at the
expense of AFC after a termination of employment, except as required by the
Consolidated Omnibus Budget Reconciliation Act of 1985.
2.13 Insurance
Each of the AFC Companies currently maintains insurance in amounts
reasonably necessary for its operations and, to the Knowledge of AFC, similar in
scope and coverage to that maintained by other entities similarly situated.
Since January 1, 2000, none of the AFC Companies has received any notice of a
premium increase or cancellation or a failure to renew with respect to any
insurance policy or bond and, within the last three fiscal years, none of the
AFC Companies has been refused any insurance coverage sought or applied for, and
AFC has no reason to believe that existing insurance coverage cannot be renewed
as and when the same shall expire upon terms and conditions as favorable as
those presently in effect, other than possible increases in premiums or
unavailability of coverage that do not result from any extraordinary loss
experience on the part of the AFC Companies.
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2.14 Loans; Allowance for Loan Losses
(a) Except as Previously Disclosed in its Disclosure Schedule, to the
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Knowledge of AFC each loan reflected as an asset in the AFC Financial Statements
(i) is evidenced by notes, agreements or evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected, (iii)
is the legal, valid and binding obligation of the obligor and any guarantor,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles, and no defense,
offset or counterclaim has been asserted with respect to any such loan which if
successful could have a Material Adverse Effect, and (iv) in all material
respects was made in accordance with AFC's standard loan policies.
(b) AFC has Previously Disclosed in its Disclosure Schedule the
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aggregate amounts as of a recent date of all loans, losses, advances, credit
enhancements, other extensions of credit, commitments and interest-bearing
assets of the AFC Companies that have been classified by any bank examiner
(whether regulatory or internal) as "Other Loans Specially Mentioned," "Special
Mention," "Substandard," "Doubtful," "Loss," "Classified" or words of similar
import, and AFC shall promptly on a periodic basis inform F&M of any such
classification arrived at any time after the date hereof.
(c) The real property classified as other real estate owned ("OREO")
included in non-performing assets is carried net of reserve at the lower of cost
or market value based on independent appraisals.
(d) The allowance for loan losses reflected on the statements of
financial condition included in the AFC Financial Statements, as of their
respective dates, is adequate in all material respects under the requirements of
generally accepted accounting principles and regulatory accounting principles to
provide for reasonably anticipated losses on outstanding loans.
2.15 Environmental Matters
(a) Except as Previously Disclosed in its Disclosure Schedule, the AFC
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Companies are in substantial compliance with all Environmental Laws (as defined
below). AFC has not received any communication alleging that AFC is not in such
compliance and there are no present circumstances that would prevent or
interfere with the continuation of such compliance.
(b) AFC has not received notice of pending, and are not aware of any
threatened, legal, administrative, arbitral or other proceedings, asserting
Environmental Claims (as defined below) or other claims, causes of action or
governmental investigations of any nature, seeking to impose, or that could
result in the imposition of, any material
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liability arising under any Environmental Laws upon (i) AFC, (ii) any person or
entity whose liability for any Environmental Claim AFC has or may have retained
either contractually or by operation of law, (iii) any real or personal property
owned or leased by AFC, or any real or personal property which AFC has been, or
is, judged to have managed or to have supervised or to have participated in the
management of, or (iv) any real or personal property in which AFC holds a
security interest securing a loan recorded on the books of AFC. AFC is not
subject to any agreement, order, judgment, decree or memorandum by or with any
court, governmental authority, regulatory agency or third party imposing any
such liability.
(c) With respect to all real and personal property owned or leased by
AFC, or all real and personal property which AFC has been, or is, judged to have
managed or to have supervised or to have participated in the management of, AFC
will promptly provide F&M with access to copies of any environmental audits,
analyses and surveys that have been prepared relating to such properties (a list
of which will be Previously Disclosed in its Disclosure Schedule). The AFC
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Companies are in compliance in all material respects with all recommendations
contained in any such environmental audits, analyses and surveys.
(d) There are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis of any
Environmental Claim or other claim or action or governmental investigation that
could result in the imposition of any liability arising under any Environmental
Laws against AFC or against any person or entity whose liability for any
Environmental Claim AFC has or may have retained or assumed either contractually
or by operation of law.
(e) For purposes of this Agreement, the following terms shall have the
following meanings:
(1) "Environmental Claim" means any written notice from any
governmental authority or third party alleging potential liability
(including, without limitation, potential liability for investigatory
costs, clean-up, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) arising out of, based
upon, or resulting from the presence, or release into the environment, of
any Materials of Environmental Concern.
(2) "Environmental Laws" means all applicable federal, state and
local laws and regulations, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, that relate
to pollution or protection of human health or the environment.
(3) "Materials of Environmental Concern" means pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products
and any other materials regulated under Environmental Laws.
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2.16 Takeover Laws
AFC has taken all action necessary to exempt this Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby from the
requirements of any "control share," "fair price," "affiliate transaction" or
other anti-takeover laws and regulations of any state, including without
limitation Sections 13.1-725 through 13.1-728 of the VSCA (because a majority of
AFC's disinterested directors approved such transactions for such purposes prior
to any "determination date" with respect to F&M) and Sections 13.1-728.1 through
13.1-728.9 of the VSCA.
2.17 Brokers
Other than the financial advisory services performed for AFC by Xxxxxxxxx &
Company LLC (on terms disclosed to F&M), neither AFC nor any of its
subsidiaries, nor any of their respective officers, directors or employees has
employed any broker, finder or financial advisor or incurred any liability for
any fees or commissions in connection with transactions contemplated by this
Agreement.
2.18 Securities Reports
AFC has filed with the Securities and Exchange Commission (the "SEC") all
required forms, reports and documents required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). AFC's Annual Report on Form 10-KSB for
the year ended December 31, 1999, and all other reports, definitive proxy
statements or documents filed or to be filed by it subsequent to December 31,
1999 under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form
filed, or to be filed, with the SEC (i) complied or will comply in all material
respects as to form with the applicable requirements under the Exchange Act and
(ii) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
2.19 Tax Treatment; Accounting Treatment
As of the date hereof, AFC is aware of no reason why the Merger will fail
to qualify as a tax-free reorganization under Section 368(a) of the Code or may
not be accounted for as "pooling of interests" under generally accepted
accounting principles.
2.20 Statements True and Correct
When the Registration Statement on Form S-4 (the "Registration Statement")
to be filed by F&M with the SEC shall become effective, and at all times
subsequent thereto up to and including the AFC shareholders' meeting called to
vote upon the Merger, such Registration Statement and all amendments or
supplements thereto, with respect to all
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information set forth therein furnished by AFC relating to AFC, (i) shall comply
in all material respects with the applicable provisions of the federal and state
securities laws, and (ii) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they are made, not misleading.
ARTICLE 3
Representations and Warranties of F&M
F&M represents and warrants to AFC as follows:
3.1 Organization, Standing and Power
F&M is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia. F&M has the corporate power and
authority to carry on its business as now conducted and to own and operate its
assets, properties and business; and F&M has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. F&M is duly registered as a
bank holding company under the Bank Holding Company Act of 1956.
3.2 Organization, Standing and Power of F&M Subsidiaries
Each subsidiary of F&M (the "F&M Subsidiaries" and, collectively with F&M,
the "F&M Companies") is a duly organized corporation, validly existing and in
good standing in their respective states of incorporation. Each F&M Subsidiary
(i) has full corporate power and authority to carry on its business as now
conducted and (ii) is duly qualified to do business in the states where its
ownership or leasing of property or the conduct of its business requires such
qualification and where the failure to so qualify would have a material adverse
effect on F&M on a consolidated basis. The outstanding shares of capital stock
of each of the F&M Subsidiaries are validly issued and outstanding, fully paid
and nonassessable and all such shares are directly or indirectly owned by F&M
free and clear of all liens, claims and encumbrances or preemptive rights of any
person.
3.3 Authorized and Effective Agreement
(a) This Agreement and the Plan of Merger and the transactions
contemplated hereby and thereby have been authorized by all necessary corporate
action on the part of F&M. This Agreement and the Plan of Merger are valid and
legally binding obligations of F&M, enforceable against it in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting the enforcement of rights of creditors or by general
principles of equity).
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(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated herein, nor compliance by F&M with
any of the provisions hereof will: (i) conflict with or result in a breach of
any provision of the Articles of Incorporation or Bylaws of F&M or any F&M
Subsidiary; (ii) constitute or result in the breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon, any property or asset of F&M
or any F&M Subsidiary pursuant to any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation that would have a Material Adverse
Effect F&M, or (iii) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to F&M or any F&M Subsidiary.
3.4 Capital Structure
The authorized capital stock of F&M consists of: (i) 5,000,000 shares of
preferred stock, no par value per share, of which none are issued and
outstanding; and (ii) 30,900,000 shares of common stock, par value $2.00 per
share, of which 24,857,526 shares were issued and outstanding on May 31, 2000.
All outstanding shares of F&M Common Stock have been duly issued and are validly
outstanding, fully paid and nonassessable and have not been issued in violation
of the preemptive rights of any person. The shares of F&M Common Stock to be
issued in exchange for shares of AFC Common Stock upon consummation of the
Merger will have been duly authorized and, when issued in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable,
will not be issued in violation of the preemptive rights of any person, and will
be duly registered under the applicable federal and state securities laws.
3.5 Financial Statements; Books and Records; Minute Books
The F&M Financial Statements (as defined below) fairly present or will
fairly present, as the case may be, the consolidated financial position of F&M
as of the dates indicated and the consolidated results of operations, changes in
shareholders' equity and statements of cash flows for the periods or as of the
dates set forth therein (subject, in the case of unaudited interim statements,
to normal recurring audit adjustments that are not material in amount or effect)
in conformity with generally accepted accounting principles applicable to
financial institutions applied on a consistent basis. The books and records of
the F&M Companies fairly reflect in all material respects the transactions to
which each company is a party or by which its properties are subject or bound.
Such books and records have been properly kept and maintained and are in
compliance in all material respects with all applicable legal and accounting
requirements. The minute books of the F&M Companies contain accurate records of
all corporate actions of their respective shareholders and Boards of Directors
(including committees of its Board of Directors). The F&M Financial Statements
shall mean (i) the consolidated balance sheets of F&M as of December 31, 1999
and 1998 and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years ended December 31, 1999,
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1998 and 1997 (including related notes and schedules, if any) and (ii) the
consolidated balance sheets of F&M and related consolidated statements of
income, shareholders' equity and cash flows (including related notes and
schedules, if any) with respect to quarterly periods ended subsequent to
December 31, 1999.
3.6 Absence of Material Changes or Events
Since March 31, 2000, there has not been any change in the financial
condition or results of operations of F&M or the F&M Subsidiaries which,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect.
3.7 Absence of Undisclosed Liabilities
Neither F&M nor any F&M Subsidiary has any liability (contingent or
otherwise) that is material to F&M on a consolidated basis or that, when
combined with all similar liabilities, would be material to F&M on a
consolidated basis, except as disclosed in the F&M Financial Statements and
except for liabilities incurred in the ordinary course of business consistent
with past practice since the date of the most recent F&M Financial Statements.
3.8 Legal Proceedings; Compliance with Laws
There are no actions, suits or proceedings instituted or pending or, to the
Knowledge of F&M, threatened against any of the F&M Companies or against any
property, asset, interest or right of any of the F&M Companies or against any
officer, director or employee of any of the F&M Companies that would, if
determined adversely to F&M or any F&M Subsidiary, have a Material Adverse
Effect on F&M on a consolidated basis. To the Knowledge of F&M, the F&M
Companies have complied in all material respects with all laws, ordinances,
requirements, regulations or orders applicable to their respective businesses
(including environmental laws, ordinances, requirements, regulations or orders).
3.9 Tax Matters
The F&M Companies have filed all Tax Returns required to be filed, and all
such Tax Returns were correct and complete in all material respects. All Taxes
owed by the F&M Companies have been paid, are reflected as a liability in the
F&M Financial Statements, or are being contested in good faith and have been
Previously Disclosed in its Disclosure Schedule. Except as Previously Disclosed,
no tax return or report of the F&M Companies is under examination by any taxing
authority or the subject of any administrative or judicial proceeding, and no
unpaid tax deficiency has been asserted against the F&M Companies by any taxing
authority.
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3.10 Employee Benefit Plans
(a) All F&M employee benefit plans are in compliance with the applicable
terms of ERISA and the Code and any other applicable laws, rules and
regulations, the breach or violation of which could result in a material
liability to F&M on a consolidated basis.
(b) No F&M employee benefit plan subject to ERISA that is a defined
benefit pension plan has any "unfunded current liability," as that term is
defined in Section 302(d)(8)(A) of ERISA, and the present fair market value of
the assets of any such plan exceeds the plan's `benefit liabilities,' as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan was terminated in accordance with all
applicable legal requirements.
3.11 Insurance
Each of the F&M Companies currently maintains insurance in amounts
reasonably necessary for its operations and, to the Knowledge of F&M, similar in
scope and coverage to that maintained by other entities similarly situated.
Since January 1, 2000, none of the F&M Companies has received any notice of a
premium increase or cancellation or a failure to renew with respect to any
insurance policy or bond and, within the last three fiscal years, none of the
F&M Companies has been refused any insurance coverage sought or applied for, and
F&M has no reason to believe that existing insurance coverage cannot be renewed
as and when the same shall expire upon terms and conditions as favorable as
those presently in effect, other than possible increases in premiums or
unavailability of coverage that do not result from any extraordinary loss
experience on the part of the F&M Companies.
3.12 Allowance for Loan Losses
The allowance for loan losses reflected on the balance sheets included in
the F&M Financial Statements, as of their respective dates, is adequate in all
material respects under the requirements of generally accepted accounting
principles and regulatory accounting principles to provide for reasonably
anticipated losses on outstanding loans.
3.13 Environmental Matters
To the Knowledge of F&M, the F&M Companies are in substantial compliance
with all Environmental Laws. None of the F&M Companies has received any
communication alleging that F&M or any F&M Subsidiary is not in such compliance
and, to the Knowledge of F&M, there are no present circumstances that would
prevent or interfere with the continuation of such compliance.
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3.14 Securities Reports
F&M has filed with the SEC all required forms, reports and documents
required under the Exchange Act. F&M's Annual Report on Form 10-K for the year
ended December 31, 1999, and all other reports, definitive proxy statements or
documents filed or to be filed by it subsequent to December 31, 1999 under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form filed, or to
be filed, with the SEC (i) complied or will comply in all material respects as
to form with the applicable requirements under the Exchange Act and (ii) did not
and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
3.14 Tax Treatment; Accounting Treatment
As of the date hereof, F&M is aware of no reason why the Merger will fail
to qualify as a tax-free reorganization under Section 368(a) of the Code or may
not be accounted for as "pooling of interests" under generally accepted
accounting principles.
3.15 Statements True and Correct
When the Registration Statement to be filed by F&M with the SEC shall
become effective, and at all times subsequent thereto up to and including the
AFC shareholders' meeting called to consider and vote on the approval of the
Merger, such Registration Statement and all amendments or supplements thereto,
with respect to all information set forth therein furnished by F&M relating to
F&M (i) shall comply in all material respects with the applicable provisions of
the federal and state securities laws, and (ii) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
ARTICLE 4
Covenants and Agreements
4.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, F&M and AFC agree to
use their reasonable best efforts in good faith to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary or desirable,
or advisable under applicable laws, so as to permit consummation of the Merger
as promptly as practicable and shall cooperate fully with the other party hereto
to that end.
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4.2 Access to Information; Notice of Certain Matters; Confidentiality
(a) F&M and AFC each will keep the other advised of all material
developments relevant to its business and to consummation of the transactions
contemplated herein. F&M and AFC each may make or cause to be made such further
investigation of the operational, financial and legal condition of the other as
such party reasonably deems necessary or advisable in connection with the
Merger, provided, however, that such investigation shall not interfere
unnecessarily with normal operations. F&M and AFC agree to furnish the other and
the other's advisors with such financial data and other information with respect
to its business and properties as such other party shall from time to time
reasonably request. No investigation pursuant to this Section 4.2 shall affect
or be deemed to modify any representation or warranty made by, or the conditions
to the obligations to consummate the Merger of, such party hereto.
(b) F&M and AFC shall give prompt notice to the other of any fact, event
or circumstance known to it that (i) is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in any Material Adverse Effect with respect to it or (ii) would cause or
constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
(c) Each party shall, and shall cause each of its directors, officers,
attorneys and advisors, to maintain the confidentiality of all information
obtained in such investigation which is not otherwise publicly disclosed by the
other party, such undertaking with respect to confidentiality to survive any
termination of this Agreement. In the event of the termination of this
Agreement, each party shall return to the furnishing party or, at the request of
the furnishing party, destroy and certify the destruction of all confidential
information previously furnished in connection with the transactions
contemplated by this Agreement.
4.3 Registration Statement; Shareholder Approval
(a) F&M and AFC agree to cooperate in the preparation of the
Registration Statement to be filed by F&M with the SEC in connection with the
issuance of F&M Common Stock in the Merger (including the proxy statement and
prospectus and other proxy solicitation materials of F&M and AFC constituting a
part thereof (the "Proxy Statement") and all related documents). F&M and AFC
agree to use all reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act of 1933, as amended (the "Securities
Act"), as promptly as reasonably practicable after filing thereof. F&M shall
also take any action required to be taken under state securities or "Blue Sky"
laws in connection with the issuance of F&M Common Stock pursuant to the Merger.
(b) AFC shall submit this Agreement and the Plan of Merger to its
shareholders at a special meeting to be held as promptly as practicable after
the Registration Statement is
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declared effective for the purpose of approving the Merger. The Board of
Directors of AFC shall recommend such approval, and AFC shall take all
reasonable lawful action to solicit such approval by its shareholders; provided,
however, that if the Board of Directors of AFC shall have reasonably determined
in good faith (after consultation with its counsel) that such recommendation is
reasonably likely to constitute a breach of its fiduciary duties to the
shareholders of AFC, then the Board of Directors of AFC shall not be obligated
to recommend the approval of this Agreement and Plan of Merger.
4.4 Operation of the Business of AFC
AFC agrees that, except as expressly permitted by this Agreement or
otherwise consented to or approved in writing by F&M, during the period from the
date hereof to the Effective Date:
(a) AFC will conduct its operations only in the ordinary and usual
course of business consistent with past practice (subject, in any event, to the
provisions of paragraph (c) below) and will use its best efforts to keep
available the services of its officers and employees and maintain satisfactory
relationships with customers, suppliers, employees and others having business
relationships with them.
(b) AFC shall not take any action, engage in any transactions or enter
into any agreement which would adversely affect or delay in any material respect
the ability of F&M or AFC to obtain any necessary approvals, consents or waivers
of any governmental authority or third party required for the transactions
contemplated hereby or to perform its covenants and agreements on a timely basis
under this Agreement.
(c) AFC will not:
(1) Other than pursuant to stock options Previously Disclosed in
--------------------
its Disclosure Schedule and currently outstanding as of the date hereof:
(i) issue, sell or otherwise permit to become outstanding, or authorize the
creation of, any additional shares of capital stock, any stock appreciation
rights or any Rights; (ii) enter into any agreement with respect to the
foregoing; or (iii) permit any additional shares of capital stock to become
subject to new grants of employee stock options, stock appreciation rights,
or similar stock-based employee rights;
(2) Enter into or amend any written employment agreement,
severance or similar agreements or arrangements with any of its directors,
officers or employees, or grant any salary or wage increase or increase any
employee benefit (including incentive or bonus payments), except for normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice;
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(3) Enter into or amend (except as may be required by applicable
law) any pension, retirement, stock option, stock purchase, savings, profit
sharing, deferred compensation, consulting, bonus, group insurance or other
employee benefit, incentive, welfare contract, plan or arrangement, or any
trust agreement related thereto, in respect of any directors, officers or
employees, including without limitation taking any action that accelerates
the vesting or exercise of any benefits payable thereunder;
(4) Incur any obligation or liability (whether absolute or
contingent, excluding suits instituted against it), make any pledge, or
encumber any of its assets, nor dispose of any of its assets in any other
manner, except in the ordinary course of its business and for adequate
value, or as otherwise specifically permitted in this Agreement;
(5) Change its lending, investment, asset/liability management or
other material banking policies in any material respect, except as may be
required by applicable law;
(6) Alter, amend or repeal its bylaws or articles of
incorporation;
(7) Take any other action which would make any representation or
warranty in Article 2 hereof untrue; or
(8) Agree or commit to do anything prohibited by this Section 4.4.
4.5 Operation of the Business of F&M
F&M agrees that, except as expressly permitted by this Agreement or
otherwise consented to or approved in writing by AFC, during the period from the
date hereof to the Effective Date:
(a) F&M will and will cause each of the F&M Subsidiaries to conduct
their respective operations only in the ordinary and usual course of business
consistent with past practice and will use its best efforts to preserve intact
their respective business organizations, keep available the services of their
officers and employees and maintain satisfactory relationships with customers,
suppliers, employees and others having business relationships with them.
(b) F&M shall not, and shall not permit any of the F&M Subsidiaries to,
take any action, engage in any transactions or enter into any agreement
which would adversely affect or delay in any material respect the ability
of F&M or AFC to obtain any necessary approvals, consents or waivers of any
governmental authority or third party required for the transactions
contemplated hereby or to perform its covenants and agreements on a timely
basis under this Agreement.
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4.6 Dividends
F&M agrees that prior to the Effective Date AFC may declare and pay its
regular quarterly cash dividend in an amount not to exceed $0.12 per share.
4.7 No Solicitation of Other Offers
Without the prior written consent of F&M, AFC shall not, and shall cause
its officers, directors, agents, advisors and affiliates not to, solicit or
encourage inquiries or proposals with respect to, furnish any information
relating to, or participate in any negotiations or discussions concerning, an
Acquisition Transaction (as hereinafter defined); provided, however, that
nothing contained in this Section 4.7 shall prohibit the Board of Directors of
AFC from furnishing information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited, written bona fide proposal
regarding an Acquisition Transaction if, and only to the extent that (i) the
Board of Directors of AFC concludes in good faith, after consultation with and
based upon the written advice of outside counsel, that the failure to furnish
such information or enter into such discussions or negotiations would likely
constitute a breach of its fiduciary duties to shareholders under applicable
law, (ii) prior to taking such action, AFC receives from such person or entity
an executed confidentiality agreement, and (iii) the Board of Directors of AFC
concludes in good faith that the proposal regarding the Acquisition Transaction
contains an offer of consideration that is superior to the consideration set
forth herein. AFC shall immediately notify F&M orally and in writing of its
receipt of any such proposal or inquiry, of the material terms and conditions
thereof, and of the identity of the person making such proposal or inquiry. For
purposes of this Agreement, "Acquisition Transaction" means any merger,
consolidation, share exchange, joint venture, business combination or similar
transaction involving AFC or any purchase of all or any material portion of the
assets of AFC.
4.8 Regulatory Filings
F&M and AFC shall use their reasonable best efforts to prepare and file as
soon as practicable after the date hereof all required applications for
regulatory approval of the Merger. F&M shall use its best efforts to obtain
prompt approval of each required application.
4.9 Public Announcements
Each party will consult with the other before issuing any press release or
otherwise making any public statements with respect to the Merger and shall not
issue any such press release or make any such public statement prior to such
consultations, except as may be required by law.
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4.10 Accounting Treatment
F&M and AFC shall each use their best efforts to ensure that the Merger
qualifies for pooling-of-interests accounting treatment.
4.11 Affiliate Agreements
AFC has identified to F&M all persons who were, as of the date hereof,
directors or executive officers of AFC (the "Affiliates"). AFC has delivered a
written letter agreement in the form of Exhibit C hereto from each Affiliate.
4.12 Benefit Plans; Certain Officer Agreements
(a) Upon consummation of the Merger, as soon as administratively
practicable, employees of AFC shall be entitled to participate in the F&M
pension, health and welfare benefit and similar plans on the same terms and
conditions as employees of the F&M Companies, giving effect to years of service
for purposes of eligibility to participate, eligibility for benefits, and
vesting with AFC as if such service were with F&M and limiting preexisting
condition exclusions in accordance with the Health Insurance Portability and
Accountability Act of 1996.
(b) F&M shall offer employment and severance agreements to those AFC
employees as have been Previously Disclosed by F&M on substantially the same
terms as Previously Disclosed by F&M prior to the date hereof.
4.13 NYSE Listing
F&M shall use its reasonable best efforts to list, as of the Effective
Date, on the NYSE upon official notice of issuance, the shares of F&M Common
Stock to be issued in the Merger.
4.14 Indemnification
Following the Effective Date and for a period of six years thereafter, F&M
shall indemnify, defend and hold harmless any person who has rights to
indemnification from AFC, to the same extent and on the same conditions as such
person is entitled to indemnification pursuant to applicable law and AFC's
Articles of Incorporation or Bylaws, as in effect on the date of this Agreement,
to the extent legally permitted to do so with respect to matters occurring on or
prior to the Effective Date. Without limiting the foregoing, in any case in
which corporate approval may be required to effectuate any indemnification, F&M
shall direct, if the party to be indemnified elects, that the determination of
permissibility of indemnification shall be made by independent counsel mutually
agreed upon between F&M and the indemnified party. F&M shall use its reasonable
best efforts to maintain AFC's existing directors' and officers' liability
policy,
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or some other policy, including F&M's existing policy, providing at least
comparable coverage, covering persons who are currently covered by such
insurance of AFC for a period of three years after the Effective Date on terms
no less favorable than those in effect on the date hereof.
4.15 Stock Option Agreement
AFC shall grant to F&M an option to acquire such number of shares of AFC
Common Stock that would equate to 19.9% of the issued and outstanding common
stock of AFC as of the date hereof, all in accordance with the Option Agreement.
ARTICLE 5
Conditions to the Merger
5.1 General Conditions
The respective obligations of each of F&M and AFC to effect the Merger
shall be subject to the fulfillment or waiver at or prior to the Effective Date
of the following conditions:
(a) Corporate Action. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and consummation of the
transactions contemplated hereby shall have been duly and validly taken,
including without limitation the approval of the shareholders of AFC.
(b) Registration Statement; NYSE Listing. The Registration Statement
shall have been declared effective under the Securities Act, and F&M shall
received all state securities laws or "blue sky" permits and other
authorizations or there shall be exemptions from registration requirements
necessary to issue F&M Common Stock in connection with the Merger, and neither
the Registration Statement nor any such permit or authorization shall be subject
to a stop order or any threatened stop order of the SEC or any state securities
commissioner. The shares of F&M Common Stock to be issued in connection with the
Merger shall have been approved for listing on the New York Stock Exchange.
(c) Regulatory Approvals. F&M and AFC shall have received all regulatory
approvals required in connection with the transactions contemplated by this
Agreement, all notice periods and waiting periods required after the granting of
any such approvals shall have passed, and all such approvals shall be in effect;
provided, however, that no such approvals shall have imposed any condition or
requirement which, in the reasonable opinion of the Boards of Directors of F&M
or AFC, would so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement as to render consummation of
the Merger inadvisable or unduly burdensome.
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(d) Tax Opinion. F&M and AFC shall have received the opinion of XxXxxxx
Xxxx, A Professional Corporation, counsel to F&M, in form and substance
satisfactory to F&M and AFC and dated as of the Effective Date to the effect
that the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code and that no gain or loss will be recognized by the
shareholders of AFC to the extent they receive F&M Common Stock solely in
exchange for their AFC Common Stock in the Merger. In rendering its opinions,
such counsel may rely upon representations contained in certificates of officers
of F&M, AFC and others.
(e) Opinions of Counsel. AFC shall have delivered to F&M and F&M shall
have delivered to AFC opinions of counsel, dated as of the Effective Date, as to
such matters as they may each reasonably request with respect to the
transactions contemplated by this Agreement and in a form reasonably acceptable
to each of them.
(f) Legal Proceedings. Neither F&M nor AFC shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger.
5.2 Conditions to Obligations of F&M
The obligations of F&M to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Date of the following
additional conditions:
(a) Representations and Warranties. The representations and warranties
of AFC set forth in Article 2 shall be true and correct as of the date of this
Agreement and as of the Effective Date as though made on the Effective Date,
except (i) for any such representations and warranties made as of a specified
date, which shall be true and correct as of such date, (ii) as expressly
contemplated by this Agreement, or (iii) for representations and warranties the
inaccuracies of which relate to matters that, individually or in the aggregate,
do not materially adversely affect the Merger and the other transactions
contemplated by this Agreement.
(b) Performance of Obligations. AFC shall have performed in all material
respects all obligations required to be performed by it under this Agreement
prior to the Effective Date.
(c) Officers' Certificate. AFC shall have delivered to F&M a
certificate, dated the Effective Date and signed by its Chairman or President,
to the effect that the conditions set forth in Sections 5.1(a), 5.2(a) and
5.2(b) have been satisfied.
(d) Accountants' Letter. F&M shall have received a letter, dated as of
the Effective Date, from Xxxxx, Hyde & Xxxxxxx, P.C., satisfactory in form and
substance to F&M, that the Merger will qualify for pooling-of-interests
accounting treatment.
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(d) Employment and Severance Agreements. Xxxxxxx X. Xxxxxxxxx shall have
entered into an employment agreement and a severance agreement, effective as of
the Effective Date, with F&M in substantially the same form and on substantially
the same terms as Previously Disclosed by F&M prior to the date hereof.
5.3 Conditions to Obligations of AFC
The obligations of AFC to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Date of the following
additional conditions:
(a) Representations and Warranties. The representations and warranties
of F&M set forth in Article 3 shall be true and correct as of the date of this
Agreement and as of the Effective Date as though made on the Effective Date,
except (i) for any such representations and warranties made as of a specified
date, which shall be true and correct as of such date, (ii) as expressly
contemplated by this Agreement, or (iii) for representations and warranties the
inaccuracies of which relate to matters that, individually or in the aggregate,
do not materially adversely affect the Merger and the other transactions
contemplated by this Agreement.
(b) Performance of Obligations. F&M shall have performed in all material
respects all obligations required to be performed by it under this Agreement
prior to the Effective Date.
(c) Officers' Certificate. F&M shall have delivered to AFC a
certificate, dated the Effective Date and signed by its Chairman or President,
to the effect that the conditions set forth in Sections 5.1(a), 5.1(b), 5.1(c),
5.3(a) and 5.3(b) have been satisfied.
(d) Investment Banking Letter. AFC shall have received an updated
fairness opinion from Xxxxxxxxx & Company LLC, financial advisor to AFC,
addressed to AFC and dated on or about the date the Proxy Statement is mailed to
shareholders of AFC, to the effect that the terms of the Merger are fair to the
shareholders of AFC from a financial point of view.
ARTICLE 6
Termination
6.1 Termination
This Agreement and the Plan of Merger may be terminated at any time before
the Effective Date, whether before or after approval thereof by the shareholders
of AFC at the AFC Meeting, as provided below:
(a) Mutual Consent. By the mutual consent in writing of F&M and AFC.
-25-
(b) Closing Delay. At the election of either party, evidenced by written
notice, if the Effective Date shall not have occurred on or before March 10,
2001, 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 6.1(b) shall
not be available to either party whose failure to perform an obligation
hereunder has been the cause of, or has resulted in, the failure of the
Effective Date to occur on or before such date.
(c) Conditions to F&M Performance Not Met. By F&M upon delivery of
written notice of termination to AFC if any event occurs which renders
impossible the satisfaction in any material respect of one or more of the
conditions to the obligations of F&M to effect the Merger set forth in Sections
5.1 and 5.2, and such noncompliance is not waived by F&M.
(d) Conditions to AFC Performance Not Met. By AFC upon delivery of
written notice of termination to F&M if any event occurs which renders
impossible the satisfaction in any material respect of one or more of the
conditions to the obligations of AFC to effect the Merger set forth in Sections
5.1 and 5.3, and such noncompliance is not waived by AFC.
(e) Due Diligence Review of AFC. By F&M in writing at any time prior to
July 31, 2000 if F&M determines in its sole good faith judgment that the
financial condition, business or prospects of AFC are materially adversely
different from what was reasonably expected by F&M after the performance of its
due diligence prior to the execution of this Agreement; provided that F&M shall
inform AFC upon such termination of the reasons for F&M's determination and,
provided further, that this Section 6.1(e) shall not limit in any way the due
diligence investigation of AFC which F&M may perform or otherwise affect any
other rights which F&M has after the date hereof and after July 31, 2000, under
the terms of this Agreement.
(f) Due Diligence Review of F&M. By AFC in writing at any time prior to
July 31, 2000, if AFC determines in its sole good faith judgment that the
financial condition, business or prospects of F&M are materially adversely
different from what was reasonably expected by AFC after the performance of its
due diligence prior to the execution of this Agreement; provided that AFC shall
inform F&M upon such termination of the reasons for AFC's determination and,
provided further, that this Section 6.1(f) shall not limit in any way the due
diligence investigation of F&M which AFC may perform or otherwise affect any
other rights which AFC has after the date hereof and after July 31, 2000, under
the terms of this Agreement.
6.2 Effect of Termination
In the event this Agreement is terminated pursuant to Section 6.1 hereof,
both this Agreement and the Plan of Merger shall become void and have no effect,
except that (i) the provisions hereof relating to confidentiality, press
releases and expenses set forth in
-26-
Sections 4.2, 4.9 and 6.4, respectively, shall survive any such termination and
(ii) a termination pursuant to 6.1(c) or 6.1(d) hereof shall not relieve the
breaching party from liability for an uncured intentional breach of any
provision of this Agreement giving rise to such termination.
6.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement and the
Plan of Merger shall not survive the Effective Date and shall be terminated and
extinguished at the Effective Date. From and after the Effective Date, the
parties hereto shall have no liability to the other on account of any breach of
any of those representations, warranties and covenants; 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.
6.4 Fees and Expenses
(a) Except as provided below, each of the parties shall bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated herein, including fees and expenses of its own financial
consultants, accountants and counsel, except that printing expenses shall be
shared equally between F&M and AFC.
(b) Notwithstanding any provision in this Agreement to the contrary, if
for any reason the Merger is not approved by AFC's shareholders at the AFC
Meeting or any adjournment thereof, then AFC shall reimburse F&M for one-half of
its reasonable out-of-pocket and other expenses incurred by F&M in connection
with entering into this Agreement and the transactions contemplated hereunder,
provided that the maximum amount that AFC shall be responsible to F&M under this
Section 6.4(b) shall be limited to $50,000.
(c) If this Agreement is terminated by F&M or AFC because of a willful
and material breach by the other of any representation, warranty, covenant,
undertaking or restriction set forth herein, and provided that the terminating
party shall not have been in breach (in any material respect) of any
representation and warranty, covenant, undertaking or restriction contained
herein, then the breaching party shall reimburse the other party for all
reasonable out-of-pocket expenses incurred by it in connection with the
transactions contemplated by this Agreement and the enforcement of its rights
hereunder.
(d) Final settlement with respect to the reimbursement of such fees and
expenses by the parties shall be made within thirty days after the termination
of this Agreement.
-27-
ARTICLE 7
General Provisions
7.1 Entire Agreement
This Agreement contains the entire agreement among F&M and AFC with respect
to the Merger and the related transactions and supersedes all prior arrangements
or understandings with respect thereto.
7.2 Binding Effect; No Third Party Rights
This Agreement shall bind F&M and AFC and their respective successors and
assigns. Other than Section 4.14, nothing in this Agreement is intended to
confer upon any person, other than the parties hereto or their respective
successors, any rights or remedies under or by reason of this Agreement.
7.3 Waiver and Amendment
Any term or provision of this Agreement may be waived in writing at any
time by the party that is, or whose shareholders are, entitled to the benefits
thereof, and this Agreement may be amended or supplemented by a written
instrument duly executed by the parties hereto at any time, whether before or
after the later of the date of the AFC Meeting, except statutory requirements
and requisite approvals of shareholders and regulatory authorities.
7.4 Governing Law
This Agreement shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Virginia without regard to the conflict of law
principles thereof.
7.5 Notices
All notices or other communications that are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
registered or certified mail, postage prepaid, addressed as follows:
If to F&M:
Xxxxxx X. Xxxxx
F&M National Corporation
0 Xxxxx Xxxxxx
X. X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Tele: (000) 000-0000
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Copy to:
Xxxxxx X. Xxxxxxx, Esquire
XxXxxxx Xxxx, A Professional Corporation
000 Xxxx Xxxx Xxxxxx; 00xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Tele: (000) 000-0000
If to AFC:
Xxxxxxx X. Xxxxxxxxx
Atlantic Financial Corp.
737 J. Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000
Tele: (000) 000-0000
Copy to:
Xxxxx X. Xxxxxxx, Xx., Esquire
Williams, Mullen, Christian & Xxxxxxx
0000 Xxxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxx 00000-0000
Tele: (000) 000-0000
7.6 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but such counterparts together shall constitute one and
the same agreement.
7.7 Severability
In the event that any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provisions hereof. Any provision of
this Agreement held invalid or unenforceable only in part or degree shall remain
in full force and effect to the extent not held invalid or unenforceable.
Further, the parties agree that a court of competent jurisdiction may reform any
provision of this Agreement held invalid or unenforceable so as to reflect the
intended agreement of the parties hereto.
-29-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seals to be affixed hereto, all as of the date first written above.
F&M NATIONAL CORPORATION
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx
President and Chief Executive Officer
ATLANTIC FINANCIAL CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
-30-
EXHIBIT A
To the Agreement and
Plan of Reorganization
PLAN OF MERGER
BETWEEN
F&M NATIONAL CORPORATION
AND
ATLANTIC FINANCIAL CORP.
Pursuant to this Plan of Merger ("Plan of Merger"), Atlantic Financial
Corp., a Virginia corporation ("AFC"), shall merge with and into F&M National
Corporation, a Virginia corporation ("F&M").
ARTICLE I
Terms of the Merger
1.1 The Merger
Subject to the terms and conditions of the Agreement and Plan of
Reorganization, dated as of July 5, 2000, by and between F&M and AFC (the
"Agreement"), at the Effective Date AFC shall be merged with and into F&M (the
"Merger") in accordance with the provisions of Virginia law and with the effect
specified in Section 13.1-721 of the Virginia Stock Corporation Act. F&M shall
be the surviving corporation of the Merger, and its name shall remain F&M (F&M
as existing on and after the Effective Date is sometimes referred to as the
"Surviving Corporation"). The Merger shall become effective on such date and
time as may be determined in accordance with Section 1.5 of the Agreement (the
"Effective Date").
1.2 Articles of Incorporation and Bylaws
The Articles of Incorporation and Bylaws of F&M in effect immediately prior
to the consummation of the Merger shall remain in effect following the Effective
Date until otherwise amended or repealed.
ARTICLE II
Manner of Converting Shares
2.1 Conversion of Shares
Upon and by reason of the Merger becoming effective, no cash shall be
allocated to the shareholders of AFC and stock shall be issued and allocated as
follows:
A-1
(a) At the Effective Date, by virtue of the Merger and without any action
on the part of the holders thereof, each share of common stock, par value $5.00
per share, of AFC ("AFC Common Stock") issued and outstanding immediately prior
to the Effective Date shall cease to be outstanding and shall be converted into
and exchanged for 0.753 shares of common stock, par value $2.00 per share, of
F&M ("F&M Common Stock") pursuant to the terms and conditions set forth in the
Agreement and this Plan of Merger (the "Exchange Ratio").
(b) Each holder of a certificate representing shares of AFC Common Stock
upon the surrender of his AFC stock certificates to the Exchange Agent (as
defined in Section 2.2), duly endorsed for transfer in accordance with Section
2.2 below, will be entitled to receive in exchange therefor a certificate or
certificates representing the number of whole shares of F&M Common Stock that
his shares shall be converted into pursuant to the Exchange Ratio. Each such
holder of AFC Common Stock shall have the right to receive the consideration
described in this Section 2.1 and Section 2.3 upon the surrender of such
certificate in accordance with Section 2.2.
(c) In the event F&M changes (or establishes a record date for changing)
the number of shares of F&M Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend, recapitalization or
similar transaction with respect to the outstanding F&M Common Stock and the
record date therefor shall be prior to the Effective Date, appropriate and
proportional adjustments will be made to the Exchange Ratio.
(d) From and after the Effective Date, all employee stock options to
purchase shares of AFC Common Stock (each, a "AFC Stock Option"), that are then
outstanding and unexercised, shall be converted into and become options to
purchase shares of F&M Common Stock, and F&M shall assume each such AFC Stock
Option in accordance with the terms of the plan and agreement by which it is
evidenced; provided, however, that from and after the Effective Date (i) each
such AFC Stock Option assumed by F&M may be exercised solely to purchase shares
of F&M Common Stock, (ii) the number of shares of F&M Common Stock purchasable
upon exercise of such AFC Stock Option shall be equal to the number of shares of
AFC Common Stock that were purchasable under such AFC Stock Option immediately
prior to the Effective Date multiplied by the Exchange Ratio and rounding down
to the nearest whole share, and (iii) the per share exercise price under each
such AFC Stock Option shall be adjusted by dividing the per share exercise price
of each such AFC Stock Option by the Exchange Ratio, and rounding up to the
nearest cent. The terms of each AFC Stock Option shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction with
respect to F&M Common Stock on or subsequent to the Effective Date. It is
intended that the foregoing assumption shall be effected in a manner that is
consistent with the requirements of Section 424 of the Internal Revenue Code of
1986, as amended (the "Code") as to any AFC Stock Option that is an "incentive
stock option" (as defined in Section 422 of the Code).
A-2
2.2 Manner of Exchange of AFC Common Stock Certificates
As promptly as practicable after the Effective Date, F&M shall cause
American Stock Transfer & Trust Company, acting as the exchange agent ("Exchange
Agent"), to send to each former holder of record of AFC Common Stock immediately
prior to the Effective Date transmittal materials for use in exchanging such
shareholder's certificates of AFC Common Stock for the consideration set forth
in Section 2.1 above. Any dividends paid on any shares of F&M Common Stock that
such shareholder shall be entitled to receive prior to the delivery to the
Exchange Agent of such shareholder's certificates representing all of such
shareholder's shares of AFC Common Stock, will be delivered to such shareholder
only upon delivery to the Exchange Agent of the certificates representing all of
such shares (or indemnity satisfactory to F&M and the Exchange Agent, in their
judgment, if any of such certificates are lost, stolen or destroyed). No
interest will be paid on any such dividends to which the holder of such shares
shall be entitled to receive upon such delivery.
2.3 No Fractional Shares
No certificates or scrip for fractional shares of F&M Common Stock will be
issued. In lieu thereof, F&M will pay the value of such fractional shares in
cash on the basis of the Average Closing Price of F&M Common Stock. As used
herein, "Average Closing Price" shall mean the average closing price of F&M
Common Stock as reported on the New York Stock Exchange for each of the ten
consecutive trading days ending on the fifth trading day prior to the Effective
Date.
2.4 Dividends
No dividend or other distribution payable to the holders of record of F&M
Common Stock at or as of any time after the Effective Date shall be paid to the
holder of any certificate representing shares of AFC Common Stock issued and
outstanding at the Effective Date until such holder physically surrenders such
certificate for exchange as provided in Section 2.2 of this Plan of Merger,
promptly after which time all such dividends or distributions shall be paid
(without interest).
2.5 Rights of Dissenting Shareholders
Shareholders of AFC who object to the Merger will be entitled to the rights
and remedies set forth in Sections 13.1-729 through 13.1-741 of the Act.
A-3
ARTICLE III
Conditions Precedent
The obligations of F&M and AFC to effect the Merger as herein provided
shall be subject to satisfaction, unless duly waived, of the conditions set
forth in the Agreement.
ARTICLE IV
Termination
This Plan of Merger may be terminated at any time prior to the Effective
Date by the parties hereto as provided in Article 6 of the Agreement.
A-4
Exhibit B
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of July 5, 2000 (the "Option
Agreement"), by and between ATLANTIC FINANCIAL CORP., a Virginia corporation
("AFC"), and F&M NATIONAL CORPORATION, a Virginia corporation ("F&M").
WITNESSETH
WHEREAS, the Boards of Directors of the parties hereto approved an
Agreement and Plan of Reorganization (the "Reorganization Agreement") and have
adopted a related Plan of Merger, dated as of the date hereof (together referred
to herein as the "Merger Agreements"), whereby AFC shall become a wholly-owned
subsidiary of F&M through the exchange of each outstanding share of common stock
of AFC for shares of common stock of F&M (the "Merger"); and
WHEREAS, as a condition to and as consideration for F&M's entry into the
Merger Agreements and to induce such entry, AFC has agreed to grant to F&M the
option set forth herein to acquire authorized but unissued shares of AFC Common
Stock.
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions
Capitalized terms used but not defined herein and defined in the Merger
Agreements shall have the same meanings as in the Merger Agreements.
2. Grant of Option
Subject to the terms and conditions set forth herein, AFC hereby grants to
F&M an option (the "Option") to acquire up to 829,468 shares of AFC Common Stock
at a price of $15.00 per share (the "Exercise Price") in exchange for the
consideration provided in Section 4 hereof; provided, however, that in the event
AFC issues or agrees to issue any shares of AFC Common Stock (other than as
permitted under the Merger Agreements) at a price less than $15.00 per share (as
adjusted pursuant to Section 6 hereof), the Exercise Price shall be equal to
such lesser price. Notwithstanding anything else in this Option Agreement to
the contrary, the number of shares of AFC Common Stock subject to the Option
shall be reduced if and to the extent necessary so that the number of shares for
which this Option is exercisable shall not exceed 19.9% of the issued and
outstanding shares of AFC Common Stock, before giving effect to the
exercise of the Option. The number of shares of AFC Common Stock that may be
received upon the exercise of the Option is subject to adjustment as set forth
herein.
2
3. Exercise of Option
(a) Subject to compliance with applicable law and regulation, F&M may
exercise the Option, in whole or part, at any time or from time to time if a
Purchase Event (as defined below) shall have occurred and be continuing.
(b) AFC shall notify F&M promptly in writing of the occurrence of any
transaction, offer or event giving rise to a Purchase Event. If more than one of
the transactions, offers or events giving rise to a Purchase Event is undertaken
or effected by the same person or occurs at the same time, then all such
transactions, offers and events shall give rise only to one Purchase Event,
which Purchase Event shall be deemed continuing for all purposes hereof until
all such transactions are terminated or abandoned by such person and all such
events have ceased or ended.
(c) In the event that F&M wishes to exercise the Option, it shall send AFC
a written notice (the date of which being herein referred to as the "Notice
Date") specifying (i) the total number of shares it will acquire pursuant to
such exercise, and (ii) a place and date not earlier than three business days
nor later than 60 business days from the Notice Date for the closing of such
transaction (the "Closing Date"); provided that if prior notification to or
approval of any federal or state regulatory agency is required in connection
with such acquisition, F&M shall promptly file the required notice or
application for approval and shall expeditiously process the same and the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification period has expired or been
terminated or such approval has been obtained and any requisite waiting period
shall have passed.
(d) The Option shall expire and terminate, to the extent not previously
exercised, upon the earlier of: (i) the Effective Time of the Merger; (ii) upon
termination of the Merger Agreements in accordance with the provisions thereof,
other than a termination based upon, following or in connection with either (A)
a material breach by AFC of a Specified Covenant (as defined below) or (B) the
failure of AFC to obtain shareholder approval of the Merger Agreements by the
vote required under applicable law, in the case that either (A) or (B) follow
the occurrence of a Purchase Event; or (iii) 12 months after termination of the
Merger Agreements based upon a material breach by AFC of a Specified Covenant or
the failure of AFC to obtain shareholder approval of the Merger Agreements by
the vote required under applicable law, in either case following the occurrence
of a Purchase Event.
(e) As used herein, a "Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(1) AFC, without having received F&M's prior written consent, shall
have entered into an agreement with any person to (i) acquire, merge or
consolidate, or enter into any similar transaction, with AFC, (ii)
purchase, lease
3
or otherwise acquire all or substantially all of the assets of AFC, or
(iii) purchase or otherwise acquire directly from AFC securities
representing 10% or more of the voting power of AFC;
(2) any person shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 20% or more of the outstanding shares of
AFC Common Stock after the date hereof (the term "beneficial ownership" for
purposes of this Option Agreement having the meaning assigned thereto in
Section 13(d) of the Exchange Act and the regulations promulgated
thereunder); or
(3) any person shall have made a bona fide proposal to AFC by public
announcement or written communication that is or becomes the subject of
public disclosure to acquire AFC by merger, share exchange, consolidation,
purchase of all or substantially all of its assets or any other similar
transaction, and following such bona fide proposal the Board of Directors
of AFC shall have recommended that the shareholders of AFC approve or
accept such proposal and not the Merger Agreements.
(f) As used herein, "Specified Covenant" means any covenant or agreement
contained in the Merger Agreements.
4. Payment and Delivery of Certificates
(a) At the Closing Date, F&M shall tender certified funds in an amount
equal to the aggregate Exercise Price for the number of shares with respect to
which F&M is exercising the Option.
(b) At such closing, AFC shall deliver to F&M a certificate or
certificates representing the number of shares of AFC Common Stock exchanged for
the Exercise Price and F&M shall deliver to AFC a letter agreeing that F&M will
not offer to sell or otherwise dispose of such shares in violation of applicable
law or the provisions of this Option Agreement.
(c) Certificates for AFC Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend which shall read substantially as follows:
"The transfer of the shares represented by
this Certificate is subject to certain provisions of an
agreement between the registered holder hereof and
Atlantic Financial Corp. and to resale restrictions
arising under the Securities Act of 1933, as amended, a
copy of which agreement is on file at the principal
office of Atlantic Financial Corp. A copy
4
of such agreement will be provided to the holder
thereof without charge upon receipt by Atlantic
Financial Corp. of a written request."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if F&M shall have delivered to
AFC a copy of a letter from the staff of the SEC, or an opinion of counsel, in
form and substance satisfactory to AFC, to the effect that such legend is not
required for purposes of the Securities Act.
5. Representations
AFC hereby represents, warrants and covenants to F&M as follows:
(a) AFC shall at all times maintain sufficient authorized but unissued
shares of AFC Common Stock so that the Option may be exercised without
authorization of additional shares of AFC Common Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of the
Option, when paid for as provided herein, will be duly authorized, validly
issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization
In the event of any change in AFC Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the type and number of shares subject to the Option, and the
purchase price per share, as the case may be, shall be adjusted appropriately.
In the event that any additional shares of AFC Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement (other than
pursuant to this Option Agreement or pursuant to the exercise of warrants or
options to acquire shares of AFC Common Stock outstanding as of the date of the
Merger Agreements or that may be issued after the date of the Merger Agreements
without constituting a breach thereof), the number of shares of AFC Common Stock
subject to the Option shall be adjusted so that, after such issuance, it equals
19.9% of the number of shares of AFC Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option or
any shares issued pursuant to the exercise of options to acquire shares of AFC
Common Stock outstanding as of the date of the Merger Agreements or that may be
issued after the date of the Merger Agreements without constituting a breach
thereof. Nothing contained in this Section 6 shall be deemed to authorize AFC to
breach any provision of the Merger Agreements.
5
7. Registration Rights
AFC shall, if requested by F&M, as expeditiously as possible file a
registration statement on a form of general use under the Securities Act if
necessary in order to permit the sale or other disposition of the shares of AFC
Common Stock that are acquired upon exercise of the Option in accordance with
the intended method of sale or other disposition requested by F&M. F&M shall
provide all information reasonably requested by AFC for inclusion in any
registration statement to be filed hereunder. AFC will use its best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 270 days from the date on which such
registration statement first becomes effective as may be reasonably necessary to
effect such sales or other dispositions. The first registration effected under
this Section 7 shall be at AFC's expense except for underwriting commissions and
the fees and disbursements of F&M's counsel attributable to the registration of
such AFC Common Stock. A second registration statement may be requested
hereunder at F&M's expense. In no event shall AFC be required to effect more
than two registrations hereunder. The filing of any registration statement
hereunder may be delayed for such period of time as may reasonably be required
to facilitate any public distribution by AFC of AFC Common Stock. If requested
by F&M, in connection with any such registration, AFC will become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements. Upon receiving any request from F&M or an assignee of F&M under this
Section 7, AFC agrees to send a copy thereof to F&M and to any assignee of F&M
known to AFC, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
8. Severability
If any term, provision, covenant or restriction contained in this Option
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Option
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option Agreement will not permit the holder to
acquire the full number of shares of AFC Common Stock provided in Section 2
hereof (as adjusted pursuant to Section 6 hereof), it is the express intention
of AFC to allow the holder to acquire, or to require AFC to repurchase, to the
extent permitted under applicable law and without having to borrow funds or
otherwise raise capital to the extent that AFC would thereafter not be
considered a "well-capitalized" institution under federal banking laws, such
number of shares as may be necessary to comply with such court or regulatory
agency's determination of the permissible number of shares, without any
amendment or modification hereof.
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9. Miscellaneous
(a) Expenses. Except as otherwise provided herein, each of the parties
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hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
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Option Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral. The terms and
conditions of this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. Nothing in
this Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Option Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its rights
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or obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that F&M may assign in whole or in part the Option and other benefits and
obligations hereunder without limitation to any of its wholly-owned
subsidiaries, and F&M may assign in whole or in part the Option and other
benefits and obligations hereunder without limitation in the event a Purchase
Event shall have occurred and F&M shall have delivered to AFC a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to AFC, to the effect that such assignment will not
violate the requirements of the Securities Act; provided that prior to any such
assignment, F&M shall give written notice of the proposed assignment to AFC, and
within 48 hours of such notice of a bona fide proposed assignment, AFC may
purchase the Option at a price and on other terms at least as favorable to F&M
as that set forth in the notice of assignment.
(d) Notices. All notices or other communications that are required or
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permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the address provided for in or pursuant to Section 7.5 of the
Reorganization Agreement.
(e) Counterparts. This Option Agreement may be executed in any number of
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counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
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inadequate remedy for a breach of the provisions of this Option Agreement by
either
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party hereto and that this Option Agreement may be enforced by either party
hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
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construed in accordance with the laws of the Commonwealth of Virginia, without
regard to the conflicts of laws principles thereof.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
ATLANTIC FINANCIAL CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
F&M NATIONAL CORPORATION
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
President and Chief Executive Officer
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