sv4
As filed
with the Securities and Exchange Commission on October 7, 2005
Registration Statement No. 333-______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FULTON FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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Pennsylvania
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6720
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23-2195389 |
(State or other jurisdiction of
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(Primary Standard Industrial
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(I.R.S. Employer Identification No.) |
incorporation or organization)
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Classification Code Number) |
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One Penn Square
Lancaster, Pennsylvania 17602
717-291-2411
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)
Rufus A. Fulton, Jr.
Chairman and Chief Executive Officer
One Penn Square
Lancaster, Pennsylvania 17602
717-291-2411
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
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Paul G. Mattaini, Esquire
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R.W. Smith, Jr. Esquire |
Kimberly J. Decker, Esquire
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Jason C. Harmon, Esquire |
Barley Snyder LLC
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DLA Piper Rudnick Gray Cary US LLP |
126 East King Street
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6225 Smith Avenue |
Lancaster, Pennsylvania 17604-2893
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Baltimore, MD 21209-3600 |
Telephone: (717) 291-5201
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Telephone: (410) 580-3000 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in connection with the formation
of a holding company and there is compliance with General Instruction G, check the following box: o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box, and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
CALCULATION OF REGISTRATION FEE
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Title of each class of |
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Amount |
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Proposed maximum |
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Proposed maximum |
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securities to be |
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to be |
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offering price |
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aggregate offering |
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Amount of |
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registered |
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registered (1) |
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per unit (2) |
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price (2)(3) |
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registration fee (4) |
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Common Stock, par
value $2.50 per share
(and associated stock
purchase rights)(3)
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14,382,332 |
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$39.77 |
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$246,015,192 |
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$27,641 |
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(1) |
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Based on maximum number of shares of the Registrants common stock that may be issued in connection with the
proposed merger of Columbia Bancorp with and into the Registrant. In accordance with Rule 416, this Registration
Statement shall also register any additional shares of the Registrants common stock which may become issuable to
prevent dilution resulting from stock splits, stock dividends or similar transactions. |
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(2) |
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Estimated solely for purposes of calculating the registration fee. Computed in accordance with Rule 457(f)(1), on
the basis of the average of the high and low prices reported by NASDAQ for the common stock of Columbia Bancorp on
October 5, 2005 of $39.77 and based on 5,550,621 shares of Columbia Bancorp common stock to be exchanged in the
merger and unexercised options to purchase 635,328 shares of Columbia Bancorp common stock. |
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(3) |
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Prior to the occurrence of certain events, the stock purchase rights will not be evidenced separately from the
common stock. Value attributable to these rights, if any, is reflected in the market price of the Registrants
common stock. |
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(4) |
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Pursuant to Rule 457(p), we are offsetting the filing fee with $1,315 of filing fees which are associated with
$11,177,765 of securities which remain unsold and were registered on Registration Statement No. 333-124053, filed by
the Registrant on April 13, 2005. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to
delay its effective date until the registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
Proxy Statement/ Prospectus
COLUMBIA BANCORP
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
[Meeting Date]
Nasdaq National Market Symbol: CBMD
FULTON
FINANCIAL CORPORATION
PROSPECTUS FOR
14,382,332 SHARES OF FULTON FINANCIAL COMMON STOCK
Nasdaq National Market Symbol: FULT
This document constitutes a proxy statement of Columbia Bancorp in connection with the
solicitation of proxies by the board of directors of Columbia Bancorp for use at the special
meeting of stockholders to be held at [Meeting Place], [Meeting Address], on [Meeting Day],
[Meeting Date], at [Meeting Time], local time. At the special meeting, Columbia Bancorp
stockholders will be asked to consider and vote on the following proposals:
1. To approve and adopt the Agreement and Plan of Merger, dated July 26, 2005, between
Columbia Bancorp and Fulton Financial Corporation (Fulton) which provides, among other
things, for the merger of Columbia Bancorp with and into Fulton and the conversion of each
share of common stock of Columbia Bancorp outstanding immediately prior to the merger into
either: (i) 2.325 shares of Fulton common stock (subject to adjustment); or (ii) $42.48 in
cash, with stockholders being permitted to elect to receive all stock, all cash, or one of
nine possible combinations of stock and cash, all of which are subject to proration;
2. To adjourn the special meeting if necessary to allow Columbia Bancorp time to
solicit additional votes in favor of the merger agreement; and
3. To transact such other business as may properly be brought before the special
meeting or any adjournment thereof.
This document also constitutes a prospectus of Fulton and is part of a registration statement
filed by Fulton with the Securities and Exchange Commission relating
to up to 14,382,332 shares of
Fulton common stock being registered in connection with the merger. On [Latest Practicable Date],
the closing price of Fultons common stock was $___, making the value of 2.325 shares of Fulton
common stock equal to $___on that date. The closing price of Columbia Bancorps common stock on
[Latest Practicable Date] was $___. These prices will fluctuate between now and the closing of
the merger, but the exchange ratio in the merger and the cash consideration per share of Columbia
Bancorp common stock will remain fixed despite these fluctuations. This document does not cover any
resale of the Fulton common stock being registered for this transaction by any stockholders deemed
to be affiliates of Fulton or Columbia Bancorp. Columbia Bancorp and Fulton have not authorized any
person to make use of this document in connection with any such resale.
Columbia Bancorp and Fulton provided all information related to their respective companies.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of this
document. Any representation to the contrary is a criminal offense.
These securities are not savings or deposit accounts or other obligations of any bank or
nonbank subsidiary of any of the parties, and they are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
All
investors should review the Risk Factors beginning on page 22.
The date of this document is ___. This document was first sent to stockholders on or about
[Mail Date].
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You should rely only on the information contained in this document or to which this document
has referred you. Columbia Bancorp and Fulton have not authorized anyone to provide you with
information that is different. You should not assume that the information in this document is
accurate as of any date other than the date on the front of the document.
This document may incorporate important business and financial information about Fulton and
Columbia Bancorp that is not included in or delivered with the document. This information is
available without charge to security holders upon written or oral request to the following persons
at either Columbia Bancorp or Fulton:
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George R. Barr, Jr., Secretary
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Sibyl S. Malatras, Secretary |
Fulton Financial Corporation
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Columbia Bancorp |
One Penn Square
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7162 Columbia Gateway Drive |
Lancaster, PA 17602
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Columbia, MD 21046 |
717-291-2411
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410-423-8000 |
To obtain timely delivery of requested documents, you must request the information no later
than [5 business days before meeting date].
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EXHIBIT A Agreement and Plan of Merger |
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A-1 |
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EXHIBIT B Amended and Restated Warrant Agreement and Warrant |
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B-1 |
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EXHIBIT C Opinion of Financial Advisor |
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C-1 |
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EXHIBIT D Form of Election Form/Letter of Transmittal |
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D-1 |
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QUESTIONS AND ANSWERS ABOUT THE MERGER
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Q1:
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What will I be voting on at the stockholders meeting? |
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A:
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You will be voting on a merger transaction in which Fulton will acquire Columbia Bancorp. |
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Q2:
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What will happen in the merger? |
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A:
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In the merger, Columbia Bancorp will merge with and into Fulton, and The Columbia Bank, a subsidiary of Columbia Bancorp,
will become a wholly owned subsidiary of Fulton. In the merger, you will receive either cash in the amount of $42.48 per
share, Fulton common stock at the rate of 2.325 shares of Fulton common stock for each share of Columbia Bancorp common
stock owned or a combination of both. See answer to Q9. |
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Q3:
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When and where will the special stockholders meeting of Columbia Bancorp be held? |
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A:
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The special stockholders meeting of Columbia Bancorp is scheduled to take place at [Meeting Place], [Meeting Address] on
[Meeting Date] at [Meeting Time]. |
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Q4:
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What do I need to do now? |
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After you have carefully read this document, indicate on your proxy card how you want your shares to be voted, then sign
and mail the proxy card in the enclosed prepaid return envelope as soon as possible, so that your shares may be represented
and voted at the special meeting of the stockholders of Columbia Bancorp to be held on [Meeting Date]. |
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Q5:
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If my shares are held in street name by my broker, will my broker vote my shares for me? |
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Maybe. Your broker will vote your shares only if you provide instructions on how to vote. You should follow the directions
provided by your broker. Without instructions, your shares will not be voted for the approval of the merger agreement. |
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Q6:
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If my shares are held in an IRA, who votes those shares? |
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A.
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You vote shares held by you in an IRA as though you held those shares directly. |
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Q7.
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If my shares are held in our 401(k) plan, who votes those shares? |
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A.
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Based on your instructions on how to vote the shares deemed to be held by you in our 401(k)
plan, the trustees of the 401(k) plan will cast the actual vote. If you are deemed to hold
shares in our 401(k) plan, you will receive a separate proxy card with respect to those
shares. |
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Q8:
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Can I change my vote after I have mailed my signed proxy card? |
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Yes. There are three ways for you to revoke your proxy and change your vote. First, you may send a written notice to the
person to whom you submitted your proxy stating that you would like to revoke your proxy. Second, you may complete and
submit a new proxy card with a later date. Third, you may vote in person at the special meeting. If you have instructed a
broker to vote your shares, you must follow directions received from your broker to change your vote. |
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Q9:
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What will Columbia Bancorp stockholders receive as a result of the merger? |
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A:
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As described in the following section entitled Summary and elsewhere in this document, if you are a Columbia Bancorp
stockholder, in exchange for each share of your Columbia Bancorp common stock, you will be entitled to elect to receive
merger consideration in the form of cash, shares of Fulton common stock, |
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or a combination of cash and Fulton common stock as further described in this document. The
actual form of merger consideration you receive will depend on your election and, in some
circumstances, on the election made by other Columbia Bancorp stockholders. Although the
merger agreement permits you to elect the form of consideration you want to receive in
exchange for your Columbia Bancorp common stock, your election is subject to proration if
the total number of shares for which cash is elected is less than 20% or more than 50% of
the total number of Columbia Bancorp shares outstanding. If that occurs, all elections will
be modified, on the same percentage basis, so that the total number of shares receiving cash
consideration is equal to 20% (if too few elections were made for cash), or 50% (if too many
elections were made for cash), as the case may be, of the total number of shares
outstanding. If the total number of shares for which all Columbia Bancorp stockholders elect
to receive cash is equal to or within the range of 20%-50% of the total number of shares of
Columbia Bancorp outstanding, then all stockholders who made valid elections will receive
the consideration that they elect. The consideration that you will receive for your shares
of Columbia Bancorp common stock, including the exchange ratio for the shares of Fulton
common stock, will not change even if the market prices of Columbia Bancorp or Fulton common
stock fluctuate. However, if you elect to receive some or all of the merger consideration
in the form of shares of Fulton common stock, the value of the shares of Fulton common stock
will fluctuate up or down with fluctuations in the market price of Fulton common stock. |
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Q10.
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What is the value of merger consideration if I elect to receive all stock? |
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A.
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The value of the consideration you receive in the merger if you properly and timely elect to
receive the stock consideration may be more or less than the $42.48 that you would receive if
you elect to receive the cash consideration. In addition, the trading price of Fulton common
stock on the date you receive your merger consideration in exchange for your shares of
Columbia common stock could be more or less than the trading price of Fulton common stock on
the date you make your election to receive the merger consideration. This means that the
then-current value of the stock consideration that you would receive for each share of Fulton
common stock if you properly and timely elect to receive some or all of the merger
consideration in Fulton common stock could be more or less than the value of the stock
consideration on the date you make your election to receive the merger consideration. The
following table illustrates the effect of changes in the value of Fulton common stock on the
value of the consideration you may receive: |
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Price Per Share of Fulton |
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Common Stock |
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Stock Election |
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Cash Election |
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$ 16.00 |
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$ 17.00 |
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39.53 |
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42.48 |
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$ 17.50(1) |
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40.69 |
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42.48 |
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$18.271(2) |
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42.48 |
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42.48 |
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$ 20.00 |
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46.50 |
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42.48 |
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The closing price per share of Fulton common stock on The Nasdaq National Market on October ___, 2005. |
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The price per share of Fulton common stock at which the value of the stock consideration is equal to the value of the cash consideration. |
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Q11:
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How do Columbia Bancorp stockholders elect the form of merger consideration they wish to receive? |
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A:
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An election form/letter of transmittal will be mailed to you shortly. You should complete the election form/letter of
transmittal according to the instructions printed on the form. The form, together with the stock certificates representing
your shares of Columbia Bancorp common stock, should be sent to the exchange agent, Fulton Financial Advisors, N.A.,
before the election deadline, which is [Election Deadline]. |
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Q12:
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What if I do not complete and return the election form before the election deadline? |
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A:
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If you do not submit a properly completed election form prior to the election deadline, you will receive cash
consideration or Fulton stock consideration in exchange for your shares of Columbia Bancorp common stock as follows: |
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If proration is not required, you will receive cash consideration until 50% (the
maximum cash percentage) of Columbia Bancorps outstanding shares have been converted
into cash. If and when the maximum cash percentage is reached, you will receive Fulton
common stock consideration for your remaining shares. |
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If proration is required because the maximum cash percentage of 50% is exceeded, you
will receive Fulton stock consideration. |
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If proration is required because less than 20% of Columbia Bancorps outstanding shares (the minimum cash percentage) have been converted into cash, you will receive
cash consideration. |
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In all other situations, you will receive cash consideration. |
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Q13.
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Can I change my election? |
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A.
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Yes. You can change or revoke your election at any time prior to [Election Deadline] by
delivering a written notice of revocation to Columbia Bancorp, attending the special meeting
and voting in person or delivering a new properly completed election form/letter of
transmittal with Fulton Financial Advisors, N.A., the exchange agent, no later than [Election
Deadline]. |
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Q14:
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Should I send in my stock certificates now? |
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A:
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No. You should send your Columbia Bancorp stock certificates to the
exchange agent with the election form/letter of transmittal that will
be mailed to you shortly. In order to make a valid election of the
consideration you want to receive, you must return your certificates
and the election form/letter of transmittal to the exchange agent no
later than [Election Deadline]. |
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Q15.
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What does the board of directors of Columbia Bancorp recommend? |
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A:
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The board of directors of Columbia Bancorp has approved the merger,
the merger agreement and the other transactions contemplated by the
merger agreement and recommends that you vote FOR the merger and the
merger agreement. |
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Q16.
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Am I entitled to dissenters rights? |
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A.
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No. Under Maryland law, holders of Columbia Bancorp common stock are not entitled to
dissenters rights in connection with the merger. |
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Q17.
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Will I recognize gain or loss for federal income tax purposes? |
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A.
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Generally, you will not recognize gain or loss for federal income tax purposes of any shares
of Fulton common stock that you receive in connection with the merger. You will, however, be
taxed on cash you receive in the merger. See the section of this document titled The Merger
Material Federal Income Tax Consequences for a summary discussion of material U.S. federal
income tax consequences to Columbia Bancorp stockholders in connection with the merger. |
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You should consult your tax advisor about the particular tax consequences of the merger to
you. |
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Q18.
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Is Fulton shareholder approval required to complete the merger? |
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A.
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No. |
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Q19.
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Will I be able to trade any Fulton common stock that I receive in the merger? |
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A.
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The Fulton common stock you receive if you properly make a timely election to receive some or
all of the merger consideration in shares of Fulton common stock will be freely tradeable,
unless you are an affiliate of Fulton or Columbia Bancorp. Fultons common stock is traded on
the Nasdaq National Market under the symbol FULT. |
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Q20:
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When do you expect to merge? |
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A:
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Fulton and Columbia Bancorp expect to complete the merger during the first quarter of 2006. In addition to the approval of
Columbia Bancorp stockholders, Fulton must also obtain regulatory approvals. Fulton and Columbia Bancorp expect to receive
all necessary approvals no later than December 31, 2005. |
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Q21:
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Who should I contact with questions or to obtain additional copies of this document? |
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A:
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You should call either: |
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George R. Barr, Jr., Secretary
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Sibyl S. Malatras, Secretary |
Fulton Financial Corporation
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Columbia Bancorp |
One Penn Square
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7162 Columbia Gateway Drive |
Lancaster, PA 17602
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Columbia, MD 21046 |
717-291-2411
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410-423-8000 |
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SUMMARY
This summary highlights selected information from this document. Because this is a summary, it
does not contain all of the information that may be important to you. To understand the merger
fully, you should carefully read this entire document and the attached exhibits. See Where You Can
Find More Information on page 67 for reference to additional information
available to you regarding Fulton and Columbia Bancorp.
Agreement
to Merge (See page 29)
Fulton and Columbia Bancorp entered into a merger agreement on July 26, 2005. The merger
agreement provides that Columbia Bancorp will merge with and into Fulton and that each share of
Columbia Bancorp common stock outstanding on the effective date of the merger will be exchanged for
either: (i) 2.325 shares of Fulton common stock (subject to adjustment); (ii) $42.48 in cash; or
(iii) a combination of cash and Fulton common stock with a stockholder being permitted to elect one
of nine permitted combinations of stock and cash for their shares. The permitted cash/stock
combinations which Columbia Bancorp stockholders may elect are as follows:
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90% cash and 10% stock
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40% cash and 60% stock |
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80% cash and 20% stock
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30% cash and 70% stock |
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70% cash and 30% stock
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20% cash and 80% stock |
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60% cash and 40% stock
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10% cash and 90% stock |
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50% cash and 50% stock |
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See The Merger Effect of the Merger on Page 38.
Stockholder consideration elections are subject to proration, as described below. A copy of
the merger agreement is attached to this document as Exhibit A and is incorporated herein by
reference.
Columbia Bancorp Stockholders may Elect their Form of Consideration (See page 39)
Shortly after you receive this document, you will receive an election form on which you may
indicate your election regarding the form of merger consideration you wish to receive. Election
forms must be returned to Fulton Financial Advisors, N.A., Fultons transfer agent, no later than
[Election Deadline]. Any Columbia Bancorp stockholder who has not returned an election form by the
indicated deadline will have all of his, her or its Columbia Bancorp shares of common stock
exchanged for Fulton common stock or cash in the merger, depending on whether proration is
necessary and whether it is the cash consideration or the stock consideration that must be
prorated. See The Merger Election Procedures on
page 39.
Stockholder Elections may be Subject to Proration (See page 39)
Although the merger agreement permits each Columbia Bancorp stockholder to elect the form of
consideration he, she or it wants to receive in exchange for his, her or its shares of Columbia
Bancorp common stock, all stockholder elections are subject to proration if the total number of
shares for which cash is elected is less than 20% or more than 50% of the total number of Columbia
Bancorp shares of common stock outstanding. If proration is necessary, each Columbia Bancorp
stockholders election will be modified, on the same percentage basis, so that the total number of
shares receiving cash consideration is equal to 20% (if too few elections were made for cash), or
50% (if too many elections were made for cash), as the case may be, of the total number of shares
outstanding. If the total number of shares for which Columbia Bancorp stockholders elect to receive
cash is equal to or within the range of 20%-50% of the total number of shares of Columbia Bancorp
outstanding, then all stockholders who made valid elections will receive the consideration that
they elect.
With respect to options to purchase shares of Columbia Bancorps common stock, option holders
may elect to receive Fulton options based on the 2.325 exchange rate or cash equal to the
difference between the exercise price
of their option shares and $42.48. In the absence of an election by the holder, all Columbia
Bancorp options shall be converted to cash. The election by option holders is not subject to
proration.
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Columbia Bancorp Consideration (See page 38)
If the merger is completed, you will receive in exchange for each share of Columbia Bancorp
common stock you own, at your election, and subject to proration as explained above, either: (i)
2.325 shares of Fulton common stock (subject to adjustment); or (ii) $42.48 in cash. A Columbia
Bancorp stockholder may elect to receive all cash, all stock or a combination of cash and stock in
one of nine permissible combinations. See The Merger Effect of the Merger on page 38. Fulton will not issue any fractional shares and, therefore, you will receive
a cash payment for any fractional shares based on the $42.48 per share cash consideration. On
[Latest Practicable Date], the closing price of Fulton common stock was $___, making the value
of 2.325 shares of Fulton common stock equal to $___on that date. The closing price of
Columbia Bancorps common stock on [Latest Practicable Date], was $___. Because the market
price of Fulton stock fluctuates, you will not know when you vote at the special meeting what
Fulton shares will be worth when issued in the merger. The market prices of both Fulton and
Columbia Bancorp common stock will fluctuate prior to the merger, but the exchange ratio in the
merger will remain fixed despite these fluctuations. The cash consideration of $42.48 per share
will also remain fixed. You should obtain current market quotations for Fulton common stock and
Columbia Bancorp common stock before making your election and voting on the merger.
Adoption of SFAS 123R (See page 54)
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 123R, Share-Based Payment. Statement 123R is a revision to the
original Statement 123 which disallows the APB 25 method of accounting for stock options and
requires public companies to recognize compensation expense related to stock-based compensation in
their income statements. Companies can adopt Statement 123R using either modified prospective
application or modified retrospective application. Modified retrospective application also
results in restatement of prior period results, based on the amounts previously disclosed in prior
period financial statements.
The effective date of Statement 123R was originally the beginning of the first fiscal quarter
after June 15, 2005. In April 2005, the Securities and Exchange Commission (SEC) delayed the
effective date to the beginning of the first fiscal year after June 15, 2005, or January 1, 2006
for Fulton. Early adoption is permissible. Fulton expects to adopt the provisions of Statement 123R
in 2005, using modified retrospective application.
The financial information presented in this Registration Statement and incorporated by
reference to previous filings with the SEC has not been restated for SFAS 123R. It has not been
restated as Fultons first filing subsequent to adoption of SFAS 123R under the 1934 Act is not
expected to be made until subsequent to the effective date of this Registration Statement.
To understand the expected impact of restatement for SFAS 123R, the reader should reference
the footnotes to consolidated financial statements for Fultons 2004 Form 10-K, which is
incorporated by reference. For 2004, the impact on diluted net income per share was a reduction of
approximately $0.02 (restated for the impact of the stock dividend issued in 2005). Implementation
of SFAS 123R is a complex process and the actual impact of a restatement may vary.
Comparative Per Share Data
Fulton and Columbia Bancorp have summarized below the per share information for each company
on an historical, pro forma combined and equivalent basis. You should read this information in
conjunction with the historical financial statements and the related notes contained in the annual
and quarterly reports and other documents Fulton and Columbia Bancorp have filed with the SEC. See
Where You Can Find More Information on page 67. The Fulton pro forma information gives effect to the merger, assuming that 2.325 shares of Fulton common stock are
issued for 50% of the outstanding shares of Columbia Bancorp common stock.
10
Selected Historical and Pro Forma
Combined Per Share Data (A)
|
|
|
|
|
|
|
|
|
|
|
As of or for the six |
|
As of or for the |
|
|
months ended |
|
year ended |
|
|
June 30, 2005 |
|
December 31, 2004 |
Fulton |
|
|
|
|
|
|
|
|
Historical Per Common Share: |
|
|
|
|
|
|
|
|
Average Shares Outstanding (Basic) |
|
|
155,922,000 |
|
|
|
149,294,000 |
|
Average Shares Outstanding (Diluted) |
|
|
157,750,000 |
|
|
|
150,801,000 |
|
Book Value |
|
$ |
7.81 |
|
|
|
7.91 |
|
Cash Dividends |
|
$ |
0.277 |
|
|
|
0.518 |
|
Net Income (Basic) |
|
$ |
0.53 |
|
|
|
1.02 |
|
Net Income (Diluted) |
|
$ |
0.53 |
|
|
|
1.01 |
|
|
|
|
|
|
|
|
|
|
Fulton and Columbia Bancorp Combined |
|
|
|
|
|
|
|
|
Pro Forma Per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Shares Outstanding (Basic) |
|
|
164,006,025 |
|
|
|
157,603,550 |
|
Average Shares Outstanding (Diluted) |
|
|
166,130,463 |
|
|
|
159,393,038 |
|
Book Value |
|
$ |
8.33 |
|
|
|
8.40 |
|
Cash Dividends |
|
$ |
0.277 |
|
|
|
0.518 |
|
Net Income (Basic) |
|
$ |
0.52 |
|
|
|
0.99 |
|
Net Income (Diluted) |
|
$ |
0.51 |
|
|
|
0.98 |
|
|
|
|
(A) |
|
The pro forma per share equivalent information is based on average shares outstanding during
the periods except that the book value per share which is based on period end shares outstanding.
The number of shares in each case has been adjusted for stock dividends and stock splits by each
institution through the periods. The equivalent pro forma per common share information is derived
by applying the exchange ratio of 2.325 shares of Fulton common stock, for each share of Columbia
Bancorp common stock to the Fulton, Columbia Bancorp, combined pro forma per common share
information. The combined pro forma financial information assumes that the holders of 50% of
Columbia Bancorps shares elect to receive the cash consideration of $42.48. It is assumed that the
funding for this cash portion of the consideration is obtained at a rate of 6.00%. The pro forma
numbers do not reflect operating cost reductions or revenue enhancements that are expected to be
realized after the acquisition. The pro forma numbers do not reflect the acquisition, by Fulton, of
SVB Financial Services, Inc. that occurred on July 1, 2005 or
the impact of the 2004 acquisitions of certain banks for the periods
prior to the date on which the business combinations were consummated. |
11
Selected Historical and Pro Forma
Per Share Equivalent Data (A)
|
|
|
|
|
|
|
|
|
|
|
As of or for the six |
|
As of or for the |
|
|
months ended |
|
year ended |
|
|
June 30, 2005 |
|
December 31, 2004 |
Columbia |
|
|
|
|
|
|
|
|
Historical Per Common Share: |
|
|
|
|
|
|
|
|
Average Shares Outstanding (Basic) |
|
|
6,954 |
|
|
|
7,148 |
|
Average Shares Outstanding (Diluted) |
|
|
7,209 |
|
|
|
7,391 |
|
Book Value |
|
$ |
13.17 |
|
|
$ |
12.98 |
|
Cash Dividends (Declared) |
|
|
.34 |
|
|
$ |
.62 |
|
Net Income (Basic) |
|
$ |
1.10 |
|
|
$ |
1.86 |
|
Net Income (Diluted) |
|
$ |
1.06 |
|
|
$ |
1.80 |
|
|
|
|
|
|
|
|
|
|
Equivalent Pro Forma Per Common |
|
|
|
|
|
|
|
|
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book Value |
|
$ |
19.37 |
|
|
|
19.53 |
|
Cash Dividends |
|
$ |
0.644 |
|
|
|
1.204 |
|
Net Income (Basic) |
|
$ |
1.21 |
|
|
|
2.29 |
|
Net Income (Diluted) |
|
$ |
1.20 |
|
|
|
2.27 |
|
|
|
|
(A) |
|
The pro forma per share equivalent information is based on average shares outstanding during
the periods except that the book value per share, which is based on period end shares outstanding.
The number of shares in each case has been adjusted for stock dividends and stock splits by each
institution through the periods. The equivalent pro forma per common share information is derived
by applying the exchange ratio of 2.325 shares of Fulton common stock for each share of Columbia
Bancorp common stock to the Fulton, Columbia Bancorp, combined pro forma per common share
information. The combined pro forma financial information assumes that 50% of Columbia Bancorps
shares elect to receive the cash consideration of $42.48. It is assumed that the funding for this
cash portion of the consideration is obtained at a rate of 6.00%. The pro forma numbers do not
reflect operating cost reductions or revenue enhancements that are expected to be realized after
the acquisition. The pro forma numbers do not reflect the acquisition, by Fulton, of SVB Financial
Services, Inc. that occurred on July 1, 2005 or the impact of
the 2004 acquisitions of certain banks for the periods prior to the
date on which the business combinations were consummated. |
12
Selected Financial Data
The following tables show selected historical consolidated summary financial data for both
Fulton and Columbia Bancorp. This information is derived from the consolidated financial statements
of Fulton and Columbia Bancorp incorporated by reference in this document. See Where You Can Find
More Information on page 67.
Fulton Financial Corporation
Selected Historical Financial Data
(In thousands, except per share data) (A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIX MONTHS |
|
June 30 |
|
|
December 31 |
|
AND YEAR ENDED |
|
2005 |
|
|
2004 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
|
2000 |
|
Interest income |
|
$ |
289,421 |
|
|
$ |
235,960 |
|
|
$ |
493,643 |
|
|
$ |
435,531 |
|
|
$ |
469,288 |
|
|
$ |
518,680 |
|
|
$ |
519,661 |
|
Interest expense |
|
|
91,248 |
|
|
|
64,287 |
|
|
|
135,994 |
|
|
|
131,094 |
|
|
|
158,219 |
|
|
|
227,962 |
|
|
|
243,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
198,173 |
|
|
|
171,673 |
|
|
|
357,649 |
|
|
|
304,437 |
|
|
|
311,069 |
|
|
|
290,718 |
|
|
|
275,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
1,525 |
|
|
|
2,540 |
|
|
|
4,717 |
|
|
|
9,705 |
|
|
|
11,900 |
|
|
|
14,585 |
|
|
|
15,024 |
|
Other income |
|
|
74,168 |
|
|
|
68,700 |
|
|
|
138,864 |
|
|
|
134,370 |
|
|
|
114,012 |
|
|
|
102,057 |
|
|
|
76,717 |
|
Other expenses |
|
|
151,837 |
|
|
|
132,809 |
|
|
|
273,615 |
|
|
|
231,559 |
|
|
|
223,765 |
|
|
|
218,234 |
|
|
|
186,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
118,979 |
|
|
|
105,024 |
|
|
|
218,181 |
|
|
|
197,543 |
|
|
|
189,416 |
|
|
|
159,956 |
|
|
|
151,271 |
|
Income taxes |
|
|
35,868 |
|
|
|
31,314 |
|
|
|
65,264 |
|
|
|
59,363 |
|
|
|
56,468 |
|
|
|
46,367 |
|
|
|
44,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
83,111 |
|
|
$ |
73,710 |
|
|
$ |
152,917 |
|
|
$ |
138,180 |
|
|
$ |
132,948 |
|
|
$ |
113,589 |
|
|
$ |
106,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (basic) |
|
$ |
0.53 |
|
|
$ |
0.50 |
|
|
$ |
1.28 |
|
|
$ |
1.23 |
|
|
$ |
1.17 |
|
|
$ |
1.00 |
|
|
$ |
0.95 |
|
Net income (diluted) |
|
|
0.53 |
|
|
|
0.50 |
|
|
|
1.27 |
|
|
|
1.22 |
|
|
|
1.17 |
|
|
|
0.99 |
|
|
|
0.95 |
|
Cash dividends declared |
|
|
0.277 |
|
|
|
0.254 |
|
|
|
0.647 |
|
|
|
0.593 |
|
|
|
0.531 |
|
|
|
0.481 |
|
|
|
0.430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT PERIOD END |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
11,571,083 |
|
|
$ |
10,556,421 |
|
|
$ |
11,158,351 |
|
|
$ |
9,767,288 |
|
|
$ |
8,387,778 |
|
|
$ |
7,770,711 |
|
|
$ |
7,364,804 |
|
Loans, net of unearned income |
|
|
7,861,508 |
|
|
|
7,042,311 |
|
|
|
7,584,547 |
|
|
|
6,159,994 |
|
|
|
5,317,068 |
|
|
|
5,373,020 |
|
|
|
5,374,659 |
|
Deposits |
|
|
8,139,667 |
|
|
|
7,430,988 |
|
|
|
7,895,524 |
|
|
|
6,751,783 |
|
|
|
6,245,528 |
|
|
|
5,986,804 |
|
|
|
5,502,703 |
|
Long-term debt |
|
|
951,745 |
|
|
|
654,886 |
|
|
|
684,236 |
|
|
|
568,730 |
|
|
|
535,555 |
|
|
|
456,802 |
|
|
|
559,503 |
|
Stockholders equity |
|
|
1,194,075 |
|
|
|
1,107,482 |
|
|
|
1,242,290 |
|
|
|
946,936 |
|
|
|
863,742 |
|
|
|
811,454 |
|
|
|
731,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE BALANCES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
$ |
1,222,511 |
|
|
$ |
1,025,658 |
|
|
$ |
1,068,464 |
|
|
$ |
894,469 |
|
|
$ |
838,213 |
|
|
$ |
779,014 |
|
|
$ |
673,971 |
|
Total assets |
|
|
11,314,220 |
|
|
|
10,140,019 |
|
|
|
10,343,328 |
|
|
|
8,802,138 |
|
|
|
7,900,500 |
|
|
|
7,520,071 |
|
|
|
7,019,523 |
|
|
|
|
(A) |
|
The numbers presented above do not reflect the acquisition, by Fulton, of SVB Financial
Services, Inc. that occurred on July 1, 2005 or the impact of
the 2004 acquisitions of certain banks for the periods prior to the
date on which the business combinations were consummated. |
13
Columbia Bancorp
Selected Historical Financial Data
(In thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIX MONTHS |
|
June 30 |
|
|
December 31 |
|
AND YEAR ENDED |
|
2005 |
|
|
2004 |
|
|
2004 |
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
|
2000 |
|
|
Interest income |
|
$ |
35,601 |
|
|
$ |
26,663 |
|
|
$ |
57,546 |
|
|
$ |
51,403 |
|
|
$ |
52,566 |
|
|
$ |
58,061 |
|
|
$ |
58,917 |
|
Interest expense |
|
|
9,410 |
|
|
|
5,335 |
|
|
|
11,963 |
|
|
|
10,736 |
|
|
|
15,479 |
|
|
|
23,983 |
|
|
|
24,176 |
|
|
|
|
Net interest income |
|
|
26,191 |
|
|
|
21,328 |
|
|
|
45,583 |
|
|
|
40,667 |
|
|
|
37,087 |
|
|
|
34,078 |
|
|
|
34,741 |
|
Provision for loan losses |
|
|
810 |
|
|
|
500 |
|
|
|
728 |
|
|
|
1,170 |
|
|
|
835 |
|
|
|
1,534 |
|
|
|
3,423 |
|
Other income |
|
|
3,408 |
|
|
|
3,653 |
|
|
|
6,798 |
|
|
|
8,963 |
|
|
|
7,945 |
|
|
|
5,930 |
|
|
|
3,960 |
|
Other expenses |
|
|
16,802 |
|
|
|
15,077 |
|
|
|
31,045 |
|
|
|
29,970 |
|
|
|
27,166 |
|
|
|
26,192 |
|
|
|
27,209 |
|
|
|
|
Income before income taxes |
|
|
11,987 |
|
|
|
9,404 |
|
|
|
20,608 |
|
|
|
18,490 |
|
|
|
17,031 |
|
|
|
12,282 |
|
|
|
8,069 |
|
Income taxes |
|
|
4,316 |
|
|
|
3,310 |
|
|
|
7,323 |
|
|
|
6,586 |
|
|
|
6,160 |
|
|
|
4,100 |
|
|
|
2,848 |
|
|
|
|
Net income |
|
$ |
7,671 |
|
|
$ |
6,094 |
|
|
$ |
13,285 |
|
|
$ |
11,904 |
|
|
$ |
10,871 |
|
|
$ |
8,182 |
|
|
$ |
6,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (basic) |
|
$ |
1.10 |
|
|
$ |
.85 |
|
|
$ |
1.86 |
|
|
$ |
1.67 |
|
|
$ |
1.53 |
|
|
$ |
1.15 |
|
|
$ |
.73 |
|
Net income (diluted) |
|
|
1.06 |
|
|
|
.82 |
|
|
|
1.80 |
|
|
|
1.62 |
|
|
|
1.50 |
|
|
|
1.13 |
|
|
|
.73 |
|
Cash dividends declared |
|
|
.34 |
|
|
|
.30 |
|
|
|
.62 |
|
|
|
.53 |
|
|
|
.46 |
|
|
|
.41 |
|
|
|
.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT PERIOD END |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,284,115 |
|
|
$ |
1,126,916 |
|
|
$ |
1,179,006 |
|
|
$ |
1,029,255 |
|
|
$ |
982,002 |
|
|
$ |
849,649 |
|
|
$ |
812,650 |
|
Loans, net of unearned
income |
|
|
1,029,568 |
|
|
|
900,320 |
|
|
|
950,170 |
|
|
|
835,484 |
|
|
|
664,826 |
|
|
|
602,087 |
|
|
|
539,051 |
|
Deposits |
|
|
976,491 |
|
|
|
891,001 |
|
|
|
912,578 |
|
|
|
787,608 |
|
|
|
730,613 |
|
|
|
638,001 |
|
|
|
630,484 |
|
Long-term debt |
|
|
36,496 |
|
|
|
26,186 |
|
|
|
30,310 |
|
|
|
20,000 |
|
|
|
20,000 |
|
|
|
20,000 |
|
|
|
20,000 |
|
Stockholders equity |
|
|
91,331 |
|
|
|
88,039 |
|
|
|
92,348 |
|
|
|
85,449 |
|
|
|
76,923 |
|
|
|
69,362 |
|
|
|
64,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE BALANCES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
$ |
90,402 |
|
|
$ |
87,960 |
|
|
$ |
89,261 |
|
|
$ |
81,377 |
|
|
$ |
73,622 |
|
|
$ |
67,557 |
|
|
$ |
62,421 |
|
Total assets |
|
|
1,227,902 |
|
|
|
1,052,448 |
|
|
|
1,100,098 |
|
|
|
977,201 |
|
|
|
907,465 |
|
|
|
812,890 |
|
|
|
733,279 |
|
14
Federal
Income Tax Consequences (See page 51)
Columbia Bancorp stockholders generally will not recognize gain or loss for federal income tax
purposes on the shares of Fulton common stock they receive in the merger. Fultons attorneys have
issued a legal opinion to this effect, which is included as an exhibit to the registration
statement filed with the SEC for the shares to be issued in the merger. Columbia Bancorp
stockholders will be taxed on cash received in the merger, including cash received instead of any
fractional shares. Tax matters are complicated, and tax results may vary among stockholders. Fulton
and Columbia Bancorp urge you to contact your own tax advisor to understand fully how the merger
will affect you.
Share Information and Market Prices
Fulton common stock trades on the National Market System of the Nasdaq Stock Market under the
trading symbol FULT. Columbia Bancorp common stock trades on the National Market System of the
Nasdaq Stock Market under the trading symbol CBMD. The table below shows the closing price of
Fulton common stock and Columbia Bancorp common stock and the equivalent price per share of
Columbia Bancorp common stock based on the exchange ratio on July 26, 2005, the last full trading
day before public announcement of the merger, and on [Latest Practicable Date], the most recent
practicable date prior to the date of this document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
Historical |
|
|
Equivalent |
|
|
|
Price Per Share |
|
|
Price Per Share (1) |
|
Fulton Common Stock |
|
|
|
|
|
|
|
|
Closing Price on July 26, 2005 |
|
$ |
18.49 |
|
|
|
N/A |
|
Closing Price on [Latest Practicable Date] |
|
$ |
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
Columbia Bancorp Common Stock |
|
|
|
|
|
|
|
|
Closing Price on July 26, 2005 |
|
$ |
37.25 |
|
|
$ |
42.99 |
|
Closing Price on [Latest Practicable Date] |
|
$ |
|
|
|
$ |
|
|
|
|
|
(1) |
|
Based upon the product of the exchange ratio (2.325) and the closing price of Fulton common stock. |
Merger Consideration is Fair From a Financial Point of View According to Columbia Bancorps
Financial Advisor (See page 34)
Danielson Associates, Inc. (Danielson) has given an opinion to Columbia Bancorps board of
directors that, as of both July 26, 2005 and ___, the consideration in the merger is
fair from a financial point of view to Columbia Bancorps stockholders. The full text of
Danielsons opinion is attached as Exhibit C to this document. Fulton and Columbia Bancorp
encourage you to read the opinion carefully. Pursuant to an engagement letter between Columbia
Bancorp and Danielson, in exchange for Danielsons services, Danielson will receive a transaction
fee equal to 0.35% of the total consideration paid to Columbia Bancorps stockholders, to be valued
at the time of consummation and which is payable promptly after the consummation of the merger.
Danielson also charged Columbia Bancorp $10,000, plus reasonable out-of-pocket costs for travel and
related expenses, materials and data and for other assistance. If Fulton and Columbia Bancorp
merge, the $10,000 will be subtracted from the transaction fee.
No Dissenters Rights Of Appraisal (See page 41)
Columbia Bancorps stockholders are not entitled to exercise dissenters rights under the
provisions of Section 3-202(c) of the Maryland General Corporation Law.
Your rights as Stockholder will change after the Merger (See page 61)
Upon completion of the merger, if you elect to receive Fulton shares in the merger or receive
Fulton shares by virtue of proration, you will become a shareholder of Fulton. Fultons Amended and
Restated Articles of
15
Incorporation and Bylaws and Pennsylvania law determine the rights of Fultons shareholders.
The rights of shareholders of Fulton differ in certain respects from the rights of stockholders of
Columbia Bancorp. The most significant of these differences include:
|
§ |
|
Fulton has adopted a Shareholder Rights Plan, which provides Fultons shareholders with
certain stock-related rights in the event of a hostile takeover but may have the effect of
discouraging such a takeover, while Columbia Bancorp has not adopted any such plan. |
|
|
§ |
|
Fultons Amended and Restated Articles of Incorporation provide that holders of not less
than 85% of its then outstanding voting power may remove directors without cause, while
Columbia Bancorps directors may not be removed without cause. |
|
|
§ |
|
Fultons Amended and Restated Articles of Incorporation deny shareholders the right to
take action without a shareholders meeting, while Columbia Bancorps stockholders are
permitted to take action without a stockholders meeting if a written consent is signed by
all of its holders of outstanding stock entitled to vote at such meeting and if a written
waiver of any right to dissent signed by each stockholder entitled to notice of the meeting
but not entitled to vote at it, are filed with the records of the stockholders meetings. |
|
|
§ |
|
Fultons Amended and Restated Articles of Incorporation provides that approval of not
less than 85% of the then outstanding voting power of its capital stock is required for a
business combination between Fulton and an interested shareholder of Fulton unless approved
by Fultons board, in which case approval of only 2/3 of the then outstanding voting power
is required, while Columbia Bancorps charter provides that all business combinations in
which Columbia Bancorp is a party with an interested stockholder are subject to the
approval of at least 80% of votes entitled to be cast at a shareholders meeting unless the
stockholders receive, in any such business combination, a minimum price determined in
accordance with the applicable Maryland statute. |
|
|
§ |
|
Fultons Amended and Restated Articles of Incorporation may be amended by either a
majority of its Board of Directors and the affirmative vote of holders of a majority of the
voting power or by holders of not less than 85% of its then outstanding voting power,
except with respect to certain provisions which may only be amended upon the approval of
either the affirmative vote of holders of 85% of the voting power or approval of a majority
of the directors and continuing directors and affirmative vote of 66-2/3% of holders of
voting power, while Columbia Bancorps charter may be amended by a the affirmative vote of
a majority of all votes entitled to be cast by stockholders following approval by its board
of directors, except that certain provisions require the approval of 80% of the votes
entitled to be cast. |
The
Companies (See page 54 for Fulton and page 59 for Columbia Bancorp)
Fulton Financial Corporation
One Penn Square
Lancaster, Pennsylvania 17602
717-291-2411
Fulton Financial Corporation is a Pennsylvania business corporation and a registered financial
holding company that maintains its headquarters in Lancaster, Pennsylvania. As a financial holding
company, Fulton engages in general commercial and retail banking and trust business, and also in
related financial businesses, through its bank and nonbank subsidiaries. Fultons bank subsidiaries
currently operate approximately 227 banking offices in Pennsylvania, Maryland, Delaware, New
Jersey and Virginia. As of June 30, 2005, Fulton had consolidated total assets of approximately
$11.6 billion.
The principal assets of Fulton are its fourteen wholly-owned bank subsidiaries:
|
§ |
|
Maryland state-chartered institutions include: Hagerstown Trust Company; and The
Peoples Bank of Elkton. |
16
|
§ |
|
Nationally chartered associations include: Swineford National Bank; FNB Bank,
National Association; and Delaware National Bank. |
|
|
§ |
|
New Jersey state-chartered institutions include: The Bank; First Washington State
Bank; Skylands Community Bank; and Somerset Valley Bank. |
|
|
§ |
|
Pennsylvania state-chartered institutions include: Fulton Bank; Lafayette
Ambassador Bank; Lebanon Valley Farmers Bank; and Premier Bank. |
|
|
§ |
|
Virginia state-chartered institutions include: Resource Bank. |
In addition, Fulton has the following wholly-owned non-bank direct subsidiaries:
|
§ |
|
Fulton Financial Realty Company, which owns or leases property to Fulton (its
corporate headquarters and primary operation center) as well as three unaffiliated
tenants at the corporate headquarters property; |
|
|
§ |
|
Fulton Reinsurance Company, LTD, which engages in the business of reinsuring credit
life, accident and health insurance that is directly related to extensions of credit by
Fultons bank subsidiaries; |
|
|
§ |
|
Central Pennsylvania Financial Corp., which owns two inactive non-banking
subsidiaries, as well as limited partnership interests in partnerships invested in low
and moderate income housing projects for Community Reinvestment Act purposes; |
|
|
§ |
|
FFC Management, Inc., which owns equity investments in various financial
institutions, mostly commercial banks, and corporate-owned life insurance policies; |
|
|
§ |
|
Fulton Financial Advisors, National Association, a limited purpose national banking
association with trust powers; |
|
|
§ |
|
Fulton Insurance Services Group, Inc., an insurance agency; |
|
|
§ |
|
FFC Penn Square, Inc., which holds approximately $44 million of trust preferred
securities issued by an affiliate; |
|
|
§ |
|
Premier Capital Trust II, PBI Capital Trust, Resource Capital Trust II, Resource
Capital Trust III, SVB Bald Eagle Statutory Trust I and SVB Bald Eagle Statutory Trust
II, each of which has issued trust preferred securities; and |
|
|
§ |
|
Virginia Financial Services, LLC, which provides management consulting services. |
Columbia Bancorp
7162 Columbia Gateway Drive
Columbia, MD 21046
908-541-9500
Columbia Bancorp, a Maryland corporation, is the bank holding company for The Columbia Bank, a
Maryland state chartered bank. At June 30, 2005, Columbia Bancorp had total consolidated assets of
approximately $1.28 billion, deposits of approximately $976 million and stockholders equity of
approximately $91 million. The Columbia Bank has 24 branches that span from the Washington, D.C.
area to the northeast of Baltimore, Maryland. The Columbia Bank is engaged principally in the
business of taking deposits and making commercial loans, residential mortgage loans, consumer loans
and home equity and property improvement loans. Columbia Bancorp has the following wholly-owned
non-bank subsidiaries:
17
|
§ |
|
Columbia Bancorp Statutory Trust I, Columbia Bancorp Statutory Trust II and Columbia
Bancorp Statutory Trust III, each of which has issued trust preferred securities. |
In addition, The Columbia Bank has the following wholly-owned subsidiaries:
|
§ |
|
McAlpine Enterprises, Inc, Howard I, LLC and Howard II, LLC, all of which are
inactive, but have been used primarily to manage properties acquired through
foreclosure; and |
|
|
§ |
|
Columbia Leasing, Inc., which is an inactive commercial leasing company. |
Vote
Required to Approve Merger Agreement (See page 28)
Approval of the merger agreement requires the affirmative vote of the holders of at least
two-thirds of all votes entitled to be cast on the matter. The directors and executive officers of
Columbia Bancorp and their affiliates together own about ___of Columbia Bancorps outstanding
common stock as of October ___, 2005. Certain of the directors and executive officers of Columbia
Bancorp, who together own about ___% of Columbia Bancorps outstanding common stock as of October
___, 2005, have signed voting agreements pursuant to which they have agreed to vote their shares
in favor of the merger agreement.
Brokers who hold shares of Columbia Bancorp common stock as nominees will not have authority
to vote those shares with respect to the merger agreement unless stockholders provide them with
voting instructions. Such broker non-votes effectively act as a vote against the merger
agreement.
Neither the merger nor the merger agreement requires the approval of Fultons shareholders.
Columbia Bancorp Board Recommends Stockholder Approval (See page 32)
The Columbia Bancorp board believes that the merger is in the best interests of Columbia
Bancorp and its stockholders and recommends that you vote FOR approval of the merger agreement.
Special Meeting to be Held [Meeting Date] (See page 27)
Columbia Bancorp will hold its special meeting of stockholders on [Meeting Day], [Meeting
Date], at [Meeting Time], local time, at [Meeting Place], [Meeting Address]. At the special
meeting, you will be asked to vote on a proposal to approve the merger agreement under which
Columbia Bancorp would merge with Fulton, to adjourn the special meeting to solicit additional
proxies, if necessary, in the event there are not sufficient votes at the time of the special
meeting to approve the merger agreement, and any other business that properly arises at the special
meeting.
Record Date Set at [Record Date]; Voting (See page 27)
You are entitled to vote at the special meeting if you owned shares of Columbia Bancorp common
stock at the close of business on [Record Date], the record date. On [Record Date], there were
___shares of Columbia Bancorp common stock outstanding. You will have one vote on all matters
at the special meeting for each share of Columbia Bancorp common stock you owned on the [Record
Date].
Conditions that must be Satisfied for the Merger to Occur (See page 41)
The following conditions must be met for Fulton and Columbia Bancorp to complete the merger in
addition to other customary conditions:
|
§ |
|
approval of the merger by Columbia Bancorps stockholders; |
|
|
§ |
|
the absence of legal restraints that prevent the completion of the merger; |
18
|
§ |
|
receipt of a legal opinion from Fultons legal counsel that the merger will be
tax-free to Columbia Bancorp stockholders as to shares of Fulton stock received, but
not as to cash received, including cash received in lieu of fractional shares; |
|
|
§ |
|
the continuing accuracy of the parties representations in the merger agreement; |
|
|
§ |
|
no material adverse change having occurred to Columbia Bancorp or Fulton; |
|
|
§ |
|
receipt of all required regulatory approvals; and |
|
|
§ |
|
the continuing effectiveness of the registration statement filed with the SEC with
respect to the merger. |
Regulatory
Approvals Required (See page 50)
Fulton and Columbia Bancorp cannot complete the merger unless Fulton obtains the approvals of
the Federal Reserve Board and the Maryland Commissioner of Financial Regulation. Fulton has filed
the required applications and notices seeking approval of the merger. Although Fulton and Columbia
Bancorp believe regulatory approvals will be received in a timely manner, Fulton and Columbia
Bancorp cannot be certain when or if the approvals will be obtained.
Termination and Amendment of the Merger Agreement (See page 48)
Columbia Bancorp and Fulton can mutually agree at any time to terminate the merger agreement
without completing the merger. Either party can also terminate the merger agreement in the
following circumstances:
|
§ |
|
if any condition precedent to a partys obligations under the merger agreement is
unable to be satisfied by June 30, 2006 (which date may be extended if the delay is a
result of the failure to obtain necessary regulatory approvals), through no fault of
its own; or |
|
|
§ |
|
if the other party has materially breached a representation, warranty or covenant
and has not cured such breach within 30 days of receiving written notice of the breach. |
In addition, Fulton may terminate the merger agreement if Columbia Bancorps board of
directors terminates the merger with Fulton to pursue a proposed acquisition of Columbia Bancorp by
someone other than Fulton. In such an event, Fulton may be able to exercise the warrant for
Columbia Bancorp common stock that it holds. Columbia Bancorp can also terminate the merger
agreement if the closing market price for Fulton common stock, determined by averaging the price of
Fultons stock over a ten day period occurring just before the merger, is less than both:
|
§ |
|
$14.79; and |
|
|
§ |
|
80% of the starting price of Fulton stock ($18.49) multiplied by the ratio of
the Nasdaq Bank Index over the same ten-day period compared to the Index on July
26, 2005. |
However, if Columbia Bancorp is permitted to terminate the merger agreement because of a
decline in Fultons stock price as explained above, Fulton may, at its option, cause Columbia
Bancorp to amend the merger agreement to increase the exchange ratio to a level equal to the
exchange ratio multiplied by (14.79 divided by the closing market price), and Columbia Bancorp will
no longer have the right to terminate the merger agreement as a result of the decline in Fultons
stock price.
Fulton and Columbia Bancorp can agree to amend the merger agreement in any way, except that
after the stockholders special meeting they cannot change the consideration you will receive in
the merger. Either party can waive any of the requirements of the other party in the merger
agreement, except that neither party can waive any required regulatory approval.
19
Fulton to Continue as Surviving Corporation (See page 38)
Fulton will continue as the surviving corporation after the merger. The boards of directors
and executive officers of Fulton and its subsidiaries will not change as a result of the merger,
except that Fulton will appoint John M. Bond, Jr., the Chairman of Columbia Bancorps board of
directors and its Chief Executive Officer, to its board of directors or, in the event he is unable
to serve, another member of Columbia Bancorps current board of directors that is reasonably
acceptable to Fulton.
All of The Columbia Banks current directors are expected to remain on the board of directors
of The Columbia Bank following the merger.
Warrant Agreement makes Third Party Offers for Columbia Bancorp More Expensive (See page 45)
To induce Fulton to enter into the merger agreement, Columbia Bancorp issued Fulton a warrant
to purchase up to 1,881,809 shares of Columbia Bancorp common stock at an exercise price of $37.26
per share, subject to certain restrictions on both (i) Fultons maximum beneficial ownership of
Columbia Bancorp common stock and (ii) the maximum value Fulton may realize from the warrant. The
warrant may discourage other companies from attempting to acquire Columbia Bancorp prior to
completion of the merger by making third party offers for Columbia Bancorp more expensive. It also
provides compensation to Fulton in the event that the merger fails to close because a third party
gains control of Columbia Bancorp. Generally, Fulton may exercise this warrant only if a third
party seeks to gain control of Columbia Bancorp. Fulton and Columbia Bancorp do not believe that
any of the events which would permit Fulton to exercise the warrant have occurred as of the date of
this document. The warrant will expire upon completion of the merger.
The amended and restated warrant agreement and warrant are attached to this document as
Exhibit B.
Risk Factors (See page 22)
You should carefully consider the information under Risk Factors and all other information
incorporated by reference in this document.
Financial Interests of Management in the Merger (See page 53)
When considering the recommendation of Columbia Bancorps board of directors, you should be
aware that some Columbia Bancorp directors and executive officers have interests in the merger
which may conflict with both your and their interests as stockholders. These interests include:
|
§ |
|
John M. Bond, Jr., Chairman and Chief Executive Officer of Columbia Bancorp, and
John A. Scaldara, Jr., President and Chief Operating Officer of Columbia Bancorp, have
each entered into a new employment agreement with The Columbia Bank, Columbia Bancorp
and Fulton that will become effective upon completion of the merger. These employment
agreements replace existing employment agreements that each of Messrs. Bond and
Scaldara has with Columbia Bancorp and The Columbia Bank. Each of Messrs. Bond and
Scaldara will receive a portion of certain change of control payments which are
triggered by the merger under their existing employment agreements; |
|
|
§ |
|
Executive officers and directors hold options to purchase Columbia Bancorp common
stock that will convert into options to purchase Fulton stock or cash, some of which
may accelerate, in terms of vesting, as a result of the merger. As of ___, 2005, the
difference between the aggregate exercise price and the market value of the shares
underlying the options held by executive officers and directors of Columbia Bancorp,
which represents the economic value of the options, was approximately $___; |
|
|
§ |
|
Following the merger, Fulton will indemnify, and provide liability insurance to,
officers and directors of Columbia Bancorp; and |
20
|
§ |
|
Following the merger, the current members of Columbia Bancorps board of directors,
all of which are also directors of The Columbia Bank, will remain directors of The
Columbia Bank, and the compensation for non-employee directors of The Columbia Bank
will remain unchanged for three years following the effective time of the merger. |
Accounting Treatment (see page 51)
Fulton will account for the merger under the purchase method of accounting for business
combinations.
Forward-Looking Information
This document contains and incorporates some forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking
statements include statements regarding intent, belief or current expectations about matters
including statements as to beliefs, expectations, anticipations, intentions or similar
words. Forward-looking statements are also statements that are not statements of historical fact.
Forward-looking statements are subject to risks, uncertainties and assumptions. These include, by
their nature:
|
§ |
|
the effects of changing economic conditions both nationally and in Fultons and
Columbia Bancorps market areas; |
|
|
§ |
|
credit risks of commercial, real estate, consumer and other lending activities; |
|
|
§ |
|
significant changes in interest rates; |
|
|
§ |
|
changes in federal and state banking laws and regulations which could impact operations; |
|
|
§ |
|
funding costs; |
|
|
§ |
|
other external developments which could materially affect the business and
operations of Fulton and Columbia Bancorp; |
|
|
§ |
|
the ability of Fulton to integrate Columbia Bancorp after the merger; and |
|
|
§ |
|
other risks detailed from time to time in Columbia Bancorps and Fultons SEC
filings, including Forms 10-Q and Annual Report on Form 10-K. |
If one or more of these risks or uncertainties occurs, or if the underlying assumptions prove
incorrect, actual results, performance or achievements in 2005 and beyond could differ materially
from those expressed in, or implied by, the forward-looking statements.
21
RISK FACTORS
An investment in Fulton common stock in connection with the merger involves certain risks,
including, among others, the risks described below. In addition to the other information contained
in this document, you should carefully consider the following risk factors in deciding whether to
vote for approval of the merger agreement.
RISK FACTORS RELATED TO THE MERGER
Some Columbia Bancorp stockholders may not receive their requested form of merger consideration.
The merger agreement provides that, in accordance with elections by Columbia Bancorps
stockholders, the merger consideration will be paid in cash, Fulton common stock or a combination
of cash and Fulton common stock. In the event that the aggregate number of shares of Columbia
Bancorp common stock for which cash elections are received is greater than 50% of the number of
shares of Columbia Bancorp common stock outstanding immediately prior to the effective time of the
merger, some of the shares for which elections for cash have been made will be converted into the
right to receive stock consideration in the manner described under The Merger Effect of the
Merger Proration on page 39. In addition, if the aggregate number of
shares of Columbia Bancorp common stock for which cash elections are received is less than 20% of
the number of Columbia Bancorp Shares outstanding immediately prior to the merger, some of the
shares for which elections for stock have been made will be converted into the right to receive
cash consideration in the manner described under The Merger Effect of the Merger Proration on
page 39. Accordingly, holders of Columbia Bancorp common stock may not
receive their requested form and/or allocation of merger consideration.
Fluctuations in the market price of Fulton common stock may cause the value of the stock
portion of the merger consideration to decrease, and Columbia Bancorps board of directors may be
able to abandon the merger as a result of such a decrease.
The aggregate market value of the Fulton common stock that you may receive in the merger is
not fixed. Columbia Bancorp has the right to terminate the merger agreement and abandon the
merger before the closing if the price of Fultons common stock, averaged over a 10 day period
occurring just before the merger, is less than $14.79 and has decreased by 20% more than the Nasdaq
Bank Index when compared, in each instance, to the value of such index and Fulton common stock on
July 26, 2005. The satisfaction of the termination condition creates a right, but not an
obligation, to terminate the merger agreement. The opportunity to evaluate the termination
provisions will take place only at the end of the transaction in accordance with its terms. In the
event the termination provision conditions set forth above allow Columbia Bancorp to terminate the
merger agreement and Columbia Bancorp intends to exercise that right, Fulton has the right to cause
Columbia Bancorp to amend the merger agreement and increase the exchange ratio in lieu of
terminating the merger agreement.
Upon completion of the merger, certain of your shares of Columbia Bancorp common stock may be
converted into shares of Fulton common stock, either through your election or as a result of
proration. While the merger consideration has been structured to provide that Columbia Bancorp
stockholders may elect to receive 2.325 shares of Fulton common stock for some or all of their
shares of Columbia Bancorp common stock which is to be exchanged for Fulton common stock, the
value of 2.325 shares of Fulton common stock at closing will not be known at the time you are
required to make your election. Changes in Fultons stock price may result from a variety of
factors that are beyond the control of Fulton, including, among other things, changes in Fultons
business, operations and prospects, regulatory considerations and general market and economic
conditions.
The price of Fulton common stock may vary from its price on the date of this document, the
date of the Columbia Bancorp special meeting, the date you are required to make an election
concerning the consideration you would like to receive and the date of closing. You will not know
at the time of the special meeting or the date you make election what the price of the Fulton
common stock will be on the date the merger is completed.
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You will have less influence as a stockholder of Fulton than as a stockholder of Columbia Bancorp.
As a Columbia Bancorp stockholder, you currently have the right to vote in the election of the
board of directors of Columbia Bancorp and on other matters affecting Columbia Bancorp. The merger
will result in the transfer of control of Columbia Bancorp and The Columbia Bank to the
stockholders of Fulton. Although when the merger occurs you may become a shareholder of Fulton,
your percentage ownership of Fulton will be significantly smaller than your percentage ownership of
Columbia Bancorp. Because of this, you will have less influence on the management and policies of
Fulton than you now have on the management and policies of Columbia Bancorp.
Fulton may fail to realize all of the anticipated benefits of the merger.
The success of the merger will depend, in part, on Fultons ability to realize the anticipated
benefits and cost savings from combining the businesses of Columbia Bancorp and Fulton. However, to
realize these anticipated benefits and cost savings, Fulton must successfully combine the
businesses of Columbia Bancorp and Fulton. If Fulton is not able to achieve these objectives, the
anticipated benefits and cost savings of the merger may not be realized fully or at all or may take
longer to realize than expected.
Columbia Bancorp and Fulton have operated and, until the completion of the merger, will
continue to operate, independently. It is possible that the integration process could result in the
loss of key employees, the disruption of each companys ongoing businesses or inconsistencies in
standards, controls, procedures and policies that adversely affect Fultons ability to maintain its
relationships with their respective clients, customers, depositors and employees or to achieve the
anticipated benefits of the merger. Integration efforts between the two companies may, to some
extent, also divert management attention and resources. These integration matters could have an
adverse effect on each of Columbia Bancorp and Fulton during such transition period.
The merger agreement limits Columbia Bancorps ability to pursue alternatives to the merger.
The merger agreement contains no shop provisions that, subject to limited exceptions, limit
Columbia Bancorps ability to discuss, facilitate or commit to competing third-party proposals to
acquire all or a significant part of the company. In addition, Columbia Bancorp has issued Fulton a
warrant to acquire up to 1,881,809 shares of Columbia Bancorp common stock pursuant to the terms of
the warrant. These provisions may discourage a potential competing acquiror that might have an
interest in acquiring all or a significant part of Columbia Bancorp from considering or proposing
that acquisition even if it were prepared to pay consideration with a higher per share market price
than that proposed in the merger, or might result in a potential competing acquiror proposing to
pay a lower per share price to acquire Columbia Bancorp than it might otherwise have proposed to
pay.
Columbia Bancorps executive officers and directors have financial interests in the merger that
are different from, or in addition to, the interests of Columbia Bancorp stockholders.
Executive officers of Columbia Bancorp negotiated the terms of the merger agreement with their
counterparts at Fulton, and Columbia Bancorps board of directors unanimously approved the merger
agreement and recommended that Columbia Bancorp stockholders vote to approve the merger agreement.
In considering these facts and the other information contained in this document, you should be
aware that Columbia Bancorps executive officers and directors have financial interests in the
merger that are different from, or in addition to, the interests of Columbia Bancorp stockholders.
For example, certain executive officers have entered into agreements with Fulton
that may provide, among other things, non-competition payments and severance and other benefits
following the merger. These and other additional interests of Columbia Bancorp directors and
executive officers may create potential conflicts of interest and cause some of these persons to
view the proposed transaction differently than you may view it, as a stockholder. Please see The
MergerFinancial Interests of Management in the MergerEmployment Agreements for information about
these financial interests.
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RISK FACTORS RELATED TO FULTONS BUSINESS
Changes in interest rates may have an adverse effect on Fultons profitability.
Fulton and its subsidiary banks are affected by fiscal and monetary policies of the federal
government, including those of the Federal Reserve Board, which regulates the national money supply
in order to manage recessionary and inflationary pressures. Among the techniques available to the
Federal Reserve Board are engaging in open market transactions of U.S. Government securities,
changing the discount rate and changing reserve requirements against bank deposits. The use of
these techniques may also affect interest rates charged on loans and paid on deposits.
Net interest income is the most significant component of Fultons net income, accounting for
approximately 72% of total revenues in 2004 and 73% of revenues in the first half of 2005. The
narrowing of interest rate spreads, the difference between interest rates earned on loans and
investments and interest rates paid on deposits and borrowings, would adversely affect Fultons
earnings and financial condition. Among other things, regional and local economic conditions as
well as fiscal and monetary policies of the federal government, including those of the Federal
Reserve Board, may affect prevailing interest rates. Fulton cannot predict or control changes in
interest rates.
During the first half of 2004, short-term interest rates were low and Fultons net interest
income and net interest margin were negatively affected because reducing the rates paid on deposits
became exceedingly difficult. During the second half of 2004 and the first half of 2005, the
Federal Reserve Board has increased short-term interest rates several times. When short-term
interest rates rise, Fulton generally expects improvements in net interest income. However, a flat
or declining interest rate environment would adversely impact Fultons net interest income. In
addition, increasing short-term rates tend to have a detrimental impact on mortgage loan
origination volumes and related mortgage-banking income.
The absolute difference between short-term interest rates and intermediate-term interest rates
can also affect Fultons net interest income. When intermediate-term interest rates exceed
short-term interest rates, generally, an increase in the interest rate differential will increase
the net interest income earned by Fulton on a portion of its earning assets. Conversely, a
reduction in the interest rate differential will generally cause a reduction in net interest income
earned by Fulton on a portion of its earning assets.
Changes in economic conditions and the composition of Fultons loan portfolios could lead to higher
loan charge-offs or an increase in Fultons allowance for loan losses and may reduce Fultons
income.
Changes in national and regional economic conditions could impact the loan portfolios of
Fultons subsidiary banks. For example, an increase in unemployment, a decrease in real estate
values or increases in interest rates, as well as other factors, could weaken the economies of the
communities Fulton serves. Weakness in the market areas served by Fultons subsidiary banks could
depress its earnings and consequently its financial condition because:
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borrowers may not be able to repay their loans; |
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the value of the collateral securing Fultons loans to borrowers may decline,
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Any of the latter three scenarios could require Fulton to charge-off a higher percentage of
its loans and/or increase its provision for loan and lease losses, which would reduce its income.
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In addition, the amount of Fultons provision for loan losses and the percentage of loans it
is required to charge-off may be impacted by the overall risk composition of the loan portfolio.
Recently, the amount of Fultons commercial loans (including agricultural loans) and commercial
mortgages have increased, comprising a greater percentage of its overall loan portfolio. These
loans are inherently more risky than certain other types of loans, such as residential mortgage
loans. While Fulton believes that its allowance for loan losses as of December 31, 2004 and June
30, 2005 is sufficient to cover losses inherent in the loan portfolio on that date, Fulton cannot
assure you that it will not be required to increase its loan-loss provision or charge-off a
higher percentage of loans due to changes in the risk characteristics of the loan portfolio,
thereby reducing its net income. To the extent any of Fultons subsidiary banks rely more heavily
on loans secured by real estate than the banking industry in general, a decrease in real estate
values could cause higher loan losses on non-performing loans and require higher loan loss
provisions.
Fluctuations in the value of Fultons equity portfolio, or assets under management by Fultons
trust and investment management services, could have a material impact on Fultons results of
operations.
At June 30, 2005, Fultons investments consisted of $67.0 million of stocks of other financial
institutions, $67.0 million of FHLB and other government agency stock and $34.3 million of mutual
funds and other investments. Fultons equity portfolio consists primarily of common stock of
publicly traded financial institutions. Fulton realized net gains on the sale of equity securities
of $14.8 million and $17.3 million in 2004 and 2003, respectively. These gains were offset by
write-downs of $137,000 in 2004 and $3.3 million in 2003 for the impairment in value of specific
equity securities. The unrealized gains on the equity portfolio represent a potential source of
revenue for Fulton. The value of the securities in Fultons equity portfolio may be affected by a
number of factors, including factors that impact the performance of the U.S. securities market in
general and, due to the concentration in stocks of financial institutions in Fultons equity
portfolio, specific risks associated with that sector. If the value of one or more equity
securities in the portfolio were to decline significantly, this revenue could be reduced or lost in
its entirety. In addition to Fultons equity portfolio, Fultons investment management and trust
services could be impacted by fluctuations in the securities market. A portion of Fultons trust
revenue is based on the value of the underlying investment portfolios. If the value of those
investment portfolios decreases, whether due to factors influencing U.S. securities markets in
general, or otherwise, Fultons revenue could be negatively impacted. In addition, Fultons ability
to sell its brokerage services is dependent, in part, upon consumers level of confidence in the
outlook for rising securities prices.
If Fulton is unable to acquire additional banks on favorable terms or if it fails to successfully
integrate or improve the operations of acquired banks, Fulton may be unable to execute its growth
strategies.
Fulton has historically supplemented its internal growth with strategic acquisitions of banks,
branches and other financial services companies. There can be no assurance that Fulton will be able
to effect future acquisitions on favorable terms or that it will be able to assimilate acquired
institutions successfully. In addition, with acquisitions, Fulton may not be able to achieve
anticipated cost savings or operating results. Acquired institutions also may have unknown or
contingent liabilities or deficiencies in internal controls that could result in material
liabilities or negatively impact Fultons ability to complete the internal control procedures
required under federal securities laws, rules and regulations or by certain laws, rules and
regulations applicable to the banking industry.
If the goodwill that Fulton has recorded in connection with its acquisitions becomes impaired, it
could have a negative impact on Fultons profitability.
Applicable accounting standards require that the purchase method of accounting be used for all
business combinations. Under purchase accounting, if the purchase price of an acquired company
exceeds the fair value of the companys net assets, the excess is carried on the acquirors balance
sheet as goodwill. At June 30, 2005, Fulton had approximately $364 million of goodwill on its
balance sheet. With the acquisition of SVB Financial on July 1, 2005, goodwill was approximately
$418 million. Companies must evaluate goodwill for impairment at least annually. Writedowns of the
amount of any impairment, if necessary, are to be charged to the results of operations in the
period in which the impairment is determined. Based on tests of goodwill impairment conducted to
date, Fulton has concluded that there has been no impairment, and no write-downs have been
recorded. However, there can be no assurance that the future evaluations of goodwill will not
result in findings of impairment and write-downs.
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Fluctuations in the level of some of Fultons defined benefit plan expense could adversely affect
its earnings.
Fultons defined benefit plan expense can be greatly impacted by the return realized on
invested plan assets and thus is not entirely within Fultons control. A downturn in the equity
markets can result in an increase in expense. Such an increase occurred in 2003, when Fultons
defined benefit plan expense increased 66.9%, from $1,812,000 to $3,025,000. This expense increased
in 2004, to $3,072,000.
The competition Fulton faces is increasing and may reduce Fultons customer base and negatively
impact Fultons results of operations.
There is significant competition among commercial banks in the market areas served by Fultons
subsidiary banks. In addition, as a result of the deregulation of the financial industry, Fultons
subsidiary banks also compete with other providers of financial services such as savings and loan
associations, credit unions, consumer finance companies, securities firms, insurance companies,
commercial finance and leasing companies, the mutual funds industry, full service brokerage firms
and discount brokerage firms, some of which are subject to less extensive regulations than Fulton
is with respect to the products and services they provide. Some of Fultons competitors, including
certain super-regional and national bank holding companies that have made acquisitions in its
market area, have greater resources than Fulton has, and as such, may have higher lending limits
and may offer other services not offered by Fulton.
Fulton also experiences competition from a variety of institutions outside its market areas.
Some of these institutions conduct business primarily over the Internet and may thus be able to
realize certain cost savings and offer products and services at more favorable rates and with
greater convenience to the customer.
Competition may adversely affect the rates Fulton pays on deposits and charges on loans,
thereby potentially adversely affecting Fultons profitability. Fultons profitability depends upon
its continued ability to successfully compete in the market areas it serves while achieving its
investment objectives.
The supervision and regulation to which Fulton is subject can be a competitive disadvantage.
Fulton is a registered financial holding company, and its subsidiary banks are depository
institutions whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC). As a
result, Fulton and its subsidiaries are subject to various regulations and examinations by various
regulatory authorities. In general, statutes establish the corporate governance and eligible
business activities for Fulton, certain acquisition and merger restrictions, limitations on
inter-company transactions such as loans and dividends, and capital adequacy requirements,
requirements for anti-money laundering programs and other compliance matters, among other
regulations. Fulton is extensively regulated under federal and state banking laws and regulations
that are intended primarily for the protection of depositors, federal deposit insurance funds and
the banking system as a whole. Compliance with these statutes and regulations is important to
Fultons ability to engage in new activities and to consummate additional acquisitions. In
addition, Fulton is subject to changes in federal and state tax laws as well as changes in banking
and credit regulations, accounting principles and governmental economic and monetary policies.
Fulton cannot predict whether any of these changes may adversely and materially affect it. Federal
and state banking regulators also possess broad powers to take supervisory actions as they deem
appropriate. These supervisory actions may result in higher capital requirements, higher insurance
premiums and limitations on Fultons activities that could have a material adverse effect on its
business and profitability. While these statutes are generally designed to minimize potential loss
to depositors and the FDIC insurance funds, they do not eliminate risk, and compliance with such
statutes increases Fultons expense, requires managements attention and can be a disadvantage from
a competitive standpoint with respect to non-regulated competitors.
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THE SPECIAL MEETING
The board of directors of Columbia Bancorp is providing this document to holders of Columbia
Bancorp common stock to solicit your proxy for use at the special meeting of Columbia Bancorp
stockholders and any adjournments or postponements of the special meeting.
Time, Date and Place
The special meeting of Columbia Bancorps stockholders will be held at [Meeting Time], local
time, on [Meeting Day], [Meeting Date], at [Meeting Place], [Meeting Address].
Matters to be Considered
The purposes of the special meeting are to consider, approve and adopt the merger agreement,
to approve a proposal to adjourn the special meeting, if necessary, because more time is needed to
solicit additional proxies, and to transact such other business as may properly come before the
special meeting or any adjournment or postponement of the special meeting. At this time, Columbia
Bancorps board of directors is unaware of any other matters that may be presented for action at
the special meeting.
A vote for approval of the merger agreement is a vote for approval of the merger of Columbia
Bancorp with and into Fulton and for the exchange of Columbia Bancorp common stock for Fulton
common stock, cash or a combination of the two. If the merger is completed, Columbia Bancorp common
stock will be cancelled and you will receive: (i) 2.325 shares of Fulton common stock (subject to
adjustment for stock splits, stock dividends and similar matters); (ii) $42.48 in cash; or (iii)
one of nine combinations of cash and stock in exchange for each share of Columbia Bancorp common
stock that you hold, in each case subject to proration, as necessary, to ensure that at least 20%,
and at most 50%, of Columbia Bancorps outstanding shares are converted into cash. Fulton will pay
cash in lieu of issuing any fractional share interests to you.
Shares Outstanding and Entitled to Vote; Record Date
The close of business on [Record Date] has been fixed by Columbia Bancorps board of directors
as the record date for the determination of holders of Columbia Bancorp common stock entitled to
notice of and to vote at the special meeting and any adjournment or postponement of the special
meeting. At the close of business on the record date, ___shares of Columbia Bancorp common
stock were outstanding and entitled to vote. Each share of Columbia Bancorp common stock entitles
the holder to one vote at the special meeting on all matters properly presented at the special
meeting.
How to Vote your Shares
Columbia Bancorp stockholders of record may vote by mail or by attending the special meeting
and voting in person. If you choose to vote by mail, simply mark the enclosed proxy card, date and
sign it, and return it in the postage paid envelope provided.
If your shares are held in the name of a bank, broker or other holder of record, you will
receive instructions from the holder of record that you must follow in order for your shares to be
voted. Also, please note that if the holder of record of your shares is a broker, bank or other
nominee, and you wish to vote in person at the special meeting, you must bring a letter from the
broker, bank or other nominee confirming that you are the beneficial owner of the shares.
Any Columbia Bancorp stockholder executing a proxy may revoke it at any time before it is
voted by:
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delivering to the Secretary of Columbia Bancorp prior to the special meeting a
written notice of revocation, addressed to Sibyl S. Malatras, Columbia Bancorp, 7162
Columbia Gateway Drive, Columbia, MD 21046; |
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delivering to Columbia Bancorp prior to the special meeting a properly executed
proxy with a later date; or |
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attending the special meeting and voting in person. |
Attendance at the special meeting will not, in and of itself, constitute revocation of a
proxy.
Each proxy returned to Columbia Bancorp (and not revoked) by the holder of Columbia Bancorp
common stock will be voted in accordance with the instructions indicated thereon. If no
instructions are indicated, the proxy will be voted FOR approval and adoption of the merger
agreement, FOR adjournment of the special meeting if necessary to allow Columbia Bancorp time to
solicit additional votes in favor of the merger agreement and, as to any other proposal properly
brought before the special meeting, in the discretion of Messrs. Bond and Scaldara in their
capacity as attorney-in-fact.
At this time, Columbia Bancorps board of directors is unaware of any matters, other than set
forth above, that may be presented for action at the special meeting or any adjournment or
postponement of the special meeting. If other matters are properly presented, however, the persons
named as proxies will vote in accordance with their judgment with respect to such matters.
Vote Required
A quorum, consisting of the holders of a majority of the issued and outstanding shares of
Columbia Bancorp common stock, must be present in person or by proxy before any action may be taken
at the special meeting. On all matters to come before the special meeting, each share of common
stock is entitled to one vote.
Under Columbia Bancorps charter and Title 3 of the Financial Institutions Article of the
Annotated Code of Maryland, the affirmative vote of two-thirds of all votes entitled to be cast on
the matter is necessary to approve and adopt the merger agreement on behalf of Columbia Bancorp.
Because the affirmative vote of two-thirds of all votes entitled to be cast at the special
meeting is needed for Columbia Bancorp to proceed with the merger, the failure to vote by proxy or
in person will have the same effect as a vote against the merger. Abstentions and broker
non-votes also will have the same effect as a vote against the merger. Accordingly, Columbia
Bancorps board of directors urges Columbia Bancorp stockholders to promptly vote by completing,
dating and signing the accompanying proxy card and to promptly return it in the enclosed
postage-paid envelope, or, if you hold your stock in street name through a bank or a broker, by
following the voting instructions of your bank or broker.
The directors and executive officers of Columbia Bancorp collectively owned approximately ___
of the outstanding shares of Columbia Bancorp common stock as of the record date for the special
meeting. Certain of Columbia Bancorps directors and executive officers, collectively owing
approximately ___% of the outstanding shares of Columbia Bancorp common stock as of the record
date, have signed voting agreements pursuant to which they have agreed to vote all of their shares
in favor of the merger.
Solicitation of Proxies
Columbia Bancorp will pay all costs incurred by it in connection with the solicitation of
proxies (including any costs incurred by Columbia Bancorp in connection with the retention by it of
a third party to solicit proxies) from its stockholders on behalf of its board of directors with
the exception of printing and mailing this document, the cost of which will be paid by Fulton. The
directors, officers and employees of Columbia Bancorp and its subsidiaries may solicit proxies from
stockholders of Columbia Bancorp in person or by telephone, facsimile or other electronic methods
without compensation other than reimbursement by Columbia Bancorp for their actual expenses.
Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries
for the forwarding of solicitation material to the beneficial owners of Columbia Bancorp common
stock held of record by such persons, and Columbia Bancorp will reimburse such firms, custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
Columbia Bancorp may retain the services of a third
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party to solicit proxies by personal interview, telephone, facsimile and/or mail, but has no
current intent to retain such services.
Do not send in your stock certificates with your proxy card. As described under the caption
The Merger Effect of the Merger Exchange of Columbia Bancorp Stock Certificates
on page 40, a letter of transmittal/election form will be mailed to you shortly.
THE MERGER
The following information is intended to summarize the material aspects of the merger
agreement. This description is only a summary. We have attached a copy of the merger agreement, the
amended and restated warrant agreement and the warrant to this document as Exhibits A and B,
respectively, and we incorporate each in this document by reference. We urge you to read the merger
agreement carefully. The merger agreement has been included to provide you with information
regarding its terms. It is not intended to provide any other factual information about Fulton or
Columbia Bancorp. Such information can be found elsewhere in this document and in the other public
filings Fulton and Columbia Bancorp make with the Securities and Exchange Commission, which are
available without charge at www.sec.gov.
The merger agreement provides, among other things, that:
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Columbia Bancorp will merge with and into Fulton, with Fulton surviving; and |
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If the merger is completed, you, as a stockholder of Columbia Bancorp, will receive,
at your election (but subject to proration): (i) 2.325 shares of Fulton common stock
for each share of Columbia Bancorp common stock owned (subject to adjustment for stock
splits, stock dividends and similar events); (ii) $42.48 in cash for each share of
Columbia Bancorp Stock owned; or (iii) one of nine permissible combinations of Fulton
common stock and cash consideration for your shares of Columbia Bancorp common stock. |
The board of directors of Columbia Bancorp has unanimously approved and adopted the merger
agreement and believes the merger is in the best interests of Columbia Bancorp and its
stockholders. Columbia Bancorps board of directors recommends that you vote FOR the merger
agreement.
Background of Merger
Columbia Bancorps business strategy has been focused on growing its business independently
and serving its customers and employee constituents. However, members of Columbia Bancorps
executive management have, on occasion, talked with principals of various interested parties and
received indications of interest to enter into discussions regarding, and at times received
proposals with various levels of specificity for, a business combination with such interested
parties. Traditionally, these indications of interest commenced through discussions between
Columbia Bancorps Chief Executive Officer and the principals of the other financial institutions.
The Chief Executive Officer would discuss any indications of interest that he considered
significant with the executive members of Columbia Bancorps Board of Directors (consisting of
Messrs. Bond, Kelly, Langenthal, Moxley and Scaldara) (the Executive Members). Under procedures
approved by the Board of Directors, any possible business combination that the Executive Members
considered to be worthy of further consideration was referred to the Strategic Planning Committee
of Columbia Bancorps Board of Directors (the Strategic Planning Committee) for further
consideration. If, after evaluating the terms and conditions and merits of the proposed business
combination, the Strategic Planning Committee determined the proposal to be desirable and in the
best interests of Columbia Bancorp and its stockholders, the Strategic Planning Committee would
then recommend that Columbia Bancorps entire Board of Directors evaluate the proposed transaction.
The final step would be for Columbia Bancorps Board of Directors to evaluate the terms and
conditions and merits of the proposed business combination to determine whether it is advisable and
in the best interests of Columbia Bancorp and its stockholders. No proposed business combination
has been deemed by all three levels of authority to meet the strategic objectives of Columbia Bancorp
other than the proposed business combination with Fulton.
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At
each stage of review, the evaluations of potential business combinations have been
undertaken in accordance with Columbia Bancorps charter and the Maryland General Corporation Law.
Columbia Bancorps charter requires that, in determining what is in the best interests of Columbia
Bancorp and its stockholders, due consideration be given to all relevant factors, including but not
limited to (a) the economic effect, both immediate and long-term, upon Columbia Bancorps
stockholders; (b) the social and economic effect on employees and customers of, and others dealing
with, Columbia Bancorp and its subsidiaries and on the communities in which Columbia Bancorp and
its subsidiaries operate; (c) whether the proposal is acceptable based on the historical and
current operating results or financial condition of Columbia Bancorp; (d) whether a more favorable
price could be obtained for Columbia Bancorps stock or other securities in the future; (e) the
reputation and business practices of the other party and its management and affiliates as they
would affect the employees of Columbia Bancorp; (f) the future value of the stock or any other
securities of Columbia Bancorp; and (g) any antitrust or other legal and regulatory issues that are
raised by the proposal.
In the Fall of 2003,
Columbia Bancorps executive management was formally introduced to Fulton
by Arnold G. Danielson, of Danielson, to discuss interest in
a potential business combination between Columbia Bancorp and Fulton. In order to facilitate
discussions, Fulton and Columbia Bancorp executed a mutual confidentiality agreement at that time.
Columbia Bancorps executive management also stated that it would be considering two other
proposals from financial institutions with which it had been having discussions regarding a
potential business combination. Fulton was asked to submit a proposal to be considered along with
the other proposals. Ultimately, Columbia Bancorp received three proposals during October and
November 2003, including one from Fulton. At that time, the Board of Directors concluded that two
of the proposals (including Fultons) were not in the best interests of Columbia Bancorp and its
stockholders. The third proposal was withdrawn for reasons
stated to be unrelated to Columbia Bancorp.
Following that determination, John M. Bond, Jr., Chairman and Chief Executive Officer of
Columbia Bancorp, was in contact from time to time with Mr. Rufus Fulton, Chairman and Chief
Executive Officer of Fulton. In October 2004, Mr. Bond and Mr. Fulton met at an investor
conference in New York and agreed to discuss the merits of a possible business combination at a
later time.
On November 22, 2004, Mr. Bond and Mr. John A. Scaldara, Jr., President and Chief Operating
Officer of Columbia Bancorp, met with Mr. Fulton and Mr. R. Scott Smith, Jr., President and Chief
Operating Officer of Fulton. A possible business combination was
discussed. Based
on the level of interest expressed and the favorable preliminary terms and conditions contemplated,
the Executive Committee was informed of the meeting and agreed unanimously that Mr. Bond and Mr.
Scaldara should continue discussions with Fulton.
On December 2, 2004, Mr. Bond and Mr. Scaldara visited with Mr. Fulton, Mr. Smith and Mr.
Charles J. Nugent, Senior Executive Vice President and Chief Financial Officer of Fulton, to
discuss other aspects of a potential business combination, including pricing, deal structure,
assumptions employed by Fulton with regard to cost savings and the corporate and management
structure of Columbia Bancorp following completion of a business combination. Following the
meeting, the Executive Members determined that pursuit of a business combination with Fulton
might be desirable, but that the timing was problematic and inopportune. Specifically, Columbia
Bancorps data processing system conversion, which began in September 2004 and was still
continuing, and the enactment by Congress of the Sarbanes-Oxley Act of 2002, were placing enormous
demands on managements time and required managements full attention. As a result, the parties
deferred further discussion of terms of a possible business combination pending
completion of these items. Columbia Bancorp and Fulton continued to remain in contact and, on
January 7, 2005, Mr. Fulton and Mr. Smith met with the Executive Members of Columbia Bancorps
Board of Directors to discuss Fultons history, business model, financial performance and
succession planning.
Following the completion of Columbia Bancorps data processing system conversion, completion
of Sarbanes-Oxley 404 compliance and the publication of Columbia Bancorps first quarter 2005
earnings press release on April 25, 2005, Mr. Bond contacted Mr. Fulton and both parties decided to
renew discussions once again to determine whether a business combination was in the interests of
both parties.
30
On May 12, 2005, Mr. Scaldara met with Mr. Nugent and his staff to discuss a potential
business combination, including detailed pricing assumptions.
On May 13, 2005, Mr. Bond and Mr. Scaldara met with Mr. Fulton, Mr. Smith and Mr. Nugent to
further discuss business terms, address personnel matters and clarify issues regarding corporate
structure subsequent to the closing of a transaction.
On May 16, 2005, the Executive Members met to evaluate the preliminary terms and conditions
and merits of a proposed business combination with Fulton and authorized Mr. Bond to continue
negotiations of the terms and conditions of the proposed transaction and to arrange due diligence
procedures as soon as practicable.
On May 27, 2005, Mr. Bond and Mr. Scaldara met with Mr. Smith and others from Fulton to
further negotiate the business terms of the proposed business combination and to begin to discuss
the schedule for drafting a merger agreement and the performance by Columbia Bancorp and Fulton
of due diligence.
From May 27, 2005 through July 6, 2005, Columbia Bancorp and Fulton exchanged information and
conducted limited due diligence.
On July 6, 2005, Mr. Bond and Mr. Scaldara met with Mr. Fulton and Mr. Smith to finalize the
business terms of the proposed business combination and requested that Fulton deliver a term sheet
detailing in definitive form the terms on which they were prepared to conclude a business
combination. On July 8, 2005, Fulton presented to Columbia Bancorp a non-binding proposal
outlining the material terms of a potential business combination which was consistent with the
terms negotiated and discussed in May and June.
On July 12, 2005, Columbia Bancorp formally engaged Danielson Associates Inc. to act as
Columbia Bancorps financial advisor in connection with a possible business combination with
Fulton.
From July 13, 2005 through July 26, 2005, Columbia Bancorp, its legal counsel, the law firm of
DLA Piper Rudnick Gray Cary US LLP (DLA Piper), and Danielson, drafted, negotiated and finalized
the merger agreement and the related agreements (including a warrant agreement, a warrant, a form
of stockholder voting agreement and employment agreements for each of Mr. Bond and Mr. Scaldara)
with Fulton and its legal counsel, Barley Snyder LLC. During this period, Columbia Bancorp and
Fulton also conducted additional due diligence on each other. On July 19, 2005, Fulton and
Columbia Bancorp executed an updated mutual confidentiality agreement.
On July 23, 2005, a combined special meeting of the Strategic Planning Committee and the
Executive Committee of the Board of Directors of Columbia Bancorp was held at the offices of DLA
Piper to review the terms of the proposed business combination. Presentations were made to the
committees by management, Mr. Danielson and DLA Piper. The members of each of the Strategic
Planning Committee and the Executive Committee voted to authorize Mr. Bond to continue
negotiations with Fulton and to recommend the proposed business combination to the Board of
Directors.
On July 25, 2005, a special meeting of the board of directors was held at the offices of DLA
Piper. At the meeting, Columbia Bancorps directors received a draft of merger agreement, pursuant
to which Columbia Bancorp would merge with and into Fulton, along with the related agreements
(including the warrant agreement, the warrant, the form of stockholder voting agreement and
employment agreements for each of Mr. Bond and Mr. Scaldara). DLA Piper made a presentation to the
board of directors, which included a review of the duties of Columbia
Bancorps directors, and
presented an overview of the terms of the merger agreement. DLA Piper also answered questions
raised by Columbia Bancorps directors relative to their duties and the proposed transaction.
Danielson then made a presentation to the board of directors, which included a review of the
financial aspects of the transaction and an analysis of the financial performance of Fulton and the
fairness of the transaction from a financial point of view to Columbia Bancorp and its
stockholders. The meeting of the board of directors adjourned without the directors voting on the
proposed business combination or adopting any resolutions.
On July 26, 2005, at a regularly scheduled meeting of the board of directors, Columbia
Bancorps board of directors received a report on the final proposed terms of the transaction and
voted to approve the merger agreement
31
on substantially the same terms as the draft previously distributed to the members of the
board of directors and the merger of Columbia Bancorp with and into Fulton. Danielson opined that
the transaction was fair from a financial point of view to Columbia Bancorp and its stockholders.
Subsequent to the close of the Nasdaq stock market later that evening, Mr. Bond, on behalf of
Columbia Bancorp, executed the merger agreement and the applicable parties signed the related
agreements. At approximately 8:45 p.m., Columbia Bancorp and Fulton then each issued a press
release announcing the potential merger and the execution of the merger agreement.
Recommendation of the Columbia Bancorp Board of Directors and Reasons for the Merger
After careful consideration, Columbia Bancorps board of directors determined that the merger
is fair to, and in the best interests of, Columbia Bancorp and its stockholders. Accordingly,
Columbia Bancorps board of directors unanimously approved the merger agreement and the merger and
recommends that Columbia Bancorp stockholders vote FOR approval and adoption of the merger
agreement.
In approving the merger agreement and the merger, Columbia Bancorps board of directors
consulted with Danielson, Columbia Bancorps financial advisor, with respect to the financial
aspects and fairness of the exchange ratio from a financial point of view, and with its legal
counsel as to its legal duties and the terms of the merger agreement. In arriving at its
determination, Columbia Bancorps board of directors also considered all material factors
concerning the merger, including the following, the order of which does not necessarily reflect
their relative significance:
|
§ |
|
the financial terms of the transaction, including the fact that the cash merger
consideration, which shall represent a minimum of 20% of the total merger consideration
based upon a price of $42.48 proposed by Fulton, represented a premium of approximately
14% over $37.25, the closing price per share of Columbia Bancorp common stock as
reported on The Nasdaq National Market on July 26, 2005; |
|
|
§ |
|
the ability of Columbia Bancorp stockholders to elect to receive stock at an
exchange ratio of 2.325 shares for a maximum of 80% of the total consideration in
shares of Fulton common stock represented the potential for Columbia Bancorp
stockholders to receive consideration with a value in excess of $42.48; |
|
|
§ |
|
the ability of Columbia Bancorp stockholders to elect to receive $42.48 per share in
cash for a minimum of 50% of the total consideration represented the potential for
Columbia Bancorp stockholders to receive at least a minimum amount of cash
consideration; |
|
|
§ |
|
the ability of Columbia Bancorps stockholders to use any cash received in the
merger to purchase shares of Fulton common stock on the open market, and, as a result,
participate in any future increases in the value of the combined company; |
|
|
§ |
|
that Fulton, through prior acquisitions, already serves markets in Maryland and
several other mid-Atlantic states, and that Columbia Bancorps trade area was a natural
extension of Fultons existing trade area; |
|
|
§ |
|
the fact that Fultons common stock is more regularly traded on the Nasdaq National
Market and provides greater liquidity than Columbia Bancorps common stock; |
|
|
§ |
|
that Fulton offers a broader range of products and services and the merger will
provide Columbia Bancorps customers with access to these products and services; |
|
|
§ |
|
the availability of Fulton staff with specialized capabilities and experience to
deal with regulatory compliance and to support The Columbia Banks continuing
operations; |
|
|
§ |
|
the strength of Fultons management and the similarity of the commitment to the
community and operating philosophies of Columbia Bancorp; |
32
|
§ |
|
that Columbia Bancorps board of directors will be entitled to appoint one of its
members to Fultons board of directors; |
|
|
§ |
|
that, for at least three years following the merger, Fultons intention is to
operate The Columbia Bank as a stand-alone subsidiary, thereby providing Columbia
Bancorps existing customers the opportunity to obtain broader products and services
from personnel with whom they are familiar; |
|
|
§ |
|
the likelihood that potential staff reductions would be minimal as compared to other
potential business combinations; |
|
|
§ |
|
the projected increase in the effective dividend yield for Columbia Bancorps
stockholders; |
|
|
§ |
|
the opinion of Columbia Bancorps financial advisor, Danielson that as of July 26,
2005, and based upon and subject to the facts and assumptions set forth in the opinion,
that the consideration to be received by holders of Columbia Bancorps common stock
pursuant to the merger agreement was fair from a financial point of view to such
holders, as more fully described below under the caption The Merger-Opinion of
Columbia Bancorps Financial Advisor; |
|
|
§ |
|
the ability of Columbia Bancorp to accept a superior proposal, as defined in the
merger agreement, under certain circumstances. |
|
|
§ |
|
other terms of the merger agreement, including the opportunity for Columbia Bancorp
stockholders to receive shares of Fulton common stock in a tax free exchange; and |
|
|
§ |
|
based upon Fultons history of acquisitions and regulatory applications, the
likelihood that the merger would be approved by appropriate regulatory authorities. |
All business combinations, including the merger, also include certain risks and disadvantages.
The material potential risks and disadvantages to Columbia Bancorps stockholders identified by
Columbia Bancorps board of directors and management include the following material matters, the
order of which does not necessarily reflect their relative significance:
|
§ |
|
the fact that the certain provisions of the merger agreement forbid Columbia Bancorp
from soliciting third parties in connection with potential business combinations; |
|
|
§ |
|
the fact that Columbia Bancorp has to waive certain anti-takeover protections
provided by Maryland law; |
|
|
§ |
|
the fact that the warrant agreement entered into in connection with the merger
agreement and certain other provisions of the merger agreement might discourage third
parties from seeking to acquire Columbia Bancorp, in light of the fact that Fulton was
unwilling to enter into the merger agreement absent such provisions; and |
|
|
§ |
|
the fact that the exchange ratio is fixed except in extraordinary circumstances,
thus rendering Columbia Bancorp stockholders subject to the risk of declines in the
market price of Fulton common stock. |
The discussion and factors considered by Columbia Bancorps Board of Directors are not
intended to be exhaustive, but include all material factors considered. In approving the merger
agreement, Columbia Bancorps board did not assign any specific or relative weights to any of the
foregoing factors, and individual directors may have weighted factors differently. In addition,
there can be no assurances that the benefits of the merger perceived by the Columbia Bancorp Board
of Directors and described above will be realized or will outweigh the risks and uncertainties.
33
Opinions of Columbia Bancorps Financial Advisor
Columbia Bancorp retained Danielson to advise Columbia Bancorps board of directors as to the
fairness to its stockholders of the financial terms of the offer to be acquired by Fulton.
Danielson was selected by Columbia Bancorp because of its knowledge, expertise and reputation in
the financial services industry, as well as, its specific knowledge
of Mid-Atlantic markets and banking
organizations operating in those markets. Danielson is regularly engaged in the valuation of banks
and bank holding companies in connection with mergers, acquisitions and other securities
transactions.
Danielson reviewed the merger agreement with respect to the pricing and other terms and
conditions of the merger. Danielson rendered its opinion directly to the Columbia Bancorp board of
directors on July 26, 2005, which it also confirmed in writing, that as of the date of the opinion,
the financial terms of the Fulton offer were fair to Columbia Bancorp and its stockholders. No
limitations were imposed by the Columbia Bancorp board of directors upon Danielson with respect to
the investigation made or procedures followed by it in arriving at its opinion. While the board of
directors considered the Danielson opinion in its determination, the decision to accept the offer
was ultimately made by the board of directors of Columbia Bancorp. In arriving at its opinion,
Danielson:
|
§ |
|
Reviewed certain business and financial information relating to Columbia Bancorp and
Fulton including call report data from January 1, 2000 through March 31, 2005,
quarterly earnings releases from January 1, 2000 through June 30, 2005 and Annual
Report on Form 10-K for fiscal years ended December 31, 2003 and December 31, 2004. |
|
|
§ |
|
Discussed with members of Columbia Bancorps executive management their assessment
of the strategic rationale for, and potential benefits of, the merger described under
The Merger Recommendation of the Columbia Bancorp Board of Directors and Reasons for
the Merger on page 32. |
|
|
§ |
|
Discussed the past and current operations, financial condition and future prospects
of Columbia Bancorp and Fulton with senior executives of Columbia and Fulton. |
|
|
§ |
|
Reviewed and compared the financial terms, to the extent publicly-available, with
comparable transactions. |
|
|
§ |
|
Reviewed the Fulton-Columbia Bancorp merger agreement and certain related documents. |
|
|
§ |
|
Considered such other factors as were deemed appropriate. |
Danielson did not obtain any independent appraisal of assets or liabilities of Columbia
Bancorp or Fulton. Furthermore, Danielson did not independently verify the information provided by
Columbia Bancorp or Fulton and assumed the accuracy and completeness of all such information.
In arriving at its opinion, Danielson performed a variety of financial analyses. Danielson
believes that its analyses must be considered as a whole and that consideration of portions of such
analyses could create an incomplete view of Danielsons opinion. The preparation of a fairness
opinion is a complex process involving subjective judgments and is not necessarily susceptible to
partial analysis or summary description.
In its analyses, Danielson made certain assumptions with respect to industry performance,
business and economic conditions, and other matters, many of which were beyond Columbia Bancorps
or Fultons control. Any estimates contained in Danielsons analyses are not necessarily
indicative of future results of value, which may be significantly more or less favorable than such
estimates. Estimates of the value of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
The following is a summary of selected analyses considered by Danielson in connection with its
opinion letter.
34
Fair Value Analysis of Fulton Common Stock
In determining the fairness of the offer by Fulton to acquire all of the common stock and
outstanding options to buy common stock of Columbia Bancorp for approximately $311 million, in the
aggregate, in a combination of cash and stock of which at least 50% would be Fulton common stock,
Danielson considered whether the Fulton common stock was fairly valued and the impact of the
Columbia Bancorp acquisition on Fultons primary determinant of stock value, which is earnings per
share. The analysis evaluated, among other things, Fultons financial performance, financial
condition, dividend yield, stock liquidity and location compared to similar banks and possible
dilution in earnings and earnings per share and/or capital adequacy as a result of the Columbia
Bancorp acquisition.
Comparable Companies
The Fulton common stock to be exchanged for the common stock of Columbia Bancorp was compared
to ten publicly-traded bank holding companies (comparable banks). These comparable banks had
assets between $5 billion and $20 billion and were located on the East Coast.
Summary and Description of Comparable Banks*
|
|
|
|
|
|
|
Short Name of Institution |
|
Assets |
|
Headquarters |
|
|
(in mill.) |
|
|
Chittenden
|
|
$ |
6,202 |
|
|
Burlington, Vt. |
F.N.B.
|
|
|
5,702 |
|
|
Hermitage, Pa. |
First Commonwealth
|
|
|
6,182 |
|
|
Indiana, Pa. |
Mercantile
|
|
|
14,628 |
** |
|
Baltimore, Md. |
Provident
|
|
|
6,407 |
|
|
Baltimore, Md. |
South Financial
|
|
|
14,879 |
|
|
Greenville, S.C. |
Susquehanna
|
|
|
7,253 |
** |
|
Lititz, Pa. |
United
|
|
|
6,311 |
** |
|
Charleston, W. Va. |
Valley National
|
|
|
12,267 |
|
|
Wayne, N.J. |
Wilmington Trust
|
|
|
9,791 |
|
|
Wilmington, Del. |
|
*Publicly-traded banks on the East Coast with assets between $5 billion and
$20 billion as of June 30, 2005 unless otherwise
noted.
|
|
**March 31, 2005 or twelve months ending March 31, 2005. |
Source: SNL Financial, Charlottesville, Virginia.
Danielson compared Fultons financial performance, balance sheet strength and stock price with
the medians of the comparable banks. Among the financial performance criteria compared were net
income and net operating income as a percent of average assets and return on average equity. The
balance sheet items compared were equity, tangible equity, nonperforming assets (NPAs), and the
mix of loans and deposits all as a percent of assets or tangible assets. The current pricing
ratios compared were price as a multiple of earnings, price as a percent of book and tangible book,
dividend yield and payout ratio.
In making these comparisons, Danielson noted that Fultons financial performance, balance
sheet strength, stock liquidity and dividend policy were generally superior to the medians of the
comparable banks. Its earnings when measured as a percent of average assets and average equity was
slightly higher as was its book and tangible book as a percent of assets. Its balance sheet mix
was not materially different, though, asset quality was better. In terms of dividend yield, it was
slightly superior. With about 190,000 shares traded daily, the liquidity of the Fulton stock was
not a concern.
The impact of location value is difficult to statistically compare as population density,
affluence and growth rates do not always reflect market value. The
markets served by Fulton
south central Pennsylvania, Delaware, Maryland, New Jersey and
Virginia are generally, however,
considered to have a high investor/acquirer appeal.
35
Thus, Danielson concluded that Fulton is at least as good, if not better, than the comparable
banks from a location perspective.
Fulton Comparable Banks Summary*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable |
|
|
|
|
|
|
Banks |
|
|
Fulton |
|
Medians |
Income
|
|
|
|
|
|
|
|
|
Net income/Avg. assets |
|
|
1.49 |
% |
|
|
1.27 |
% |
Net oper. income**/Avg. assets |
|
|
2.14 |
|
|
|
2.08 |
|
Return on average equity |
|
|
13.91 |
|
|
|
12.69 |
|
|
|
|
|
|
|
|
|
|
Balance
Sheet
|
|
|
|
|
|
|
|
|
Equity/Assets |
|
|
10.32 |
% |
|
|
9.86 |
% |
Tangible capital/Tangible assets |
|
|
7.22 |
|
|
|
6.57 |
|
NPAs***/Assets |
|
|
.27 |
|
|
|
.42 |
|
Loans/Assets |
|
|
69 |
|
|
|
67 |
|
Deposits/Assets |
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
Stock
Price**** |
|
|
|
|
|
|
|
|
Price/Earnings |
|
|
17.6 |
X |
|
|
16.6 |
X |
Price/Tangible book |
|
|
349 |
|
|
|
321 |
|
Dividend yield |
|
|
3.15 |
|
|
|
3.05 |
|
Payout ratio |
|
|
53 |
|
|
|
53 |
|
|
|
|
* |
|
June 30, 2005 or the twelve months ending June, 2005, or if
unavailable, March 31, 2005 or the twelve months ending March 31,
2005. |
|
** |
|
Net interest income plus noninterest income less operating expense. |
|
*** |
|
NPAs including loans 90 days past due and still accruing. |
|
**** |
|
Closing prices as of July 25, 2005 and financial data for March
31, 2005 or the twelve months ending March 31, 2005. |
|
Source: |
|
SNL Financial, Charlottesville, Virginia. |
With Fultons stock price, when valued as a multiple of earnings, only slightly above the
upper end of the comparable banks normal range and its financial performance, balance sheet
condition and location that, collectively, are superior to the medians of the comparative group,
Danielson concluded that the Fulton common stock to be exchanged for the common stock of Columbia
Bancorp is fairly valued. Danielson also noted that the higher value based on a multiple of
earnings was supported by a good dividend yield and high stock liquidity.
Pro Forma Merger Analyses
Danielson analyzed the likely impact on Fultons future earnings, book value per share and
capital adequacy of its $311 million offer for all of the outstanding shares of Columbia Bancorp
common stock and options to purchase Columbia Bancorp common stock. This analysis found that while
the deal may be dilutive to Fultons pro forma earnings per share, even after expected cost
savings, the dilution is not large and should not have a significant negative impact on Fultons
earnings per share or stock price. The impact on Fultons capital adequacy
36
is negligible. Accordingly, Danielson concluded that the Fulton stock is fairly valued by the
market and that any dilution from the transaction is manageable.
Comparable Transaction Analysis
Danielson also compared the consideration to be paid by Fulton for all of the common stock and
options to buy common stock of Columbia Bancorp as a multiple of earnings and percent of book with
the pricing of bank acquisitions nationally and in the Maryland-Northern Virginia area. In doing
so, Danielson stated that in determining the fair sale value of Columbia Bancorp, the key factor,
other than its earnings, is the prices paid in recent comparable bank transactions. The national
group was comprised of 20 bank sales in 2003, 2004 and approximately the first half of 2005 with
deal values between $200 million and $700 million and returns on equity over 10%. This group had
median deal values of 22.1 times earnings and 259% of book. If the deal value floor of the group
were raised from $200 million to $300 million a price that would include Fultons offer to
acquire Columbia Bancorp the median slips to 20.5 times earnings and 233% of book. The three
most comparable sales in the group that involved sellers in Maryland and Northern Virginia, had a
deal values of about 23 times earnings for the two in Northern Virginia and 19.7 times earnings for
the one in Maryland.
Comparable Transaction Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median Price |
|
|
|
|
|
|
Times |
|
|
Percent |
|
|
No. in |
|
|
|
Earnings |
|
|
of Book |
|
|
Sample |
|
Acquisition Pricing 2003-05
|
|
|
|
|
|
|
|
|
|
|
|
|
National
Median*
|
|
|
22.1 |
X |
|
|
259 |
% |
|
|
20 |
|
-Over $300 million** |
|
|
20.5 |
|
|
|
233 |
|
|
|
12 |
|
Most Applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
Provident-Southern Financial
|
|
|
23.1 |
X |
|
|
313 |
% |
|
|
|
|
Mercantile-Community N.Va.
|
|
|
23.0 |
|
|
|
341 |
|
|
|
|
|
Mercantile-F&M |
|
|
19.7 |
|
|
|
259 |
|
|
|
|
|
|
|
|
* |
|
Deal values between $200 and $700 million and seller with a double-digit return on equity. |
|
** |
|
Deal value between $300 and $700 million and seller with a double-digit return on equity. |
Source: SNL Financial, Charlottesville, Virginia.
If recent bank acquisition pricing were applied to Columbia Bancorp, it would suggest a value
in the 20 to 22 times earnings range. This pricing range times Columbia Bancorps earnings for the
twelve months ending June 30, 2005 of $14,862,000 creates a fair value range of $297 million to
$327 million, or $40.66 to $45.50 per share.
Discounted Dividends Analysis
Danielson applied present value calculations to Columbia Bancorps estimated dividend stream
under several specific growth and earnings scenarios. The projected dividend streams and terminal
values, which were based on a range of earnings multiples, were then discounted to present value
using discount rates based on assumptions regarding the rates of return required by holders or
prospective buyers of Columbia Bancorp common stock. The discounted dividend calculation resulted
in a value of 16.8 times earnings, with a 14% discount rate, 12% growth rate, 10% cost savings and
a terminal value of 14 times earnings. If the discount rate is reduced to 12%, the value increases
to 22.6 times earnings. The results of this analysis showed the most applicable discounted
dividend analysis to be below recent acquisition pricing.
Value Adjustments
In addition to performing the analyses summarized above, Danielson also considered other
factors. These included how Columbia Bancorp compared with other banks that were sold relative to
earnings, capitalization,
37
market size, deposit and asset mix, asset quality and management. When the various components
of Columbia Bancorps value are considered, there were no components that suggest a value based on
earnings would merit any premiums or discounts relative to its fair sale value.
Conclusion
Since no comparable banks or bank acquisitions used in the various analyses are totally
identical to Fulton, Columbia Bancorp or the particulars of this merger, the results do not
represent mathematical certainty. Instead the comparisons rely on the likelihood that the median
stock prices and the bank acquisition prices of comparable banks are applicable to the pertinent
stock and acquisition values in this merger.
The summary set forth above is not a complete description of the analyses and procedures
performed by Danielson in the course of arriving at its opinion. The full text of the opinion of
Danielson dated July 26, 2005, which sets forth the assumptions made and matters considered, is
attached hereto as Exhibit C of this document. Columbia Bancorp stockholders should read the
opinion in its entirety. Danielsons opinion is directed only to the fairness of the
consideration received by Columbia Bancorp stockholders and does not constitute a recommendation to
any Columbia Bancorp stockholder as to how such stockholder should vote relative to this merger or
as to how such stockholder should elect to allocate such stockholders receipt of the merger
consideration. Further, Danielsons opinion was not intended to address the propriety of every
individual stockholder decision as to how such stockholder should elect to allocate such
stockholders receipt of the merger consideration.
Compensation of Financial Advisor
Pursuant to a contract dated July 13, 2005, if Columbia Bancorp and Fulton merge, Danielson
will be paid a fee of 0.35% of the transactions value at closing less $10,000. At the time of the
announcement of the merger, assuming Columbia Bancorp and Fulton merge, this fee would have been
approximately $1,078,500.
Fultons Board of Directors Reasons for the Merger
The acquisition of Columbia Bancorp was attractive to Fultons board of directors because it
presented an opportunity to acquire a performing financial institution in a market adjacent to
Fultons current markets which would contribute to the expansion of Fultons franchise in the State
of Maryland and into Maryland markets that fit the profile of Fultons desired markets in terms of
economic growth and demographics.
The Fulton
board of directors met at a board meeting on each of June 21,
2005 and July ___, 2005 and approved the nature
and amount of consideration that could be offered by management, the
form of the definitive merger agreement and authorized the Chairman of the
board of directors, President or any Executive Vice President to negotiate and sign the definitive
merger agreement.
Effect of the Merger
Upon completion of the merger, Columbia Bancorp will merge with and into Fulton, and the
separate legal existence of Columbia Bancorp will cease. As a consequence of the merger, all
property, rights, debts and obligations of Columbia Bancorp will automatically transfer to and vest
in Fulton, in accordance with Pennsylvania and Maryland law. Fulton, as the surviving corporation,
will be governed by the Amended and Restated Articles of Incorporation and Bylaws, as amended, of
Fulton in effect upon consummation of the merger. The directors and executive officers of Fulton
prior to the merger will continue, in their respective capacities, as the directors and executive
officers of Fulton after the merger, except that Fulton will appoint to its board of directors John
M. Bond, Jr., the Chairman of the board of directors and Chief Executive Officer of Columbia
Bancorp.
Exchange of Shares
On the effective date of the merger, each outstanding share of Columbia Bancorp common stock
will, at the holders election and subject to proration as explained below, be exchanged for: (i)
2.325 shares of Fulton common stock; (ii) $42.48 in cash; or (iii) a combination of (i) and (ii).
Even if you elect to receive all of your consideration in Fulton stock, you will still receive cash
instead of any resulting fractional share interests of Fulton common stock.
38
The permitted cash/stock consideration combinations which Columbia Bancorp stockholders may
elect are as follows:
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90% cash and 10% stock |
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80% cash and 20% stock |
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70% cash and 30% stock |
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60% cash and 40% stock |
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50% cash and 50% stock |
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40% cash and 60% stock |
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30% cash and 70% stock |
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20% cash and 80% stock |
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10% cash and 90% stock |
Fulton will adjust the number of shares of Fulton common stock issuable in exchange for shares
of Columbia Bancorp common stock to take into account any stock splits, stock dividends,
reclassifications or other similar events that may occur involving Fulton common stock or Columbia
Bancorp common stock prior to closing.
Election Procedures
All stockholder elections will be made on the election form/letter of transmittal that will be
mailed to you shortly after you receive this document. Fulton will use its reasonable best efforts
to mail or otherwise make available an election form/letter of transmittal to all persons who
become holders of record of Columbia Bancorp common stock after the date of the mailing of the
election form/letter of transmittal and prior to the election deadline. To be effective, an
election form/letter of transmittal must be returned, properly completed and accompanied by the
stock certificate(s) as to which the election is being made, to Fulton Financial Advisors, N.A.,
the exchange agent, no later than [Election Deadline]. A record holder that fails to submit a valid
election form/letter of transmittal prior to the election deadline will receive cash or Fulton
stock, depending on whether proration is necessary and whether proration applies to the aggregate
cash consideration or stock consideration as described below:
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If proration is not required, you will receive cash consideration until 50% (the
maximum cash percentage) of Columbia Bancorps outstanding shares have been converted
into cash. If and when the maximum cash percentage is reached, you will thereafter
receive Fulton common stock consideration for your remaining shares. |
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If proration is required because the maximum cash percentage of 50% is exceeded, you
will receive Fulton stock consideration. |
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If proration is required because less than 20% of Columbia Bancorps outstanding
shares (the minimum cash percentage) have not been converted into cash, you will
receive cash consideration. |
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In all other situations you will receive cash consideration. |
A record holder who fails to properly make an election will receive a letter of transmittal
after the election deadline with instructions for surrendering the Columbia Bancorp stock
certificates and receiving the merger consideration. Elections may be revoked or amended upon
written notice to the exchange agent prior to the election deadline. Although stockholders will
make an election to receive their preferred form of consideration, a stockholder may not receive
the exact form of consideration elected due to certain limits on the total number of Columbia
Bancorp shares for which a cash election may be made. See The
Merger Effect of the Merger
Proration, below. No one is making any recommendation as to whether Columbia Bancorp stockholders
should elect to receive cash or Fulton common stock in the merger. Each Columbia Bancorp
stockholder must make his, her or its own decision with respect to such election.
Proration
In certain circumstances, a Columbia Bancorp stockholders election of merger consideration
may be subject to adjustment. If elections to receive cash are made for fewer than 20% of the
outstanding Columbia Bancorp shares, then the number of shares to be converted into cash by each
stockholder will be increased by the same proportion until at least 20% of the Columbia Bancorp
shares are converted into cash consideration. If
39
elections to receive cash are made for greater than 50% of the outstanding shares of Columbia
Bancorp, then the number of shares to be converted into cash by each stockholder will be decreased
by the same proportion until no more than 50% of the outstanding shares of Columbia Bancorp are
converted into cash consideration. If proration is necessary, you will not receive the exact merger
consideration that you requested. Changes in the amount of cash or stock you receive as a result of
proration will have no impact on your vote on the merger.
Before generally prorating stockholder elections, shares for which no valid election has been
made will be converted into cash or stock (depending on whether too much cash or too much stock was
elected) as described above under the heading Election Procedures. If proration is still
necessary after the conversion of all non-electing shares, then all electing shares will be
prorated as described above.
In addition, in order to ensure that the merger qualifies as a reorganization under federal
tax laws, Fulton will increase the number of shares of Columbia Bancorp common stock that are
exchanged for Fulton common stock and reduce the number of shares of Columbia Bancorp common stock
that will be exchanged for cash to the extent necessary, if at all, to cause the value of the
Fulton stock issued, based on the lowest price at which a share of Fulton common stock trades on
Nasdaq on the effective date of the merger, to exceed the value of the cash consideration paid by
at least $100.00.
Stock Options
Columbia Bancorp option holders will have the option to elect to either (i) cash out their
options for an amount equal to the number of shares subject to the option times the difference
between $42.48 and the exercise price of each option; or (ii) automatically convert their Columbia
Bancorp option on the effective date of the merger into an option to purchase shares of Fulton
common stock. In the absence of an election, each Columbia Bancorp option holder will be deemed to
have made an election to convert their Columbia Bancorp option into cash. If an option holders
Columbia Bancorp option is converted to a Fulton option:
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The number of shares of Fulton common stock issuable upon exercise will equal the
number of shares of Columbia Bancorp common stock subject to the option multiplied by
the exchange ratio, rounded down to the nearest whole share; |
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The exercise price for a whole share of Fulton common stock will equal the stated
exercise price of the option divided by the exchange ratio, rounded up to the nearest
whole cent; |
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The duration and other terms of the Fulton stock option will be identical to the
duration and other terms of the Columbia Bancorp option, except that all references to
Columbia Bancorp will be deemed to be references to Fulton and its affiliates where the
context so requires, and will remain exercisable until the stated expiration date of
the corresponding Columbia Bancorp option; and |
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Except with respect to vesting requirements, options to acquire Fulton common stock
will remain subject to the terms of the plans and grant agreements of Columbia Bancorp
under which Columbia Bancorp issued the options. |
Exchange of Columbia Bancorp Stock Certificates
An election form/letter of transmittal will be mailed to you shortly. The form contains
instructions on how to surrender certificates representing Columbia Bancorp common stock in
exchange for the merger consideration and also contains instructions on how to elect the merger
consideration you would like to receive.
40
Effective Date of the Merger
The effective date of the merger will occur within 30 days following the receipt of all
regulatory and stockholder approvals. However, Fulton and Columbia Bancorp may also mutually agree
on a different date. Fulton and Columbia Bancorp presently expect that the effective date of the
merger will occur in the first quarter of 2006.
On or prior to the effective date of the merger, Fulton and Columbia Bancorp will file
articles of merger with the Pennsylvania Department of State and the State Department of
Assessments and Taxation of Maryland, and such document will set forth the effective date of the
merger. Either Fulton or Columbia Bancorp can terminate the merger agreement if, among other
reasons, the merger does not occur on or before June 30, 2006 (which date may be extended to
September 30, 2006 if closing hasnt occurred because of a failure to obtain regulatory approval),
and the terminating party has not breached or failed to perform any of its obligations under the
merger agreement. See Termination of Merger; Effect of Termination
on page 48.
No Dissenters Rights
Columbia Bancorp stockholders are not entitled to dissenters rights under Section 3-202(c) of
the Maryland General Corporation Law in connection with the merger.
Dividends
The merger agreement permits Columbia Bancorp to pay a dividend of up to $0.17 per share on
each of July 28, 2005 and October 28, 2005, and a dividend of up to $0.19 per share on January 25,
2006, April 14, 2006 and July 14, 2006. However, each such dividend may only be paid if the merger
is not completed on or before the record date for the Fulton dividend corresponding to the Columbia
Bancorp dividend for any such quarter prior to completion of the merger.
Conditions to the Merger
The obligations of Fulton and Columbia Bancorp to complete the merger are subject to various
conditions, which include, among other customary provisions for transactions of this type, the
following:
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approval of the merger agreement by Columbia Bancorps stockholders; |
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receipt of all required regulatory approvals, including the expiration or
termination of any notice and waiting periods; |
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the absence of any action, suit or proceeding, pending or threatened, which seeks to
modify, enjoin or prohibit or otherwise adversely and materially affect the transaction
contemplated by the merger agreement; |
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delivery of a tax opinion by Fultons legal counsel to each of Fulton and Columbia Bancorp; |
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listing of the Fulton stock to be issued as consideration on the Nasdaq National Market; |
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the registration statement of which this document is a part has been declared effective; |
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the absence of any material and adverse change in the condition, assets,
liabilities, business or operations or future prospects of either party; |
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the accuracy in all material respects as of the date of the merger agreement and as
of the effective date of the merger of the representations and warranties of the other
party, except as to any representation or warranty which specifically relates to an
earlier date and except as otherwise contemplated by the merger agreement; |
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the other partys material performance of all its covenants and obligations; and |
41
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other conditions customary for similar transactions, such as the receipt of officer
certificates and legal opinions. |
Except for the requirements of stockholder approval, regulatory approvals and the absence of
any legal action preventing the merger, each of the conditions described above may be waived in the
manner and to the extent described in The Merger Merger Agreement Amendment; Waivers on page
48. As of the date of this document, Fultons counsel has delivered the required tax opinion.
Representations and Warranties
The merger agreement contains customary representations and warranties that Fulton and
Columbia Bancorp made to each other. The assertions embodied in those representations and
warranties are qualified by information in confidential disclosure schedules that Fulton and
Columbia Bancorp have exchanged in connection with the signing of the merger agreement. While
Fulton and Columbia Bancorp do not believe that the disclosure schedules contain information that
securities laws require to be publicly disclosed, other than information that has already been
disclosed, the disclosure schedules do contain information that modifies, qualifies and creates
exceptions to the representations and warranties set forth in the attached merger agreement and
described below. Accordingly, you should not rely on the representations and warranties as
characterizations of the actual state of facts, since they are modified in important part by the
underlying disclosure schedules. These disclosure schedules contain information that has been
included in each companys general prior public disclosures, as well as potential additional
non-public information. Moreover, information concerning the subject matter of the representations
and warranties may have changed since the date of the agreement, which subsequent information may
or may not be fully reflected in the companies public disclosures. The merger agreement contains
customary representations and warranties relating to:
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the corporate organization of Fulton, Columbia Bancorp, The Columbia Bank and their
respective subsidiaries and capital structures; |
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the approval and enforceability of the merger agreement; |
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the consistency of financial statements with generally accepted accounting principles; |
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the filing of tax returns and payment of taxes; |
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the absence of material adverse changes, since March 31, 2005, in the condition,
assets, liabilities, business or operations of either Fulton or Columbia Bancorp, on a
consolidated basis; |
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the absence of undisclosed material pending or threatened litigation; |
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compliance with applicable laws and regulations; |
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retirement and other employee plans and matters relating to the Employee Retirement
Income Security Act of 1974, as amended; |
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the quality of title to assets and properties; |
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the maintenance of adequate insurance; |
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the performance of material contracts; |
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the absence of undisclosed brokers or finders fees; |
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the absence of material environmental violations, actions or liabilities; |
42
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the consistency of the allowance for loan losses with generally accepted accounting
principles and all applicable regulatory criteria; |
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the receipt of a fairness opinion as to the fairness of the merger consideration to
Columbia Bancorps stockholders; and |
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the accuracy of information supplied by Fulton and Columbia Bancorp in connection
with the Registration Statement filed by Fulton with the SEC, this document and all
applications filed with regulatory authorities for approval of the merger. |
The merger agreement also contains other representations and warranties by Columbia Bancorp
relating to:
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transactions between Columbia Bancorp and certain related parties; |
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the filing of all regulatory reports; |
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the lack of any regulatory agency proceeding or investigation into the business or
operations of Columbia Bancorp or any of its subsidiaries; and |
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the receipt by Columbia Bancorps board of directors of a written fairness opinion. |
Conduct of Columbia Bancorp Business Pending the Merger
Under the merger agreement, between the date the merger agreement was signed and the date the
merger occurs, Columbia Bancorp and its subsidiaries agreed, among other things, except as
disclosed to or consented to by Fulton, to:
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use all reasonable efforts to carry on their respective businesses in the ordinary
course; |
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use all reasonable efforts to preserve their respective business organizations, to
retain the services of substantially all of their present officers and employees and to
maintain their relationships with customers, suppliers and others with whom they have
business dealings; |
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maintain all of their real and personal property in good repair, except for ordinary
wear and tear and damage by unavoidable casualty; |
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use all reasonable efforts to preserve or collect all material claims and causes of action; |
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keep in full force and effect all insurance policies now carried; |
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perform in all material respects each of their obligations under all material contracts; |
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maintain their books of account and other records in the ordinary course; |
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comply in all material respects with all applicable laws, rules and regulations; |
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not amend any of their charter documents; |
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not enter into, assume or incur any material contract, liability, obligation or
commitment, except in the ordinary course; |
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not make any material acquisition or disposition of properties or assets (except for
acquisitions or dispositions of properties or assets which, in any case, do not exceed
$100,000), or subject any of their properties or assets to any material lien, claim,
charge, or encumbrance, except for loan and investment activity engaged in the ordinary
course consistent with past practice; |
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not knowingly take or permit to be taken any action which would constitute or cause
a material breach of any representation, warranty or covenant; |
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not declare, set aside or pay any dividend or make any other distribution in respect
of Columbia Bancorp common stock or preferred stock except as otherwise permitted by
the merger agreement; |
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not authorize, purchase, redeem, issue or sell any shares of Columbia Bancorp common
stock or any other equity or debt security of Columbia Bancorp (other than for the
exercise of outstanding options, the warrant or the Columbia Bancorp common stock
issuable under the warrant); |
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not increase compensation, or pay a bonus or severance compensation to, establish or
amend any Columbia Bancorp benefit plan or enter into or amend any employment
obligation other than reasonable salary increases and bonuses in the ordinary course
consistent with past practice; |
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not enter into any related party transaction; |
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in determining the additions to loan loss reserves and the loan write-offs,
writedowns and other adjustments that reasonably should be made by The Columbia Bank in
classifying, valuing and retaining its investment portfolio, during the fiscal year
ending December 31, 2005 and thereafter, consult with Fulton and act in accordance with
generally accepted accounting principles; |
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file all tax returns and other material reports required to be filed, pay in full or
make adequate provisions for the payment of all taxes, interest, penalties, assessments
or deficiencies shown to be due and report all information on such returns truthfully,
accurately and completely; |
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not renew any existing contract for services, goods, equipment or the like or enter
into, materially amend or terminate any contract involving an amount in excess of
$250,000 or for a term of one year or more; |
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not make any capital expenditures other than in the ordinary course or as necessary
to maintain existing assets in good repair; |
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not make application for the opening or closing of any, or open or close any,
branches or automated banking facility; |
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not make or commit to any equity investment in real estate or in any real estate
development project, other than in connection with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt restructuring in the ordinary course consistent
with customary banking practice; |
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not take any other action which would cause the merger not to qualify as a tax-free
reorganization; and |
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following receipt of both stockholder and regulatory approval of the merger and upon
agreement as to the effective date by Fulton and Columbia Bancorp, conform its
practices to the standards used by Fulton, with respect to its investment and loan
portfolios and loan loss reserve. |
No Solicitation of Transactions
The merger agreement prohibits Columbia Bancorp or any of its affiliates or representatives
from:
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initiating, encouraging or taking any other action to facilitate any inquiries
relating to an acquisition of Columbia Bancorp; and |
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withdrawing approval or recommendation of the merger agreement or the merger,
approving a third partys proposal to acquire Columbia Bancorp or entering into a
letter of intent, acquisition agreement or similar agreement with a third party with
respect to an acquisition of Columbia Bancorp by such |
44
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party, except under limited circumstances where a third partys proposal to acquire
Columbia Bancorp or its subsidiaries is superior to Fultons proposal, and Columbia
Bancorps board of directors determines, in good faith, and with the advice of outside
counsel, that failure to do so would be inconsistent with their responsibilities under
Maryland law. |
Columbia Bancorp agreed to notify Fulton if it receives any inquiries or proposals relating to
an acquisition by a party other than Fulton.
Board of Directors Covenant to Recommend the Merger Agreement
Columbia Bancorps board of directors is permitted to withdraw, modify or change in a manner
adverse to Fulton, its recommendation to Columbia Bancorp stockholders with respect to the merger
agreement and the merger only if:
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after consultation with its outside legal counsel, the board of directors
determines in good faith that failing to take such action would be inconsistent
with their responsibilities under Maryland law; |
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Columbia Bancorp has not breached its obligations under the merger agreement
regarding no solicitation of offers from third parties in connection with a
business combination with Columbia Bancorp and the board of directors has
authorized, subject to complying with the terms of the merger agreement, Columbia
Bancorp to enter into a binding written agreement for a transaction that is a
superior proposal; |
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Fulton does not make, within five business days after receipt of Columbia
Bancorps written notice of its intention to enter into a binding agreement for a
superior proposal, any offer that the board of directors of Columbia Bancorp
reasonably and in good faith determines, after consultation with its financial and
legal advisors, is at least as favorable to the stockholders of Columbia Bancorp as
the superior proposal and during such period Columbia Bancorp reasonably considers
and discusses in good faith all proposals submitted by Fulton and meets and
discusses with Fulton its proposals; and |
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prior to the termination of the merger agreement, Columbia confirms in writing
that such termination allows exercise of the warrant. |
Amended and Restated Warrant Agreement and Warrant
General
To induce Fulton to enter into the merger agreement, Columbia Bancorp executed a warrant
agreement, dated July 26, 2005, and which was subsequently amended and restated, which permits
Fulton to purchase shares of Columbia Bancorp common stock under the circumstances described below.
Under the warrant agreement, Fulton received a warrant to purchase up to 1,881,809 shares of
Columbia Bancorp common stock, subject to adjustment. This number represents approximately 19.9% of
the issued and outstanding shares of Columbia Bancorp common stock on July 26, 2005, assuming
exercise of the warrant by Fulton and assuming exercise of all outstanding Columbia Bancorp
options. The exercise price per share to purchase Columbia Bancorp common stock under the warrant
is $37.26, subject to adjustment. The exercise price represents Columbia Bancorps closing common
stock price plus one cent on July 26, 2005, the day Columbia Bancorps board of directors approved
the merger agreement. The warrant is only exercisable if the events specified in the warrant
occur. These triggering events are described below. To the best of Fultons or Columbia Bancorps
knowledge, as of the date of this document, none of the triggering events have occurred.
45
Effect of Warrant Agreement
Attempts by a third party to acquire Columbia Bancorp or an interest in Columbia Bancorp, as
described under Exercise of Warrant, below, would cause the warrant to become exercisable.
Fultons exercise of the warrant would significantly increase a potential acquirers cost of
acquiring Columbia Bancorp compared to the cost that would be incurred without the warrant
agreement. Therefore, the warrant agreement, together with Columbia Bancorps agreement not to
solicit other transactions relating to the acquisition of Columbia Bancorp by a third party, may
have the effect of discouraging third parties from making a proposal to acquire Columbia Bancorp,
including one that may be more favorable, from a financial point of view, to Columbia Bancorp
stockholders than the merger.
Terms of Warrant and Warrant Agreement
The following is a brief summary of the material provisions of the warrant and warrant
agreement, and we qualify this discussion by reference to the full amended and restated warrant
agreement and warrant. Complete copies of the amended and restated warrant agreement and warrant
are included as Exhibit B to this document, and are incorporated in this document by reference.
Fulton and Columbia Bancorp urge you to read them carefully.
Exercise of the Warrant
The warrant is exercisable only upon the occurrence of one of the following events:
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if Columbia Bancorp breaches any representation or covenant in the merger agreement
which would permit Fulton to terminate the merger agreement and which occurs following
a third partys offer (consummated within twelve months) to acquire 25% or more of the
voting power of Columbia Bancorp or one of its subsidiaries; |
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if Columbia Bancorps stockholders fail to approve the merger agreement and, at the
time of the stockholders special meeting, a third party proposal to merge with or
acquire or lease all or substantially all of the assets of Columbia Bancorp or one of
its subsidiaries, or to acquire 25% or more of the voting power of Columbia Bancorp or
a subsidiary, has been announced and Columbia Bancorps board fails to either recommend
against accepting the third party offer or takes no position; |
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if a person other than Fulton acquires beneficial ownership of 25% or more of
Columbia Bancorp common stock; |
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if a person other than Fulton makes an offer (and such offer is consummated within
twelve months) to acquire 25% or more of the voting power of Columbia Bancorp or one of
its subsidiaries; |
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if a person or group, other than Fulton, enters into any agreement, letter of
intent, or other understanding with Columbia Bancorp to merge or consolidate with
Columbia Bancorp, to acquire all or substantially all of the assets or liabilities of
Columbia Bancorp or one of its subsidiaries, or to acquire beneficial ownership of 25%
or more of the voting power of Columbia Bancorp or one of its subsidiaries or to
negotiate such a transaction except as specifically permitted by the Merger Agreement;
or |
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if Fulton or Columbia Bancorp terminates the merger agreement because Columbia
Bancorps board of directors takes certain actions inconsistent with Fultons
acquisition of Columbia Bancorp. |
If the warrant becomes exercisable, Fulton may exercise the warrant by presenting the warrant
to Columbia Bancorp along with:
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a written notice of exercise; |
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payment to Columbia Bancorp of the exercise price for the number of shares specified
in the notice of exercise; and |
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a certificate specifying the events which have occurred which cause the warrant to
be exercisable. |
Termination
of the Warrant
The warrant terminates on the earlier of:
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the effective date of the merger; or |
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valid termination of the merger agreement (other than a termination by Fulton caused
by Columbia Bancorps board of directors taking action with respect to a third party
offer), except that if one of the events described above which causes the warrant to be
exercisable occurs prior to termination of the merger agreement, the warrant shall not
terminate until twelve months after such event; |
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if the warrant has not previously been exercised, twelve months after the occurrence
of one of the events described above which causes the warrant to be exercisable; or |
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twelve months after a valid termination by Fulton caused by Columbia Bancorps board
taking action with respect to a third party offer. |
Adjustments and Limitations
In the event of any change in Columbia Bancorp common stock by reason of stock dividends,
split-ups, recapitalizations, combinations, conversions, divisions, exchanges of shares or the
like, the number and kind of shares issuable under the warrant are adjusted appropriately.
However, adjustments to the number of warrant shares on account of the issuance of additional
shares for consideration is limited in that the number of warrant shares cannot exceed 19.9% of the
outstanding shares of Columbia common stock as of July 26, 2005 if the exercise price adjusts to a
price less than $37.26. In addition, Fulton may not beneficially own greater than 19.9% of Columbia
Bancorps common stock after exercise of the warrant (and giving effect to the exercise).
However, notwithstanding any other provision of the warrant, the amended and restated warrant
agreement or the merger agreement, in no event shall Fultons Total Profit (as defined in the
warrant agreement) exceed $21,900,000, and, if it otherwise would exceed such amount, Fulton, at
its sole discretion, shall either (i) reduce the number of shares subject to the warrant, (ii)
deliver to Columbia Bancorp, for cancellation, shares of Columbia Bancorp common stock, (iii) pay
cash to Columbia Bancorp, (iv) reduce the amount of the consideration paid pursuant to the warrant
agreement or (v) any combination of the foregoing so that Fultons actually realized Total Profit
shall not exceed $21,900,000 after taking into account the foregoing actions. Notwithstanding any
other provision of the warrant, the warrant agreement or the merger agreement, the warrant may not
be exercised for a number of shares as would, as of the date of exercise, result in a Notional
Total Profit (as defined in the warrant agreement) of more than $21,900,000 and, if exercise of
the warrant would otherwise result in the Notional Total Profit exceeding such amount, Fulton, in
its discretion, may take any of the actions above so that the Notional Total Profit shall not
exceed $21,900,000; provided, however, that Fulton is not restricted from a subsequent exercise of
the warrant which at such time complies with the foregoing.
Repurchase of Warrant or Warrant Shares
Under the warrant agreement, in the event the warrant has become exercisable, Fulton has the
right to require Columbia Bancorp to repurchase the warrant or, in the event the warrant has been
exercised in whole or in part, redeem the shares obtained upon such exercise. In the case of a
repurchase of shares obtained upon exercise of the warrant, the redemption price per share is to be
equal to the highest of: (i) 110% of the exercise price, (ii) the highest price paid or agreed to
be paid for any share of common stock by an acquiring person (defined as any person who or which is
the beneficial owner of 25% or more of the Columbia Bancorp common stock) during the one year
period immediately preceding the date of redemption, and (iii) in the event of a sale of all or
substantially all of
47
Columbia Bancorps assets: (x) the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Columbia Bancorp as determined by a recognized
investment banking firm selected by Fulton and reasonably acceptable to Columbia Bancorp, divided
by (y) the number of shares of Columbia Bancorp common stock then outstanding. If the price paid
consists in whole or in part of securities or assets other than cash, the value of such securities
or assets shall be their then current market value as determined by a recognized investment banking
firm selected by Fulton and reasonably acceptable to Columbia Bancorp.
In the case of a repurchase of the warrant, the redemption price is to be equal to the product
obtained by multiplying: (i) the number of shares of Columbia Bancorp common stock represented by
the portion of the warrant that Fulton is requiring Columbia Bancorp to repurchase, multiplied by
(ii) the excess of the redemption price over the exercise price, subject to the limitations on
Fultons Total Profit described above.
Registration Rights
Columbia Bancorp granted Fulton the right to request registration under the Securities Act of
1933, as amended, or the Securities Act, for the shares of Columbia Bancorp common stock which are
issuable upon exercise of the warrant.
Merger Agreement Amendment; Waivers
Subject to any applicable legal restrictions, at any time prior to completion of the merger,
Fulton and Columbia Bancorp may:
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§ |
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amend the merger agreement, except that any amendment relating to the consideration
to be received by the Columbia Bancorp stockholders in exchange for their shares must
be approved by the Columbia Bancorp stockholders; |
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§ |
|
extend the time for the performance of any of the obligations or other acts of
Fulton and Columbia Bancorp required in the merger agreement; or |
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§ |
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waive any term or condition in the merger agreement to the extent permitted by law. |
Termination of Merger; Effect of Termination
Fulton and Columbia Bancorp may terminate the merger agreement at any time prior to completion
of the merger by mutual written consent.
Either Fulton or Columbia Bancorp may terminate the merger agreement at any time prior to
completion of the merger if:
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§ |
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there has been a material breach by the other party of a material representation,
warranty or covenant in the merger agreement and such breach has not been cured within
30 days after written notice of such breach has been given; or |
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§ |
|
any condition precedent to its obligations under the merger agreement remains
unsatisfied as of June 30, 2006 through no fault of its own; or |
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§ |
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the board of directors of Columbia Bancorp, acting in good faith and consistent with
Maryland law, takes certain actions in connection with an acquisition of Columbia
Bancorp by a party other than Fulton, which it believes is more favorable to Columbia
Bancorps stockholders. |
Columbia Bancorp can terminate the merger agreement if the closing market price for Fulton
common stock, determined by averaging the price of Fultons common stock over a ten day period
occurring just before the merger, is less than both:
48
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§ |
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$14.79; and |
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§ |
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80% of the ratio of the Nasdaq Bank Index over the same ten-day period compared to
the Index on July 26, 2005, times the starting price of Fulton stock ($18.49). |
However, if Columbia Bancorp is permitted to terminate on account of a reduction in Fultons
stock price as explained above, Fulton may, at its option, cause Columbia Bancorp to amend the
merger agreement to increase the exchange ratio to a level equal to the exchange ratio times 14.79
divided by the closing market price. This increase will end Columbia Bancorps ability to
terminate the merger agreement under the Fulton stock price provisions.
We anticipate that the merger will close in the first quarter of 2006. Neither Columbia
Bancorp nor Fulton can predict whether the market price of Fultons common stock will increase,
decrease or remain stable between the date of this document and the date of closing.
In the event that either Fulton or Columbia Bancorp terminates the merger agreement, neither
Fulton nor Columbia Bancorp will have any continuing liability or obligation other than the
obligation dealing with confidentiality and any liabilities resulting from a breach by the other of
a material term or condition of the merger agreement. However, if the merger terminates under
certain circumstances, described above, Fulton will have the right to exercise the warrant.
Management and Operations after The Merger
The board of directors and executive officers of Fulton and its subsidiaries will not change
as a result of the merger, except that Fulton will appoint to its board of directors John M. Bond,
Jr., the Chairman of the board of directors and Chief Executive Officer of Columbia Bancorp. The
Columbia Banks current directors will remain as directors of The Columbia Bank.
Employment; Severance
Upon completion of the merger, Fulton will use its good faith efforts to continue the
employment of the present employees of Columbia Bancorp and The Columbia Bank. Where that is not
possible, Fulton will make severance payments to affected persons as described below.
Except for Messrs. Bond and Scaldara and any other employees who have agreed in writing with
Fulton otherwise, employees with written employment agreements will receive any severance payments
to which they are entitled under such agreements. If the employment of employees without written
agreements is involuntarily terminated, other than for unsatisfactory performance, within one year
of the effective date of the merger, severance benefits will be paid in the amount of one weeks
salary plus an additional one weeks salary for each year of service with Columbia Bancorp or a
subsidiary, up to a maximum of 26 weeks salary. In the event the employment of employees without
written agreements is involuntarily terminated following the one year anniversary of the effective
date of the merger, severance payments will be made in accordance with Fultons then existing
severance policy.
Employee Benefits
The employee benefits provided to former Columbia Bancorp employees that continue to be
employed after the mergers effective date will be substantially equivalent to the employee
benefits, in the aggregate, provided by Columbia Bancorp prior to the merger for at least three
years after the effective date of the merger, or until Fulton or its subsidiaries can no longer
satisfy the applicable qualified retirement plan discrimination testing under the Internal Revenue
Code. Each Columbia Bancorp employee who becomes an employee of Fulton or of a Fulton subsidiary
will be entitled to full credit for each year of service with Columbia Bancorp for purposes of
determining eligibility for vesting in Fultons employee benefit plans, programs and policies.
49
Regulatory Approvals
Fulton and Columbia Bancorp must obtain regulatory approvals before the merger can be
completed, but we cannot assure you that these regulatory approvals will be obtained or when they
will be obtained.
It is a condition to completion of the merger that Fulton and Columbia Bancorp receive all
necessary regulatory approvals to the merger, without the imposition by any regulator of any
condition or requirements that would materially and adversely impact the economic or business
benefits of the merger. Fulton and Columbia Bancorp cannot assure you that the regulatory approvals
of the merger will not contain terms, conditions or requirements that would have such an impact.
Fulton and Columbia Bancorp are not aware of any material governmental approvals or actions
that are required to complete the merger, except as described below. If any other approval or
action is required, the parties expect that they will seek such approval or action.
The merger is subject to the prior approval of the Board of Governors of the Federal Reserve
System pursuant to the Bank Holding Company Act of 1956, as amended. Under this law, the Federal
Reserve Board generally may not approve any proposed transaction:
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§ |
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that would result in a monopoly or that would further a combination or conspiracy to
monopolize banking in the United States, or |
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§ |
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that could substantially lessen competition in any section of the country, that
would tend to create a monopoly in any section of the country, or that would be in
restraint of trade, unless the Federal Reserve Board finds that the public interest in
meeting the convenience and needs of the community served clearly outweighs the
anti-competitive effects of the proposed transaction. |
The Federal Reserve Board is also required to consider the financial and managerial resources
and future prospects of the bank holding companies and banks concerned, as well as the convenience
and needs of the community to be served. Consideration of financial resources generally focuses on
capital adequacy. Consideration of convenience and needs includes the parties performance under
the Community Reinvestment Act of 1977, as amended.
The merger may not be completed until the 30th day following the date of the Federal Reserve
Board approval, although the Federal Reserve Board may reduce that period to 15 days. During this
period, the United States Department of Justice has the opportunity to challenge the transaction on
antitrust grounds. The commencement of any antitrust action would stay the effectiveness of the
Federal Reserve Boards approval, unless a court of competent jurisdiction specifically ordered
otherwise.
Fulton filed notice of the proposed merger with the Federal Reserve Bank of Philadelphia on
October ___, 2005, seeking prior approval of the merger from the Federal Reserve Bank, pursuant to
authority delegated to it by the Federal Reserve Board. As of the date of this document, the
Federal Reserve Bank has not yet approved or disapproved the merger.
The merger is also subject to the prior approval of the Maryland Commissioner of Financial
Regulation under the provisions of the Financial Institutions Article of the Annotated Code of
Maryland. As of the date of this document, the Commissioner of Financial Regulation has not yet
approved or disapproved the merger.
Material Contacts between the Parties
There have been no other material contracts or other transactions between Columbia Bancorp and
Fulton since signing the merger agreement other than in connection with the transactions
contemplated by the merger agreement, nor have there been any material contracts, arrangements,
relationships or transactions between Columbia Bancorp and Fulton during the past five years, other
than in connection with the merger agreement and as described in this document.
50
Material Federal Income Tax Consequences
To complete the merger, Fulton and Columbia Bancorp must receive an opinion of Barley Snyder
LLC, counsel to Fulton, that the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, and that Fulton and Columbia Bancorp will each be a
party to the reorganization within the meaning of Section 368(b) of the Code. Barley Snyder LLC has
provided this opinion and has consented to its inclusion in the registration statement.
In the opinion of Barley Snyder LLC, the material federal income tax consequences of the
merger will be as follows:
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|
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Fulton and Columbia Bancorp will not recognize gain or loss in the merger; |
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Columbia Bancorps stockholders will not recognize any gain or loss upon receipt of
Fulton common stock in exchange for Columbia Bancorp common stock, except that (1)
stockholders who receive cash proceeds for fractional share interests will recognize
gain or loss equal to the difference between such proceeds and the tax basis allocated
to their fractional share interests, and such gain or loss will constitute capital gain
or loss if the stockholders held their Columbia Bancorp common stock as a capital asset
at the effective date of the merger and (2) stockholders who receive cash consideration
and Fulton common stock in exchange for Columbia Bancorp common stock will recognize
gain, but not loss, realized with respect to any Columbia Bancorp common share but not
in excess of the amount of cash received or deemed received for that Columbia Bancorp
common share, and such gain will constitute capital gain if the stockholders held their
Columbia Bancorp common stock as a capital asset at the effective date of the merger; |
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Columbia Bancorps stockholders who elect to receive only cash consideration in
exchange for Columbia Bancorp common stock pursuant to the merger will generally
recognize gain or loss based on the difference between the cash consideration received
and the adjusted basis in the Columbia Bancorp common stock exchanged; |
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the tax basis of shares of Fulton common stock received by Columbia Bancorps
stockholders in the merger will be the same as the tax basis of their shares of
Columbia Bancorp common stock less any basis that would be allocable to a fractional
share of Fulton common stock for which cash is received; and |
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the holding period of the Fulton common stock that Columbia Bancorps stockholders
receive in the merger will include the holding period of their shares of Columbia
Bancorp common stock, provided that they hold their Columbia Bancorp common stock as a
capital asset at the time of the merger. |
This is not a complete description of all the federal income tax consequences of the merger
and, in particular, does not address tax considerations that may affect the treatment of
stockholders who acquired their Columbia Bancorp common stock pursuant to the exercise of employee
stock options or otherwise as compensation, or stockholders which are exempt organizations or who
are not citizens or residents of the United States. Each stockholders individual circumstances may
affect the tax consequences of the merger to such stockholder. In addition, this discussion does
not address the tax consequences of the merger under applicable state, local, or foreign laws.
Accordingly, you should consult a tax advisor to discuss the specific tax consequences of the
merger to you.
Accounting Treatment
Fulton will account for the acquisition using the purchase method of accounting. Purchase
accounting requires Fulton to allocate the total purchase price of the acquisition to the assets
acquired and liabilities assumed, based on their respective fair values at the acquisition date,
with any remaining unallocated acquisition cost being recorded as goodwill. Resulting goodwill
balances are then subject to an impairment review on at least an annual basis. The results of
Columbia Bancorps operations will be included in Fultons financial statements prospectively from
the date of the acquisition.
51
The
total purchase price is estimated to be approximately $295 million, which includes the
cost of Fulton stock to be issued, Columbia Bancorp options to be converted and certain acquisition
related costs. The actual purchase price will depend on the percentage of shares paid in cash and
the price of Fulton stock on the acquisition date. The total purchase price will be allocated to
the net assets acquired as of the merger effective date, based on fair market values at that date.
Fulton expects to record a core deposit intangible asset and goodwill as a result of the
acquisition accounting.
The Selected Historical and Pro Forma Combined Per Share Data in this document have been
prepared based on Columbia Bancorps net assets and the fair market values of those net assets as
calculated by Columbia Bancorp as of December 31, 2004 and June 30, 2005. In addition, the core
deposit intangible was estimated to be $18.6 million,
representing 3.5% of demand and savings
deposits, and was assumed to be amortized over 8 years using an accelerated method. These
assumptions resulted in goodwill of approximately $185.6 million. The actual amounts to be recorded
by Fulton to reflect the purchase are dependent on various factors, including but not limited to,
the interest rate environment and final valuations for loans and deposits and other assets and
liabilities, including the core deposit intangible, and may differ materially from the estimates
provided herein.
Expenses
Fulton and Columbia Bancorp will each pay all their own costs and expenses, including fees and
expenses of financial consultants, accountants and legal counsel, except that Fulton will pay for
the cost of printing and mailing this document.
Resale of Fulton Common Stock
The Fulton common stock issued in the merger will be freely transferable under the Securities
Act except for shares issued to any Columbia Bancorp stockholder who is an affiliate of Columbia
Bancorp or Fulton for purposes of SEC Rule 145.
An affiliate of Columbia Bancorp is a person who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, Columbia Bancorp.
These restrictions are expected to apply to the directors and executive officers of Columbia
Bancorp and the holders of 10% or more of the outstanding Columbia common stock. The same
restrictions apply to spouses and certain relatives of those persons and any trusts, estates,
corporations or other entities in which those persons have a 10% or greater beneficial or equity
interest. Any subsequent transfers of shares, however, by any person who is an affiliate of
Columbia Bancorp at the time the merger is submitted for a vote of the Columbia Bancorp
stockholders will, under existing law, require:
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§ |
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the further registration under the Securities Act of the Fulton stock to be
transferred; |
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§ |
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compliance with Rule 145 promulgated under the Securities Act, which permits limited
sales under certain circumstances; or |
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§ |
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the availability of another exemption from registration. |
Each director and executive officer of Columbia Bancorp will enter into an agreement with
Fulton providing that, as an affiliate, he or she will not transfer any Fulton common stock
received in the merger except in compliance with the securities laws.
Dividend Reinvestment Plan
Fulton currently maintains a stockholder dividend reinvestment plan. This plan provides
stockholders of Fulton with a simple and convenient method of investing cash dividends, as well as
voluntary cash payments, in additional shares of Fulton common stock without payment of any
brokerage commission or service charge. Fulton expects to continue to offer this plan after the
effective date of the merger, and stockholders of Columbia Bancorp who become stockholders of
Fulton will be eligible to participate in this plan.
52
Financial Interests of Management in the Merger
When you are considering the recommendation of Columbia Bancorps board of directors with
respect to approving the merger agreement and the merger, you should be aware that Columbia Bancorp
directors and executive officers have interests in the merger as individuals which are in addition
to, or different from, their interests as stockholders of Columbia Bancorp. The Columbia Bancorp
board of directors was aware of these factors and considered them, among other matters, in
approving the merger agreement and the merger. These interests are described below.
Stock Options
As of the record date, the directors and executive officers of Columbia Bancorp hold options
to purchase approximately ___ shares of Columbia Bancorp common stock. On the effective date
of the merger, each option will convert into cash or an option to acquire Fulton common stock as
described above under The Merger Effect of the Merger
Stock Options on page 40. In addition,
all Columbia Bancorp options subject to vesting will immediately vest, in full, upon closing of the
merger.
Employment Agreements
In connection with the merger agreement, Columbia Bancorp, The Columbia Bank, Fulton and each
of Messrs. Bond and Scaldara entered into employment agreements. The employment agreements become
effective on the effective date of the merger and, until effective, Messrs. Bond and Scaldara
remain subject to existing employment agreements with Columbia Bancorp. Following the merger, Mr.
Bond will be Chairman and Chief Executive Officer of The Columbia Bank and Mr. Scaldara will be
President and Chief Operating Officer of The Columbia Bank. Each will be entitled to an annual base
salary and to participate in The Columbia Banks incentive compensation plans. The Columbia Bank
has also agreed to pay a portion of the change in control payment that each of Messrs. Bond and
Scaldara would otherwise have been entitled to receive under his existing agreement with The
Columbia Bank, with half of this amount payable on the effective date of the merger and half
payable six months thereafter. If The Columbia Bank terminates either of Messrs. Bond or Scaldaras
employment without cause (as defined in the respective employment agreement) or if either of them
terminates his employment for good reason (as defined in the respective employment agreement), the
terminated person will be entitled to receive his base salary and incentive compensation for a
period of three years and to receive all employee benefits that he was receiving prior to
termination of employment during such three year period, subject to
certain minimum payment amounts.
Mr. Scaldara is also entitled to certain excise tax gross-up
payments with respect to payments under his employment agreement. In addition, upon a change in control, all option grants and shares of restricted stock
held by Messrs. Bond and Scaldara shall immediately become fully vested and exercisable. Each of
Messrs. Bond and Scaldara will be subject to certain confidentiality and non-competition and
non-solicitation provisions.
Indemnification and Insurance
The merger agreement provides that Fulton shall indemnify and hold harmless each present and
former director, officer and employee of Columbia Bancorp or a Columbia Bancorp subsidiary,
determined as of the effective time of the merger, against any costs or expenses, judgments,
losses, claims, damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, arising out of matters existing or occurring at or prior to the
effective time of the merger, arising in whole or in part out of, or pertaining to the fact that he
or she is or was a director, officer or employee of Columbia Bancorp or any of its subsidiaries.
In addition, the merger agreement provides that Fulton shall maintain tail coverage for
Columbia Bancorps existing directors and officers liability insurance policy for acts or
omissions occurring prior to the effective time of the merger for the benefit of persons who are
currently covered by such insurance policy for a period of six years following the effective time
of the merger. Fulton may, however, substitute new policies in lieu of Columbia Bancorps existing
policies if the new policies provide at least the same coverage and amounts containing terms and
conditions which are substantially no less advantageous.
53
Directors Fees
Certain of Columbia Bancorps and The Columbia Banks current directors will serve in one or
more of the following capacities after the effective date of the merger:
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One Columbia Bancorp director, John M. Bond, Jr., will serve as director of Fulton; and |
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All directors of The Columbia Bank will continue to serve as directors of The Columbia Bank. |
As such, each non-employee director will be entitled to receive fees for his or her service in
such capacity equal to the fees received by him or her as in effect from time to time, subject to
restrictions set forth on the merger agreement, for a period of three years. The fees payable to
each non-employee director are $425 per meeting. Chairmen of committees of The Columbia Banks
board of directors receive an additional $125 per meeting.
Other than as set forth above, no director or executive officer of Columbia Bancorp has any
direct or indirect material interest in the merger, except insofar as ownership of Columbia Bancorp
common stock might be deemed such an interest.
INFORMATION ABOUT FULTON
General
As permitted by the rules of the SEC, financial and other information relating to Fulton that
is not included in or delivered with this document, including information relating to Fultons
directors and executive officers, is incorporated herein by reference. See Where You Can Find More
Information on page 67 and Incorporation By
Reference on page 67.
Adoption of SFAS 123R
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 123R, Share-Based Payment. Statement 123R is a revision to the
original Statement 123 which disallows the APB 25 method of accounting for stock options and
requires public companies to recognize compensation expense related to stock-based compensation in
their income statements. Companies can adopt Statement 123R using either modified prospective
application or modified retrospective application. Modified retrospective application also
results in restatement of prior period results, based on the amounts previously disclosed in prior
period financial statements.
The effective date of Statement 123R was originally the beginning of the first fiscal quarter
after June 15, 2005. In April 2005, the SEC delayed the
effective date to the beginning of the first fiscal year after June 15, 2005, or January 1, 2006
for Fulton. Early adoption is permissible. Fulton expects to adopt the provisions of Statement 123R
in 2005, using modified retrospective application.
The financial information presented in this Registration Statement and incorporated by
reference to previous filings with the SEC has not been restated for SFAS 123R. It has not been
restated as Fultons first filing subsequent to adoption of SFAS 123R under the 1934 Act is not
expected to be made until subsequent to the effective date of this Registration Statement.
To understand the expected impact of restatement for SFAS 123R, the reader should reference
the footnotes to consolidated financial statements for Fultons 2004 Form 10-K, which is
incorporated by reference. For 2004, the impact on diluted net income per share was a reduction of
approximately $0.02 (restated for the impact of the stock dividend issued in 2005). Implementation
of SFAS 123R is a complex process and the actual impact of a restatement may vary.
54
Market Price of and Dividends on Fulton Common Stock and Related Shareholder Matters
Fulton common stock trades on the NASDAQ National Market under the symbol FULT. The table
below shows for the periods indicated the amount of dividends paid per share and the quarterly
ranges of high and low sales prices for Fulton common stock as reported by the NASDAQ National
Market. Stock price information does not necessarily reflect mark-ups, mark-downs or commissions.
Per share amounts have been retroactively adjusted to reflect the effect of stock dividends
declared.
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Price Range Per Share |
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Per Share Dividend |
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High |
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Low |
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2005
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Fourth Quarter (through [Latest Practicable Date]) |
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Third Quarter
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$ |
18.90 |
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$ |
16.20 |
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$ |
0.145 |
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Second Quarter |
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|
18.00 |
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16.46 |
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0.145 |
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First Quarter |
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|
18.82 |
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16.80 |
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|
0.132 |
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2004
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Fourth Quarter |
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18.88 |
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16.84 |
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0.132 |
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Third Quarter |
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17.52 |
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16.00 |
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|
0.132 |
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Second Quarter |
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|
17.31 |
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|
|
15.31 |
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|
|
0.132 |
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First Quarter |
|
|
17.36 |
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|
|
15.89 |
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|
|
0.122 |
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2003
|
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Fourth Quarter |
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|
16.76 |
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|
|
15.05 |
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|
0.122 |
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Third Quarter |
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|
16.38 |
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|
|
14.66 |
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|
|
0.122 |
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Second Quarter |
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|
16.00 |
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|
|
13.61 |
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|
0.122 |
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First Quarter |
|
|
13.86 |
|
|
|
12.71 |
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|
|
0.109 |
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For certain limitations on the ability of Fultons subsidiaries to pay dividends to Fulton,
see Fultons Annual Report on Form 10-K for the year ended December 31, 2004, which is incorporated
herein by reference. See Where You Can Find More
Information on page 67.
On July 26, 2005, the last full trading day prior to public announcement of the proposed
merger, the high, low and last sales price of Fulton common stock were as follows:
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High: |
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$ |
18.63 |
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Low: |
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$ |
18.40 |
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Last Sales price: |
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$ |
18.49 |
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On [Latest Practicable Date], the most recent practicable date prior to the printing of this
document, the high, low and last sales price of Fulton common stock were as follows:
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High: |
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$ |
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Low: |
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$ |
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Last Sales price: |
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$ |
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You should obtain current market quotations prior to making any decisions about the merger.
Indemnification
The Bylaws of Fulton provide for indemnification of its directors, officers, employees and
agents to the fullest extent permitted under the laws of the Commonwealth of Pennsylvania, provided
that the person seeking indemnification acted in good faith, in a manner he or she reasonably
believed to be in the best interests of Fulton, and without willful misconduct or recklessness.
Fulton has purchased insurance to indemnify its directors, officers, employees and agents under
certain circumstances.
55
Insofar as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling Fulton pursuant to the foregoing provisions
of Fultons Bylaws, Fulton has been informed that, in the opinion of the SEC, such indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable.
Description of Fulton Financial Common Stock
General
The authorized capital of Fulton consists exclusively of 600 million shares of common stock,
par value $2.50 per share, and 10 million shares of preferred stock, without par value. As of June
30, 2005, there were issued and outstanding approximately
152,956,077 shares of Fulton common
stock, which shares were held by 19,843 owners of record, and
there were 5,942,926 shares
issuable upon the exercise of options. No shares of preferred stock have been issued by Fulton.
Fultons common stock is listed for quotation on the Nasdaq National Market System under the symbol
FULT. The holders of Fulton common stock are entitled to one vote per share on all matters
submitted to a vote of the shareholders and may not cumulate their votes for the election of
directors. Each share of Fulton common stock is entitled to participate on an equal pro rata basis
in dividends and other distributions. The holders of Fulton common stock do not have preemptive
rights to subscribe for additional shares that may be issued by Fulton, and no share is entitled in
any manner to any preference over any other share. Fulton Financial Advisors, N.A. serves as the
transfer agent for Fulton.
The holders of Fulton common stock are entitled to receive dividends when, as and if declared
by the board of directors out of funds legally available. Fulton has in the past paid quarterly
cash dividends to its shareholders on or about the 15th day of January, April, July and October of
each year. The ability of Fulton to pay dividends to its shareholders is dependent primarily upon
the earnings and financial condition of Fultons subsidiary banks. Funds for the payment of
dividends on Fulton common stock are expected for the foreseeable future to be obtained primarily
from dividends paid to Fulton by its bank subsidiaries, which dividends are subject to certain
statutory limitations, described below:
|
|
|
|
|
Pennsylvania State
Chartered Banks
|
|
Fulton Bank, Lebanon
Valley Farmers Bank,
Lafayette Ambassador
Bank, and Premier
Bank
|
|
may pay dividends
only out of
accumulated net
earnings and may not
declare or pay any
dividend requiring a
reduction of the
statutorily required
surplus of the
institution |
|
|
|
|
|
National Banks
|
|
Swineford National
Bank, FNB Bank, N.A.,
Delaware National
Bank, and Fulton
Financial Advisors,
N.A.
|
|
the approval of the
Office of the
Comptroller of the
Currency is required
under federal law if
the total of all
dividends declared
during any calendar
year would exceed the
net profits (as
defined) of the bank
for the year,
combined with its
retained net profits
(as defined) for the
two preceding
calendar years |
|
|
|
|
|
Maryland Commercial
Banks
|
|
Hagerstown Trust
Company and The
Peoples Bank of
Elkton
|
|
may only declare a
cash dividend from
their undivided
profits or (with the
prior approval of the
Commissioner of
Financial Regulation)
from its surplus in
excess of 100% of its
required capital
stock, in each case
after providing for
due or accrued
expenses, losses,
interest and taxes.
In addition, if
Hagerstowns or
Peoples surplus
becomes less than
100% of its required
capital stock,
Hagerstown or Peoples
may not declare or
pay any cash
dividends that exceed
90% of its net
earnings until its
surplus becomes 100%
of its required
capital stock |
56
|
|
|
|
|
New Jersey Banks
|
|
The Bank, Skylands
Community Bank, First
Washington State
Bank, Somerset Valley
Bank
|
|
may not declare or
pay any dividends
which would impair
their capital stock
or reduce their
surplus to a level of
less than 50% of
their capital stock
or if the surplus is
currently less than
50% of the capital
stock, the payment of
such dividends would
not reduce the
surplus of the bank |
|
|
|
|
|
Virginia Bank
|
|
Resource Bank
|
|
may only declare or
pay any dividends up
to the amount of
retained earning |
In addition to the foregoing statutory restrictions on dividends, state banking regulations
(with respect to state-chartered banks), the FDIC (with respect to state-chartered banks that are
not members of the Federal Reserve System, such as Fulton Bank, Skylands Community Bank, Hagerstown
Trust Company, The Bank, The Peoples Bank of Elkton, First Washington State Bank and Somerset
Valley Bank), the Federal Reserve Board (with respect to state-chartered banks that are members of
the Federal Reserve System, such as Lebanon Valley Farmers Bank, Lafayette Ambassador Bank, Premier
Bank and Resource Bank), and the Office of the Comptroller of the Currency (with respect to
national banks such as Swineford National Bank, FNB Bank, N.A., Delaware National Bank, and Fulton
Financial Advisors, N.A.), also have adopted minimum capital standards and have broad authority to
prohibit a bank from engaging in unsafe or unsound banking practices. Specifically, a member bank
may not pay a dividend in excess of its net income less dividends declared, plus the prior two
years net income, less dividends declared during the prior two years. The payment of a dividend by
a bank could, depending upon the financial condition of the bank involved and other factors, be
deemed to impair its capital or to be as such an unsafe or unsound practice.
Dividend Reinvestment Plan
The holders of Fulton common stock may elect to participate in the Fulton Financial
Corporation Dividend Reinvestment Plan, which is a plan administered by Fulton Financial Advisors,
N.A. as the plan agent. Under the dividend reinvestment plan, dividends payable to participating
shareholders are paid to the plan agent and are used to purchase, on behalf of the participating
shareholders, additional shares of Fulton common stock. Participating shareholders may make
additional voluntary cash payments, which are also used by the plan agent to purchase, on behalf of
such shareholders, additional shares of Fulton common stock. Shares of Fulton common stock held for
the account of participating shareholders are voted by the plan agent in accordance with the
instructions of each participating shareholder as set forth in his or her proxy.
Securities Laws
Fulton, as a business corporation, is subject to the registration and prospectus delivery
requirements of the Securities Act and is also subject to similar requirements under state
securities laws. Fultons common stock is registered with the SEC under Section 12(g) of the
Securities Exchange Act of 1934, as amended, or the 1934 Act, and Fulton is subject to the periodic
reporting, proxy solicitation and insider trading requirements of the 1934 Act. The executive
officers, directors and 10% shareholders of Fulton are subject to certain restrictions affecting
their right to buy and sell shares of Fulton common stock owned beneficially by them. Specifically,
each such person is subject to the beneficial ownership reporting requirements and to the
short-swing profit recapture provisions of Section 16 of the 1934 Act and may sell shares of Fulton
common stock only: (i) in compliance with the provisions of C Rule 144 promulgated under the
Securities Act, (ii) in compliance with the provisions of another applicable exemption from the
registration requirements of the Securities Act, or (iii) pursuant to an effective registration
statement filed with the SEC under the Securities Act.
Anti-takeover Provisions
The Amended and Restated Articles of Incorporation and Bylaws of Fulton include certain
provisions which may be considered to be anti-takeover in nature because they may have the effect
of discouraging or making more difficult the acquisition of control over Fulton by means of a
hostile tender offer, exchange offer, proxy contest or similar transaction. These provisions are
intended to protect the shareholders of Fulton by providing a measure of assurance that Fultons
shareholders will be treated fairly in the event of an unsolicited takeover bid
57
and by preventing a successful takeover bidder from exercising its voting control to the
detriment of the other shareholders. However, the anti-takeover provisions set forth in the Amended
and Restated Articles of Incorporation and Bylaws of Fulton, taken as a whole, may discourage a
hostile tender offer, exchange offer, proxy solicitation or similar transaction relating to Fulton
common stock. To the extent that these provisions actually discourage such a transaction, holders
of Fulton common stock may not have an opportunity to dispose of part or all of their stock at a
higher price than that prevailing in the market. In addition, these provisions make it more
difficult to remove, and thereby may serve to entrench, incumbent directors and officers of Fulton,
even if their removal would be regarded by some shareholders as desirable.
The provisions in the Amended and Restated Articles of Incorporation of Fulton which may be
considered to be anti-takeover in nature include the following:
|
§ |
|
a provision that provides for substantial amounts of authorized but unissued capital
stock, including a class of preferred stock whose rights and privileges may be
determined prior to issuance by Fultons board of directors; |
|
|
§ |
|
a provision that does not permit shareholders to cumulate their votes for the
election of directors; |
|
|
§ |
|
a provision that requires a greater than majority shareholder vote in order to
approve certain business combinations and other extraordinary corporate transactions; |
|
|
§ |
|
a provision that establishes criteria to be applied by the board of directors in
evaluating an acquisition proposal; |
|
|
§ |
|
a provision that requires a greater than majority shareholder vote in order for the
shareholders to remove a director from office without cause; |
|
|
§ |
|
a provision that prohibits the taking of any action by the shareholders without a
meeting and eliminates the right of shareholders to call a special meeting; |
|
|
§ |
|
a provision that limits the right of the shareholders to amend the Bylaws; and |
|
|
§ |
|
a provision that requires, under certain circumstances, a greater than majority
shareholder vote in order to amend the Amended and Restated Articles of Incorporation. |
The provisions of the Bylaws of Fulton which may be considered to be anti-takeover in nature
include the following:
|
§ |
|
a provision that limits the permissible number of directors; |
|
|
§ |
|
a provision that establishes a board of directors divided into three classes, with
members of each class elected for a three-year term that is staggered with the terms of
the members of the other two classes; and |
|
|
§ |
|
a provision that requires advance written notice as a precondition to the nomination
of any person for election to the board of directors, other than in the case of
nominations made by existing management. |
As a Pennsylvania business corporation and a corporation whose common shares are registered
under the 1934 Act, Fulton is subject to, and may take advantage of the protections of, the
anti-takeover provisions of the Pennsylvania Business Corporation Law of 1988, as amended. These
anti-takeover provisions, which are designed to discourage the acquisition of control over a
targeted Pennsylvania business corporation, include:
|
§ |
|
a provision whereby the directors of the corporation, in determining what is in the
best interests of the corporation, may consider factors other than the economic
interests of the shareholders, such as the |
58
|
|
|
effect of any action upon other constituencies, including employees, suppliers,
customers, creditors and the community in which the corporation is located; |
|
|
§ |
|
a provision that permits shareholders to demand that a controlling person pay to
them the fair value of their shares in cash upon a change in control; |
|
|
§ |
|
a provision that restricts certain business combinations unless there is prior
approval by the directors or a supermajority of the shareholders; |
|
|
§ |
|
a provision permitting a corporation to adopt a shareholders rights plan; |
|
|
§ |
|
a provision denying the right to vote to a person who acquires a specified
percentage of stock ownership unless those voting rights are restored by a vote of
disinterested shareholders; and |
|
|
§ |
|
a provision requiring a person who acquires control shares, which are described in
the previous sentence, to disgorge to the corporation all profits from the sale of
equity securities within eighteen months thereafter. |
Corporations may elect to opt out of any or all of these anti-takeover provisions of the
Pennsylvania corporate law. Fulton has not elected to opt out of any of the protections provided by
the anti-takeover statutes.
On April 27, 1999, Fulton extended the term of its Shareholder Rights Plan, originally adopted
in June of 1989, by ten years. The plan is intended to discourage unfair or financially inadequate
takeover proposals and abusive takeover practices and to encourage third parties who may in the
future be interested in acquiring Fulton to negotiate with Fultons board of directors. The plan
may have the effect of discouraging or making more difficult the acquisition of Fulton by means of
a hostile tender offer, exchange offer or similar transaction. The plan is similar to shareholder
rights plans which have been adopted by other bank holding companies and business corporations and
contains flip-in rights (allowing certain shareholders to purchase Fultons common stock equal to
two times the rights exercise price) and flip-over rights (allowing rights holders to acquire
shares of the acquirers stock at a substantial discount) which are typically included in plans of
this kind. Each share of Fulton common stock, including all shares that will be issued to Columbia
Bancorps stockholders in the merger, also represent one right pursuant to the terms of the
shareholder rights plan, which right will initially, and until it becomes exercisable, trade with
and be represented by the Fulton common stock certificates to be received by the stockholders of
Columbia Bancorp.
The management of Fulton does not presently contemplate recommending to the shareholders the
adoption of any additional anti-takeover provisions.
INFORMATION ABOUT COLUMBIA BANCORP
As permitted by the rules of the SEC, financial and other information relating to Columbia
Bancorp, including information relating to Columbia Bancorps directors and executive officers, is
incorporated herein by reference. See Where You Can Find More Information on page 67 and
Incorporation By Reference on page 68. A copy of Columbia Bancorps 10-K for the year ended
December 31, 2004 is incorporated herein by reference.
General
Columbia Bancorp is a Maryland corporation and a registered bank holding company headquartered
in Columbia, Maryland. Columbia Bancorp is the holding company for The Columbia Bank, a Maryland
state chartered commercial bank. The bank is a full service commercial bank, providing a wide range
of business and consumer financial services through 24 branch offices that span from the
Washington, D.C. area to northeast of Baltimore, Maryland. In addition to The Columbia Bank,
Columbia Bancorp has the following wholly-owned subsidiaries:
59
|
§ |
|
Columbia Bancorp Statutory Trust I, Columbia Bancorp Statutory Trust II and Columbia
Bancorp Statutory Trust III, each of which has issued trust preferred securities. |
In addition, The Columbia Bank has the following wholly-owned subsidiaries:
|
§ |
|
McAlpine Enterprises, Inc, Howard I, LLC and Howard II, LLC, which are inactive, but
have been used primarily to manage properties acquired through foreclosure; and |
|
|
§ |
|
Columbia Leasing, Inc., which is an inactive commercial leasing company. |
Columbia Bancorp had approximately $1.28 billion in assets and $976 million in deposits at
June 30, 2005. On June 30, 2005, The Columbia Bank employed 309 full-time and 76 part-time
employees throughout its branch offices.
Market Price of and Dividends on Columbia Bancorp Common Stock and Related Stockholder Matters
The Columbia Bancorp common stock trades on the NASDAQ National Market under the symbol
CBMD. As of ___, there were ___shares of Columbia Bancorp common stock
issued and outstanding, held by approximately ___stockholders of record. The following table
sets forth the high and low sale prices for shares of Columbia Bancorp common stock for the periods
indicated as reported on the Nasdaq National Market and the cash dividends paid per share for such
periods. Such prices do not necessarily reflect mark-ups, mark-downs or commissions. Per share
amounts have been retroactively adjusted to reflect the effect of all stock dividends and stock
splits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price Range Per Share |
|
Per Share Dividend |
|
|
High |
|
|
Low |
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter (through [Latest Practicable Date]) |
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
$ |
42.19 |
|
|
$ |
39.85 |
|
$ |
.170 |
|
|
Second Quarter |
|
|
36.96 |
|
|
|
30.21 |
|
|
.170 |
|
|
First Quarter |
|
|
35.49 |
|
|
|
31.30 |
|
|
.170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
37.49 |
|
|
$ |
28.25 |
|
$ |
.170 |
|
|
Third Quarter |
|
|
30.10 |
|
|
|
26.50 |
|
|
.150 |
|
|
Second Quarter |
|
|
32.00 |
|
|
|
28.05 |
|
|
.150 |
|
|
First Quarter |
|
|
32.86 |
|
|
|
29.00 |
|
|
.150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
32.49 |
|
|
$ |
27.21 |
|
$ |
.150 |
|
|
Third Quarter |
|
|
29.67 |
|
|
|
23.96 |
|
|
.125 |
|
|
Second Quarter |
|
|
26.00 |
|
|
|
22.41 |
|
|
.125 |
|
|
First Quarter |
|
|
25.32 |
|
|
|
21.35 |
|
|
.125 |
|
|
The merger agreement restricts the amount of dividends that Columbia Bancorp may pay as
described under the heading The Merger Dividends on page 42.
On July 26, 2005, the last full trading day prior to public announcement of the proposed
merger, the high, low and last sales price of Columbia Bancorp common stock were as follows:
|
|
|
|
|
High: |
|
$ |
37.47 |
|
Low: |
|
$ |
36.82 |
|
Last Sales Price: |
|
$ |
37.25 |
|
60
On [Latest Practical Date], the most recent practicable date prior to the printing of this
document, the high, low and last sales price of Columbia Bancorp common stock were as follows:
|
|
|
|
|
High: |
|
$ |
|
|
Low: |
|
|
|
|
Last Sales Price: |
|
|
|
|
You should obtain current market quotations prior to making any decisions as to the merger
agreement.
COMPARISON OF STOCKHOLDER RIGHTS
If Fulton and Columbia Bancorp complete the merger, stockholders of Columbia Bancorp
automatically will become shareholders of Fulton, and their rights as shareholders will thereafter
be determined by the Pennsylvania Business Corporation Law of 1988, as amended, and by Fultons
Amended and Restated Articles of Incorporation and Bylaws. The following is a summary of material
differences between the rights of holders of Fulton common stock and the rights of holders of
Columbia Bancorp common stock. These differences arise from differing provisions of the charter and
bylaws of Fulton and Columbia Bancorp, differences in Maryland and Pennsylvania corporate law and
from the existence of Fultons Shareholder Rights Plan.
|
|
|
|
|
|
|
COLUMBIA BANCORP |
|
FULTON |
Title
|
|
Common Stock, $0.01 par value per share
|
|
Common Stock, $2.50 par value per share |
|
|
|
|
|
Shares Authorized
|
|
Columbia Bancorps charter authorizes
issuance of up to 10,000,000 shares of
capital stock, $0.01 par value per
share, all of which are classified as
Common Stock. Columbia Bancorps
charter provides that the board of
directors has the power to classify and
reclassify any unissued shares of
capital stock by setting or changing in
any one or more respects the
preferences, conversion or other
rights, voting powers, restrictions,
limitations as to dividends,
qualifications or terms or conditions
of redemption of such shares of stock.
|
|
Fultons charter authorizes issuance of
up to 600,000,000 shares of common
stock, par value $2.50 per share. |
|
|
|
|
|
Shares Issued &
Outstanding
|
|
156,953,150 shares, as of
September 30, 2005
|
|
6,938,276 shares, as of
September 30, 2005 |
|
|
|
|
|
Preemptive Rights
|
|
No
|
|
No |
|
|
|
|
|
Classification of
board of directors
|
|
Columbia Bancorps bylaws provide that
the board of directors shall be divided
into three classes as nearly equal in
number as possible, with each class
serving a three year term.
|
|
Fultons bylaws provide that the board
of directors shall be divided into
three classes as nearly equal as
possible with each class serving a
three year term. |
|
|
|
|
|
Voting: Election
and Removal of
Directors
|
|
Columbia Bancorps bylaws provide that
a plurality of all the votes cast at a
meeting of stockholders at which a
quorum is present is sufficient to
elect a director. There is no
cumulative voting.
|
|
Fultons bylaws provide that a
plurality of all the votes cast at a
meeting of stockholders at which a
quorum is present is sufficient to
elect a director. There is no
cumulative voting.
Fultons articles of incorporation
provide that, |
61
|
|
|
|
|
|
|
COLUMBIA BANCORP |
|
FULTON |
|
|
Columbia Bancorps charter provides
that, subject to the rights of the
holders of any class separately
entitled to elect one or more
directors, any director or the entire
board of directors, may be removed from
office at any time, but only for cause
and then only by the affirmative vote
of the holders of at least 80% of the
combined voting power of all classes of
shares of capital stock entitled to
vote in the election of directors.
|
|
subject to the rights of
the holders of any class separately
entitled to elect one or more
directors, a director may be removed by
shareholder vote:
(1) With cause, by a majority of the
voting power of the then outstanding
shares of capital stock of the
corporation entitled to vote generally
in the election of directors, voting
together as a single class; or
(2) Without cause, by not less than 85%
of the voting power of the then
outstanding shares of capital stock of
the corporation entitled to vote
generally in the election of directors,
voting together as a single class |
|
|
|
|
|
Voting: Approval
of Fundamental
Transactions
|
|
2/3 of all votes entitled to be cast at
stockholders meeting.
|
|
2/3 of voting power of the then
outstanding voting stock |
|
|
|
|
|
Voting: Amendment
of Articles of
Incorporation
|
|
The affirmative vote of a majority of
all votes entitled to be cast by the
stockholders of Columbia Bancorp on the
matter is required following approval
by Columbia Bancorps board of
directors of such amendment, provided
that certain provisions of Columbia
Bancorps charter require the approval
of 80% entitled to be cast thereon.
|
|
Amendment of Fultons articles with
respect to the provisions regarding
Fultons authorized shares, required
votes for fundamental transactions,
removal of directors, ability to call
(or act without) a special meeting and
requirements to amend the articles and
bylaws require the approval of either: (i) affirmative vote of holders of 85%
of voting power; or (ii) approval of a
majority of directors and continuing
directors and affirmative vote of
66-2/3 of holders of voting power. All
other amendments of Fultons articles
must be approved by either: (a)
majority of directors and the
affirmative vote of holders of a
majority of voting power or (b) the
affirmative vote of holders of 85% of
voting power. |
|
|
|
|
|
Voting: Other
Matters
|
|
One vote for each share owned of record.
|
|
One vote for each share owned of record. |
|
|
Columbia Bancorps bylaws provide that
a majority of all the votes cast at a
meeting at which a quorum is present is
sufficient to approve any matter which
properly comes before the meeting.
|
|
Fultons bylaws provide that a majority
of all the votes cast at a meeting at
which a quorum is present is sufficient
to approve any matter which properly
comes before the meeting. |
|
|
|
|
|
Approval Required
for Restricted
Transactions with
Significant
Beneficial Owners
|
|
The Maryland Business Combination Act,
which is contained in the MGCL,
provides that unless exempted, a
Maryland corporation may not engage in
business combinations, including
mergers, dispositions of 10% or more of
its assets, issuances of shares of
stock or other specified transactions,
with an interested stockholder or an
affiliate of an interested stockholder
for five years after the most recent
date on which the interested
stockholder became an interested
stockholder, and thereafter unless
certain
|
|
Approval of a fundamental transaction
with or involving an interested
shareholder (generally speaking, a 5%
or greater beneficial owner of Fultons
voting stock) or an affiliate or
associate of an interested shareholder
requires the affirmative vote of
holders of not less than 85% of the
voting power of the then outstanding
shares of voting stock. If such
transaction is approved by a majority
of continuing directors, or six
economic and procedural conditions are
met by the transaction, then the
holders of not less than 66-2/3% of the
voting power of the then |
62
|
|
|
|
|
|
|
COLUMBIA BANCORP |
|
FULTON |
|
|
criteria specified in the
Maryland Business Combination Act are
met. These criteria include approval by
an 80% supermajority vote of the
stockholders unless the stockholders
receive, in any such business
combination, a minimum price for the
shares, determined in accordance with
the provisions of the statute. An
interested stockholder is generally a
person owning or controlling, directly
or indirectly, 10% or more of the
voting power of the outstanding stock
of a Maryland corporation.
|
|
outstanding shares of voting stock is required. |
|
|
|
|
|
|
|
Columbia Bancorps board of directors
has adopted a resolution exempting the
merger with Fulton from the Maryland
Business Combination Act. However,
Columbia Bancorps board of directors
could repeal or modify this resolution
prior to the closing of the merger, in
which case, the provisions of the
Maryland Business Combination Act will
be applicable to the business
combination between Columbia Bancorp
and Fulton. |
|
|
|
|
|
|
|
Dissenters Rights
|
|
The Maryland General Corporation Law
(the MGCL) generally provides that a
stockholder of a Maryland corporation
is not entitled to dissenters rights
if the stock received in a merger is
designated as a national market system
security on an interdealer quotation
system by the National Association of
Securities Dealers, Inc.
|
|
The Pennsylvania Business Corporation
Law (the BCL) generally provides that
a shareholder of a Pennsylvania
corporation is not entitled to
dissenters rights if the stock
received in a merger is designated as a
national market system security on an
interdealer quotation system by the
National Association of Securities
Dealers, Inc. |
|
|
|
|
|
Dividend
Reinvestment Plan
|
|
Yes
|
|
Yes |
|
|
|
|
|
Market
|
|
Listed for quotation on the Nasdaq
National Market
|
|
Listed for quotation on Nasdaq National
Market |
|
|
|
|
|
Registered under
1934 Act
|
|
Yes
|
|
Yes |
|
|
|
|
|
Limitation of
Liability of
Directors for
Monetary Damages
|
|
Columbia Bancorps charter provides for
the elimination of personal liability
for directors and officers to the
fullest extent possible under
applicable law.
|
|
Fultons charter provides for the
elimination of personal liability for
directors and officers to the fullest
extent possible under applicable law. |
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Under applicable law, by virtue of such
charter provision, a director or
officer of Columbia Bancorp will have
no personal liability to Columbia
Bancorp or its stockholders for
monetary damages except: (i) to the
extent that it is proved that the
director or officer actually received
an improper personal benefit or profit
in money, property or services for the
amount
|
|
Under applicable law, by virtue of such
charter provision, a director or
officer of Fulton will have no personal
liability to Fulton or its stockholders
for monetary damages except: (i) to
the extent the director has breached or
failed to perform the duties of his
office under Section 8363 of the
Directors Liability Act, and (ii) the
breach or failure to perform
constitutes self-dealing, willful |
63
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|
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|
COLUMBIA BANCORP |
|
FULTON |
|
|
of the improper personal benefit
or profit in money, property or
services actually received; or (ii) to
the extent that a judgment or other
adjudication adverse to the director or
officer is entered in a proceeding
based on a finding in the proceeding
that the directors or officers
action, or failure to act, was the
result of active and deliberate
dishonesty and was material to the
cause of action adjudicated in the
proceeding.
|
|
misconduct or recklessness.
These provisions do not exempt a
director from: (a) the responsibility
or liability of a director pursuant to
any criminal statute; or (b) the
liability of a director for the payment
of taxes pursuant to local, state or
federal law. |
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|
Indemnification of
Directors, Officers
and Employees
|
|
Columbia Bancorps charter and bylaws
provide that Columbia Bancorp will
indemnify its directors to the fullest
extent permitted by applicable law and
will indemnify its officers to such
extent as shall be authorized by the
board of directors of Columbia Bancorp
and permitted by law.
The applicable provisions of the
MGCL allow corporations to indemnify
any person who was or is a party or is
threatened to be made a party to any
threatened, pending or completed
action, suit or proceeding, whether
civil, criminal, administrative or
investigative, by reason of the fact
that he or she is or was a director,
officer, employee or agent of the
corporation or is or was serving at the
request of the corporation as a
director, officer, employee, partner,
trustee, or agent of another foreign or
domestic corporation, partnership,
joint venture, trust, other enterprise
or employee benefit plan unless it is
established that: (i) the act or
omission was material to the matter
giving rise to the proceeding and
either was committed in bad faith or
was the result of active and deliberate
dishonesty; (ii) the person actually
received an improper personal benefit
in money, property or services; or
(iii) in the case of any criminal
proceeding, the person had reasonable
cause to believe that the act or
omission was unlawful.
|
|
Fultons bylaws provide that Fulton
will indemnify its officers and
directors to the fullest extent
permitted by applicable law.
The applicable provisions of the BCL
allow corporations to indemnify any
person who was or is a party or is
threatened to be made a party to any
threatened, pending or completed action
or proceeding, whether civil, criminal,
administrative or investigative, by
reason of he fact that he is or was a
representative of the corporation, if
(i) he acted in good faith and in a
manner he reasonably believed to be in,
or not opposed to, the best interests
of the corporation and, (ii) with
respect to any criminal proceeding, had
no reasonable cause to believe his
conduct was unlawful. |
|
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Qualification of
Directors
|
|
Columbia Bancorps bylaws prohibit a
person standing for election as a
director who would be 70 years of age
on or before the date of the election
(with no age limit in the case of any
person who is serving as the Chairman
of the board of directors, the chairman
of any standing committee of the board
of directors, the Chief Executive
Officer or the President just prior to
his election).
|
|
Fultons bylaws prohibit a person
standing for election as a director who
would be 70 years of age on or before
the date of the election. |
64
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|
COLUMBIA BANCORP |
|
FULTON |
Authorized Class of
Preferred Stock
|
|
Columbia Bancorp currently has no
authorized preferred stock.
Columbia Bancorps charter provides
that the board of directors has the
power to classify and reclassify any
unissued shares of capital stock by
setting or changing in any one or more
respects the preferences, conversion or
other rights, voting powers,
restrictions, limitations as to
dividends, qualifications or terms or
conditions of redemption of such shares
of stock.
|
|
Fultons articles of incorporation
authorize 10,000,000 shares of
preferred stock, without par value,
which can be issued under terms and
conditions to be determined by the
board of directors. |
|
|
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|
Right of
Stockholders to
call an Annual
Meeting
|
|
No
|
|
No |
|
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|
|
Right of
Stockholders to
call a Special
Meeting
|
|
Special meetings of stockholders shall
only be called by the secretary upon
the written request of the stockholders
entitled to cast not less than a
majority of all the votes entitled to
be cast at such meeting. Such requests
shall state the purpose of such meeting
and the matters proposed to be acted on
at such meeting. At a special meeting
of the stockholders, only the business
described in the notice of the meeting
shall be conducted.
|
|
Fultons articles of incorporation
provide that a special meeting may only
be called by (i) the Chief Executive
Officer of the corporation, (ii) the
Executive Committee of the board of
directors, or (iii) the board of
directors pursuant to a resolution
adopted by the affirmative vote of a
majority of the whole board of
directors. Special meetings may not be
called by shareholders. |
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|
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|
Stockholder
Inspection Rights
|
|
Pursuant to the MGCL, one or more
persons who have been stockholders of a
Maryland corporation for at least six
months and in total hold at least 5% of
the outstanding stock of any class may
request a statement of the
corporations current assets and
liabilities and may inspect and copy
the corporations books of account and
stock ledger.
|
|
Pursuant to the BCL, every shareholder
may, upon written demand stating a
proper purpose therefor, have a right
to examine the share register, books
and records of account, and records of
the proceedings of the incorporators,
shareholders and directors of the
company and to make copies or extracts.
A proper purpose shall mean a purpose
reasonably related to the interest of
the person as a shareholder. |
|
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Right of
Stockholders to act
by Written Consent
|
|
Under the MGCL, any action required or
permitted to be taken at a meeting of
stockholders may be taken without a
meeting if written consent or consents
setting forth the action taken are
signed by the holders of all of the
outstanding stock entitled to vote on
the matter, and if a written waiver of
any right to dissent signed by each
stockholder entitled to notice of the
meeting but not entitled to vote at it,
are filed with the records of the
stockholders meetings.
|
|
Fultons articles of incorporation
prohibit shareholders from consenting
in writing to action without a meeting. |
ADJOURNMENT
If Columbia Bancorp does not have sufficient votes for a quorum or to approve the merger
agreement at the special meeting, Columbia Bancorp intends to adjourn the special meeting to permit
further solicitation of proxies. The board of directors of Columbia Bancorp recommends that
stockholders vote their proxies in favor of the
65
adjournment proposal so that their proxies may be used to vote for an adjournment if
necessary. The proxy holders will vote properly executed proxies in favor of the adjournment
proposal unless the proxies indicate otherwise. If Columbia Bancorp adjourns the special meeting,
Columbia Bancorp will not give notice of the time and place of the adjourned special meeting other
than by an announcement of such time and place at the special meeting.
EXPERTS
The consolidated financial statements of Fulton Financial Corporation as of December 31, 2004
and 2003, and for each of the years in the three-year period ended December 31, 2004, and
managements assessment of the effectiveness of internal control over financial reporting as of
December 31, 2004 have been incorporated by reference herein in reliance upon the reports of KPMG
LLP, independent registered public accounting firm, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The audit report on managements assessment of the effectiveness of internal control over
financial reporting and the effectiveness of internal control over financial reporting as of
December 31, 2004, contains an explanatory paragraph that states Fulton Financial Corporation
acquired First Washington FinancialCorp. on December 31, 2004, and management excluded from its
assessment of the effectiveness of Fulton Financial Corporations internal control over financial
reporting as of December 31, 2004, First Washington FinancialCorp.s internal control over
financial reporting associated with total assets of approximately $585 million and total revenues
of $0 included in the consolidated financial statements of Fulton Financial Corporation as of and
for the year ended December 31, 2004. The audit of internal control over financial reporting of
Fulton Financial Corporation also excluded an evaluation of the internal control over financial
reporting for First Washington FinancialCorp.
The consolidated financial statements of Columbia Bancorp as of December 31, 2004 and 2003,
and for each of the years in the three-year period ended December 31, 2004, and managements
assessment of the effectiveness of internal control over financial reporting as of December 31,
2004 have been incorporated by reference herein in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Barley Snyder LLC will pass on the validity of the Fulton common stock issued in the merger
and certain federal income tax consequences of the merger.
DLA Piper Rudnick Gray Cary US LLP has acted as counsel to Columbia Bancorp in connection with
the merger.
OTHER MATTERS
Columbia Bancorps board of directors knows of no matters other than those described in this
document or referred to in the accompanying notice of special meeting of stockholders that may be
presented at the special meeting. However, if any other matter should be properly presented for
consideration and voting at the special meeting or any adjournments of the special meeting, the
proxy holders will vote the proxies in their discretion in the manner they determine to be in
Columbia Bancorps best interest.
STOCKHOLDER PROPOSALS
Because Columbia Bancorp and Fulton anticipate that the merger will be completed no later than
the first quarter of 2006, Columbia Bancorp does not anticipate holding a 2006 annual meeting of
Columbia Bancorp stockholders.
66
WHERE YOU CAN FIND MORE INFORMATION
Fulton and Columbia Bancorp are subject to the informational requirements of the Securities
Exchange Act of 1934, and file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read and copy any reports, proxy statements and other information
that Fulton and/or Columbia Bancorp file at the Securities and Exchange Commissions public
reference rooms at One Station Place, 100 F Street, N.E., Washington, D.C. 20549. You may call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public
reference room. Fultons and Columbia Bancorps Securities and Exchange Commission filings are also
available on the Securities and Exchange Commissions Internet site at http://www.sec.gov. You can
also inspect reports, proxy statements and other information concerning Fulton or Columbia Bancorp
at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006. Additionally, Columbia Bancorps Internet site is www.thecolumbiabank.com.
Fultons Internet site is www.fult.com.
Fulton filed a Registration Statement on Form S-4 (No. 333-___) to register with the
Securities and Exchange Commission the Fulton common stock issuable to Columbia Bancorp
stockholders in the merger. This document is a part of that Registration Statement and constitutes
a prospectus of Fulton in addition to being a proxy statement of Columbia Bancorp for the special
meeting. As allowed by Securities and Exchange Commission rules, this document does not contain all
the information you can find in the Registration Statement or the exhibits to the Registration
Statement.
INCORPORATION BY REFERENCE
Some of the information that you may want to consider in deciding how to vote with respect to
the merger is not physically included in this document, but rather is incorporated by reference
to documents that have been filed by Fulton and Columbia Bancorp with the Securities and Exchange
Commission. As permitted by the SEC, the following documents are incorporated by reference in this
document:
Documents filed by Fulton (SEC File No. 0-10587):
|
§ |
|
Annual Report on Form 10-K, filed March 16, 2005, for the year ended December 31, 2004; |
|
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§ |
|
Quarterly Reports on Form 10-Q, filed May 10, 2005, for the quarter ended March 31,
2005 and filed August 9, 2005 for the quarter ended June 30, 2005; |
|
|
§ |
|
Current Reports on Form 8-K filed: January 3, 2005, July 26, 2005, January 18, 2005,
March 2, 2005, March 16, 2005, March 22, 2005, March 24, 2005, March 31, 2005, April
13, 2005, May 5, 2005, June 9, 2005, June 15, 2005, June 24, 2005, June 27, 2005, July
1, 2005, July 5, 2005, July 19, 2005, July 26, 2005, July 27, 2005, July 29, 2005 and
August 9, 2005; |
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|
§ |
|
The description of Fulton common stock contained in Fultons registration statement
on Form 8-A, dated July 3, 1989, and any amendment or reports filed for purposes of
updating such description. |
Documents filed by Columbia Bancorp (SEC File No.0-24302):
|
§ |
|
Annual Report on Form 10-K filed March 15, 2005, for the year ended December 31, 2004; |
|
|
§ |
|
Quarterly Reports on Form 10-Q filed May 10, 2005 for the quarter ended March 31,
2005 and filed August 8, 2005 for the quarter ended June 30, 2005; |
|
|
§ |
|
Current Reports on Form 8-K filed: January 3, 2005, February 4, 2005, March 25,
2005, and July 29, 2005. |
|
|
§ |
|
The description of Columbia Bancorp common stock contained in its Registration
Statement on Form 8-A, dated June 9, 1994. |
67
All documents filed by Fulton and Columbia Bancorp pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, after the date of this document and prior
to the date of the special meeting are also incorporated by reference into this document and will
be deemed to be a part hereof from the date of filing of such documents.
Any statement contained in a document that is incorporated by reference will be deemed to be
modified or superseded for all purposes to the extent that a statement contained herein (or in any
other document that is subsequently filed with the Securities and Exchange Commission and
incorporated by reference) modifies or is contrary to that previous statement.
We may have sent you some of the documents incorporated by reference, but you can obtain any
of them through us or the Securities and Exchange Commission. Documents incorporated by reference
are available from Fulton or Columbia Bancorp without charge, excluding all exhibits unless we have
specifically incorporated an exhibit into this document by reference. Columbia Bancorp stockholders
may obtain documents incorporated by reference in this document, with respect to Fulton, by
requesting them in writing or by telephone from: Fulton Financial Corporation, One Penn Square,
Lancaster, PA 17602, Attention: George R. Barr, Jr. (telephone number (717) 291-2411), and with
respect to Columbia Bancorp, by requesting them in writing or by telephone from: Columbia Bancorp,
7162 Columbia Gateway Drive, Columbia, MD 21046, Attention: Sibyl S. Malatras (telephone number
410-423-8000). In order to ensure timely delivery of such documents, any request should be made by
___, 2005.
All information contained or incorporated by reference in this document relating to Fulton and
its subsidiaries has been supplied by Fulton. All information contained or incorporated by
reference in this document relating to Columbia Bancorp and its subsidiaries has been supplied by
Columbia Bancorp.
68
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
EXHIBIT A
Agreement and Plan of Merger
By and Between
Columbia Bancorp and
Fulton Financial Corporation
July 26, 2005
TABLE OF CONTENTS
|
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|
ARTICLE I THE MERGER |
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2 |
|
Section 1.1 Merger |
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2 |
|
Section 1.2 Name |
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2 |
|
Section 1.3 Articles of Incorporation |
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2 |
|
Section 1.4 Bylaws |
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2 |
|
Section 1.5 Directors and Officers |
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2 |
|
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|
ARTICLE II CONVERSION OF SHARES AND EXCHANGE OF STOCK
CERTIFICATES |
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|
2 |
|
Section 2.1 Conversion of Shares |
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2 |
|
Section 2.2 Exchange of Stock Certificates |
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4 |
|
Section 2.3 Treatment of Outstanding Columbia Options. |
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12 |
|
Section 2.4 Reservation of Shares |
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14 |
|
Section 2.5 Taking Necessary Action |
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14 |
|
Section 2.6 Press Releases, Etc |
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14 |
|
Section 2.7 Fulton Common Stock |
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14 |
|
Section 2.8 Dissenters Rights |
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14 |
|
Section 2.9 Certain Actions |
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14 |
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|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COLUMBIA |
|
|
15 |
|
Section 3.1 Authority |
|
|
15 |
|
Section 3.2 Organization and Standing |
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15 |
|
Section 3.3 Subsidiaries |
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16 |
|
Section 3.4 Capitalization |
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16 |
|
Section 3.5 Charter, Bylaws and Minute Books |
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16 |
|
Section 3.6 Financial Statements |
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17 |
|
Section 3.7 Absence of Undisclosed Liabilities |
|
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20 |
|
Section 3.8 Absence of Changes |
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20 |
|
Section 3.9 Dividends, Distributions and Stock Purchases |
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|
20 |
|
Section 3.10 Taxes |
|
|
20 |
|
Section 3.11 Title to and Condition of Assets |
|
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21 |
|
Section 3.12 Contracts. |
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21 |
|
Section 3.13 Litigation and Governmental Directives |
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22 |
|
Section 3.14 Compliance with Laws; Governmental Authorizations |
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23 |
|
Section 3.15 Insurance |
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23 |
|
Section 3.16 Financial Institutions Bonds |
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23 |
|
Section 3.17 Labor Relations and Employment Agreements |
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24 |
|
Section 3.18 Employee Benefit Plans |
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24 |
|
Section 3.19 Related Party Transactions |
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25 |
|
Section 3.20 No Finder |
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25 |
|
Section 3.21 Complete and Accurate Disclosure |
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25 |
|
Section 3.22 Environmental Matters |
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26 |
|
Section 3.23 Proxy Statement/Prospectus |
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26 |
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Section 3.24 SEC Filings |
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27 |
|
Section 3.25 Reports |
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27 |
|
Section 3.26 Loan Portfolio of The Columbia Bank. |
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27 |
|
Section 3.27 Investment Portfolio |
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28 |
|
Section 3.28 Regulatory Examinations. |
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28 |
|
Section 3.29 Regulatory Agreements and Matters |
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28 |
|
Section 3.30 Beneficial Ownership of Fulton Common Stock |
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29 |
|
Section 3.31 Fairness Opinion |
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29 |
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|
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FULTON |
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29 |
|
Section 4.1 Authority |
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29 |
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Section 4.2 Organization and Standing |
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30 |
|
Section 4.3 Capitalization |
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30 |
|
Section 4.4 Articles of Incorporation and Bylaws |
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30 |
|
Section 4.5 Subsidiaries |
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30 |
|
Section 4.6 Financial Statements |
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31 |
|
Section 4.7 Absence of Undisclosed Liabilities |
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34 |
|
Section 4.8 Absence of Changes; Dividends, Etc. |
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34 |
|
Section 4.9 Litigation and Governmental Directives |
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34 |
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Section 4.10 Compliance with Laws; Governmental Authorizations |
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34 |
|
Section 4.11 Complete and Accurate Disclosure |
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34 |
|
Section 4.12 Labor Relations |
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35 |
|
Section 4.13 Employee Benefit Plans |
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35 |
|
Section 4.14 Environmental Matters |
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35 |
|
Section 4.15 SEC Filings |
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36 |
|
Section 4.16 Proxy Statement/Prospectus |
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36 |
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Section 4.17 Regulatory Approvals |
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36 |
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Section 4.18 No Finder |
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36 |
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Section 4.19 Taxes |
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36 |
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Section 4.20 Title to and Condition of Assets |
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37 |
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Section 4.21 Contracts |
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37 |
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Section 4.22 Insurance |
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37 |
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Section 4.23 Reports |
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37 |
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Section 4.24 Regulatory Agreements and Matters |
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38 |
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Section 4.25 Regulatory Examinations |
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38 |
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ARTICLE V COVENANTS OF COLUMBIA |
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39 |
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Section 5.1 Conduct of Business |
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39 |
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Section 5.2 Best Efforts |
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42 |
|
Section 5.3 Access to Properties and Records |
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42 |
|
Section 5.4 Subsequent Financial Statements |
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42 |
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Section 5.5 Update Schedules |
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42 |
|
Section 5.6 Notice |
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42 |
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Section 5.7 No Solicitation. |
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42 |
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A-ii
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Section 5.8 Affiliate Letters |
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45 |
|
Section 5.9 No Purchases or Sales of Fulton Common Stock
During Price Determination Period |
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45 |
|
Section 5.10 Dividends |
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46 |
|
Section 5.11 Internal Controls. |
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46 |
|
Section 5.12 Certain Matters, Certain Revaluations, Changes and Adjustments. |
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46 |
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Section 5.13 Other Policies |
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47 |
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Section 5.14 Other Transactions |
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47 |
|
Section 5.15 Transaction Expenses of Columbia. |
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47 |
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ARTICLE VI COVENANTS OF FULTON |
|
|
48 |
|
Section 6.1 Best Efforts |
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48 |
|
Section 6.2 Access to Properties and Records |
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49 |
|
Section 6.3 Subsequent Financial Statements |
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49 |
|
Section 6.4 Update Schedules |
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49 |
|
Section 6.5 Notice |
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49 |
|
Section 6.6 No Purchase or Sales of Fulton Common Stock During
Price Determination Period |
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50 |
|
Section 6.7 Assumption of Columbia Trust Preferred Securities |
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50 |
|
Section 6.8 Employment Arrangements. |
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50 |
|
Section 6.9 Insurance; Indemnification. |
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52 |
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Section 6.10 Appointment of Fulton Director |
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53 |
|
Section 6.11 Continuation of The Columbia Banks Structure,
Name and Directors. |
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53 |
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ARTICLE VII CONDITIONS PRECEDENT |
|
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54 |
|
Section 7.1 Common Conditions |
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54 |
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Section 7.2 Conditions Precedent to Obligations of Fulton |
|
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56 |
|
Section 7.3 Conditions Precedent to the Obligations of Columbia |
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60 |
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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER |
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|
62 |
|
Section 8.1 Termination |
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|
62 |
|
Section 8.2 Effect of Termination. |
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63 |
|
Section 8.3 Amendment |
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64 |
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Section 8.4 Waiver |
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64 |
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ARTICLE IX CLOSING AND EFFECTIVE TIME |
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64 |
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Section 9.1 Closing |
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64 |
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Section 9.2 Effective Time |
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65 |
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ARTICLE X NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES |
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65 |
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Section 10.1 No Survival |
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65 |
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|
ARTICLE XI GENERAL PROVISIONS |
|
|
65 |
|
Section 11.1 Expenses |
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65 |
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Section 11.2 Other Mergers and Acquisitions |
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65 |
|
Section 11.3 Notices |
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65 |
|
A-iii
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Section 11.4 Counterparts |
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66 |
|
Section 11.5 Governing Law |
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66 |
|
Section 11.6 Parties in Interest |
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66 |
|
Section 11.7 Disclosure Schedules. |
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67 |
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Section 11.8 Entire Agreement |
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67 |
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Section 11.9 Definitions |
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|
67 |
|
A-iv
INDEX OF SCHEDULES
|
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|
Schedule 2.3
|
|
Columbia Options |
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|
|
Schedule 3.3
|
|
Other Columbia Subsidiaries |
|
|
|
Schedule 3.6
|
|
Financial Statements |
|
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|
Schedule 3.7
|
|
Undisclosed Liabilities |
|
|
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Schedule 3.8
|
|
Changes |
|
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Schedule 3.9
|
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Dividends, Distributions and Stock Purchases |
|
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Schedule 3.10
|
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Taxes |
|
|
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Schedule 3.11
|
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Title to and Condition of Assets |
|
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Schedule 3.12
|
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Contracts |
|
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Schedule 3.13
|
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Litigation and Governmental Directives |
|
|
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Schedule 3.14
|
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Compliance with Laws; Governmental Authorizations |
|
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Schedule 3.15
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Insurance |
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Schedule 3.16
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Financial Institutions Bonds |
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Schedule 3.17
|
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Labor Relations and Employment Agreements |
|
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Schedule 3.18
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Employee Benefit Plans |
|
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Schedule 3.19
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Related Party Transactions |
|
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Schedule 3.20
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Finders |
|
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Schedule 3.22
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Environmental Matters |
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Schedule 3.26
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Loan Portfolio |
|
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Schedule 3.27
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Investment Portfolio |
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Schedule 3.29
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Regulatory Agreements |
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Schedule 4.5
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Subsidiaries |
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Schedule 4.6
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Financial Statements |
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Schedule 4.7
|
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Undisclosed Liabilities |
|
|
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Schedule 4.8
|
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Dividends, Distributions and Stock Purchases |
|
|
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Schedule 4.9
|
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Litigation and Governmental Directives |
|
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Schedule 4.10
|
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Compliance with Laws; Governmental Authorizations |
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Schedule 4.14
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Environmental Matters |
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Schedule 4.19
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Taxes |
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Schedule 5.1
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Conduct of Business |
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Schedule 5.1(xxi)
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Pending and Contemplated Applications |
A-v
INDEX OF EXHIBITS
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Exhibit A
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Form of Warrant Agreement |
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Exhibit B
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Form of Warrant |
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Exhibit C
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Form of Voting Agreement |
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Exhibit D
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Form of Employment Agreements |
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Exhibit E
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Form of Opinion of Columbias Counsel |
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Exhibit F
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Form of Opinion of Fultons Counsel |
A-vi
Agreement and Plan of Merger
AGREEMENT AND PLAN OF MERGER made as of the 26th day of July, 2005, by and between FULTON
FINANCIAL CORPORATION, a Pennsylvania business corporation having its administrative headquarters
at One Penn Square, P.O. Box 4887, Lancaster, Pennsylvania 17604 (Fulton), and COLUMBIA BANCORP,
a Maryland corporation having its administrative headquarters at 7168 Columbia Gateway Drive,
Columbia, Maryland 21046 (Columbia).
BACKGROUND:
Fulton is a financial holding company registered under the Bank Holding Company Act of 1956,
as amended (the BHC Act). Columbia is a bank holding company registered under the BHC Act and is
the parent of The Columbia Bank, a Maryland trust company (The Columbia Bank). In addition to
The Columbia Bank, Columbia has three 100% directly owned subsidiaries: Columbia Bancorp Statutory
Trust I, Columbia Bancorp Statutory Trust II and Columbia Bancorp Statutory Trust III, which were
formed in connection with Columbias issuance of trust preferred securities (the Columbia Trust
Preferred Securities). The Columbia Bank has four 100% directly owned subsidiaries: McAlpine
Enterprises, Inc., Howard I, LLC and Howard II, LLC, which are used primarily to manage properties
acquired through foreclosure, and Columbia Leasing, Inc., which is an inactive commercial leasing
company. The Columbia Bank and all other wholly-owned subsidiaries of Columbia and The Columbia
Bank are collectively referred to herein as the Columbia Subsidiaries. The Boards of Directors of
Fulton and Columbia have determined that it is in the best interests of Fulton and Columbia,
respectively, to merge with each other, resulting in The Columbia Bank becoming a subsidiary of
Fulton. Subject to the terms and conditions of this Agreement, the foregoing transaction will be
accomplished by means of a merger (the Merger) in which (i) Columbia will be merged with and into
Fulton, (ii) Fulton will survive the Merger, and (iii) all of the outstanding shares of the common
stock of Columbia, $ .01 par value per share (Columbia Common Stock), will be converted into cash
and shares of the common stock of Fulton, par value $2.50 per share, and the associated Fulton
Rights (as such term is defined in Section 2.1 herein) (Fulton Common Stock) on the terms
described in this Agreement.
In connection with the execution of this Agreement, the parties are to enter into a Warrant
Agreement in substantially the form of Exhibit A attached hereto (the Warrant Agreement),
which provides for the delivery by Columbia of a warrant in substantially the form of Exhibit
B attached hereto (the Warrant) entitling Fulton to purchase shares of Columbia Common
Stock in certain circumstances. In addition, Columbia has obtained voting agreements in the form
of Exhibit C attached hereto, from the directors and executive officers listed on
Exhibit C, who have agreed to vote shares of voting capital stock beneficially owned by
them in Columbia in favor of this Agreement, the Merger and, to the extent required, all
transactions incident thereto (collectively, the Voting Agreements).
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants contained herein and intending to be
legally bound, the parties hereby agree as follows:
ARTICLE I THE MERGER
Subject to the terms and conditions of this Agreement, Columbia shall merge with and into
Fulton in accordance with the following:
Section 1.1 Merger. At the Effective Time (as defined in Section 9.2 herein) (i) Columbia
shall merge with and into Fulton pursuant to the provisions of the Pennsylvania Business
Corporation Law of 1988, as amended (the BCL), and the Maryland General Corporation Law (the
"GCL), whereupon the separate existence of Columbia shall cease, and Fulton shall be the surviving
corporation (hereinafter sometimes referred to as the Surviving Corporation), and (ii)
all of the outstanding shares of Columbia Common Stock will be converted into Fulton Common Stock and cash in accordance with the
provisions of Article II hereof.
Section 1.2 Name. The name of the Surviving Corporation shall be Fulton Financial
Corporation. The address of the principal office of the Surviving Corporation will be One Penn
Square, P.O. Box 4887, Lancaster, Pennsylvania 17604.
Section 1.3 Articles of Incorporation. The Articles of Incorporation of the Surviving
Corporation shall be the Articles of Incorporation of Fulton as in effect at the Effective Time.
Section 1.4 Bylaws. The Bylaws of the Surviving Corporation shall be the Bylaws of Fulton as
in effect at the Effective Time.
Section 1.5 Directors and Officers. The directors and officers of the Surviving Corporation
shall be the directors and officers of Fulton in office at the Effective Time. Each of such
directors and officers shall serve until such time as his successor is duly elected and has
qualified.
ARTICLE II CONVERSION OF SHARES AND EXCHANGE OF STOCK CERTIFICATES
Section 2.1 Conversion of Shares. At the Effective Time (as defined in Section 9.2 herein)
the shares of Columbia Common Stock then outstanding shall be converted into shares of Fulton
Common Stock and cash, as follows:
(a) Conversion of Columbia Shares. Except as set forth in subsection (d)
below, each share of Columbia Common Stock (a Columbia Share) issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holders thereof, cease to be outstanding and be cancelled and
extinguished and converted into the right to receive, upon the surrender of the share
certificates evidencing the Columbia Shares, the Fulton Stock Consideration or the Cash
Consideration, or a combination of Fulton Stock Consideration and the Cash Consideration,
without any interest thereon, as specified in this Article II (the Merger
Consideration) in accordance with Section 2.2 herein.
(b) Definitions. For purposes hereof, the following terms have the following
respective meanings:
A-2
Cash Consideration means an amount in cash payable in the Merger at a rate of
$42.48 per Columbia Share.
Conversion Ratio means 2.325.
Outstanding Shares means the aggregate number of Columbia Shares outstanding
immediately prior to the Effective Time, but excluding Columbia Shares to be
cancelled pursuant to Section 2.1(d), which number will not be greater than the
number of shares outstanding on the date of this Agreement (except as permitted in
Section 5.1 herein)
Fulton Rights means rights to purchase common stock of Fulton distributed to
holders of common stock of Fulton pursuant to a Rights Agreement dated June 20, 1989,
as amended and restated as of April 27, 1999 (the Fulton Rights Agreement).
Fulton Stock Consideration means that number of shares of Fulton Common Stock
payable in the Merger at a rate of one share of Fulton Common Stock multiplied by
the Conversion Ratio per Columbia Share. In the event that Fulton shall at any time
before the Effective Time: (i) issue a dividend payable in shares of Fulton Common
Stock, (ii) combine the outstanding shares of Fulton Common Stock into a smaller
number of shares, or (iii) subdivide the outstanding shares of Fulton Common Stock
into a greater number of shares, then the Conversion Ratio shall be proportionately
adjusted (calculated to four decimal places), so that each Columbia stockholder
shall receive at the Effective Time, in exchange for his shares of Columbia Common
Stock, the number of shares of Fulton Common Stock as would then have been owned by
him if the Effective Time had occurred before the record date of such event. For
example, if Fulton were to declare a five percent (5%) stock dividend after the date
of this Agreement and if the record date for that stock dividend were to occur
before the Effective Time, the Conversion Ratio would be adjusted from 2.325 to
2.413 shares. In the event that between the date of this Agreement, and the
Effective Time, the issued and outstanding shares of Fulton Common Stock shall have
been effected or changed into a different number of shares or a different class of
shares as a result of a stock split, reverse stock split, stock dividend, spin-off,
extraordinary dividend, recapitalization, reclassification, subdivision, combination
of shares or other similar transaction, or
there shall have been a record date declared for any such matter, the Fulton Stock
Consideration shall be proportionately adjusted.
Stock Test Amount means the product of (i) the number of Outstanding Shares to be
converted into Fulton Stock Consideration (determined after taking into account
adjustments under Section 2.2(b)(i)), multiplied by (ii) the Conversion Ratio,
multiplied by (iii) the Fulton Share Value.
Cash Test Amount means the product of (i) the number of Outstanding Shares to be
converted into the right to receive the Cash Consideration (determined
A-3
after
taking into account adjustments under Section 2.2(b)(i)), multiplied by (ii) $42.48.
"Fulton Share Value means the lowest price at which a share of Fulton Common Stock
trades on NASDAQ on the Effective Date.
(c) No Fractional Shares. No fractional shares of Fulton Common Stock shall be
issued in connection with the Merger. In lieu of the issuance of any fractional share to
which he would otherwise be entitled, each former stockholder of Columbia shall receive in
cash an amount equal to the fair market value of his fractional interest, which fair market
value shall be determined by multiplying such fraction by $42.48.
(d) Cancelled Columbia Shares. Notwithstanding the provisions of Section
2.1(a) herein, the following shares of Columbia Common Stock shall not be converted into
Fulton Common Stock and shall be cancelled at the Effective Time: (i) shares of Columbia
Common Stock then owned by Fulton or any direct or indirect subsidiary of Fulton (except for
trust account shares or shares acquired in connection with debts previously contracted); and
(ii) shares of Columbia Common Stock owned by Columbia or any direct or indirect subsidiary
of Columbia (except for trust account shares or shares acquired in connection with debts
previously contracted).
(e) Closing Market Price. For purposes of this Agreement, the Closing Market Price
shall be the average of the per share closing bid and asked prices for Fulton Common Stock,
calculated to two decimal places, for the ten (10) consecutive trading days immediately
preceding the date which is two (2) business days before the Effective Date (as such term is
defined in Section 9.2 herein), as reported on the National Market System of the National
Association of Securities Dealers Automated Quotation System (NASDAQ), the foregoing
period of ten (10) trading days being hereinafter sometimes referred to as the Price
Determination Period (For example, if January 15, 2006 were to be the Effective Date, then
the Price Determination Period would be December 29-30, 2005 and January 2-6 and January 9-11, 2006).
In the event that NASDAQ shall fail to report closing bid and asked prices for Fulton Common
Stock for any trading day during the Price Determination Period, the closing bid and asked
prices for that day shall be equal to the average of the closing bid and asked prices as
quoted: (i) by F. J. Morrissey & Company, Inc. and by Ryan, Beck & Co.; or (ii) in the event
that both of these firms are
not then making a market in Fulton Common Stock, by two brokerage firms then making a
market in Fulton Common Stock to be selected by Fulton and approved by Columbia.
Section 2.2 Exchange of Stock Certificates. Columbia Common Stock certificates shall be
exchanged for certificates evidencing the Fulton Stock Consideration and the Cash Consideration in
accordance with the following procedures:
(a) Election Procedure. Each holder of Columbia Shares (other than holders of
Columbia Shares to be cancelled as set forth in Section 2.1(d)) shall have the right to
submit a request specifying either that such holders Columbia Shares shall be converted
into the
A-4
Fulton Stock Consideration, Cash Consideration or a combination of Cash
Consideration and Fulton Stock Consideration, without interest, in the Merger in accordance
with the following procedures:
(i) Each holder of Columbia Shares may specify in a request made in accordance
with the provisions of this Section 2.2 (herein called an Election) to either: (i)
convert each Columbia Share owned by such holder into the right to receive the
Fulton Stock Consideration in the Merger (a Stock Election); (ii) convert each
Columbia Share owned by such holder into the right to receive the Cash Consideration
in the Merger (a Cash Election); or (iii) convert a portion of the Columbia Shares
owned by such holder into the right to receive the Cash Consideration in the Merger,
and a portion of the Columbia Shares owned by such holder into the right to receive
the Fulton Stock Consideration in the Merger, in such ratio of Fulton Stock
Consideration to Cash Consideration of 90%/10% 80%/20%, 70%/30%, 60%/40%, 50%/50%,
40%/60%, 30%/70%, 20%/80%, 10%/90% (a Cash/Stock Election). A Form of Election (as
defined below) shall be included with each copy of the Proxy Statement/Prospectus
(as defined in Section 6.1(b)) mailed to stockholders of Columbia in connection with
the meeting of stockholders called to consider the approval of this Agreement.
Fulton and Columbia shall each use its reasonable best efforts to mail or otherwise
make available the Form of Election to all persons who become holders of Columbia
Shares during the period between the record date for such stockholder meeting and
the Election Deadline (as defined in Section 2.2(a)(iv)).
(ii) Fulton shall prepare a form (the Form of Election), which shall be in
form and substance acceptable to Columbia, pursuant to which each holder of Columbia
Shares, no later than at the close of business on the Election Deadline, may make an
Election and which shall be mailed to the Columbia stockholders in accordance with
Section 2.2(a)(i) so as to permit Columbias stockholders to exercise their right to
make an Election on or prior to the Election Deadline.
(iii) Holders of record of Columbia Shares who hold such shares as nominees,
trustees, or in other representative capacities may submit multiple Forms of
Election, provided that such representative certifies that each Form of
Election covers all Columbia Shares held by such representative for a
particular beneficial owner.
(iv) Not later than the filing of the Proxy Statement/Prospectus with the
Securities and Exchange Commission (the SEC), as contemplated in Section 6.1(b)
hereof, Fulton shall appoint Fulton Financial Advisors, National Association, as the
person to receive Forms of Election and to act as exchange agent under this
Agreement (the Exchange Agent). Any Columbia stockholders Election shall have
been made properly only if the Exchange Agent shall have received, by 5:00 p.m.
local time in the city in which the principal office of such Exchange Agent is
located, on the date of the Election Deadline, a Form of Election properly completed
and signed and accompanied by certificates
A-5
for the Columbia Shares to which such
Form of Election relates (or by an appropriate guarantee of delivery of such
certificates, as set forth in such Form of Election, from a member of any registered
national securities exchange or of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company in the United States provided such
certificates are in fact delivered to the Exchange Agent by the time required in
such guarantee of delivery). Failure to deliver Columbia Shares covered by such a
guarantee of delivery within the time set forth on such guarantee shall be deemed to
invalidate any otherwise properly made Election. As used herein, Election
Deadline means the date announced by Fulton (which date shall be agreed upon by
Columbia), as the last day on which Forms of Election will be accepted, which date
shall be no more than ten (10) business days before the Effective Time. In the
event this Agreement shall have been terminated prior to the Effective Time, the
Exchange Agent shall immediately return all Forms of Election and certificates for
Columbia Shares to the appropriate Columbia stockholders.
(v) Any Columbia stockholder may at any time prior to the Election Deadline
change his Election by written notice received by the Exchange Agent prior to the
Election Deadline accompanied by a revised Form of Election properly completed and
signed.
(vi) Any Columbia stockholder may, at any time prior to the Election Deadline,
revoke his Election by written notice received by the Exchange Agent prior to the
Election Deadline or by withdrawal prior to the Election Deadline of his
certificates for Columbia Shares, or of the guarantee of delivery of such
certificates, previously deposited with the Exchange Agent. All Elections shall be
revoked automatically if the Exchange Agent is notified in writing by Fulton or
Columbia that this Agreement has been terminated. Any Columbia stockholder who
shall have deposited certificates for Columbia Shares with the Exchange Agent shall
have the right to withdraw such certificates by written notice received by the
Exchange Agent prior to the Election Deadline and thereby revoke his Election as of
the Election Deadline if the Merger shall not have been consummated prior thereto.
(vii) Fulton and Columbia shall have the right to make rules, not inconsistent
with the terms of this Agreement, governing the validity of the Forms of Election,
the manner and extent to which Elections are to be taken into account in making the
determinations prescribed by Section 2.2, the issuance and delivery of certificates
for Fulton Common Stock into which Columbia Shares are converted in the Merger and
the payment of cash for Columbia Shares converted into the right to receive the Cash
Consideration in the Merger.
(b) Issuance of Fulton Stock Consideration and Payment of Cash Consideration;
Proration. The manner in which each Columbia Share (except Columbia Shares to be
cancelled as set forth in Section 2.1(d)) shall be converted into the Fulton Stock
Consideration, the Cash Consideration or the right to receive a combination of Fulton
A-6
Stock
Consideration and Cash Consideration at the Effective Time shall be as set forth in this
Section 2.2(b) subject to the provisions of Section 2.2(b)(i)(A).
(i) As is more fully set forth below, the number of Columbia Shares to be converted into
the right to receive the Cash Consideration in the Merger pursuant to this Agreement
shall not exceed fifty percent (50%) of all Outstanding Shares (the Maximum Cash
Percentage) and shall not be less than twenty percent (20%) of all Outstanding
Shares (the Minimum Cash Percentage); provided, however, that for federal income
tax purposes, it is intended that the Merger should qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Code) and, notwithstanding anything to
the contrary contained herein, in order that the Merger will not fail to satisfy
continuity of interest requirements under applicable federal income tax principles
relating to reorganizations under Section 368(a) of the Code, as reasonably
determined by Barley Snyder LLC, Fulton shall increase the number of Outstanding
Shares that will be converted into the Fulton Stock Consideration and reduce the
number of Outstanding Shares that will be converted into the right to receive the
Cash Consideration to the extent, if any, necessary to cause the Stock Test Amount
to exceed the Cash Test Amount by at least $100.00 provided, however, that, solely
for purposes of determining whether the Stock Test Amount exceeds the Cash Test
Amount, shares issuable under Fulton Stock Options issued under Section 2.3 and cash
paid for Columbia Options pursuant to Section 2.3 shall be disregarded.
(ii) If the percentage of Outstanding Shares for which a Cash Election is made
(including the cash portion of any Cash/Stock Elections) exceeds the Minimum Cash
Percentage and is less than the Maximum Cash Percentage, all Elections shall be
honored as submitted and all Non-Electing Shares shall be converted into the Cash
Consideration until the Maximum Cash Percentage is reached and thereafter into
Fulton Stock Consideration.
(iii) If the percentage of Outstanding Shares for which a Cash Election is made
(including the cash portion of any Cash/Stock Elections) exceeds the Maximum Cash
Percentage: Each Columbia Share for which the holder made a Stock Election, the
portion of each Cash/Stock Election electing Fulton Stock
Consideration (collectively, the Aggregate Stock Elections) and each
Non-Electing Share shall be converted in the Merger into the Fulton Stock
Consideration. Each Columbia Share for which a Cash Election has been received and
the portion of a Cash/Stock Election electing Cash Consideration (collectively, the
Aggregate Cash Elections) shall be converted into the right to receive Cash
Consideration and Fulton Stock Consideration in the following manner:
(A) Each Columbia stockholder shall have the Pro-rated Cash Percentage
of the Columbia Shares for which he or she elected Cash Consideration
(including the cash portion of any Cash/Stock Election) converted into the
Cash Consideration;
A-7
(B) Each Columbia stockholder shall have the Remaining Stock Percentage
of the Columbia Shares for which he or she elected Cash Consideration
(including the portion of any Cash/Stock Election electing Cash
Consideration) converted into the Fulton Stock Consideration; and
(C) For the purposes of the foregoing:
Aggregate Cash Election Percentage shall mean the percentage of
Outstanding Shares represented by the Aggregate Cash Elections.
Pro-rated Cash Percentage shall mean the percentage determined by
the following formula:
1 (Aggregate Cash Election Percentage 50%)/Aggregate Cash
Election Percentage
Remaining Stock Percentage shall mean the percentage determined by
subtracting the Pro-rated Cash Percentage from 100%.
(iv) If the percentage of Outstanding Shares for which a Cash Election is made
(including the cash portion of any Cash/Stock Elections) is less than the Minimum
Cash Percentage: Each Columbia Share for which the Aggregate Cash Elections have
been made and each Non-Electing Share shall be converted in the Merger into the Cash
Consideration. Each Columbia Share for which the Aggregate Stock Elections have
been made shall be converted into the right to receive the Cash Consideration and
Fulton Stock Consideration in the following manner:
(A) Each Columbia Stockholder shall have the Pro-rated Stock Percentage
of the Columbia Shares for which he or she elected Fulton Stock Election converted
into the Fulton Stock Consideration;
(B) Each Columbia Stockholder shall have the Remaining Cash Percentage
of the Columbia Shares for which he or she elected Fulton Stock Consideration
(including the portion of any Cash/Stock Election electing Fulton Stock
Consideration) converted into the Cash Consideration; and
(C) For the purposes of the foregoing:
Aggregate Stock Election Percentage shall mean the percentage of
Outstanding Shares represented by the Aggregate Stock Elections.
Pro-rated Stock Percentage shall mean the percentage determined by
the following formula:
A-8
1 (Aggregate Stock Election Percentage 80%)/Aggregate
Stock Election Percentage
Remaining Cash Percentage shall mean the percentage determined by
subtracting the Pro-rated Stock Percentage from 100%.
(v)
If Non-Electing Shares are not converted under Sections (i) (iv) above, the
Exchange Agent shall convert each Non-Electing Share into the Cash Consideration.
(vi) For the purposes of this Section 2.2, Outstanding Shares as to which an
Election is not in effect at the Election Deadline shall be called Non-Electing
Shares. If Fulton shall determine that any Election is not properly made with
respect to any Columbia Shares, such Election shall be deemed to be not in effect,
and the Columbia Shares covered by such Election shall, for purposes hereof, be
deemed to be Non-Electing Shares. Fulton, Columbia and the Exchange Agent shall
have no obligation to notify any person of any defect in any Form of Election
submitted to the Exchange Agent.
(vii) The Exchange Agent shall make all computations contemplated by this
Section 2.2 and all such computations shall be conclusive and binding on the holders
of Columbia Shares absent manifest error.
(c) Issuance of Fulton Stock Consideration.
(i) Immediately prior to the Effective Time, Fulton shall deliver to the
Exchange Agent, in trust for the benefit of the holders of Columbia Shares,
certificates representing an aggregate number of shares of Fulton Common Stock as
nearly as practicable equal to the number of shares to be converted into Fulton
Common Stock as determined in Section 2.2(b)
(ii) As soon as practicable following the Effective Time, each holder of
Columbia Shares converted into Fulton Stock Consideration pursuant to Article II,
upon proper surrender to the Exchange Agent with a properly completed Letter of
Transmittal (to the extent not previously surrendered with a Form of Election ) of
one or more certificates for such Columbia Shares for cancellation, shall be
entitled to receive (and the Exchange Agent shall deliver) certificates representing
the number of shares of Fulton Common Stock into which such Columbia Shares shall
have been converted in the Merger.
(iii) No dividends or distributions that have been declared, if any, will be
paid to persons entitled to receive certificates for shares of Fulton Common Stock
until such persons surrender their certificates for Columbia Shares, at which time all such dividends and
distributions shall be paid. In no event shall the persons entitled to receive such
dividends be entitled to receive interest on such dividends. If any certificate for
such Fulton Common Stock is to be issued in a name other than that in which the
A-9
certificate surrendered in exchange therefor is registered, it shall be a condition
of such exchange that the person requesting such exchange shall pay to the Exchange
Agent any transfer taxes or other taxes required by reason of issuance in a name
other than the registered holder of the certificate surrendered, or shall establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of Columbia Shares for any Fulton Common Stock or
dividends thereon delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(d) Payment of Cash Consideration. Immediately prior to the Effective Time,
Fulton shall deposit with the Exchange Agent, in trust for the benefit of the holders of
Columbia Shares, an amount in cash equal to the Cash Consideration to be paid to holders of
Columbia Shares to be converted into the right to receive the Cash Consideration as
determined in Section 2.2(b). As soon as practicable following the Effective Time, the
Exchange Agent shall distribute to holders of Columbia Shares converted into the right to
receive the Cash Consideration and determined in accordance with Section 2.2(b), upon proper
surrender to the Exchange Agent (to the extent not previously surrendered with a Form of
Election) of one or more certificates for such Columbia Shares for cancellation, a bank
check for an amount equal to the Cash Consideration multiplied by the number of Columbia
Shares to converted. In no event shall the holder of any such surrendered certificates be
entitled to receive interest on any of the Cash Consideration to be received in the Merger.
If such check is to be issued in the name of a person other than the person in whose name
the certificates surrendered for exchange therefor are registered, it shall be a condition
of the exchange that the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of issuance of such check to a person other than
the registered holder of the certificates surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto shall be
liable to a holder of Columbia Shares for any
amount paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
(e) Letter of Transmittal. Fulton will instruct the Exchange Agent to mail to
each holder of record of Columbia Shares who has not previously surrendered such holders
certificates with a validly executed Form of Election as soon as reasonably practical after
the Effective Time, (i) a Letter of Transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to such holders certificates shall pass, only upon
proper delivery of the certificates to the Exchange Agent and shall be in such form and have
such other provisions as shall be agreed upon by Columbia prior to the Effective Time) and
(ii) instructions for use in effecting the surrender of certificates in exchange for the
Merger Consideration (the Letter of Transmittal).
A-10
(f) Missing Certificates.
(i) If any holder of Columbia Shares convertible into the right to receive the
Merger Consideration is unable to deliver the certificates which represent such
shares, the Exchange Agent shall deliver to such holder the Merger Consideration to
which the holder is entitled for such shares upon presentation of the following:
(A) evidence to the reasonable satisfaction of Fulton that any such
certificate has been lost, wrongfully taken or destroyed;
(B) such security or indemnity as may be reasonably requested by Fulton
in accordance with industry standards to indemnify and hold harmless Fulton
and the Exchange Agent; and
(C) evidence satisfactory to Fulton that such person is the owner of
the shares theretofore represented by each certificate claimed to be lost,
wrongfully taken or destroyed and that the holder is the person who would be
entitled to present such certificate for payment pursuant to this Agreement.
(ii) Fulton shall receive any remaining Cash Consideration and Fulton Stock
Consideration on deposit with the Exchange Agent on the date which is one year after
the Effective Date, and any stockholder of Columbia who has not surrendered his
certificate(s) to the Exchange Agent prior to such time shall be entitled to receive
the Merger Consideration without interest upon the surrender of such certificate(s)
to Fulton, subject to applicable escheat or abandoned property laws.
(iii) In the event that any certificates for Columbia Shares have not been surrendered for exchange
in accordance with this Section on or before the first anniversary of the Effective
Time, Fulton may at any time thereafter, with or without notice to the holders of
record of such certificates, sell for the accounts of any or all of such holders any
or all of the shares of Fulton Common Stock which such holders are entitled to
receive under Article II hereof (the Unclaimed Shares). Any such
sale may be made by public or private sale or sale at any brokers board or on
any securities exchange in such manner and at such times as Fulton shall determine.
If, in the opinion of counsel for Fulton, it is necessary or desirable, any
Unclaimed Shares may be registered for sale under the Securities Act of 1933, as
amended (the 1933 Act), and applicable state laws. Fulton shall not be obligated
to make any sale of Unclaimed Shares if it shall determine not to do so, even if
notice of the sale of the Unclaimed Shares has been given. The net proceeds of any
such sale of Unclaimed Shares shall be held for holders of the unsurrendered
certificates for Columbia Shares whose Unclaimed Shares have been sold, to be paid to them upon
surrender of the certificates for shares of Fulton Common Stock. From and after any
such sale, the sole right of the holders of the unsurrendered certificates for Columbia Shares whose
Unclaimed Shares have been sold shall be the right to collect the net sale proceeds
held by Fulton for their respective accounts, and such holders shall not be entitled
to receive any interest on such net sale proceeds held
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by Fulton. If outstanding
certificates are not surrendered or the payment for them is not claimed prior to the
date on which such payments would otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed items shall, to the extent permitted by
abandoned property laws, escheat laws and any other applicable law, become the
property of Fulton (and to the extent not in its possession shall be paid over to
it), free and clear of all claims or interest of any person previously entitled to
such claims. Notwithstanding the foregoing, none of Fulton, Columbia, the Exchange
Agent or any other person shall be liable to any former holder of Columbia Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) Withholding Rights. Fulton shall be entitled to deduct and withhold, or
cause the Exchange Agent to deduct and withhold, from funds provided by the holder or from
the consideration otherwise payable pursuant to this Agreement to any holder of Columbia
Shares, the minimum amounts (if any) that Fulton is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of tax law. To the
extent that amounts are so withheld by Fulton, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of Columbia Shares in
respect of which such deduction and withholding was made by Fulton.
(h) Expenses. All costs and expenses associated with the foregoing surrender
and exchange procedure shall be borne by Fulton.
Section 2.3 Treatment of Outstanding Columbia Options.
(a) At the Effective Time, each option (collectively, Columbia Options) to purchase
shares of Columbia Common Stock that (i) is outstanding at the Effective Time, (ii) has been
granted pursuant to Columbias 1987 Stock Option Plan, as amended, 1990 Director Stock
Option Plan, as amended and 1997 Stock Option Plan, as amended (collectively, the Columbia
Stock Option Plans); and (iii) would otherwise survive
the Effective Time, in the absence of the transactions contemplated by this Agreement,
shall, at the election of the holder of a Columbia Option made on or before the Election
Deadline, either (A) be entitled to cash in an amount equal to the number of shares of
Columbia Common Stock covered by such Columbia Option multiplied by the excess, if any, of
$42.48 over the exercise price per share of such Columbia Option or (B) be assumed by Fulton
through the grant of an option to acquire shares of Fulton Common Stock on the terms set
forth below (each Columbia Option, as assumed, a Fulton Stock Option). In the absence of
an election by the holder of a Columbia Option and subject to the next sentence, Columbia
Options held by such holder shall be converted to cash .
(b) A Fulton Stock Option shall be a stock option to acquire shares of Fulton Common
Stock with the following terms: (i) the number of shares of Fulton Common Stock which may
be acquired pursuant to such Fulton Stock Option shall be equal to the product of the number
of shares of Columbia Common Stock covered by the Columbia
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Option multiplied by the
Conversion Ratio, provided that any fractional share of Fulton Common Stock resulting from
such multiplication shall be rounded down to the nearest whole share; (ii) the exercise
price per share of Fulton Common Stock shall be equal to the exercise price per share of
Columbia Common Stock of such Columbia Option, divided by the Conversion Ratio, provided
that such exercise price shall be rounded up to the nearest whole cent; (iii) the duration
and other terms of such Fulton Stock Option shall be identical to the duration and other
terms of such Columbia Option (giving effect to the terms of the Columbia Stock Option Plans
or the Columbia Options providing for accelerated vesting as a result of the transactions
contemplated by this Agreement) except that all references to Columbia shall be deemed to be
references to Fulton and its affiliates, where the context so requires, and shall remain
exercisable until the stated expiration date of the corresponding Columbia Option; (iv)
Fulton shall assume such Columbia Option, whether vested or not vested, as contemplated by
Section 424(a) of the Code; and (v) to the
extent Columbia Options qualify as incentive stock options under Section 422 of the Code,
the Fulton Stock Options exchanged therefor shall also so qualify. In connection with the
foregoing, (i) the foregoing is intended to effect an assumption of a Columbia Option by
Fulton under Section 424(a) of the Code and (ii) neither a Fulton Option nor the assumption
of a Columbia Option shall give the holder of a Columbia Option additional benefits which he
did not have under such Columbia Option within the meaning of Section 424(a)(1) of the Code.
Subject to the Fulton Stock Options and the foregoing, the Columbia Stock Option Plans and
all options or other rights to acquire Columbia Common Stock issued thereunder shall
terminate at the Effective Time. Fulton shall not issue or pay for any fractional shares
otherwise issuable upon exercise of a Fulton Stock Option.
(c) Prior to the Effective Time, Fulton shall take appropriate action to reserve for
issuance and, if not previously registered pursuant to the 1933 Act, register the number of
shares of Fulton Common Stock necessary to satisfy Fultons obligations with respect to the
issuance of Fulton Common Stock pursuant to the exercise of Fulton Stock Options and under
Section 2.3.
(d) On or before the Election Deadline (to the extent required as determined by Fulton
or Columbia under applicable law, the terms of the Columbia Stock Option Plans or
otherwise), Fulton shall receive agreements from each holder of a Columbia Option that does
not elect to exercise such Columbia Option immediately prior to the Effective Time and have
the Columbia Common Stock acquired as a result of such exercise converted into cash or
Fulton Common Stock pursuant to Section 2.1 of this Agreement, pursuant to which each such
holder agrees to accept cash or a Fulton Stock Option in substitution for the Columbia
Option, as of the Effective Time.
(e) Schedule 2.3 sets forth a listing of each Columbia Option as of the date of
this Agreement (copies of which have been provided to Fulton), including the name of each
holder of such Columbia Option, the date of grant, the number of shares of Columbia Common
Stock subject to such Columbia Option, the exercise price per share
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of such Columbia Option,
the expiration date, and the classification of whether such Columbia Option is an incentive
stock option or a nonqualified stock option.
Section 2.4 Reservation of Shares. Fulton agrees that (i) prior to the Effective Time, it
will take appropriate action to reserve a sufficient number of authorized but unissued shares of
Fulton Common Stock to be issued in accordance with this Agreement, and (ii) at the Effective Time,
Fulton will issue shares of Fulton Common Stock to the extent set forth in, and in accordance with,
this Agreement.
Section 2.5 Taking Necessary Action. Fulton and Columbia shall take all such actions as may
be reasonably necessary or appropriate in order to effectuate the transactions contemplated hereby
including, without limitation, providing information necessary for preparation of any filings
needed to obtain the regulatory approvals required to consummate the Merger. In case at any time
after the Effective Time any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest Fulton with full title to all properties, assets, rights, approvals,
immunities and franchises of Columbia, the officers and directors of Columbia, at the expense of
Fulton, shall use commercially reasonable efforts to take all such necessary action.
Section 2.6 Press Releases, Etc. Fulton and Columbia agree that all press releases or other
public communications relating to this Agreement or the transactions contemplated hereby will
require mutual approval by Fulton and Columbia, unless counsel has advised any such party that such
release or other public communication must immediately be issued and the issuing party has not been
able, despite its good faith efforts, to obtain such approval.
Section 2.7 Fulton Common Stock. Each share of Fulton Common Stock that is issued and
outstanding immediately before the Effective Time shall, on and after the Effective Time, remain
issued and outstanding as one (1) share of Fulton Common Stock, and each holder thereof shall
retain his rights therein. The
holders of the shares of Fulton Common Stock outstanding immediately prior to the Effective
Time shall, immediately after the Effective Time, continue to hold a majority of the outstanding
shares of Fulton Common Stock.
Section 2.8 Dissenters Rights. Pursuant to Section 3-202(c) of the GCL, the stockholders of
Columbia shall not be entitled to exercise dissenters rights.
Section 2.9 Certain Actions. Prior to the Effective Time, Fulton and Columbia shall take all
such steps as may be required to cause any dispositions of shares of Columbia Common Stock
(including derivative securities with respect to such shares) resulting from the transactions
contemplated by Article II of this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended (the 1934 Act),
with respect to Columbia to be exempt under Rule 16b-3 promulgated under the 1934 Act, such steps
to be taken in accordance with the No-Action Letter dated January 12, 1999 issued by the SEC to
Skadden, Arps, Slate, Meagher & Flom LLP.
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF COLUMBIA
Columbia represents and warrants to Fulton, as of the date of this Agreement, as follows:
Section 3.1 Authority. The execution and delivery of this Agreement, the Warrant Agreement
and the Warrant and the performance of the transactions contemplated herein and therein have been
authorized by the Board of Directors of Columbia. At a meeting duly called and held, by a vote of
at least a majority of the members of the Board of Directors, the Board of Directors (i) approved
the Merger and this Agreement, and (ii) directed that this Agreement and Merger be submitted for
approval by its stockholders with the recommendation of the Board of Directors that the
stockholders of Columbia approve this Agreement, the Merger and the transactions contemplated
thereby, and, except for the approval of this Agreement by its stockholders, Columbia has taken all
corporate action necessary on its part to authorize this Agreement, the Warrant Agreement and the
Warrant and the performance of the transactions contemplated herein and therein. This Agreement,
the Warrant Agreement and the Warrant have been duly executed and delivered by Columbia and,
assuming due authorization, execution and delivery by Fulton, constitute valid and binding
obligations of Columbia, enforceable against Columbia in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors rights and remedies generally, regulations and rules affecting
financial institutions and subject as to enforceability, to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or in equity (the Bankruptcy
and Equity Exceptions). The execution, delivery and performance of this Agreement, the Warrant
Agreement and the Warrant will not constitute a violation or breach of or default under (i) the
Articles of Incorporation or Bylaws of Columbia, (ii) the Articles of Incorporation or Bylaws of
The Columbia Bank, (iii) any statute, rule, regulation,
order, decree or directive of any governmental authority or court applicable to Columbia or
any Columbia Subsidiary, subject to the receipt of all required governmental approvals, or (iv) any
agreement, contract, memorandum of understanding, indenture or other instrument to which Columbia
or any Columbia Subsidiary is a party or by which Columbia or any Columbia Subsidiary or any of
their properties are bound.
Section 3.2 Organization and Standing. Columbia is a corporation that is duly organized,
validly existing and in good standing under the laws of the State of Maryland. Columbia is a bank
holding company under the BHC Act, and has full power and lawful authority to own and hold its
properties and to carry on its business as presently conducted. The Columbia Bank is a trust
company that is duly organized, validly existing and in good standing under the laws of the State
of Maryland. The Columbia Bank is an insured bank under the provisions of the Federal Deposit
Insurance Act, as amended (the FDI Act), and is not a member of the Federal Reserve System. The
Columbia Bank has full power and lawful authority to own and hold its properties and to carry on
its business as presently conducted. Each of the Columbia Subsidiaries currently conducting
operations other than The Columbia Bank is an entity or business trust that is duly organized,
validly existing and in good standing under the laws of its state of incorporation or formation.
Each of the Columbia Subsidiaries currently conducting operations has full power and lawful
authority to own and hold its properties and to carry on its business as presently conducted.
Section 3.3 Subsidiaries. The Columbia Bank, Columbia Bancorp Statutory Trust I, Columbia
Bancorp Trust II and Columbia Bancorp Statutory Trust III are wholly-owned subsidiaries of Columbia
(except that Columbia owns 100% of the common securities of such trusts and third parties own the
capital securities issued by such trusts). Each of McAlpine
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Enterprises, Inc., Howard I, LLC,
Howard II, LLC and Columbia Leasing, Inc. is a wholly-owned subsidiary of The Columbia Bank.
Except for the Columbia Subsidiaries, Columbia owns no subsidiaries, directly or indirectly.
Section 3.4 Capitalization. The authorized capital of Columbia consists exclusively of
10,000,000 shares of Columbia Common Stock. As of the date of this Agreement, 6,932,702 shares of
Columbia Common Stock are outstanding, all of which are validly issued, fully paid and
non-assessable. In addition, as of the date of this Agreement, 641,815 shares of Columbia Common
Stock are subject to issuance upon the exercise of Columbia Options and 1,881,809 shares of
Columbia Common Stock will be reserved for issuance upon exercise of the Warrant. Except for the
Columbia Options and the Warrant, there are no outstanding obligations, options or rights of any
kind entitling other persons to acquire shares of Columbia Common Stock and there are no
outstanding securities or other instruments of any kind that are convertible into shares of
Columbia Common Stock. The authorized capital of The Columbia Bank consists exclusively of shares
of common stock (the Columbia Bank Common Stock). All of the outstanding shares of Columbia Bank
Common Stock are owned beneficially and of record by Columbia and are
validly issued, fully-paid and non-assessable. There are no outstanding obligations, options
or rights of any kind entitling other persons to acquire shares of Columbia Bank Common Stock, and
there are no outstanding securities or instruments of any kind that are convertible into shares of
Columbia Bank Common Stock. All outstanding shares of the capital stock or membership interests,
as applicable, of the other Columbia Subsidiaries are owned beneficially and of record by Columbia
or The Columbia Bank, as appropriate, except that, in the case of Columbia Bancorp Statutory Trust
I, Columbia Bancorp Statutory Trust II and Columbia Bancorp Statutory Trust III, Columbia owns 100%
of the common securities and the purchasers thereof own the capital securities issued by each said
trust. There are no outstanding obligations, options or rights of any kind entitling other persons
to acquire shares of such Columbia Subsidiaries, and there are no outstanding securities or
instruments of any kind that are convertible into shares of such Columbia Subsidiaries. The
Columbia Bank Common Stock and the common stock or membership interests of the other Columbia
Subsidiaries are sometimes collectively referred to herein as the Columbia Subsidiaries Common
Equity.
Section 3.5 Charter, Bylaws and Minute Books. The copies of the Certificate of Incorporation
and Bylaws or Articles of Organization and Operating Agreements (or, with respect to Columbia
Bancorp Statutory Trust I, Columbia Bancorp Statutory Trust II and Columbia Bancorp Statutory Trust
III, their trust declarations) of Columbia and the Columbia Subsidiaries that have been made
available to Fulton for inspection are true, correct and complete. Except as previously disclosed
to Fulton in writing, the minute books of Columbia and the Columbia Subsidiaries that have been
made available to Fulton for inspection are true, correct and complete in all material respects and
accurately record the actions taken by the Boards of Directors and stockholders or members of
Columbia and the Columbia Subsidiaries at the meetings documented in such minutes, excluding
information related to the transactions contemplated by this Agreement and to any other merger,
consolidation, share exchange or sale, exchange or other disposition of all, or substantially all,
of Columbias property or assets.
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Section 3.6 Financial Statements.
(a) Columbia has delivered to Fulton the following financial statements: Consolidated
Balance Sheets of Columbia at December 31, 2004 and 2003 and Consolidated Statements of
Income, Statements of Stockholders Equity, and Consolidated Statements of Cash Flows of
Columbia for the years ended December 31, 2004, 2003 and 2002, audited by KPMG LLP, and set
forth in the 2004 Annual Report to Columbias stockholders and unaudited Consolidated
Balance Sheets of Columbia at March 31, 2005 and unaudited Consolidated Statements of Income
for the three-month periods ended March 31, 2005 and 2004, unaudited Consolidated Statements
of Stockholders Equity for the three-month periods ended March 31, 2005 and 2004 and
unaudited Consolidated Statements of Cash Flows for the three-month periods ended March 31,
2005 and 2004, as filed with the SEC in a Quarterly Report on Form 10-Q (the aforementioned
Balance Sheet as of March 31, 2005 being hereinafter referred to as the
Columbia Balance Sheet). Each of the foregoing financial statements fairly present
the consolidated financial position, and results of operations and cash flows of Columbia at
their respective dates and for the respective periods then ended and has been prepared in
accordance with United States generally accepted accounting principles consistently applied
(GAAP), except as otherwise noted in a footnote thereto and except for (i) the omission of
the notes from the financial statements applicable to any interim period and (ii) with
respect to any interim period, normal year-end adjustments.
(b) Except (A) as reflected in Columbias unaudited balance sheet at March 31, 2005 or
liabilities described in any notes thereto (or liabilities for which neither accrual nor
footnote disclosure is required pursuant to GAAP) or (B) for liabilities incurred in the
ordinary course of business since March 31, 2005 consistent with past practices or in
connection with this Agreement or the transactions contemplated hereby, neither Columbia nor
any of its subsidiaries has any material liabilities or obligations of any nature. The
Columbia SEC Reports describe and Columbia has delivered to Fulton copies of the
documentation creating or governing, all securitization transactions and off-balance sheet
arrangements (as defined in Item 303(c) of Regulation S-K of the SEC) effected by Columbia
or its subsidiaries since KPMG LLP expressed its opinion with respect to the financial
statements of Columbia and its subsidiaries included in the Columbia SEC Reports (including
the related notes).
(c) KPMG LLP is and has been (x) since September 24, 2003, a registered public
accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (the SOX
Act)), (y) throughout the periods covered by such financial statements, independent with
respect to Columbia within the meaning of Regulation S-X, and (z) since May 6, 2003, in
compliance with subsections (g) through (l) of Section 10A of the 1934 Act and the related
Rules of the SEC and the Public Company Accounting Oversight Board. The Columbia SEC
Reports describe the types of non-audit services performed by KPMG LLP for Columbia and
its subsidiaries since January 1, 2002, other than non-audit services performed in
connection with the transactions contemplated by this Agreement.
(d) Each of Columbia and the Columbia Subsidiaries maintains accurate books and records
reflecting its assets and liabilities and maintains proper and adequate internal
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accounting
controls which provide assurance that (i) transactions are executed with managements
authorization; (ii) transactions are recorded as necessary to permit preparation of the
consolidated financial statements of Columbia and to maintain accountability for Columbias
consolidated assets; (iii) access to Columbias assets is permitted only in accordance with
managements authorization; (iv) the reporting of Columbias assets is compared with
existing assets at regular intervals; and (v) accounts, notes and other receivables and
inventory are recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.
(e) Columbia has, on a timely basis, filed all forms, reports and documents required to
be filed by it with the SEC since January 1, 2002. Except to the extent
available in full without redaction on the SECs website through the Electronic Data
Gathering, Analysis and Retrieval System (EDGAR), Columbia has delivered to Fulton copies
in the form filed with the SEC of (i) Columbias Annual Reports on Form 10-K for each fiscal
year of Columbia from and after January 1, 2002, (ii) its Quarterly Reports on Form 10-Q for
each of the first three fiscal quarters in each of the fiscal years of Columbia referred to
in clause (i) above, (iii) all proxy statements relating to Columbias meetings of
stockholders (whether annual or special) held, and all information statements relating to
stockholder consents since the beginning of the first fiscal year referred to in clause (i)
above, (iv) all certifications and statements required by (x) the SECs Order dated June 27,
2002 pursuant to Section 21(a)(1) of the 1934 Act (File No. 4-460), (y) 18 U.S.C. §1350
(Section 906 of the SOX Act) with respect to any report referred to in clause (i) or (iii)
above, (y) all other forms, reports, registration statements and other documents (other than
preliminary materials if the corresponding definitive materials have been provided to Fulton
pursuant to this Section 3.6) filed by Columbia with the SEC since the beginning of the
first fiscal year referred to in clause (i) above (the forms, reports, registration
statements and other documents referred to in clauses (i), (ii), (iii), (iv) and (v) above
are, collectively, the Columbia SEC Reports and, to the extent available in full without
redaction on the SECs website through EDGAR two days prior to the date of this Agreement,
are, collectively, the Filed Columbia SEC Reports), and (vi) all comment letters received
by Columbia from the Staff of the SEC since January 1, 2002 and all responses to such
comment letters by or on behalf of Columbia. The Columbia SEC Reports (x) were prepared in
accordance with the requirements of the 1933 Act and the 1934 Act, as the case may be, and
the rules and regulations thereunder and (y) did not at the time they were filed with the
SEC, or will not at the time they are filed with the SEC, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under which they
were made, not misleading. No Subsidiary of Columbia is or has been required to file any
form, report, registration statement or other document with the SEC.
(f) Columbia maintains disclosure controls and procedures required by Rule 13a-15 or
15d-15 under the 1934 Act; such controls and procedures are effective to ensure that all
material information concerning Columbia and its subsidiaries is made known on a timely
basis to the individuals responsible for the preparation of Columbias filings with
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the SEC
and other public disclosure documents. Schedule 3.6 lists, and Columbia has
delivered to Fulton copies of, all written descriptions of, and all policies, manuals and
other documents promulgating, such disclosure controls and procedures. To Columbias
knowledge, except as set forth in the Columbia SEC Reports, each director and executive
officer of Columbia has filed with the SEC on a timely basis all statements required by
Section 16(a) of the 1934 Act and the rules and regulations thereunder since January 1,
2002. As used in this Section 3.6, the term file shall be broadly construed to include
any manner in which a document or information is furnished, supplied or otherwise made
available to the SEC. To the extent required, Columbia and The Columbia Bank have in place
disclosure controls and procedures as defined in Rules 13a-15(e) and 15(d)-15(e) of the
1934 Act to allow Columbias management to make timely decisions regarding required
disclosures and to make the certifications of the Chief
Executive Officer and Chief Financial Officer of Columbia required under the 1934 Act.
Since March 31, 2005, there has not been any material change in the internal controls
utilized by Columbia to assure that its consolidated financial statements conform with GAAP.
Without limiting the generality of the foregoing, Columbias disclosure controls and
procedures are designed and maintained to ensure that (i) transactions are executed in
accordance with managements general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets, (iii) access to assets is permitted only in
accordance with managements general or specific authorization, (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences, (v) all information (both
financial and non-financial) required to be disclosed by Columbia in the reports that it
files or submits under the 1934 Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC, and (vi) all such information
is accumulated and communicated to Columbias management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications of the Chief
Executive Officer and Chief Financial Officer of Columbia required under the 1934 Act with
respect to such reports. None of Columbias or any Columbia Subsidiarys records, systems,
controls, data or information are recorded, stored, maintained, operated or otherwise wholly
or partly dependent on or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct control of the
Columbia or the Columbia Subsidiaries or their independent accountants.
(g) Each of the Chief Executive Officer and the Chief Financial Officer of Columbia has
signed, and Columbia has furnished to the SEC, all certifications required by Sections 302
and 906 of the SOX Act; such certifications contain no qualifications or exceptions to the
matters certified therein and have not been modified or withdrawn; and neither Columbia nor
any of its officers has received notice from any Governmental Entity questioning or
challenging the accuracy, completeness, form or manner of filing or submission of such
certifications.
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(h) Columbia heretofore has provided to Fulton complete and correct copies of all
certifications filed with the SEC pursuant to Sections 302 and 906 of the SOX Act and to the
Knowledge of Columbia, the matters and statements made in such certificates were true as of
the date thereof.
Section 3.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule 3.7,
or as reflected, noted or adequately reserved against in the Columbia Balance Sheet, at March 31,
2005, Columbia had no material liabilities (whether accrued, absolute, contingent or otherwise)
which were required to be reflected, noted or reserved against in the Columbia Balance Sheet under
GAAP. Except as disclosed in Schedule 3.7, Columbia and the Columbia Subsidiaries have not
incurred, since March 31, 2005, any such liability, other than liabilities of the same nature as
those set forth in the Columbia
Balance Sheet, all of which have been incurred in the Ordinary Course of Business. For
purposes of this Agreement, the term Ordinary Course of Business shall mean the ordinary course
of business consistent with Columbias and the Columbia Subsidiaries customary business practices.
Section 3.8 Absence of Changes. Since March 31, 2005, Columbia and the Columbia Subsidiaries
have each conducted their businesses in the Ordinary Course of Business and, except as disclosed in
Schedule 3.8, neither Columbia nor the Columbia Subsidiaries have undergone any changes in
their condition (financial or otherwise), assets, liabilities, business, results of operations or
future prospects other than changes in the Ordinary Course of Business, which have been, in the
aggregate, materially adverse as to Columbia and the Columbia Subsidiaries on a consolidated basis
(a Columbia Material Adverse Effect).
Section 3.9 Dividends, Distributions and Stock Purchases. Since March 31, 2005, Columbia has
not declared, set aside, made or paid any dividend or other distribution in respect of the Columbia
Common Stock, or purchased, issued or sold any shares of Columbia Common Stock or the Columbia
Subsidiaries Common Equity, other than as described in the Columbia SEC Reports.
Section 3.10 Taxes. Columbia and The Columbia Bank have filed all federal, state, county,
municipal and foreign tax returns, reports and declarations which are required to be filed by them
or either of them as of March 31, 2005. Except as disclosed in Schedule 3.10: (i) Columbia
and The Columbia Bank have paid all taxes, penalties and interest which have become due pursuant
thereto or which became due pursuant to federal, state, county, municipal or foreign tax laws
applicable to the periods covered by the foregoing tax returns, (ii) neither Columbia nor the
Columbia Subsidiaries have received any notice of deficiency or assessment of additional taxes, and
no tax audits are in process; and (iii) the Internal Revenue Service (the IRS) has not commenced
or given notice of an intention to commence any examination or audit of the federal income tax
returns of Columbia or The Columbia Bank for any year through and including the year ended December
31, 2004. Except as disclosed in Schedule 3.10, neither Columbia nor the Columbia
Subsidiaries have granted any waiver of any statute of limitations or otherwise agreed to any
extension of a period for the assessment of any
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federal, state, county, municipal or foreign income
tax. The accruals and reserves reflected in the Columbia Balance Sheet for taxes (including
interest and penalties, if any, thereon) have been made in accordance with GAAP.
Section 3.11 Title to and Condition of Assets. Except as disclosed in Schedule 3.11,
Columbia and the Columbia Subsidiaries have good and marketable title to all material consolidated
real and personal properties and assets reflected in the Columbia Balance Sheet or acquired
subsequent to March 31, 2005, (other than property and assets disposed of in the Ordinary Course of
Business), free and clear of all liens or encumbrances of any kind whatsoever; provided, however,
that the representations and
warranties contained in this sentence do not cover liens or encumbrances that: (i) are
reflected in the Columbia Balance Sheet or in Schedule 3.11; (ii) represent liens of
current taxes not yet due or which, if due, may be paid without penalty, or which are being
contested in good faith by appropriate proceedings; and (iii) represent such imperfections of
title, liens, encumbrances, zoning requirements and easements, if any, as are not substantial in
character, amount or extent and do not materially detract from the value, or interfere with the
present use, of the properties and assets subject thereto. The material structures and other
improvements to real estate, furniture, fixtures and equipment reflected in the Columbia Balance
Sheet or acquired subsequent to March 31, 2005: (A) are in good operating condition and repair
(ordinary wear and tear excepted), and (B) comply in all material respects with all applicable
laws, ordinances and regulations, including without limitation all building codes, zoning
ordinances and other similar laws, except where any noncompliance would not materially detract from
the value, or interfere with the present use, of such structures, improvements, furniture, fixtures
and equipment. Columbia and the Columbia Subsidiaries own or have the right to use all real and
personal properties and assets that are material to the conduct of their respective businesses as
presently conducted.
Section 3.12 Contracts.
(a) Each written or oral contract entered into by Columbia or the Columbia Subsidiaries
(other than loan agreements, promissory notes, deeds of trust and other contracts with
customers reasonably entered into by Columbia or the Columbia Subsidiaries in the Ordinary
Course of Business) which involves aggregate payments or receipts in excess of $100,000 per
year, including without limitation every employment contract, employee benefit plan,
agreement, lease, license, indenture, mortgage and other commitment to which either Columbia
or the Columbia Subsidiaries are a party or by which Columbia or the Columbia Subsidiaries
or any of their properties may be bound (collectively referred to herein as Material
Contracts) is identified in Schedule 3.12. Except as disclosed in Schedule
3.12, all Material Contracts are enforceable against Columbia or the Columbia
Subsidiaries, as the case may be, and Columbia or the Columbia Subsidiaries have in all
material respects performed all obligations required to be performed by them to date and are
not in default in any material respect and Columbia has no Knowledge (as defined in Section
3.13) of any default by a third party under a Material Contract. Schedule 3.12
identifies all Material Contracts which require the consent or approval of third parties to
the execution and delivery of this Agreement or to the consummation of the transactions
contemplated herein.
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(b) Except for the Warrant Agreement and as set forth in Schedule 3.12, as of
the date of this Agreement, neither Columbia nor the Columbia Subsidiaries is a party to, or
bound by, any oral or written:
(i) material contract as such term is defined in Item 601(b)(10) of
Regulation S-K promulgated by the SEC;
(ii) consulting agreement involving the payment of more than $100,000 per annum
or extending for a period longer than one year;
(iii) agreement with any officer or other key employee the benefits of which
are contingent, or the terms of which are materially altered, upon the occurrence of
a transaction of the nature contemplated by this Agreement;
(iv) agreement with respect to any officer providing any term of employment or
compensation guarantee extending for a period longer than one year or for a payment
in excess of $100,000;
(v) agreement or plan, including any stock option plan, stock appreciation
rights plan, employee stock ownership plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this Agreement;
(vi) agreement containing covenants that limit its ability to compete in any
line of business or with any person, or that involve any restriction on the
geographic area in which, or method by which, it may carry on its business (other
than as may be required by law or any regulatory agency);
(vii) agreement, contract or understanding, other than this Agreement, and the
Warrant Agreement, regarding the capital stock of Columbia and/or The Columbia Bank
or committing to dispose of some or all of the capital stock or substantially all of
the assets of Columbia and/or The Columbia Bank;
(viii) collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization;
(ix) deferred compensation plan or arrangement; or
(x) joint venture agreements.
Section 3.13 Litigation and Governmental Directives. Except as disclosed in Schedule
3.13, (i) there is no litigation, investigation or proceeding pending, or to the Knowledge (as
that term is defined below) of Columbia or the Columbia Subsidiaries, threatened, that involves
Columbia or the Columbia Subsidiaries or any of their properties and
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that, if determined adversely,
would have a Columbia Material Adverse Effect; (ii) there are no outstanding orders, writs,
injunctions, judgments, decrees, regulations, directives, consent agreements or memoranda of
understanding issued by any federal, state or local court or governmental agency or authority or
arbitration tribunal (each a Governmental Entity issued against or with the consent of Columbia or the Columbia Subsidiaries
that would have a Columbia Material Adverse Effect or that materially restricts the right of
Columbia or the Columbia Subsidiaries to carry on their businesses as presently conducted taken as
a whole; and (iii) neither Columbia nor the Columbia Subsidiaries have Knowledge of any fact or
condition presently existing that might give rise to any litigation, investigation or proceeding
which, if determined adversely to either Columbia or the Columbia Subsidiaries, would have a Columbia Material Adverse Effect or would
materially restrict the right of Columbia or the Columbia Subsidiaries to carry on their businesses
as presently conducted taken as a whole. All litigation (except for bankruptcy proceedings in
which Columbia or the Columbia Subsidiaries have filed proofs of claim) in which Columbia or the
Columbia Subsidiaries are involved as a plaintiff (other than routine collection and foreclosure
suits initiated in the Ordinary Course of Business) in which the amount sought to be recovered is
greater than $125,000 is identified in Schedule 3.13. In this Agreement, the terms
Knowledge of Columbia or The Columbia Bank and Knowledge of Columbia and the Columbia
Subsidiaries shall mean the actual knowledge of the
Contract Employees (as defined in Section 3.17).
Section 3.14 Compliance with Laws; Governmental Authorizations. Except as disclosed in
Schedule 3.14 or where noncompliance would not have a Columbia Material Adverse Effect: (i)
Columbia and the Columbia Subsidiaries are in compliance with all statutes, laws, ordinances,
rules, regulations, judgments, orders, decrees, directives, consent agreements, memoranda of
understanding, permits, concessions, grants, franchises, licenses, and other governmental
authorizations or approvals applicable to Columbia or the Columbia Subsidiaries or to any of their
properties; and (ii) all material permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals necessary for the conduct of the business of Columbia or
the Columbia Subsidiaries as presently conducted have been duly obtained and are in full force and
effect, and there are no proceedings pending or, to the Knowledge of Columbia threatened, which may
result in the revocation, cancellation, suspension or materially adverse modification of any
thereof.
Section 3.15 Insurance. All policies of insurance relating to Columbias and the Columbia
Subsidiaries operations (except for title insurance policies), including without limitation all
financial institutions bonds, held by or on behalf of Columbia or the Columbia Subsidiaries are
listed in Schedule 3.15. All such policies of insurance are in full force and effect, and
no notices of cancellation have been received in connection therewith.
Section 3.16 Financial Institutions Bonds. Since January 1, 2000, The Columbia Bank has
continuously maintained in full force and effect one or more financial institutions bonds listed in
Schedule 3.16 insuring The Columbia Bank against acts of dishonesty by each of its
employees. No claim has been made under any such bond and The Columbia Bank has no Knowledge of
any fact or condition presently existing which might form the basis of a claim under any such bond.
The Columbia Bank has received no notice that its present
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financial institutions bond or bonds
will not be renewed by its carrier on substantially the same terms as those now in effect.
Section 3.17 Labor Relations and Employment Agreements. Neither Columbia nor any of the
Columbia Subsidiaries is a party to or bound by any collective bargaining agreement. To their
Knowledge, Columbia and the Columbia Subsidiaries enjoy good working relationships with their employees, and there are no labor disputes
pending, or to the Knowledge of Columbia or The Columbia Bank threatened, that would have a
Columbia Material Adverse Effect. Except as disclosed in Schedule 3.17, neither Columbia
nor any of the Columbia Subsidiaries has any employment contract, change of control agreement or
policy, severance agreement, deferred compensation agreement, consulting agreement or similar
obligation (including any related amendments, each an Employment Obligation) with any director,
officer, employee, agent or consultant; provided however, that, as of the date of this Agreement
(and effective as of the Effective Time), each of John M. Bond, Jr. and John A. Scaldara, Jr. (the
Contract Employees) has executed employment agreements (the Employment Agreements) with Fulton
and The Columbia Bank so as to, among other things, (i) consent to certain changes in their
respective duties, powers and functions following the Merger, such agreements to be substantially
in the form of Exhibit D attached hereto and (ii) provide for the payment of a portion of
the change of control payments due under their existing employment agreements with Columbia or
The Columbia Bank. Except as disclosed in Schedule 3.17, as of the Effective Time (as
defined in Section 9.2 herein), neither Columbia nor the Columbia Subsidiaries will have any
liability for employee termination rights arising out of any Employment Obligation and neither the
execution of this Agreement nor the consummation of the Merger shall, by itself, entitle any
employee of Columbia or the Columbia Subsidiaries to any change of control payments or benefits.
Except as set forth on Schedule 3.17, no payment that is owed or may become due to any
director, officer, employee, or agent of Columbia or any Columbia Subsidiary as a result of the
consummation of the Merger will be non-deductible to Columbia or any Columbia Subsidiary or subject
to tax under IRC § 280G or § 4999; nor, except as set forth on Schedule 3.17, will Columbia
or any Columbia Subsidiary be required to gross up or otherwise compensate any such person
because of the imposition of any excise tax on a payment to such person as a result of the
consummation of the Merger.
Section 3.18 Employee Benefit Plans. All employee benefit plans, contracts or arrangements to
which Columbia or the Columbia Subsidiaries are a party or by which Columbia or the Columbia
Subsidiaries are bound, including without limitation all pension, retirement, deferred
compensation, savings, incentive, bonus, profit sharing, stock purchase, stock option, life
insurance, death or survivors benefit, health insurance, sickness, disability, medical, surgical,
hospital, severance, layoff or vacation plans, contracts or arrangements (collectively the
Columbia Benefit Plans), but not including the Employment Obligations described in Section 3.17,
are identified in Schedule 3.18. Each of the Columbia Benefit Plans which is an employee
pension benefit plan as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended (ERISA; each such Plan being herein called a Columbia Pension Plan) is exempt
from tax under Sections 401 and 501 of the Code and has been maintained and operated in material
compliance with all applicable provisions of the Code and ERISA, except where a failure to so
comply would not result in a material liability. No prohibited transaction (as such term is
defined in Section 4975 of the
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Code or Section 406 of ERISA) and not otherwise exempt under ERISA
or the Code has occurred in respect of the Columbia Pension Plans. There have been no material
breaches of fiduciary duty by any fiduciary under or with respect to the Columbia Pension Plans or
any other Columbia Benefit Plan which is an employee welfare benefit plan as defined in Section
3(1) of ERISA, and no claim is pending or, to the Knowledge of Columbia, threatened
with respect to any Columbia Benefit Plan other than claims for benefits made in the Ordinary
Course of Business. Neither Columbia nor the Columbia Subsidiaries have incurred any material
penalty imposed by the Code or by ERISA with respect to the Columbia Pension Plans or any other
Columbia Benefit Plan. Within the past five years, there has not been any audit of any Columbia
Benefit Plan by the U.S. Department of Labor or the IRS.
Section 3.19 Related Party Transactions.
(a) Except as disclosed in Schedule 3.19, neither Columbia nor any of the
Columbia Subsidiaries has any contract, extension of credit, or business arrangement of any
kind with any of the following persons: (i) any executive officer or director (including any
person who has served in such capacity since January 1, 2000) of Columbia or any of the
Columbia Subsidiaries; (ii) any stockholder owning five percent (5%) or more of the
outstanding Columbia Common Stock; and (iii) any associate (as defined in Rule 405 under
the 1933 Act) of the foregoing persons or any business in which any of the foregoing persons
is an officer, director, employee or five percent (5%) or greater equity owner. Each such
contract or extension of credit disclosed in Schedule 3.19, except as otherwise
specifically described therein, has been made in the Ordinary Course of Business on
substantially the same terms, including interest rates and collateral, as those prevailing
at the time for comparable arms length transactions with other persons that do not involve
more than a normal risk of collectability or present other unfavorable features.
(b) Except as disclosed in Schedule 3.19, Columbia has not, since July 30, 2002,
extended or maintained credit, arranged for the extension of credit, or renewed an extension
of credit, in the form of a personal loan to or for any director or executive officer (or
equivalent thereof) of Columbia. Schedule 3.19 identifies any loan or extension of
credit maintained by Columbia to which the second sentence of Section 13(k)(l) of the 1934
Act applies.
Section 3.20 No Finder. Except as disclosed in Schedule 3.20, neither Columbia nor
any of the Columbia Subsidiaries have paid or become obligated to pay any fee or commission of any
kind whatsoever to any investment banker, broker, finder, financial advisor or other intermediary
for, on account of or in connection with the transactions contemplated in this Agreement.
Section 3.21 Complete and Accurate Disclosure. Neither this Agreement (insofar as it relates
to Columbia, the Columbia Subsidiaries, the Columbia Common Stock, the Columbia Subsidiaries
Common Equity, and the involvement of Columbia and the Columbia Subsidiaries in the transactions
contemplated hereby) nor any Exhibits or Schedules to this Agreement nor the Financial Statements
delivered by Columbia to Fulton pursuant to Section 3.6
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contains any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they were made, not
misleading.
Section 3.22 Environmental Matters. Except as disclosed in Schedule 3.22, neither
Columbia nor any of the Columbia Subsidiaries has any material liability relating to any
environmental contaminant, pollutant, toxic or hazardous waste or other similar substance that has
been generated, used, stored, processed, disposed of or discharged onto any of the real estate now
or previously owned or acquired (including without limitation any real estate acquired by means of
foreclosure or exercise of any other creditors right) or leased by Columbia or any of the Columbia
Subsidiaries and which is required to be reflected, noted or adequately reserved against in
Columbias consolidated financial statements under GAAP. In particular, without limiting the
generality of the foregoing sentence, but subject to the materiality and financial statement
disclosure standards therein, except as disclosed in Schedule 3.22, neither Columbia nor
any of the Columbia Subsidiaries have environmental liabilities based on their use or incorporation
of: (i) any materials containing asbestos in any building or other structure or improvement
located on any of the real estate now or previously owned or acquired (including without limitation
any real estate acquired by means of foreclosure or exercise of any other creditors right) or
leased by Columbia or any of the Columbia Subsidiaries; (ii) any electrical transformers,
fluorescent light fixtures with ballasts or other equipment containing PCBs on any of the real
estate now or previously owned or acquired (including without limitation any real estate acquired
by means of foreclosure or exercise of any other creditors right) or leased by Columbia or any of
the Columbia Subsidiaries; or (iii) any underground storage tanks for the storage of gasoline,
petroleum products or other toxic or hazardous wastes or similar substances located on any of the
real estate now or previously owned or acquired (including without limitation any real estate
acquired by means of foreclosure or exercise of any other creditors right) or leased by Columbia
or any of the Columbia Subsidiaries.
Section 3.23 Proxy Statement/Prospectus. At the time the Proxy Statement/Prospectus (as
defined in Section 6.1(b) herein) is mailed to the stockholders of Columbia and at all times
subsequent to such mailing, up to and including the Effective Time, the Proxy Statement/Prospectus
(including any pre- and post-effective amendments and supplements thereto), with respect to all
information relating to Columbia, the Columbia Subsidiaries, Columbia Common Stock, the Columbia
Subsidiaries Common Equity and all actions taken and statements made by Columbia and the Columbia
Subsidiaries in connection with the transactions contemplated herein (except for information
provided by Fulton to Columbia or the Columbia Subsidiaries) will: (i) comply in all material
respects with applicable provisions of the 1933 Act, and the 1934 Act and the applicable rules and
regulations of the SEC thereunder; and (ii) not contain any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading with respect to any
material fact, or omit to state any material fact that is required to be stated therein or
necessary in order (A) to make the statements therein not false or misleading, or (B) to correct
any statement in an earlier communication with respect to the Proxy Statement/Prospectus which has
become false or misleading.
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Section 3.24 SEC Filings. No registration statement, offering circular, proxy statement,
schedule or report filed and not withdrawn by Columbia or The Columbia Bank with the SEC under the
1933 Act or the 1934 Act, on the date of effectiveness (in the case of any registration statement
or offering circular) or on the date of filing (in the case of any report or schedule) or on the
date of mailing (in the case of any proxy statement), contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they were made, not
misleading.
Section 3.25 Reports. Columbia and The Columbia Bank have filed all material reports,
registrations and statements that are required to be filed with the Federal Reserve Board (the
FRB), the Federal Deposit Insurance Company (FDIC), the Commissioner of Financial Regulation,
Maryland Department of Labor, Licensing and Regulation (the Department) and any other applicable
federal, state or local governmental or regulatory authorities and such reports, registrations and
statements referred to in this Section 3.25 were, as of their respective dates, in compliance in
all material respects with all of the statutes, rules and regulations enforced or promulgated by
the governmental or regulatory authority with which they were filed; provided, however, that the
failure to file any such report, registration, or statement or the failure of any report,
registration or statement to comply with the applicable regulatory standard shall not be deemed to
be a breach of the foregoing representation unless such failure has or may have a Columbia Material
Adverse Effect. Columbia has furnished Fulton with, or made available to Fulton, copies of all
such filings made in the last three fiscal years and in the period from January 1, 2005 through the
date of this Agreement. Columbia is required to file reports with the SEC pursuant to Section 12
of the 1934 Act, and Columbia has made all appropriate filings under the 1934 Act and the rules
and regulations promulgated thereunder; provided, however, that the failure to make any such filing
shall not be deemed to be a breach of the foregoing representation unless such failure has or may
have a Columbia Material Adverse Effect. The Columbia Common Stock is traded on NASDAQ under the
symbol CBMD.
Section 3.26 Loan Portfolio of The Columbia Bank.
(a) Attached hereto as Schedule 3.26 is a list of (i) all outstanding
commercial loans, commercial loan commitments and commercial letters of credit of The
Columbia Bank in excess of $3,000,000, (ii) all loans of The Columbia Bank classified by The
Columbia Bank or any regulatory authority as Monitor, Substandard, Doubtful or
Loss, (iii) all commercial and mortgage loans of The Columbia Bank classified as
non-accrual, and (iv) all commercial loans of The Columbia Bank classified as in
substance foreclosed.
(b) The Columbia Bank has adequately reserved for or charged off loans in accordance
with applicable regulatory requirements, United States GAAP and current written policies of
The Columbia Bank.
(c) Except as set forth on Schedule 3.26, The Columbia Bank does not engage in
so-called subprime Section 32 lending. For the purposes of this representation, subprime
Section 32 lending shall be deemed to refer to programs that target borrowers with weakened credit
histories typically characterized by payment delinquencies, previous charge-offs, judgments
or bankruptcies, or that target borrowers with questionable repayment capacity evidenced by
low credit scores or high debt-burden ratios.
Section 3.27 Investment Portfolio. Attached hereto as Schedule 3.27 is a list of all
securities held by Columbia and the Columbia Subsidiaries for investment, showing the holder,
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principal amount, book value and market value of each security as of a recent date, and of all
short-term investments held by them as of March 31, 2005. These securities are free and clear of
all liens, pledges and encumbrances, except as shown on Schedule 3.27. Except as set forth
on Schedule 3.27, the investment portfolio of Columbia or the Columbia Subsidiaries does
not include any financial derivatives.
Section 3.28 Regulatory Examinations.
(a) Except for normal examinations conducted by a regulatory agency in the Ordinary
Course of Business, to Columbias Knowledge, no regulatory agency has initiated any material
proceeding or investigation into the business or operations of Columbia or any of the
Columbia Subsidiaries within the past three (3) years. Except as otherwise disclosed in
Schedule 3.28, neither Columbia nor any of the Columbia Subsidiaries have received
any notice from any regulatory agency relating to any examinations of Columbia and any of
the Columbia Subsidiaries which would have a Columbia Material Adverse Effect.
(b) Neither Columbia nor any of the Columbia Subsidiaries are required to divest any
assets currently held by it or discontinue any activity currently conducted as a result of
the Federal Deposit Insurance Corporation Improvement Act of 1991, any regulations
promulgated thereunder, or otherwise which would have a Columbia Material Adverse Effect.
Section 3.29 Regulatory Agreements and Matters.
(a) Except as set forth on Schedule 3.29, on the date hereof, neither Columbia
nor The Columbia Bank is a party to any assistance agreement, directive, commitment letter,
supervisory agreement or letter, memorandum of understanding, consent order, cease and
desist order, or condition of any regulatory order, decree or similar directive with or by
the FDIC, the FRB, the Department or any other financial services regulatory agency having
jurisdiction over Columbia or The Columbia Bank that relates to the conduct of the business
of Columbia or The Columbia Bank, nor has Columbia or The Columbia Bank been advised by any
such regulatory agency or other governmental entity that it is considering issuing or
requesting any such agreement, order or decree.
(b) No report has been made by any attorney to Columbias chief legal officer, chief
executive officer, board of directors (or committee thereof) or other representative
pursuant to 17 CFR Part 205.
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(c) Columbia is, or will timely be in all material respects, in compliance with all
current and proposed listing and corporate governance requirements of NASDAQ, and is in
compliance in all material respects, and will continue to remain in compliance following the
Effective Time, with all rules, regulations, and requirements of the SOX Act and the SEC.
(d) Each of Columbia and its senior financial officers has had the opportunity to
consult with Columbias independent auditors and with Columbias outside counsel with
respect to, and (to the extent applicable to the Company) is familiar in all material
respects, with all of the requirements of the SOX Act. Columbias directors have had the
opportunity to consult with Columbias independent auditors and with Columbias outside
counsel with respect to, and (to the extent applicable to the Company) each has a reasonable
understanding in all material respects, of all of the requirements of the SOX Act. The
Company is in material compliance with the provisions of the SOX Act applicable to it as of
the date hereof and has implemented such programs and has taken reasonable steps, upon the
advice of Columbias independent auditors and outside counsel, respectively, to ensure
Columbias future compliance (not later than the relevant statutory and regulatory deadlines
therefor) and all provisions of the SOX Act which shall become applicable to Columbia after
the date hereof.
Section 3.30 Beneficial Ownership of Fulton Common Stock. Columbia and the Columbia
Subsidiaries do not, and prior to the Effective Time, Columbia and the Columbia Subsidiaries will
not, own beneficially (within the meaning of SEC Rule 13d 3(d)(1)) more than five percent (5%) of
the outstanding shares of Fulton Common Stock.
Section 3.31 Fairness Opinion. Columbias Board of Directors has received a written opinion
from Danielson Associates Inc. to be updated in writing prior to the publication of the Proxy
Statement/Prospectus (a copy of such updated written opinion being provided simultaneously to
Fulton at the time of receipt), to the effect that the Conversion Ratio and the Cash Consideration,
at the time of execution of this Agreement and the mailing of the Proxy Statement/Prospectus, is
fair to Columbias stockholders from a financial point of view.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FULTON
Fulton represents and warrants to Columbia, as of the date of this Agreement and as of the
date of the Closing, as follows:
Section 4.1 Authority. The execution and delivery of this Agreement and the consummation of the transactions
contemplated herein have been authorized by the Board of Directors of Fulton, and no other
corporate or shareholder action on the part of Fulton is necessary to authorize this Agreement or
consummate the transactions contemplated herein. This Agreement has been duly executed and
delivered by Fulton and, assuming due authorization, execution and delivery by Columbia,
constitutes a valid and binding obligation of Fulton, enforceable against Fulton in accordance with
its terms, subject to the Bankruptcy and Equity Exceptions. The execution, delivery and
consummation of this Agreement will not constitute a violation or breach of or default under the
Articles of Incorporation or Bylaws of Fulton or any statute, rule, regulation, order, decree or
directive of any governmental authority or
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court applicable to Fulton, agreement, contract,
memorandum of understanding, indenture or other instrument to which Fulton is a party or by which
Fulton or any of its properties are bound.
Section 4.2 Organization and Standing. Fulton is a business corporation that is duly
organized, validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. Fulton is a registered financial holding company under the BHC Act and has full
power and lawful authority to own and hold its properties and to carry on its business as presently
conducted.
Section 4.3 Capitalization. The authorized capital of Fulton consists exclusively of
600,000,000 shares of Fulton Common Stock and 10,000,000 shares of preferred stock without par
value (the Fulton Preferred Stock). As of July 21, 2005, there were 172,118,122 shares of
Fulton Common Stock validly issued, fully paid and non-assessable and 15,311,691 shares are held as
treasury shares. No shares of Fulton Preferred Stock have been issued as of the date of this
Agreement, and Fulton has no present intention to issue any shares of Fulton Preferred Stock. As
of the date of this Agreement, there are no outstanding obligations, options or rights of any kind
entitling other persons to acquire shares of Fulton Common Stock or shares of Fulton Preferred
Stock and there are no outstanding securities or other instruments of any kind convertible into
shares of Fulton Common Stock or into shares of Fulton Preferred Stock, except as follows: (i)
5,837,659 shares of Fulton Common Stock were issuable upon the exercise of outstanding stock
options granted under the Fulton Incentive Stock Option Plan and the Fulton Employee Stock Purchase
Plan and (ii) there were outstanding 172,118,122 Rights representing the right under certain
circumstances to purchase shares of Fulton Common Stock pursuant to the terms of a Fulton Rights
Agreement and (iii) 2,671,846 shares of Fulton Common Stock reserved from time to time for issuance
pursuant to Fultons Employee Stock Purchase and Dividend Reinvestment Plans. All shares of Fulton
Common Stock that are issued in the Merger shall include purchase Rights under the Fulton Rights
Agreement unless, prior to the Effective Date, all Rights issued under said Agreement shall have
been redeemed by Fulton without a Distribution Date having occurred under such Agreement.
Section 4.4 Articles of Incorporation and Bylaws. The copies of the Articles of Incorporation, as amended, and of the Bylaws, as amended, of
Fulton that have been delivered to Columbia are true, correct and complete.
Section 4.5 Subsidiaries. Schedule 4.5 contains a list of all subsidiaries (Fulton
Subsidiaries) which Fulton owns, directly or indirectly. Except as otherwise disclosed on
Schedule 4.5: (i) Fulton owns, directly or indirectly, all of the outstanding shares of
capital stock of each Fulton Subsidiary, and (ii) as of the date of this Agreement: (A) there are
no outstanding obligations, options or rights of any kind entitling persons (other than Fulton or
any Fulton Subsidiary) to acquire shares of capital stock of any Fulton Subsidiary, and (B) there
are no outstanding securities or other instruments of any kind held by persons (other than Fulton
or any Fulton Subsidiary) that are convertible into shares of capital stock of any Fulton
Subsidiary. Each Fulton Subsidiary is duly organized, validly existing and in good standing under
the laws of the jurisdiction pursuant to which it is incorporated. Each Fulton Subsidiary has full
power and lawful authority to own and hold its properties and to carry on its business as presently
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conducted. Each Fulton Subsidiary which is a banking institution is an insured bank under the
provisions of the FDI Act.
Section 4.6 Financial Statements.
(a) Fulton has delivered to Columbia the following financial statements: Consolidated
Balance Sheets at December 31, 2004 and 2003 and Consolidated Statements of Income,
Consolidated Statements of Stockholders Equity, and Consolidated Statements of Cash Flows
for the years ended December 31, 2004, 2003 and 2002, audited by KPMG LLP and set forth in
the Annual Report to the shareholders of Fulton for the year ended December 31, 2004, and
unaudited Consolidated Balance Sheets as of March 31, 2005, unaudited Consolidated
Statements of Income for the three-month periods ended March 31, 2005 and 2004, and
unaudited Consolidated Statements of Cash Flows for the three-months ended March 31, 2005
and 2004 as filed with the SEC in a Quarterly Report on Form 10-Q (the Consolidated Balance
Sheet as of March 31, 2005 being hereinafter referred to as the Fulton Balance Sheet).
Each of the foregoing financial statements fairly presents the consolidated financial
position, assets, liabilities and results of operations and cash flows of Fulton at their
respective dates and for the respective periods then ended and has been prepared in
accordance with GAAP, except as otherwise noted in a footnote thereto.
(b) Except (A) as reflected in Fultons unaudited balance sheet at March 31, 2005 or
liabilities described in any notes thereto (or liabilities for which neither accrual nor
footnote disclosure is required pursuant to GAAP) or (B) for liabilities incurred in the
ordinary course of business since March 31, 2005 consistent with past practices or in
connection with this Agreement or the transactions contemplated hereby, neither Fulton nor
any of the Fulton Subsidiaries has any material liabilities or obligations of any nature.
Schedule 4.6 lists and Fulton has delivered to Columbia copies of the documentation
creating or governing, all securitization transactions and off-balance sheet
arrangements (as defined in Item 303(c) of Regulation S-K of the SEC) effected by
Fulton or the Fulton Subsidiaries since KPMG LLP expressed its opinion with respect to the
financial statements of Fulton and the Fulton Subsidiaries included the Fulton SEC
Reports (including the related notes).
(c) KPMG LLP is and has been (x) since September 24, 2003, a registered public
accounting firm (as defined in Section 2(a)(12) of the SOX Act), (y) throughout the periods
covered by such financial statements, independent with respect to Fulton within the
meaning of Regulation S-X, and (z) since May 6, 2003, in compliance with subsections (g)
through (l) of Section 10A of the 1934 Act and the related Rules of the SEC and the Public
Company Accounting Oversight Board. Schedule 4.6 lists all non-audit services performed by
KPMG LLP for Fulton and the Fulton Subsidiaries since January 1, 2002.
(d) Each of Fulton and the Fulton Subsidiaries maintains accurate books and records
reflecting its assets and liabilities and maintains proper and adequate internal accounting
controls which provide assurance that (i) transactions are executed with managements
authorization; (ii) transactions are recorded as necessary to permit preparation of the
consolidated financial statements of Fulton and to maintain accountability for Fultons
consolidated assets; (iii) access to Fultons assets is permitted only in accordance with
managements authorization; (iv) the reporting of Fultons assets is compared with existing
assets at regular intervals; and (v) accounts, notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to effect the
collection thereof on a current and timely basis.
(e) Fulton has, on a timely basis, filed all forms, reports and documents required to
be filed by it with the SEC since January 1, 2002. Schedule 4.6 lists, and except
to the
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extent available in full without redaction on the SECs website through EDGAR has
delivered to Columbia copies in the form filed with the SEC of (i) Fultons Annual Reports
on Form 10-K for each fiscal year of Fultons beginning since January 1, 2002, (ii) its
Quarterly Reports on Form 10-Q for each of the first three fiscal quarters in each of the
fiscal years of Fulton referred to in clause (i) above, (iii) all proxy statements relating
to Fultons meetings of stockholders (whether annual or special) held, and all information
statements relating to stockholder consents since the beginning of the first fiscal year
referred to in clause (i) above, (iv) all certifications and statements required by (x) the
SECs Order dated June 27, 2002 pursuant to Section 21(a)(1) of the 1934 Act (File No.
4-460), (y) 18 U.S.C. §1350 (Section 906 of the SOX Act) with respect to any report referred
to in clause (i) or (iii) above, (v) all other forms, reports, registration statements and
other documents (other than preliminary materials if the corresponding definitive materials
have been provided to Columbia pursuant to this Section 4.6) filed by Fulton with the SEC
since the beginning of the first fiscal year referred to in clause (i) above (the forms,
reports, registration statements and other documents referred to in clauses (i), (ii),
(iii), (iv) and (v) above are, collectively, the Fulton SEC Reports and, to the extent
available in full without redaction on the SECs website through EDGAR two days prior to the
date of this Agreement, are, collectively, the Filed Fulton SEC Reports), and (vi) all
comment letters received by Fulton from the Staff of the SEC
since January 1, 2002 and all responses to such comment letters by or on behalf of
Fulton. The Fulton SEC Reports (x) were or will be prepared in accordance with the
requirements of the 1933 Act and the 1934 Act, as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed with the SEC, or will not
at the time they are filed with the SEC contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were made, not
misleading. No Fulton Subsidiary is or has been required to file any form, report,
registration statement or other document with the SEC.
(f) Fulton maintains disclosure controls and procedures required by Rule 13a-15 or
15d-15 under the 1934 Act; such controls and procedures are effective to ensure that all
material information concerning Fulton and the Fulton Subsidiaries is made known on a timely
basis to the individuals responsible for the preparation of Fultons filings with the SEC
and other public disclosure documents. Schedule 4.6 lists, and Fulton has delivered
to Columbia copies of, all written descriptions of, and all policies, manuals and other
documents promulgating, such disclosure controls and procedures. To Fultons knowledge, each
director and executive officer of Fulton has filed with the SEC on a timely basis all
statements required by Section 16(a) of the 1934 Act and the rules and regulations
thereunder since January 1, 2002. As used in this Section 4.6, the term file shall be
broadly construed to include any manner in which a document or information is furnished,
supplied or otherwise made available to the SEC. To the extent required, Fulton has in
place disclosure controls and procedures as defined in Rules 13a-15(e) and 15(d)-15(e) of
the 1934 Act to allow Fultons management to make timely decisions regarding required
disclosures and to make the certifications of the Chief Executive Officer and Chief
Financial Officer of Fulton required under the 1934 Act. Since March 31, 2005, there has
not been any material change in the internal controls utilized by
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Fulton to assure that its
consolidated financial statements conform with GAAP. Without limiting the generality of the
foregoing, Fultons disclosures and controls are designed and maintained to ensure that (i)
transactions are executed in accordance with managements general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with managements general or specific
authorization, (iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any
differences, (v) all information (both financial and non-financial) required to be disclosed
by Fulton in the reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the SEC,
and (vi) all such information is accumulated and communicated to Fultons management as
appropriate to allow timely decisions regarding required disclosure and to make the
certifications of the Chief Executive Officer and Chief Financial Officer of Fulton required
under the 1934 Act with respect to such reports. None of Fultons or any Fulton
Subsidiarys records, systems, controls, data or information are recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any means
(including any electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct control of the
Fulton or the Fulton Subsidiaries or their independent accountants.
(g)
Each of the Chief Executive Officer and the Chief Financial Officer of Fulton has signed,
and Fulton has furnished to the SEC, all certifications required by Sections 302 and 906 of
the SOX Act; such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither Fulton nor any of its
officers has received notice from any Governmental Entity questioning or challenging the
accuracy, completeness, form or manner of filing or submission of such certifications.
(h) Fulton heretofore has provided to Columbia complete and correct copies of all
certifications filed with the SEC pursuant to Sections 302 and 906 of the SOX Act and hereby
reaffirms, represents and warrants to Columbia the matters and statements made in such
certificates.
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Section 4.7 Absence of Undisclosed Liabilities. Except as disclosed in Schedule 4.7
or as reflected, noted or adequately reserved against in the Fulton Balance Sheet, at March 31,
2005, Fulton had no material liabilities (whether accrued, absolute, contingent or otherwise)
which were required to be reflected, noted or reserved against in the Fulton Balance Sheet under
GAAP. Except as disclosed in Schedule 4.7, since March 31, 2005, Fulton has not incurred
any such liability other than liabilities of the same nature as those set forth in the Fulton
Balance Sheet, all of which have been reasonably incurred in the ordinary course of business
consistent with Fultons customary business practices (the Ordinary Course of Business of
Fulton).
Section 4.8 Absence of Changes; Dividends, Etc. Since March 31, 2005 (a) there has not been
any material and adverse change in the condition (financial or otherwise), results of operations,
assets, liabilities, business or future prospects of Fulton and the Fulton Subsidiaries on a
consolidated basis (a Fulton Material Adverse Effect) and (b) except as disclosed in Schedule
4.8, Fulton has not declared, set aside, made or paid any dividend or other distribution in
respect of the Fulton Common Stock, or purchased, issued or sold any shares of Fulton Common Stock
or the Fulton Subsidiaries Common Stock.
Section 4.9 Litigation and Governmental Directives. Except as disclosed in Schedule
4.9: (i) there is no litigation, investigation or proceeding pending, or to the knowledge of
Fulton or the Fulton Subsidiaries threatened, that involves Fulton or any Fulton Subsidiary or its
properties and that, if determined adversely to Fulton or the Fulton Subsidiary, would have a
Fulton Material Adverse Effect; (ii) there are no outstanding orders, writs, injunctions,
judgments, decrees, regulations, directives, consent agreements or memoranda of understanding
issued by any federal, state or local court or governmental agency or authority or of any
arbitration tribunal issued against or with the consent of Fulton against Fulton which would have a
Fulton Material Adverse Effect or materially restrict the right of Fulton to carry on its business as presently conducted; and (iii) Fulton
has no knowledge of any fact or condition presently existing that might give rise to any
litigation, investigation or proceeding which, if determined adversely to Fulton, would have a
Fulton Material Adverse Effect or materially restrict the right of Fulton to carry on its business
as presently conducted.
Section 4.10 Compliance with Laws; Governmental Authorizations. Except as disclosed in
Schedule 4.10 or where noncompliance would not have a Fulton Material Adverse Effect: (i)
Fulton and each of the Fulton Subsidiaries are in compliance with all statutes, laws, ordinances,
rules, regulations, judgments, orders, decrees, directives, consent agreements, memoranda of
understanding, permits, concessions, grants, franchises, licenses, and other governmental
authorizations or approvals applicable to their respective operations and properties; and (ii) all
permits, concessions, grants, franchises, licenses and other governmental authorizations and
approvals necessary for the conduct of the respective businesses of Fulton and each of the Fulton
Subsidiaries as presently conducted have been duly obtained and are in full force and effect, and
there are no proceedings pending or threatened which may result in the revocation, cancellation,
suspension or materially adverse modification of any thereof.
Section 4.11 Complete and Accurate Disclosure. Neither this Agreement (insofar as it relates
to Fulton, the Fulton Subsidiaries, Fulton Common Stock, and the
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involvement of Fulton in the
transactions contemplated hereby) nor any Exhibits or Schedules to this Agreement nor the
Financial Statements delivered by Fulton to Columbia pursuant to Section 4.6 contains any untrue
statement of a material fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
Section 4.12 Labor Relations. Neither Fulton nor any of the Fulton Subsidiaries is a party to
or bound by any collective bargaining agreement. To its knowledge, Fulton and each of the Fulton
Subsidiaries enjoy good working relationships with their employees, and there are no labor disputes
pending, or to the knowledge of Fulton or any Fulton Subsidiary threatened, that would have a
Fulton Material Adverse Effect.
Section 4.13 Employee Benefit Plans. Fultons contributory profit-sharing plan, defined
benefits pension plan and 401(k) plan (hereinafter collectively referred to as the Fulton Pension
Plans) are exempt from tax under Sections 401 and 501 of the Code, have been maintained and
operated in compliance with all applicable provisions of the Code and ERISA, are not subject to any
accumulated funding deficiency within the meaning of ERISA and the regulations promulgated
thereunder, and do not have any outstanding liability to the Pension Benefit Guaranty Corporation
(the PBGC). No prohibited transaction or reportable event (as such terms are defined in the
Code or ERISA) has occurred with respect to the Fulton Pension Plans or any other employee benefit
plan to which Fulton or any of the Fulton Subsidiaries are a party or by which Fulton or any of the
Fulton Subsidiaries are bound (each hereinafter called a Fulton Benefit Plan). There have
been no breaches of fiduciary duty by any fiduciary under or with respect to the Fulton Pension
Plans or any other Fulton Benefit Plan, and no claim is pending or threatened with respect to any
Fulton Benefit Plan other than claims for benefits made in the Ordinary Course of Business of
Fulton. Neither Fulton or any of the Fulton Subsidiaries have incurred any liability for any tax
imposed by Section 4975 of the Code or for any penalty imposed by the Code or by ERISA with respect
to the Fulton Pension Plans or any other Fulton Benefit Plan. There has not been any audit of any
Fulton Benefit Plan by the U.S. Department of Labor, the IRS or the PBGC since 1990.
Section 4.14 Environmental Matters. Except as disclosed in Schedule 4.14, Fulton has
no material liability relating to any environmental contaminant, pollutant, toxic or hazardous
waste or other similar substance that has been used, generated, stored, processed, disposed of or
discharged onto any of the real estate now or previously owned or acquired (including without
limitation any real estate acquired by means of foreclosure or other exercise of any creditors
right) or leased by Fulton and which is required to be reflected, noted or adequately reserved
against in Fultons consolidated financial statements under GAAP. In particular, without limiting
the generality of the foregoing sentence, but subject to the materiality standard therein, except
as disclosed in Schedule 4.14, neither Fulton nor any of the Fulton Subsidiaries have used
or incorporated: (i) any materials containing asbestos in any building or other structure or
improvement located on any of the real estate now or previously owned or acquired (including
without
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limitation any real estate acquired by means of foreclosure or exercise of any other
creditors right) or leased by Fulton or any of the Fulton Subsidiaries; (ii) any electrical
transformers, fluorescent light fixtures with ballasts or other equipment containing PCBs on any
of the real estate now or previously owned or acquired (including without limitation any real
estate acquired by means of foreclosure or exercise of any other creditors right) or leased by
Fulton or any of the Fulton Subsidiaries; or (iii) any underground storage tanks for the storage of
gasoline, petroleum products or other toxic or hazardous wastes or similar substances located on
any of the real estate now or previously owned or acquired (including without limitation any real
estate acquired by means of foreclosure or exercise of any other creditors right) or leased by
Fulton or any of the Fulton Subsidiaries.
Section 4.15 SEC Filings. No registration statement, offering circular, proxy statement,
schedule or report filed and not withdrawn by Fulton with the SEC under the 1933 Act or the 1934
Act, on the date of effectiveness (in the case of any registration statement or offering circular)
or on the date of filing (in the case of any report or schedule) or on the date of mailing (in the
case of any proxy statement), contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.
Section 4.16 Proxy Statement/Prospectus. At the time the Proxy Statement/Prospectus (as defined in Section 6.1(b)) is mailed to the
stockholders of Columbia and at all times subsequent to such mailing, up to and including the
Effective Time, the Proxy Statement/Prospectus (including any pre- and post-effective amendments
and supplements thereto), with respect to all information relating to Fulton, Fulton Common Stock,
and actions taken and statements made by Fulton in connection with the transactions contemplated
herein (other than information provided by Columbia or The Columbia Bank to Fulton), will: (i)
comply in all material respects with applicable provisions of the 1933 Act and 1934 Act and the
applicable rules and regulations thereunder; and (ii) not contain any statement which, at the time
and in light of the circumstances under which it is made, is false or misleading with respect to
any material fact, or omits to state any material fact that is required to be stated therein or
necessary in order (A) to make the statements therein not false or misleading, or (B) to correct
any statement in an earlier communication with respect to the Proxy Statement/Prospectus which has
become false or misleading.
Section 4.17 Regulatory Approvals. Fulton is not aware of any reason why any of the required
regulatory approvals to be obtained in connection with the Merger should not be granted by such
regulatory authorities or why such regulatory approvals should be conditioned on any requirement
which would be a significant impediment to Fultons ability to carry on its business.
Section 4.18 No Finder. Fulton has not paid or become obligated to pay any fee or commission
of any kind whatsoever to any investment banker, broker, finder, advisor or other intermediary for,
on account of, or in connection with the transactions contemplated in this Agreement.
Section 4.19
Taxes. Fulton has filed, or, as disclosed in Schedule 4.19 has received
extension for filing, all federal, state, county, municipal and foreign tax returns, reports and
declarations which are required to be filed by it as of December 31, 2004. Except as disclosed in
Schedule 4.19, (i) Fulton has paid all taxes, penalties and interest which have become due
pursuant thereto or which became due pursuant to federal, state, county, municipal
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or foreign tax
laws applicable to the periods covered by the foregoing tax returns, (ii) Fulton has not received
any notice of deficiency or assessment of additional taxes; (iii) the IRS has not commenced or
given notice of an intention to commence any examination or audit of the federal income tax returns
of Fulton for any year through and including the year ended December 31, 2004. Except as disclosed
in Schedule 4.19, Fulton has not granted any waiver of any statute of limitations or otherwise
agreed to any extension of a period for the assessment of any federal, state, county, municipal or
foreign income tax. Except as disclosed in Schedule 4.19, the accruals and reserves
reflected in the Fulton Balance Sheet for taxes (including interest and penalties, if any, thereon)
have been made in accordance with GAAP.
Section 4.20 Title to and Condition of Assets. Fulton has good and marketable title to all material consolidated real and personal
properties and assets reflected in the Fulton Balance Sheet or acquired subsequent to March 31,
2005 (other than property and assets disposed of in the Ordinary Course of Business of Fulton),
free and clear of all liens or encumbrances of any kind whatsoever; provided, however, that the
representations and warranties contained in this sentence do not cover liens or encumbrances that:
(i) are reflected in the Fulton Balance Sheet; (ii) represent liens of current taxes not yet due or
which, if due, may be paid without penalty, or which are being contested in good faith by
appropriate proceedings; and (iii) represent such imperfections of title, liens, encumbrances,
zoning requirements and easements, if any, as are not substantial in character, amount or extent
and do not materially detract from the value, or interfere with the present or proposed use, of the
properties and assets subject thereto. Fulton owns or has the right to use all real and personal
properties and assets that are material to the conduct of its business as presently conducted.
Section 4.21 Contracts. All Fulton Material Contracts are enforceable against Fulton, and
Fulton has in all material respects performed all obligations required to be performed by it to
date and is not in default in any material respect and has no knowledge of any default by a third
party under a Fulton Material Contract. Fulton Material Contracts shall be defined as each
written or oral contract entered into by Fulton or any Fulton Subsidiary (other than contracts with
customers reasonably entered into by Fulton in the Ordinary Course of
Business of Fulton) which involves
aggregate payments or receipts in excess of $500,000 per year, including without limitation every
employment contract, employee benefit plan, agreement, lease, license, indenture, mortgage and
other commitment to which either Fulton or a Fulton Subsidiary is a party or by which Fulton or any
of the Fulton Subsidiaries or any of their properties may be bound.
Section 4.22 Insurance. All policies of insurance relating to operations of Fulton, including
without limitation all financial institutions bonds, held by or on behalf of Fulton are in full
force and effect, and no notices of cancellation have been received in connection therewith.
Section 4.23 Reports. Fulton and the Fulton Subsidiaries have filed all material reports,
registrations and statements that are required to be filed with the FRB, the FDIC, the Pennsylvania
Department of Banking (the Pennsylvania Department), and any other applicable federal, state or local governmental or regulatory
authorities and such reports, registrations and statements referred to in this Section 4.23 were,
as of their respective dates, in compliance in all material respects with
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all of the statutes,
rules and regulations enforced or promulgated by the governmental or regulatory authority with
which they were filed; provided, however, that the failure to file any such report, registration or
statement or the failure of any report, registration or statement to comply with the applicable
regulatory standard shall not be deemed to be a breach of the foregoing representation unless such
failure has or may have a material adverse impact on Fulton and the Fulton Subsidiaries on a
consolidated basis. Fulton has furnished Columbia with, or made available to Columbia, copies of
all such filings made in the last three fiscal years and in the period from January 1,
2005 through the date of this Agreement. Fulton is required to file reports with the SEC
pursuant to Section 12 of the 1934 Act, and Fulton has made all appropriate filings under the 1934
Act and the rules and regulations promulgated thereunder; provided, however, that the failure to
make any such filing shall not be deemed to be a breach of the foregoing representation unless such
failure has or may have a material adverse impact on Fulton and the Fulton subsidiaries. The
Fulton Common Stock is traded on NASDAQ under the symbol FULT.
Section 4.24 Regulatory Agreements and Matters.
(a) Except as set forth on Schedule 4.24, on the date hereof, neither Fulton
nor any Fulton Subsidiary is a party to any assistance agreement, directive, commitment
letter, supervisory agreement or letter, memorandum of understanding, consent order, cease
and desist order, or condition of any regulatory order, decree or similar directive with or
by the FDIC, the FRB, the Pennsylvania Department or any other financial services regulatory agency
having jurisdiction over Fulton or any Fulton Subsidiary that relates to the conduct of the
business of Fulton or any Fulton Subsidiary Bank, nor has Fulton or any Fulton Subsidiary
been advised by any such regulatory agency or other governmental entity that it is
considering issuing or requesting any such agreement, order or decree.
(b) No report has been made by any attorney to Fultons chief legal officer, chief
executive officer, board of directors (or committee thereof) or other representative
pursuant to 17 CFR Part 205.
(c) Fulton is, or will timely be in all material respects, in compliance with all
current and proposed listing and corporate governance requirements of NASDAQ, and is in
compliance in all material respects, and will continue to remain in compliance following the
Effective Time, with all rules, regulations, and requirements of the SOX Act and the SEC.
(d) Fulton is in material compliance with the provisions of the SOX Act applicable to
it as of the date hereof and has implemented such programs and has taken reasonable steps,
upon the advice of Fultons independent auditors and outside counsel, respectively, to
ensure Fultons future compliance (not later than the relevant statutory and regulatory
deadlines therefore) and all provisions of the SOX Act which shall become applicable to
Fulton after the date hereof.
Section 4.25 Regulatory Examinations. Except for normal examinations conducted by a
regulatory agency in the Ordinary Course of Business of Fulton, to Fultons knowledge, no
regulatory agency has initiated any material proceeding or investigation into the
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business or
operations of Fulton within the past three (3) years. Fulton has not received any notice objection
from any regulatory agency relating to any examinations of Fulton which would have a Fulton
Material Adverse Effect.
Fulton is not required to divest any assets currently held by it or discontinue any activity
currently conducted as a result of the Federal Deposit Insurance Corporation Improvement Act
of 1991, any regulations promulgated thereunder, or otherwise which would have a materially
adverse effect on Fulton.
ARTICLE V COVENANTS OF COLUMBIA
From the date of this Agreement until the Effective Time, Columbia covenants and agrees to do,
and shall cause the Columbia Subsidiaries to do, the following:
Section 5.1 Conduct of Business. Except as otherwise consented to by Fulton in writing (such
consent not to be unreasonably withheld) or as set forth on Schedule 5.1, Columbia and the
Columbia Subsidiaries shall:
(i) use all reasonable efforts to carry on their respective businesses in, and
only in, the Ordinary Course of Business;
(ii) use all reasonable efforts to preserve their present business
organizations, to retain the services of substantially all of their present officers
and employees, and to maintain their relationships with customers, suppliers and
others having business dealings with Columbia or any of the Columbia Subsidiaries;
(iii) maintain all of their structures, equipment and other real property and
tangible personal property in good repair, order and condition, except for ordinary
wear and tear and damage by unavoidable casualty;
(iv) use all reasonable efforts to preserve or collect all material claims and
causes of action belonging to Columbia or any of the Columbia Subsidiaries;
(v) keep in full force and effect all insurance policies now carried by
Columbia or any of the Columbia Subsidiaries;
(vi) perform in all material respects each of their obligations under all
Material Contracts to which Columbia or any of the Columbia Subsidiaries are a party
or by which any of them may be bound or which relate to or affect their properties,
assets and business;
(vii) maintain their books of account and other records in the Ordinary Course
of Business;
(viii) comply in all material respects with all statutes, laws, ordinances,
rules and regulations, decrees, orders, consent agreements, memoranda of
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understanding and other federal, state, and local governmental directives applicable
to Columbia or any of the Columbia Subsidiaries and to the conduct of their
businesses;
(ix) not amend Columbias or any of the Columbia Subsidiaries Certificate of
Incorporation or Bylaws, except in accordance with the terms hereof or to the extent
necessary to consummate the transactions contemplated by this Agreement;
(x) not enter into or assume any Material Contract, incur any material
liability or obligation, or make any material commitment, except in the Ordinary
Course of Business;
(xi) not make any material acquisition or disposition of any properties or
assets (except for acquisitions or dispositions of properties or assets in
accordance with any Material Contract disclosed on Schedule 3.12 or which do
not exceed, in any case, $100,000), or subject any of their properties or assets to
any material lien, claim, charge, or encumbrance of any kind whatsoever, except for
loan and investment activity engaged in the Ordinary Course of Business and
consistent with past practice;
(xii) not knowingly take or permit to be taken any action which would
constitute or cause a material breach of any representation, warranty or covenant
set forth in this Agreement as of or subsequent to the date of this Agreement or as
of the Effective Date;
(xiii) except as permitted in Section 5.10 herein, not declare, set aside or
pay any dividend or make any other distribution in respect of Columbia Common Stock;
(xiv) not authorize, purchase, redeem, issue (except upon the exercise of
outstanding options under the Columbia Stock Option Plans) or sell (or grant options
or rights to purchase or sell) any shares of Columbia Common Stock or any other
equity or debt securities of Columbia (other than the Warrant or the Columbia Common
Stock issuable under the Warrant);
(xv) not increase the rate of compensation of, pay a bonus or severance
compensation to, establish or amend any Columbia Benefit Plan, except as required by
law, or enter into or amend any Employment Obligation, severance or change in
control agreement or arrangement with any officer, director, employee or
consultant of Columbia or any of the Columbia Subsidiaries, except that Columbia and
the Columbia Subsidiaries may grant reasonable salary increases and bonuses to their
officers and employees in the Ordinary Course of Business to the extent consistent
with past practice, in magnitude and otherwise;
(xvi) not enter into any related party transaction of the kind contemplated in
Section 3.19 herein;
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(xvii) in determining the additions to loan loss reserves and the loan
write-offs, writedowns and other adjustments that reasonably should be made by The
Columbia Bank and classifying, valuing and retaining its investment
portfolio, during the fiscal year ending December 31, 2005 and thereafter,
Columbia and the Columbia Subsidiaries shall act in accordance with GAAP and shall
advise Fulton of, and provide Fulton with the opportunity to comment on, any
material changes thereto;
(xviii) file with appropriate federal, state, local and other governmental
agencies all tax returns and other material reports required to be filed, pay in
full or make adequate provisions for the payment of all taxes, interest, penalties,
assessments or deficiencies shown to be due on tax returns or by any taxing
authorities and report all information on such returns truthfully, accurately and
completely;
(xix) not renew any existing contract for services, goods, equipment or the
like or enter into, amend in any material respect or terminate any contract or
agreement (including without limitation any settlement agreement with respect to
litigation) involving an amount in excess of $250,000 or for a term of one year or
more;
(xx) except as permitted by (xi) above, not make any capital expenditures other
than in the Ordinary Course of Business or as necessary to maintain existing assets
in good repair;
(xxi) not make application for the opening or closing of any, or open or close
any, branches or automated banking facility except as disclosed on Schedule
5.1(xxi);
(xxii) not make any equity investment or commitment to make such an investment
in real estate or in any real estate development project, other than in connection
with foreclosures, settlements in lieu of foreclosure or troubled loan or debt
restructuring in the Ordinary Course of Business consistent with customary banking
practice;
(xxiii) not take any other action which would cause the Merger not to qualify
as a tax-free reorganization under Section 368 of the Code; and
(xxiv) following receipt of both stockholder and regulatory approval of the
Merger and upon agreement as to the Effective Date by Fulton and Columbia, conform
its practices to the standards used by Fulton, with respect to its investment and
loan portfolios and loan loss reserve; provided, however, (A) in taking such
actions, Columbia shall not be required to breach any existing contractual
obligations and (B) any such actions taken at the request of Fulton shall be subject
to the provisions of subparagraph (a) of Section 7.2(f) herein.
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Section 5.2 Best Efforts. Columbia and the Columbia Subsidiaries shall cooperate with Fulton
and shall use their best efforts to do or cause to be done all things necessary or appropriate on
their part in order to
fulfill the conditions precedent set forth in Article VII of this Agreement and to consummate
the transactions contemplated by this Agreement, including the Merger. In particular, without
limiting the generality of the foregoing sentence, Columbia and the Columbia Subsidiaries shall:
(i) cooperate with Fulton in the preparation of all required applications for regulatory approval
of the transactions contemplated by this Agreement and in the preparation of the Registration
Statement (as defined in Section 6.1(b)); and (ii) cooperate with Fulton in making Columbias and
the Columbia Subsidiaries employees reasonably available for training by Fulton at Columbias and
the Columbia Subsidiaries facilities prior to the Effective Time, to the extent that such training
is deemed reasonably necessary by Fulton to ensure that Columbias and the Columbia Subsidiaries
facilities will be properly operated in accordance with Fultons policies after the Merger.
Section 5.3 Access to Properties and Records. Columbia and the Columbia Subsidiaries shall
give to Fulton and its authorized employees and representatives (including without limitation its
counsel, accountants, economic and environmental consultants and other designated representatives)
such access during normal business hours to all properties, books, contracts, documents and records
of Columbia and the Columbia Subsidiaries as Fulton may reasonably request, subject to the
obligation of Fulton and its authorized employees and representatives to maintain the
confidentiality of all nonpublic information concerning Columbia and the Columbia Subsidiaries
obtained by reason of such access and subject to applicable law.
Section 5.4 Subsequent Financial Statements. Between the date of signing of this Agreement
and the Effective Time, Columbia and the Columbia Subsidiaries shall promptly prepare and deliver
to Fulton as soon as practicable all internal monthly and quarterly financial statements, all
quarterly and annual reports to stockholders and all reports to regulatory authorities prepared by
or for either Columbia or any of the Columbia Subsidiaries (which additional financial statements
and reports are hereinafter collectively referred to as the Additional Columbia Financial
Statements). Columbia shall be deemed to make the representations and warranties set forth in
Section 3.6, 3.7 and 3.8 to Fulton with respect to the Additional Columbia Financial Statements
upon delivery thereof.
Section 5.5 Update Schedules. Columbia or any of the Columbia Subsidiaries shall promptly
disclose to Fulton in writing any material change, addition, deletion or other modification to the
information set forth in its Schedules hereto.
Section 5.6 Notice. Columbia or any of the Columbia Subsidiaries shall promptly notify Fulton
in writing of any actions, claims, investigations, proceedings or other developments which, if
pending or in existence on the date of this Agreement, would have been required to be disclosed to
Fulton in order to ensure the accuracy of the representations and warranties set forth in this
Agreement or
which otherwise would have a Columbia Material Adverse Effect or restrict in any material
manner their ability to carry on their respective businesses as presently conducted.
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Section 5.7 No Solicitation.
(a) Columbia and the Columbia Subsidiaries shall not, and shall not authorize or permit
any of their officers, directors or employees or any investment banker, financial advisor or
attorney to initiate or encourage or take any other action to facilitate (including by way
of furnishing non-public information) any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal, provided,
however, that if, at any time the Board of Directors of Columbia determines in good faith,
after consultation with outside counsel, that failure to do so would be inconsistent with
their responsibilities under Maryland law, Columbia, in response to a written Acquisition
Proposal that (i) was unsolicited or that did not otherwise result from a breach of this
Section, and (ii) may lead to a Superior Proposal, Columbia and the Columbia Subsidiaries
may (x) furnish non-public information with respect to Columbia or the Columbia Subsidiaries
to the person who made such Acquisition Proposal pursuant to a customary confidentiality
agreement and (y) participate in negotiations regarding such Acquisition Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any director or officer of Columbia or any of the Columbia
Subsidiaries or any investment banker, financial advisor, attorney, accountant, or other
representative of Columbia or any of the Columbia Subsidiaries, whether or not acting on
behalf of Columbia or any of its subsidiaries, shall be deemed to be a breach of this
Section by Columbia.
(b) Columbia shall call a meeting of its stockholders to be held as promptly as
practicable for the purpose of voting upon this Agreement and shall take, in good faith, all
actions which are necessary or appropriate on its part in order to secure the approval of
this Agreement by its stockholders at the meeting, including recommending the approval of
this Agreement by Columbias stockholders; provided, however, that Columbias Board of
Directors shall not be required to take any action otherwise required by this sentence that
it has determined in good faith, after consultation with outside counsel, would be
inconsistent with their responsibilities under Maryland law.
(c) The Board of Directors of Columbia shall not (1) fail to recommend this Agreement,
withdraw or modify, or propose to withdraw or modify, in a manner adverse to Fulton, its
approval or recommendation of this Agreement or the Merger unless there is an Acquisition
Proposal outstanding, (2) approve or recommend, or propose to approve or recommend, an
Acquisition Proposal or (3) cause Columbia to enter into any letter of intent, agreement in
principle, acquisition agreement or other agreement with respect to an Acquisition Proposal
unless the Board of Directors of Columbia shall have determined in good faith after
consultation with outside counsel, that failure to do so would be inconsistent with their
responsibilities under Maryland law and that the applicable Acquisition Proposal is a
Superior Proposal.
(d) Nothing contained in this Section shall prohibit Columbia from at any time taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated
under the 1934 Act, as amended, provided, however, that neither Columbia nor its Board of
Directors shall, except as permitted by paragraph (b) or (c) of this section, propose to
approve or recommend, an Acquisition Proposal.
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(e) Columbia shall promptly (but in any event within one day) advise Fulton orally and
in writing of any Acquisition Proposal or any inquiry regarding the making of an Acquisition
Proposal including any request for information, the material terms and conditions of such
request, Acquisition Proposal or inquiry and the identity of the person making such request,
Acquisition Proposal or inquiry. Columbia will, to the extent reasonably practicable, keep
Fulton fully informed of the status and details (including amendments or proposed
amendments) of any such request, Acquisition Proposal or inquiry.
(i) In the event the Board of Directors of Columbia takes any of the actions
set forth in clauses (1), (2) and/or (3) of Section 5.7(c) in compliance with the
standards therein, such action shall allow termination of this Agreement by Fulton
under Section 8.1(b)(iii) herein which shall be treated in the same manner as
termination under Section 8.1(a) herein and shall allow exercise of the Warrant. In
the event the Board of Directors of Columbia takes any of the actions set forth in
clauses (1), (2) and/or (3) of Section 5.7(c) without compliance with the standards
therein, such action shall constitute a breach allowing termination of this
Agreement by Fulton under Section 8.1(b)(iii) herein which shall be treated in the
same manner as termination by Fulton under Section 8.1(b)(i) herein and shall allow
exercise of the Warrant.
(ii) This Agreement may be terminated by Columbia prior to the stockholders
meeting of Columbia if (A) the Board of Directors of Columbia shall have determined
in good faith after consultation with outside counsel that failure to do so would be
reasonably likely to be inconsistent with their responsibilities under Maryland law,
(B) it is not in breach of its obligations under this Section 5.7 in any material
respect and has complied with, and continues to comply with, all requirements and
procedures of this Section 5.7 in all material respects and the Board of Directors
of Columbia has authorized, subject to complying with the terms of this Agreement,
Columbia to enter into a binding written agreement for a transaction that
constitutes a Superior Proposal and Columbia notifies Fulton in writing that it
intends to enter into such agreement, attaching the most current version of such
agreement to such notice; (C) Fulton does not make, within five (5) business days
after receipt of Columbias written notice of its intention to enter into a binding
agreement for a Superior Proposal, any offer that the Board of Directors of Columbia
reasonably and in good faith determines, after consultation with its financial and
legal advisors, is at least as favorable to the stockholders of Columbia as the
Superior Proposal and during such period Columbia reasonably considers and discusses
in good faith all proposals submitted by Fulton and, without limiting the foregoing,
meets with, and causes its financial and legal
advisors to meet with, Fulton and its advisors from time to time as required by
Fulton to consider and discuss in good faith Fultons proposals, and (D) prior to
Columbias termination pursuant to this Section 5.7(e)(ii), Columbia confirms in
writing that such termination allows exercise of the Warrant. Columbia agrees (x)
that it will not enter into a binding agreement referred to in clause (B) above
until at least the five (5) business days after Fulton has received the notice to
Fulton
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required by clause (C) and (y) to notify Fulton promptly if its intention to
enter into a binding agreement referred to in its notice to Fulton shall change at
any time after giving such notice.
(f) For the purpose of this Section 5.7:
(i) Acquisition Proposal shall mean a written proposal or written offer
(other than by another party hereto) for a tender or exchange offer for securities
of Columbia or any of the Columbia Subsidiaries, or a merger, consolidation or other
business combination involving an acquisition of Columbia or any of the Columbia
Subsidiaries or any proposal to acquire in any manner a substantial equity interest
in or a substantial portion of the assets of Columbia or any of the Columbia
Subsidiaries.
(ii) A Superior Proposal shall be an Acquisition Proposal that the Board of
Directors of Columbia believes in good faith (after consultation with its financial
advisor) is reasonably capable of being completed, taking into account all relevant
legal, financial, regulatory and other aspects of the Acquisition Proposal and the
source of its financing, on the terms proposed and, believes in good faith (after
consultation with its financial advisor), would, if consummated, result in a
transaction more favorable to the stockholders of Columbia from a financial point of
view, than the transactions contemplated by this Agreement and believes in good
faith (after consultation with its financial advisor) that the person making such
Acquisition Proposal has, or is reasonably likely to have or obtain, any necessary
funds or customary commitments to provide any funds necessary to consummate such
Acquisition Proposal.
Section 5.8 Affiliate Letters. Columbia shall use its best efforts to deliver or cause to be
delivered to Fulton, at or before the Closing, a letter from each of the executive officers and
directors of Columbia and shall use its best efforts to obtain and deliver such a letter from each
stockholder of Columbia who may be deemed to be an affiliate (as that term is defined for
purposes of Rules 145 and 405 promulgated by the SEC under the 1933 Act) of Columbia, in form and
substance satisfactory to Fulton and Columbia, under the terms of which each such officer, director
or stockholder acknowledges and agrees to abide by all limitations imposed by the 1933 Act and by
all rules, regulations and releases promulgated thereunder by the SEC with respect to the sale or
other disposition of the shares of Fulton Common Stock to be received by such person pursuant to
this Agreement.
Section 5.9 No Purchases or Sales of Fulton Common Stock During Price Determination Period.
Columbia and the Columbia Subsidiaries shall not, and shall use their best efforts to ensure that
their executive officers and directors do not, and shall use their best efforts to ensure that each
stockholder of Columbia who may be deemed an affiliate (as defined in SEC Rules 145 and 405) of
Columbia does not, purchase or sell on NASDAQ, or submit a bid to purchase or an offer to sell on
NASDAQ, directly or indirectly, any shares of Fulton Common Stock or any options, rights or other
securities convertible into shares of Fulton Common Stock during the Price Determination Period,
provided, however, that Columbia may
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purchase shares of Columbia Common Stock in the ordinary
course of business during the Price Determination Period for the benefit of Columbias Benefit
Plans or Columbias Dividend Reinvestment Plan.
Section 5.10 Dividends. Between the date of this Agreement and the Effective Date, Columbia
shall not declare or pay cash dividends on the Columbia Common Stock; provided, however, that (a)
Columbia may declare and pay a quarterly dividend of up to $0.17 per share on the Columbia Common
Stock on each of (i) July 28, 2005; and (ii) October 28, 2005, provided that the Effective Date
does not occur (or is not expected to occur) on or before the record date for the dividend on
Fulton Common Stock scheduled to be paid on or about October 14, 2005; and (b) Columbia may declare
and pay a quarterly dividend of up to $0.19 per share on the Columbia Common Stock on each of (i)
January 25, 2006, provided that the Effective Date does not occur (or is not expected to occur) on
or before the record date for the dividend on the Fulton Common Stock scheduled to be paid on or
about January 16, 2006; (ii) April 14, 2006, provided that the Effective Date does not occur (or is
not expected to occur) on or before the record date for the dividend on the Fulton Common Stock
scheduled to be paid on or about April 14, 2006 and (iii) July 28, 2006, provided that the
Effective Date does not occur (or is not expected to occur) on or before the record date for the
dividend on the Fulton Common Stock scheduled to be paid on or about July 14, 2006 (it being the
intent of Fulton and Columbia that Columbia be permitted to pay a dividend on the Columbia Common
Stock on the dates indicated in subsections (a)(ii), (b)(i), (ii) and (iii) above only if the
stockholders of Columbia, upon becoming shareholders of Fulton, would not be entitled to receive a
dividend on the Fulton Common Stock on the payment dates indicated in such subsections.
Section 5.11 Internal Controls. Between the date of this Agreement and the Closing Date,
Columbia shall permit Fulton senior officers to meet with the Chief Financial Officer of Columbia
and other officers responsible for the Columbia Financial Statements, the internal controls of
Columbia and the disclosure controls and procedures of Columbia to discuss such matters as Fulton
may deem reasonably necessary or appropriate for Fulton to satisfy its obligations under Sections
302, 404 and 906 of the SOX Act and any rules and regulations relating thereto. Fulton shall have
continuing access through the Effective Time to both the Columbia books and records and internal
audit team for the purpose of ongoing assessment of internal controls and shall cause its outside
auditors to provide any documentation regarding Columbias internal control to Fulton
and cause its auditors to be available for discussions with Fultons representatives regarding
Columbias systems of internal controls.
Section 5.12 Certain Matters, Certain Revaluations, Changes and Adjustments.
Notwithstanding that Columbia believes that it and the Columbia Subsidiaries have established
all reserves and taken all provisions for possible loan losses required by GAAP and applicable
laws, rules and regulations, Columbia recognizes that Fulton may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of reserves for possible
loan losses). At or before the Effective Time, upon the request of Fulton and Fultons written
confirmation that all conditions precedent under Article VII (other than the delivery of customary
closing documents) have been satisfied or waived, and in order to
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formulate the plan of integration
for the Merger, Columbia shall, consistent with GAAP, modify and change its loan, litigation and
real estate valuation policies and practices (including loan classifications and levels of
reserves) so as to be applied consistently on a mutually satisfactory basis with those of Fulton
and establish such accruals and reserves as shall be necessary to reflect Merger-related expenses
and costs incurred by Columbia and its Subsidiaries, provided, however, that Columbia shall not be
required to take such action prior to receipt of stockholder and regulatory approvals; and provided
further, however, that no accrual or reserve made by Columbia or any Columbia Subsidiary pursuant
to this Section 5.12 or any litigation or regulatory proceeding arising out of any such accrual or
reserve, shall constitute or be deemed to be a breach, violation of or failure to satisfy any
representation, warranty, covenant, condition or other provision of this Agreement or otherwise be
considered in determining whether any such breach, violation or failure to satisfy shall have
occurred.
Section 5.13 Other Policies. Between the date of this Agreement and the Effective Time,
Columbia shall cooperate with Fulton to reasonably conform the policies and procedures of Columbia
and its Subsidiaries regarding applicable regulatory matters to those
of Fulton and the Fulton Subsidiaries, as Fulton may reasonably identify to Columbia from time to time, provided, however,
that implementation of such conforming actions may at Columbias discretion be delayed until the
time period following satisfaction of the conditions set forth in Section 5.12.
Section 5.14 Other Transactions. Columbia acknowledges that Fulton may be in the process of
acquiring other banks and financial institutions or in offering securities to the public and that
in connection with such transactions, information concerning Columbia
and the Columbia Subsidiaries may be
required to be included in the registration statements, if any, for the sale of securities of
Fulton or in SEC reports in connection with such transactions. Fulton shall provide Columbia and
its counsel with copies of such registration statements at the time of filing. Columbia agrees to
provide Fulton with any information, certificates, documents or other materials about Columbia and
the Columbia Subsidiaries as are reasonably necessary to be included in such SEC reports or registration
statements, including registration statements which may be filed by Fulton prior to the Effective
Time. Columbia shall use its reasonable efforts to cause its attorneys and accountants to
provide Fulton and any underwriters for Fulton with any consents, comfort letters, opinion letters,
reports or information which are necessary to complete the registration statements and applications
for any such acquisition or issuance of securities. Fulton shall not file with the SEC any
registration statement or amendment thereto or supplement thereof containing information regarding
Columbia unless Columbia shall have consented in writing to such filing, which consent shall not be
unreasonably delayed or withheld.
Section 5.15 Transaction Expenses of Columbia.
(a)
Columbia shall cause its and the Columbia Subsidiaries professionals to render monthly
invoices within 30 days after the end of each month. Columbia shall advise Fulton monthly of
all out-of-pocket expenses which Columbia and the Columbia Subsidiaries have incurred in connection
with the transactions contemplated hereby. Columbia shall not, and
shall cause each of the Columbia Subsidiaries not to, pay fees and expenses to its accountants or attorneys
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on any basis
different than the basis on which such professionals would be paid in the absence of any
business combination.
(b) Columbia, in reasonable consultation with Fulton and at Fultons expense, shall
make all arrangements with respect to the printing and mailing of the Prospectus/Proxy
Statement.
ARTICLE VI COVENANTS OF FULTON
From the date of this Agreement until the Effective Time, or until such later date as may be
expressly stipulated in any Section of this Article VI, Fulton covenants and agrees to do the
following:
Section 6.1 Best Efforts. Fulton shall cooperate with Columbia and the Columbia Subsidiaries
and shall use its best efforts to do or cause to be done all things necessary or appropriate on its
part in order to fulfill the conditions precedent set forth in Article VII of this Agreement and to
consummate the transactions contemplated by this Agreement, including the Merger. In particular,
without limiting the generality of the foregoing sentence, Fulton agrees to do the following:
(a) Applications for Regulatory Approval. Fulton shall promptly prepare and
file, with the cooperation and assistance of (and after review by) Columbia and its counsel
and accountants, all required applications for regulatory approval of the transactions
contemplated by this Agreement, including without limitation applications for approval under
the BHC Act and the Financial Institutions Article of the Annotated Code of Maryland, as
amended.
(b) Registration Statement. Fulton shall promptly prepare, with the
cooperation and assistance of (and after review by) Columbia and its counsel and
accountants, and file with the SEC a registration statement (the Registration Statement)
for the purpose of registering under the 1933 Act the shares of Fulton Common Stock to be
issued to stockholders of Columbia under the provisions of this Agreement and a proxy statement
and prospectus which is prepared as a part thereof (the Proxy Statement/Prospectus) for
the purpose of registering under the 1933 Act the shares of Fulton Common Stock to be issued
to the stockholders of Columbia, and the soliciting of the proxies of Columbias
stockholders in favor of the Merger, under the provisions of this Agreement. Fulton may
rely upon all information provided to it by Columbia and The Columbia Bank in connection
with the preparation of the Proxy Statement/Prospectus and Fulton shall not be liable for
any untrue statement of a material fact or any omission to state a material fact in the
Registration Statement, or in the Proxy Statement/Prospectus, if such statement is made by
Fulton in reliance upon any information provided to Fulton by Columbia or the Columbia
Subsidiaries or by any of their officers, agents or representatives. Fulton shall provide a
draft of the Registration Statement to Columbia and its counsel for comment and review at
least ten (10) business days in advance of the anticipated filing date.
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(c) State Securities Laws. Fulton, with the cooperation and assistance of
Columbia and its counsel and accountants, shall promptly take all such actions as may be
necessary or appropriate in order to comply with all applicable securities laws of any state
having jurisdiction over the transactions contemplated by this Agreement.
(d) Stock Listing. Fulton, with the cooperation and assistance of Columbia and
its counsel and accountants, shall promptly take all such actions as may be necessary or
appropriate in order to list the shares of Fulton Common Stock to be issued in the Merger on
NASDAQ.
(e) Adopt Amendments. Fulton shall not adopt any amendments to its charter or
bylaws or other organizational documents that would alter the terms of Fultons Common Stock
or could reasonably be expected to have a material adverse effect on the ability of Fulton
to perform its obligations under this Agreement.
(f) Tax Treatment. Fulton shall take no action which would have the effect of
causing the Merger not to qualify as a tax-free reorganization under Section 368 of the
Code.
Section 6.2 Access to Properties and Records. Fulton shall give to Columbia and to its
authorized employees and representatives (including without limitation Columbias counsel,
accountants, economic and environmental consultants and other designated representatives) such
access during normal business hours to all properties, books, contracts, documents and records of
Fulton as Columbia may reasonably request, subject to the obligation of Columbia and its authorized
employees and representatives to maintain the confidentiality of all nonpublic information
concerning Fulton obtained by reason of such access and subject to applicable law.
Section 6.3 Subsequent Financial Statements. Between the date of signing of this Agreement and the Effective Time, Fulton shall promptly
prepare and deliver to Columbia as soon as practicable each Quarterly Report to Fultons
shareholders and any Annual Report to Fultons shareholders and all reports to regulatory
authorities normally prepared by Fulton. Fulton shall be deemed to make the representations and
warranties set forth in Sections 4.6, 4.7 and 4.8 herein to Columbia with respect to the financial
statements (hereinafter collectively referred to as the Additional Fulton Financial Statements)
set forth in the foregoing Quarterly Reports and any Annual Report to Fultons shareholders upon
delivery thereof.
Section 6.4 Update Schedules. Fulton shall promptly disclose to Columbia in writing any
change, addition, deletion or other modification to the information set forth in its Schedules to
this Agreement.
Section 6.5 Notice. Fulton shall promptly notify Columbia in writing of any actions, claims,
investigations, proceedings or other developments which, if pending or in existence on the date of
this Agreement, would have been required to be disclosed to Columbia in order to ensure the
accuracy of the representations and warranties set forth in this Agreement or which otherwise would
have a Fulton Material Adverse Effect or materially restrict in any manner the right of Fulton to
carry on its business as presently conducted.
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Section 6.6 No Purchase or Sales of Fulton Common Stock During Price Determination Period
Neither Fulton nor any Fulton Subsidiary, nor any executive officer
or director of Fulton or any Fulton Subsidiary, nor any shareholder of Fulton who may be deemed to be an affiliate (as that
term is defined for purposes of Rules 145 and 405 promulgated by the SEC under the 1933 Act) of
Fulton, shall purchase or sell on NASDAQ, or submit a bid to purchase or an offer to sell on
NASDAQ, directly or indirectly, any shares of Fulton Common Stock or Columbia Common Stock or any
options, rights or other securities convertible into shares of Fulton Common Stock or Columbia
Common Stock during the Price Determination Period; provided, however, that Fulton may purchase
shares of Fulton Common Stock in the Ordinary Course of Business of Fulton during the Price
Determination Period for the benefit of Fultons Benefit Plans or Fultons Dividend Reinvestment
Plan.
Section 6.7 Assumption of Columbia Trust Preferred Securities. Fulton agrees that, effective
with the Effective Date, it shall assume the Columbia Trust Preferred Securities, and all of
Columbias obligations under the related Indentures, and shall take all actions necessary or
appropriate in accordance therewith, including, if requested by the trustee, execution of a
supplemental indenture and other appropriate documents or certificates.
Section 6.8 Employment Arrangements.
(a) In arriving at the Merger Consideration, Fulton anticipated that there will be some
consolidation of The Columbia Banks back room operations. Subject to that caveat, from
and after the Effective Time, (i) Fulton, The Columbia Bank or another subsidiary of Fulton
(any such parties employing employees of Columbia or a Columbia Subsidiary, the Fulton
Employers) shall: (A) satisfy each of the Employment Obligations, and (B) use its good
faith efforts to retain each present employee of Columbia and the Columbia Subsidiaries in
such employees current position and salary compensation (or, if offered to, and accepted
by, an employee, a position for which the employee is qualified with the Fulton Employers at
a compensation commensurate with the position), (ii) in the event that the Fulton Employers
shall continue to employ officers or employees of Columbia and the Columbia Subsidiaries as
of the Effective Time, the Fulton Employers shall employ such persons on the Effective Time
who are not Contract Employees as at-will employees, and (iii) in the event the Fulton
Employers are not willing to employ, or terminate the employment (other than as a result of
unsatisfactory performance of their respective duties) of, any officers or employees of
Columbia or the Columbia Subsidiaries who are not Contract Employees, the Fulton Employers
shall pay severance benefits to such employees (other than Contract Employees) as follows:
(A) in the event employment is terminated on or prior to the date which is one year after
the Effective Date, one weeks salary plus one weeks salary for each year of service with
Columbia or a Columbia Subsidiary, or predecessor of Columbia or a Columbia Subsidiary if
such service was recognized by Columbia for the purposes of Columbias 401(k) Plan, up to a
maximum of 26 weeks salary; (B) in the event employment is terminated thereafter, in
accordance with the then existing severance policy of Fulton or its
successor; or (C) as
otherwise agreed between Fulton and Columbia.
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(b) The Fulton Employers shall be obligated to provide employee benefits to each person
who is an employee of Columbia or a Columbia Subsidiary immediately before the Effective
Time and continues to be employed that are substantially equivalent, in the aggregate, to
the benefits under the Columbia Benefit Plans prior to the Effective Time, until at least
three (3) years after the Effective Date. Notwithstanding the immediately preceding
sentence, if the Fulton Employers can no longer satisfy the applicable employee benefit plan
testing requirements under the Code after applicable transition periods under the Code with
respect to a Fulton Benefit Plan then the Fulton Employers shall provide appropriately
adjusted benefits to each person who is an employee of Columbia or a Columbia Subsidiary
that would permit such Fulton Benefit Plan to satisfy the applicable test under the Code.
(c) For at least the required three-year period, the Fulton Employers shall adopt or
maintain a Fulton Benefit Plan that is a 401(k) plan for the benefit of each person who is
an employee of Columbia or a Columbia Subsidiary, as of the Effective Time, and who is
eligible to participate in the Columbia Bancorp 401(k) Plan as of the Effective Date. Such
Fulton Benefit Plan shall provide either (i) a matching contribution equal to 50% of each
participants salary deferral contributions made under such 401(k) plan, with the matching
contribution applicable only to salary deferral contributions up to 15% covered compensation
or (ii) such other employer contribution amounts as proposed by Fulton and agreed upon by
Columbia on or before the Effective Date.
(d) For at least the required three-year period, the Fulton Employers shall adopt or
maintain a Fulton Benefit Plan that is a deferred compensation plan for the benefit of each
person who is an employee of Columbia or a Columbia Subsidiary, as of the Effective Time,
and who is eligible, as of the date hereof, to participate in any Columbia Bank deferred
compensation plans as in effect on the date hereof. Such Fulton Benefit Plan shall provide
either (i) a matching contribution equal to 50% of each participants salary deferral
contributions made under such deferred compensation plan, with the matching contribution
applicable only to salary deferral contributions up to 15% of covered compensation or (ii)
such other employer contribution amounts as proposed by Fulton and agreed upon by Columbia
on or before the Effective Date. Such Fulton Benefit Plan shall also provide for benefits
and other provisions consistent with the existing deferred compensation plans, including
continuation of the accrual of earnings (but with only the prime rate election available)
and the continuation of the death benefit provisions beyond the required three-year period,
until the applicable employee consents to an amendment thereto.
(e) For vesting and eligibility purposes for employee benefits, under each Fulton
Benefit Plan and/or any employee benefit plan established by Fulton after the Effective
Date, employees of Columbia and the Columbia Subsidiaries shall receive credit for all years
of service with Columbia and the Columbia Subsidiaries or predecessor of Columbia or the
Columbia Subsidiaries if such service was recognized by Columbia for purposes of a
comparable Columbia Benefit Plan.
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(f) Except to the extent not allowable under the terms of existing insurance contracts,
any restrictions on coverage for preexisting conditions or requirements for evidence of
insurability under a Fulton Benefit Plan that is an employee welfare benefit plan shall be
waived for the employees of Columbia and the Columbia Subsidiaries who are currently covered
for such conditions under Columbias existing insurance plans, and such employees shall
receive credit under the applicable Fulton Benefit Plan for co-payments and payments under a
deductible limit made by them and for out-of-pocket maximums applicable to them during the
plan year of the Columbia Benefit Plan in accordance with the corresponding Columbia Benefit
Plan. If the terms of an existing insurance contract do not permit a waiver of restrictions
or credit for co-payments and payments as described in the preceding sentence, Fulton agrees
to use its best efforts to negotiate such provisions with the applicable insurer and, if
Fulton is unable to obtain such provision, Fulton shall provide reasonable compensation to
such employee in respect thereof. For the purposes of the foregoing sentence, reasonable
compensation shall be deemed to be annual compensation in the amount of the premium
contribution which Fulton makes under any such insurance policy on behalf of other employees
with similar age and years of service.
Section 6.9 Insurance; Indemnification.
(a) For six (6) years after the Effective Date, Fulton shall (and The Columbia Bank
shall cooperate in these efforts) obtain and maintain tail coverage relating to Columbias
existing directors and officers liability insurance policy (provided that such insurance
shall be in such amount and with terms and conditions no less favorable than the director
and officer liability policy of Columbia as of the date of this Agreement and carry such
premium (not to exceed the greater of (i) 150% of the current premium for Columbias
existing directors and officers liability insurance policy or (ii) the applicable percentage
increase payable by Fulton during such period for its directors and officers liability
insurance policy) and that Fulton may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are substantially no less
advantageous) with respect to claims arising from facts or circumstances which occur prior
to the Effective Date (including facts or circumstances relating to this Agreement and the
transactions contemplated herein to the extent coverage therefor is available) and covering
persons who are covered by such insurance immediately prior to the Effective Date.
(b) From and after the Effective Date, Fulton shall indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof, or who becomes
prior to the Effective Date, an officer, employee, director or manager of Columbia or a
Columbia Subsidiary (the Indemnified Parties) against all losses, claims, damages, costs,
expenses (including reasonable attorneys fees), liabilities or judgments or amounts that
are paid in settlement (which settlement shall require the prior written consent of Fulton,
which consent shall not be unreasonably withheld) or in connection with any claim, action,
suit, proceeding or investigation (a Claim) in which an Indemnified Party is, or is
threatened to be made, a party or a witness based in whole or in part out of the fact that
such person is or was a director, officer or employee of
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Columbia or a Columbia Subsidiary if such Claim pertains to any matter of fact arising,
existing or occurring prior to the Effective Date (including, without limitation, the Merger
and other transactions contemplated by this Agreement) regardless of whether such Claim is
asserted or claimed prior to, at, or after the Effective Date (the Indemnified
Liabilities) to the full extent permitted under applicable law as of the date hereof or
amended prior to the Effective Date and under the Articles of Incorporation or Bylaws of
Columbia or a Columbia Subsidiary as in effect as of the date hereof (and Fulton shall pay
expenses in advance of the full disposition of any such action or proceeding to each of the
Indemnified Parties to the full extent permitted by applicable law (including the SOX Act)
and Fultons Articles of Incorporation and Bylaws). Any Indemnified Party wishing to claim
indemnification under this provision, upon learning of any Claim, shall notify Fulton (but
the failure to so notify Fulton shall not relieve Fulton from any liability which Fulton may
have under this section except to the extent Fulton is materially prejudiced thereby). In
the defense of any Claim covered by this Section 6.9(b), Fulton shall have the right to
direct the defense of such action and retain counsel of its choice; provided, however, that,
notwithstanding the foregoing, the Indemnified Parties as a group may retain a single law
firm to represent them with respect to each matter under this section if there is, under
applicable standards of professional conduct, a conflict on any significant issue between
the positions of Fulton and the Indemnified Parties (the Indemnified Parties may also retain
more than one law firm if there is, under applicable standards of professional conduct, a
conflict of any significant issues between the positions of two or more Indemnified
Parties). Fulton shall have an obligation to advance funds to satisfy an obligation of
Fulton or any successor to Fulton under this Section 6.9(b) to the same extent that Fulton
would be obligated to advance funds under the indemnification provisions of its Articles of
Incorporation and/or Bylaws.
Section 6.10 Appointment of Fulton Director. Fulton shall, on or promptly after the Effective
Date (but no later than Fultons next Board of Directors meeting following the Effective Date),
appoint to Fultons Board of Directors John M. Bond, Jr. to serve as a director of Fulton or,
subject to the reasonable approval of Fulton, such other person as may be determined by vote of
Columbias Board of Directors prior to the Effective Date. Fulton has a mandatory retirement
policy for directors who attain age 70.
Section 6.11 Continuation of The Columbia Banks Structure, Name and Directors.
(a) For a period of three (3) years after the Effective Date, Fulton shall (subject to
the right of Fulton and The Columbia Bank Continuing Directors (as defined below) to
terminate such obligations under this Section 6.11(a) under subsections (b) and (c) below)
(i) preserve the business structure of The Columbia Bank as a Maryland trust company; (ii)
preserve and use the present name of The Columbia Bank, and (iii) continue in office the
present directors of The Columbia Bank who indicate their desire to serve (the Columbia
Bank Continuing Directors), provided, that (A) prior to the Effective Time and for the
three-year period following the Effective Time, each non-employee Columbia Bank Continuing
Director shall continue to receive directors fees as
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set forth on Schedule 6.11; provided that, in the event an individual Columbia
Bank Continuing Director ceases to act as a director or as a member of any committee
thereof, the foregoing obligation to pay such fees shall apply to successors in such
positions until the expiration of such three-year period and (B) after such three-year
period, each Columbia Bank Continuing Director shall be subject to Fultons mandatory
retirement rules for directors and shall receive the standard fee paid to directors of
comparable subsidiary banks of Fulton.
(b) Fulton shall have the right to terminate its obligations under subsection (a) of
this Section 6.11 as a result of (i) regulatory requirements, (ii) safe and sound banking
practices as enunciated by bank regulatory agencies, or (iii) based upon the advice of
outside legal counsel the exercise of their fiduciary duties by Fultons directors.
(c) Notwithstanding anything herein to the contrary, The Columbia Bank Continuing
Directors, in their exercise of their fiduciary duty as to the best interests of The
Columbia Bank and Fulton, may, by a majority vote of such directors, modify or waive any or
all of the foregoing provisions in subsection (a) of this Section 6.11.
ARTICLE VII CONDITIONS PRECEDENT
Section 7.1 Common Conditions. The obligations of the parties to consummate this Agreement
shall be subject to the satisfaction of each of the following common conditions prior to or as of
the Closing, except to the extent that any such condition shall have been waived in accordance with
the provisions of Section 8.4 herein:
(a) Stockholder Approval: This Agreement shall have been duly authorized,
approved and adopted by the stockholders of Columbia in accordance with applicable law,
NASDAQ rules and regulations, the GCL and the Certificate of Incorporation of Columbia.
(b) Regulatory Approvals: The approval of each federal and state regulatory
authority having jurisdiction over the transactions contemplated by this Agreement
(including the Merger), including without limitation, the Federal Reserve Board and the
Department, shall have been obtained and all applicable waiting and notice periods shall
have expired, subject to no terms or conditions which would (i) require or could reasonably
be expected to require (A) any divestiture by Fulton of a portion of the business of Fulton,
or any subsidiary of Fulton or (B) any divestiture by Columbia or the Columbia Subsidiaries
of a portion of their businesses which Fulton in its good faith judgment believes will have
a significant and material adverse impact on the business of Columbia or the Columbia
Subsidiaries, as the case may be, or (ii) impose any condition upon Fulton or The Columbia
Bank, or their other subsidiaries, taken as a whole, which in Fultons good faith judgment
(x) would be materially burdensome to Fulton and The Fulton Subsidiaries taken as a whole, (y)
would significantly increase the costs incurred or that will be incurred by Fulton as a
result of consummating the Merger or (z) would prevent Fulton from obtaining any material
benefit contemplated by it to be attained as a result of the Merger.
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(c) Stock Listing. The shares of Fulton Common Stock to be issued in the
Merger shall have been authorized for listing on NASDAQ.
(d) Tax Opinion. Each of Fulton and Columbia shall have received an opinion of
Fultons counsel, Barley Snyder LLC, , reasonably acceptable to Fulton and Columbia,
addressed to Fulton and Columbia, with respect to federal tax laws or regulations, to the
effect that:
(i) The Merger will constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Code and Fulton and Columbia will each be a party to a
reorganization within the meaning of Section 368(b)(1) of the Code;
(ii) No gain or loss will be recognized by Fulton or Columbia by reason of the
Merger;
(iii) The bases of the assets of Columbia in the hands of Fulton will be the
same as the bases of such assets in the hands of Columbia immediately prior to the
Merger;
(iv) The holding period of the assets of Columbia in the hands of Fulton will
include the period during which such assets were held by Columbia prior to the
Merger;
(v) A holder of Columbia Common Stock who receives shares of Fulton Common
Stock in exchange for his Columbia Common Stock pursuant to the reorganization
(except with respect to cash received in lieu of fractional shares of Fulton Common
Stock deemed issued as described below) will not recognize any gain or loss upon the
exchange.
(vi) A holder of Columbia Common Stock who receives cash in lieu of a
fractional share of Fulton Common Stock will be treated as if he received a
fractional share of Fulton Common Stock pursuant to the reorganization which Fulton
then redeemed for cash. The holder of Columbia Common Stock will recognize gain or
loss on the constructive redemption of the fractional share in an amount equal to
the difference between the cash received and the adjusted basis of the fractional
share.
(vii) The tax basis of the Fulton Common Stock to be received by the
stockholders of Columbia pursuant to the terms of this Agreement will include the
holding period of the Columbia Common Stock surrendered in exchange therefor,
provided that such Columbia Common Stock is held as a capital asset at the Effective
Time.
(viii) The holding period of the shares of Fulton Common Stock to be received
by the stockholders of Columbia will include the period during which they held the shares of Columbia Common Stock surrendered, provided the shares
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of Columbia Common Stock are held as a capital asset on the date of the
exchange.
(ix) A holder of Columbia Common Stock who receives Cash Consideration and
Fulton Common Stock in exchange for his Columbia Common Stock pursuant to the
reorganization will recognize gain equal to the lesser of (a) the amount of gain
realized upon the exchange or (b) the amount of Cash Consideration received.
(x) A holder of Columbia Common Stock who receives Cash Consideration in
exchange for his Columbia Common Stock will recognized gain or less on exchange
based on the difference between the Cash Consideration received and the adjusted
basis of his Columbia Common Stock.
(e) Registration Statement: The Registration Statement (as defined in Section
6.1(b), including any amendments thereto) shall have been declared effective by the SEC; the
information contained therein shall be true, complete and correct in all material respects
as of the date of mailing of the Proxy Statement/Prospectus (as defined in Section 6.1(b))
to the stockholders of Columbia; regulatory clearance for the offering contemplated by the
Registration Statement (the Offering) shall have been received from each federal and state
regulatory authority having jurisdiction over the Offering; and no stop order shall have
been issued and no proceedings shall have been instituted or threatened by any federal or
state regulatory authority to suspend or terminate the effectiveness of the Registration
Statement or the Offering.
(f) No Suits: No action, suit or proceeding shall be pending or threatened
before any federal, state or local court or governmental authority or before any arbitration
tribunal which seeks to modify, enjoin or prohibit or otherwise adversely and materially
affect the transactions contemplated by this Agreement; provided, however,
that if Fulton agrees to defend and indemnify Columbia and The Columbia Bank and their
respective officers and directors with regard to any such action, suit or proceeding pending
or threatened against them or any of them on such specific terms and conditions as are
mutually agreeable to Columbia and Fulton, then such pending or threatened action, suit or
proceeding shall not be deemed to constitute the failure of a condition precedent to the
obligation of Columbia to consummate this Agreement.
(g) Federal and State Securities and Antitrust Laws: All applicable securities
and antitrust laws of the federal government and of any state government having jurisdiction
over the transactions contemplated by this Agreement shall have been complied with.
Section 7.2 Conditions Precedent to Obligations of Fulton. The obligations of Fulton to
consummate this Agreement shall be subject to the satisfaction of each of the following conditions
prior to or as of the Closing, except to the extent that any such condition shall have been waived
by Fulton in accordance with the provisions of Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the representations and
warranties of Columbia as set forth in this Agreement shall be true and correct in all
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material respects as of the Closing as if made on such date (or on the date to which it
relates in the case of any representation or warranty which expressly relates to an earlier
date). Solely for purposes of determining whether or not a Columbia Material Adverse Effect
has occurred for purposes of this Section 7.2(a), the exceptions set forth in Section 7.2(f)
(a) (g) and (h) shall be applied.
(b) Covenants Performed: Columbia shall have performed or complied in all
material respects with each of the covenants required by this Agreement to be performed or
complied with by it.
(c) Opinion of Counsel for Columbia: Fulton shall have received an opinion,
dated the Effective Time, from DLA Piper Rudnick Gray Cary US LLP, counsel to Columbia, in
substantially the form of Exhibit E hereto. In rendering any such opinion, such
counsel may require and, to the extent they deem necessary or appropriate may rely upon,
opinions of other counsel and upon representations made in certificates of officers of
Columbia, Fulton, affiliates of the foregoing, and others.
(d) Affiliate Agreements: Stockholders of Columbia who are or will be
affiliates of Columbia or Fulton for the purposes of the 1933 Act shall have entered into
agreements with Fulton, in form and substance satisfactory to Fulton, reasonably necessary
to assure compliance with Rule 145 under the 1933 Act.
(e) Columbia Options: As may be required by Section 2.3 herein, all holders of
Columbia Options who have not exercised such options shall have delivered documentation
reasonably satisfactory to Fulton with respect to the assumption by Fulton of the Columbia
Options and the payment of cash in cancellation of the Columbia Options as set forth in
Section 2.3.
(f) No Material Adverse Change: There shall not have been any material and
adverse change, as established by Fulton to its reasonable satisfaction, in the condition
(financial or otherwise), assets, liabilities, business, results of operations or future
prospects of Columbia and the Columbia Subsidiaries on a consolidated basis taken as a
whole, since the date of this Agreement. In particular, without limiting the generality of
the foregoing sentence, the Additional Columbia Financial Statements (as defined in Section
5.4) shall indicate that the consolidated financial condition, assets, liabilities and
results of operations of Columbia as of the respective dates reported therein do not vary
adversely in any material respect from the consolidated financial condition, assets,
liabilities and results of operations presented in Columbias Quarterly Report on Form 10-Q
for the three months ended March 31, 2005. For purposes of this Section 7.2(f), a material
and adverse change shall mean an event, change, or occurrence which, individually or
together with any other event, change, or occurrence, has a material adverse impact on (i)
the condition (financial or otherwise), assets, liabilities business, results of operations
or future prospects of Columbia or (ii) the ability of Columbia to perform its obligations
under this Agreement, provided that material and adverse change shall not be deemed to
include the impact of any of the following (nor will any of the following be taken into
account in determining whether there has been a material
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adverse change): (a) changes in law, rules, regulations, orders or other binding
directives by any Governmental Entity, including without limitation, changes in banking and
similar laws of general applicability or interpretations thereof by courts or governmental
authorities, (b) changes in GAAP or regulatory accounting principles generally applicable to
banks and their holding companies, (c) actions or omissions of Columbia taken at the
direction or behest of Fulton with the prior written consent of Fulton, including any action
or actions, individually or in the aggregate, taken by Columbia or the Columbia
Subsidiaries, (d) changes in economic conditions generally affecting financial institutions
or residential mortgage businesses, including, without limitation, changes in the general
level of interest rates, (e) the direct effects of compliance with this Agreement and of
satisfying or causing to be satisfied the conditions set forth in this Article VII on the
operating performance of Columbia, including reasonable expenses incurred by Columbia in
consummating the transactions contemplated by the Agreement, (f) changes in the relative
percentages of Columbias net income generated by The Columbia Banks commercial lending
activities and residential mortgage lending activities, (g) national or international
political or social conditions, including without limitation the engagement by the United
States in hostilities, whether or not pursuant to the declaration of a national emergency or
war, or the occurrence of any military or terrorist attack upon the United States, or any of
its territories, possessions or diplomatic or consular offices or upon any military
installation, equipment or personnel of the United States, (h) changes in financial, banking
or securities markets (including any disruption thereof and any decline in the price of any
security or market index), and (i) any existing fact, event, occurrence, or circumstance
with respect to which Fulton has knowledge as of the date hereof. At the Closing, Columbia
shall deliver to Fulton a certificate confirming the absence of a material adverse change
described herein and a certificate (from appropriate officers of Columbia or Columbias
transfer agent) as to the issued and outstanding shares of Columbia Common Stock, shares
issuable under outstanding stock options granted under Columbias Stock Option Plans and any
outstanding obligations, options or rights of any kind entitling persons to purchase or sell
any shares of Columbia Common Stock and any outstanding securities or other instruments of
any kind that are convertible into such shares.
(g) Accountants Letter. Subject to the requirements of Statement of Auditing
Standards No. 72 of the American Institute of Certified Public Accountants, KPMG LLP, or any
other accounting firm reasonably acceptable to Fulton and Columbia, shall have furnished to
Fulton an agreed upon procedures letter, dated the Effective Date, in form and substance
satisfactory to Fulton to the effect that:
(i) In their opinion, the consolidated financial statements of Columbia
examined by them and included in the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act and
the published rules and regulations thereunder; and
(ii) On the basis of limited procedures, not constituting an audit, including a
limited review of the unaudited financial statements referred to below, a limited
review of the latest available unaudited consolidated interim financial
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statements of Columbia, inspection of the minute books of Columbia and the
Columbia Subsidiaries since December 31, 2004, inquiries of officials of Columbia
and the Columbia Subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter, nothing came
to their attention that caused them to believe that:
(A) any unaudited Consolidated Balance Sheets, Consolidated Statements
of Income, Consolidated Statements of Stockholders Equity and Consolidated
Statements of Cash Flows of Columbia included in the Registration Statement
are not in conformity with GAAP applied on a basis substantially consistent
with that of the audited financial statements covered by their report
included in the Registration Statement;
(B) as of a specified date not more than five days prior to the date of
delivery of such letter, there have been any decreases in the consolidated
stockholders equity of Columbia as compared with amounts shown in the
balance sheet as of December 31, 2004 included in the Registration
Statement, except in each case for such changes, increases or decreases
which the Registration Statement discloses have occurred or may occur and
except for such changes, decreases or increases as aforesaid which are
immaterial; and
(C) for the period from January 1, 2005 to such specified date, there
were any decreases in the consolidated total net interest income,
consolidated net interest income after provision for loan losses,
consolidated other income, consolidated net income or net income per share
amounts of Columbia as compared with the comparable period of the preceding
year, except in each case for decreases which the Registration Statement
discloses have occurred or may occur, and except for such decreases which
are immaterial.
(h) Contract Employees. Each Contract Employee shall remain employed with
Columbia or The Columbia Bank other than as a result of the death or Disability (as such
term is defined in the Employment Agreements) of such Contract Employee.
(i) Closing Documents: Columbia shall have delivered to Fulton: (i) a
certificate signed by Columbias Chairman and Chief Executive Officer and by its President
and Chief Operating Officer (or other officers reasonably acceptable to Fulton) verifying
that, to their knowledge, all of the representations and warranties of Columbia set forth in
this Agreement are true and correct in all material respects as of the Closing and that
Columbia has performed in all material respects each of the covenants required to be
performed by it under this Agreement; and (ii) such other certificates and documents as
Fulton and its counsel may reasonably request (all of the foregoing certificates and other
documents being herein referred to as the Columbia Closing Documents).
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Section 7.3 Conditions Precedent to the Obligations of Columbia. The obligation of Columbia
to consummate this Agreement shall be subject to the satisfaction of each of the following
conditions prior to or as of the Closing, except to the extent that any such condition shall have
been waived by Columbia in accordance with the provisions of Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the representations and
warranties of Fulton as set forth in this Agreement shall be true and correct in all
material respects as of the Closing as if made on such date (or on the date to which it
relates in the case of any representation or warranty which expressly relates to an earlier
date). Solely for purposes of determining whether or not a Fulton Material Adverse Effect
has occurred for purposes of this Section 7.3(a), the exceptions set forth in Section 7.3(e)
(a) (d), (f) and (g) shall be applied.
(b) Covenants Performed: Fulton shall have performed or complied in all
material respects with each of the covenants required by this Agreement to be performed or
complied with by Fulton.
(c) Opinion of Counsel for Fulton: Columbia shall have received an opinion
from Barley Snyder LLC, counsel to Fulton, dated the Effective Time, in substantially the
form of Exhibit F hereto. In rendering any such opinion, such counsel may require
and, to the extent they deem necessary or appropriate may rely upon, opinions of other
counsel and upon representations made in certificates of officers of Fulton, Columbia,
affiliates of the foregoing, and others.
(d) Fulton Options: Fulton Stock Options or cash, as applicable, shall have
been substituted for the Columbia Options which have not been exercised pursuant to Section
2.3 herein. Agreements evidencing the assumption of the Columbia Options pursuant to Section
2.3 shall have been delivered and the Registration Statement for the purpose of registering
the shares necessary to satisfy Fultons obligation with respect to the issuance of Fulton
Common Stock pursuant to the exercise of the Fulton Stock Options shall have been declared
effective.
(e) No Material Adverse Change: There shall not have been any material and
adverse change, as established by Columbia to its reasonable satisfaction, in the condition
(financial or otherwise), assets, liabilities, business or results of operations or future
prospects of Fulton since the date of this Agreement. In particular, without limiting the
generality of the foregoing sentence, the Additional Fulton Financial Statements (as defined
in Section 6.3) shall indicate that the consolidated financial condition, assets,
liabilities and results of operations of Fulton as of the respective dates reported therein
do not vary adversely in any material respect from the consolidated financial condition,
assets, liabilities and results of operations presented in the Fultons Quarterly Report on
Form 10-Q for the three months ended March 31, 2005. For purposes of this Section 7.3(e), a
material and adverse change shall mean an event, change, or occurrence which, individually
or together with any other event, change, or occurrence, has a material adverse impact on
(i) the condition (financial or otherwise), assets, liabilities,
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business, results of operations or future prospects of Fulton or (ii) the ability of
Fulton to perform its obligations under this Agreement, provided that material and adverse
change shall not be deemed to include the impact of any of the following (nor will any of
the following be taken into account in determining whether there has been a material adverse
change): (a) changes in law, rules, regulations, orders or other binding directives by any
Governmental Entity, including without limitation, changes in banking and similar laws of
general applicability or interpretations thereof by courts or governmental authorities, (b)
changes in GAAP or regulatory accounting principles generally applicable to banks and their
holding companies, (c) changes in economic conditions generally affecting financial
institutions or residential mortgage businesses, including, without limitation, changes in
the general level of interest rates, and (d) the direct effects of compliance with this
Agreement and of satisfying or causing to be satisfied the conditions set forth in this
Article VII on the operating performance of Fulton, including reasonable expenses incurred
by Fulton in consummating the transactions contemplated by the Agreement, (e) changes in the
relative percentages of Fultons net income generated by Fultons commercial lending
activities and residential mortgage lending activities, (f) national or international
political or social conditions, including without limitation the engagement by the United
States in hostilities, whether or not pursuant to the declaration of a national emergency or
war, or the occurrence of any military or terrorist attack upon the United States, or any of
its territories, possessions or diplomatic or consular offices or upon any military
installation, equipment or personnel of the United States, (g) changes in financial, banking
or securities markets (including any disruption thereof and any decline in the price of any
security or market index), and (h) any existing fact, event, occurrence, or circumstance
with respect to which Columbia has Knowledge as of the date hereof. At the Closing, Fulton
shall deliver to Columbia a certificate confirming the absence of a material adverse change
described herein and a certificate (from appropriate officers of Fulton and/or Fultons
transfer agent) as to the issued and outstanding shares of Fulton Common Stock, shares of
Fulton Common Stock reserved for issuance upon the exercise of stock options, under Fultons
Employee Stock Purchase Plan, under Fultons Dividend Reinvestment Plan and under Fultons
Shareholders Rights Plan, any outstanding obligations, options or rights of any kind
entitling persons to purchase or sell any shares of Fulton Common Stock and any
outstanding securities or other instruments of any kind that are convertible into such
shares.
(f) Fairness Opinion: Columbia shall have obtained from Danielson Associates
Inc. or another independent financial advisor selected by the Board of Directors of
Columbia, an opinion dated within five (5) days of the Proxy Statement/Prospectus to be
furnished to the Board of Directors of Columbia stating that the Conversion Ratio and Cash
Consideration contemplated by this Agreement is fair to the stockholders of Columbia from a
financial point of view.
(g) Contract Employees. Each Contract Employee shall remain employed with
Columbia or The Columbia Bank other than as a result of the death or Disability (as such
term is defined in the Employment Agreements) of such Contract Employee.
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(h) Closing Documents: Fulton shall have delivered to Columbia: (i) a
certificate signed by Fultons Chairman and Chief Executive Officer (or other officer
reasonably acceptable to Columbia) verifying that, to their knowledge, all of the
representations and warranties of Fulton set forth in this Agreement are true and correct in
all material respects as of the Closing and that Fulton has performed in all material
respects each of the covenants required to be performed by Fulton; and (ii) such other
certificates and documents as Columbia and its counsel may reasonably request (all of the
foregoing certificates and documents being herein referred to as the Fulton Closing
Documents).
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any time before the Effective
Time (whether before or after the authorization, approval and adoption of this Agreement by the
stockholders of Columbia) as follows:
(a) Mutual Consent: This Agreement may be terminated by mutual consent of the
parties upon the affirmative vote of a majority of each of the Boards of Directors of
Columbia and Fulton, followed by written notices given to the other party.
(b) Unilateral Action by Fulton: This Agreement may be terminated unilaterally
by the affirmative vote of the Board of Directors of Fulton, followed by written notice
given promptly to Columbia, if: (i) there has been a material breach by Columbia of any
material representation or warranty or material failure by Columbia to comply with any
material covenant set forth in this Agreement and such breach has not been cured within
thirty (30) days after written notice of such breach has been given by Fulton to Columbia;
(ii) any condition precedent to Fultons obligations as set forth in Article VII of this
Agreement remains unsatisfied, through no fault of Fulton or unless any such condition
remains unsatisfied primarily as a result of Fulton breaching any of its representations,
warranties or covenants in this Agreement, on June 30, 2006; provided, that such date may be
extended until September 30, 2006 by Columbia by written notice to Fulton (given not later
than June 30, 2006) if the Closing shall not have occurred because of failure to obtain
approval from one or more regulatory authorities whose approval is required in connection
with this Agreement; or (iii) Fultons Board of Directors makes an election provided for in
Section 5.7(e)(i) herein.
(c) Unilateral Action By Columbia: This Agreement may be terminated
unilaterally by the affirmative vote of a majority of the Board of Directors of Columbia,
followed by written notice given promptly to Fulton, if: (i) there has been a material
breach by Fulton of any material representation, or warranty or material failure by Fulton
to comply with any covenant set forth in this Agreement and such breach has not been cured
within thirty (30) days after written notice of such breach has been given by Columbia to
Fulton; (ii) any condition precedent to Columbias obligations as set forth in Article VII
of this Agreement remains unsatisfied, through no fault of Columbia or unless any such
condition remains unsatisfied primarily as a result of Columbia breaching any of its
representations, warranties or covenants in this Agreement, on June 30, 2006;
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provided, that such date may be extended until September 30, 2006 by Fulton by written
notice to Columbia (given not later than June 30, 2006) if the Closing shall not have
occurred because of failure to obtain approval from one or more regulatory authorities whose
approval is required in connection with this Agreement; (iii) Columbias Board of Directors
makes an election provided for in, and subject to the conditions of, Section 5.7(e)(ii)
herein, (iv) the fairness opinion described in Section 7.3(f) is withdrawn; (v) the
stockholders of Columbia do not approve the Merger at a stockholders meeting called for such
purpose or (vi) based on the Closing Market Price as follows:
(i) Subject to the provisions of subparagraph (B) below, Columbia shall have
the right to terminate this Agreement, through a resolution adopted by its Board of
Directors, if the Closing Market Price is less than both (I) $14.79, i.e., eighty
percent (80%) of the Starting Price (the Floor Price) and (II) the amount per
share equal to (x) the Starting Price multiplied by (y) .80 multiplied by (z) the
quotient of the Average NASDAQ Bank Index for the Price Determination Period (the
numerator) over the NASDAQ Bank Index on the Pre-Announcement Date (the
denominator).
(ii) In the event the conditions in (A) above allowing Columbia to terminate
the Agreement are satisfied and Columbia makes such election, Fulton, through a
resolution adopted by its Board of Directors, shall have the option to cause
Columbia to amend this Agreement (and, upon such amendment, Columbia shall not have
the right to terminate this Agreement) to increase the Conversion Ratio to a level,
calculated to four decimal places, equal to the Conversion Ratio multiplied by the
quotient of the Floor Price (the numerator) over the Closing Market Price (the
denominator). For example, if the Closing Market Price is $14.00 and the Floor Price
is $14.79, Parent would have the option to increase the Exchange Ratio to 2.4562
(2.325x $14.79/$14.00) in lieu of terminating this Agreement.
(iii) For purposes of this Section 8.1(c), (I) Pre-Announcement Date shall
mean July 26, 2005, and (II) Starting Price shall mean $18.49.
(iv) The Starting Price, the Closing Market Price, the Floor Price and the
other amounts above shall be appropriately adjusted for an event described in the
definition of Fulton Stock Consideration in Section 2.1(b) herein.
Section 8.2 Effect of Termination.
(a) Effect. In the event of a permitted termination of this Agreement under
Section 8.1 herein, the Agreement shall become null and void and the transactions
contemplated herein shall thereupon be abandoned, except that the provisions relating to
limited liability and confidentiality set forth in Sections 8.2(b) and 8.2(c) herein shall
survive such termination.
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(b) Limited Liability. Subject to the terms of the Warrant Agreement and the
Warrant, the termination of this Agreement in accordance with the terms of Section 8.1
herein shall create no liability on the part of either party, or on the part of either
partys directors, officers, stockholders, agents or representatives, except that if this
Agreement is terminated by Fulton by reason of a material breach by Columbia, or if this
Agreement is terminated by Columbia by reason of a material breach by Fulton, and such
breach involves an intentional, willful or grossly negligent misrepresentation or breach of
covenant, the breaching party (i.e., Fulton or Columbia) shall be liable to the nonbreaching
party for all costs and expenses reasonably incurred by the nonbreaching party in connection
with the preparation, execution and attempted consummation of this Agreement, including the
reasonable fees of its counsel, accountants, consultants and other advisors and
representatives. In no event shall either partys directors, officers, stockholders, agents
or representatives have any personal liability for any misrepresentation or breach in
connection with this Agreement.
(c) Confidentiality. In the event of a termination of this Agreement, neither
Fulton nor Columbia nor The Columbia Bank shall use or disclose to any other person any
confidential information obtained by it during the course of its investigation of the other
party or parties, except as may be necessary in order to establish the liability of the
other party or parties for breach as contemplated under Section 8.2(b) herein.
Section 8.3 Amendment. To the extent permitted by law, this Agreement may be amended at any
time before the Effective Time (whether before or after the authorization, approval and adoption of
this Agreement by the stockholders of Columbia), but only by a written instrument duly authorized,
executed and delivered by Fulton and by Columbia; provided, however, that any amendment to the
provisions of Section 2.1 herein relating to the consideration to be received by the former
stockholders of Columbia in exchange for their shares of Columbia Common Stock shall not take
effect until such amendment has been approved, adopted or ratified by the stockholders of Columbia
in accordance with applicable provisions of the GCL.
Section 8.4 Waiver. Any term or condition of this Agreement may be waived, to the extent
permitted by applicable federal and state law, by the party or parties entitled to the benefit
thereof at any time before the Effective Time (whether before or after the authorization, approval
and adoption of this Agreement by the stockholders of Columbia) by a written instrument duly
authorized, executed and delivered by such party or parties.
ARTICLE IX CLOSING AND EFFECTIVE TIME
Section 9.1 Closing. Provided that all conditions precedent set forth in Article VII of this
Agreement shall have been satisfied or shall have been waived in accordance with Section 8.4 of
this Agreement, the parties shall hold a closing (the Closing) at the offices of Fulton at One
Penn Square, Lancaster, Pennsylvania, no later than thirty (30) days after the receipt of all
required regulatory and stockholder approvals and after the expiration of all applicable waiting
periods on a specific date to be agreed upon by the parties, at which time the parties shall
deliver the Columbia Closing Documents, the Fulton Closing Documents, the opinions of counsel
required by Sections 7.1(d), 7.2(c) and 7.3(c) herein, and such other
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documents and instruments as may be necessary or appropriate to effectuate the purposes of
this Agreement.
Section 9.2 Effective Time. Immediately following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VIII hereof, Fulton and Columbia
will cause Articles of Merger (the Articles of Merger) to be delivered and properly filed with
the Department of State of the Commonwealth of Pennsylvania (the Department of State) and the
State Department of Assessments and Taxation of the State of Maryland (the Department of
Assessments and Taxation and, with the Department of State, the Filing Offices). The Merger
shall become effective at 11:59 p.m. (or such other time as the parties may agree) on the day on
which the Closing occurs and Articles of Merger are filed with the Filing Offices or such later
date and time as may be specified in the Articles of Merger (the Effective Time). The Effective
Date when used herein means the day on which the Effective Time occurs.
ARTICLE X NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 10.1 No Survival. The representations and warranties of Columbia and of Fulton set
forth in this Agreement shall expire and be terminated on the Effective Time by consummation of
this Agreement, and no such representation or warranty shall thereafter survive. Except with
respect to the agreements of the parties which by their terms are intended to be performed either
in whole or in part after the Effective Time, the agreements of the parties set forth in this
Agreement shall not survive the Effective Time, and shall be terminated and extinguished at the
Effective Time, and from and after the Effective Time none of the parties hereto shall have any
liability to the other on account of any breach of such agreements.
ARTICLE XI GENERAL PROVISIONS
Section 11.1 Expenses. Except as provided in Section 8.2(b) herein, each party shall pay its
own expenses incurred in connection with this Agreement and the consummation of the transactions
contemplated herein. For purposes of this Section 11.1 herein, the cost of printing the Proxy
Statement/Prospectus shall be deemed to be an expense of Fulton.
Section 11.2 Other Mergers and Acquisitions. Subject to the right of Columbia to refuse to
consummate this Agreement pursuant to Section 8.1(c)(i) herein by reason of a material breach by
Fulton of the warranty and representation set forth in Section 4.7 herein, nothing set forth in
this Agreement shall be construed: (i) to preclude Fulton from acquiring, or to limit in any way
the right of Fulton to acquire, prior to or following the Effective Time, the stock or assets of
any other financial services institution or other corporation or entity, whether by issuance or
exchange of Fulton Common Stock or otherwise; (ii) to preclude Fulton from issuing, or to limit in
any way the right of Fulton to issue, prior to or following the Effective Time, Fulton Common
Stock, Fulton Preferred Stock or any other equity or debt securities; or (iii) to preclude Fulton
from taking, or to limit in any way the right of Fulton to take, any other action not expressly and
specifically prohibited by the terms of this Agreement.
Section 11.3 Notices. All notices, claims, requests, demands and other communications which
are required or permitted to be given under this Agreement shall be in
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writing and shall be deemed to have been duly delivered if delivered in person, transmitted by
telegraph or facsimile machine (but only if receipt is acknowledged in writing), or mailed by
registered or certified mail, return receipt requested, as follows:
(a) If to Fulton, to:
Rufus A. Fulton, Jr., Chairman and Chief Executive Officer
Fulton Financial Corporation
One Penn Square, P.O. Box 4887
Lancaster, Pennsylvania 17604
With a copy to:
Paul G. Mattaini, Esquire
Barley Snyder LLC
126 East King Street
Lancaster, Pennsylvania 17602
(b) If to Columbia, to:
John M. Bond, Jr.
Chairman and Chief Executive Officer
Columbia Bancorp
7168 Columbia Gateway Drive
Columbia, Maryland 21046
With a copy to:
Jason C. Harmon, Esquire
DLA Piper Rudnick Gray Cary US LLP
6225 Smith Avenue
Baltimore, Maryland 21209-3600
Section 11.4 Counterparts. This Agreement may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all such counterparts together shall
be deemed to be one and the same instrument.
Section 11.5 Governing Law. This Agreement shall be deemed to have been made in, and shall be
governed by and construed in accordance with the substantive laws of, the Commonwealth of
Pennsylvania, except to the extent that the GCL or federal law specifically applies to the Merger
and the transactions contemplated thereby.
Section 11.6 Parties in Interest. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns and legal representatives;
provided, however, that neither party may assign its rights or delegate its duties
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under this Agreement without the prior written consent of the other party (which consent may
be withheld in such other partys sole and absolute discretion). Other than the right to receive
the consideration payable as a result of the Merger pursuant to Article II hereof and the
provisions of Section 3.17 with respect to the Contract Employees and the provisions of Section 6.9
with respect to Columbias directors, this Agreement is not intended to and shall not confer upon
any other person any rights, benefits or remedies of any nature whatsoever under or by reason of
this Agreement.
Section 11.7 Disclosure Schedules. The inclusion of a given item in a disclosure schedule
annexed to this Agreement shall not be deemed a conclusion or admission that such item (or any
other item) is material or is a material and adverse change. Information disclosed for one section
shall constitute disclosure for other sections whether or not specifically referenced.
Section 11.8 Entire Agreement. This Agreement (including the Schedules and Exhibits hereto),
together with the Warrant Agreement and the Warrant being executed by the parties on the date
hereof, sets forth the entire understanding and agreement of the parties hereto and supersedes any
and all prior agreements, arrangements and understandings, whether oral or written, relating to the
subject matter hereof and thereof.
Section 11.9 Definitions
Definitions of the following capitalized terms used in this Agreement are set forth in the
following sections:
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1933 Act
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Section 2.2(f)(iii) |
1934 Act
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Section 2.9 |
Acquisition Proposal
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Section 5.7(f)(i) |
Additional Fulton Financial Statements
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Section 6.3 |
Additional Columbia Financial Statements
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Section 5.4 |
Aggregate Cash Election Percentage
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Section 2.2(b)(iii)(C) |
Aggregate Cash Elections
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Section 2.2(b)(iii) |
Aggregate Stock Election Percentage
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Section 2.2(b)(iv)(C) |
Aggregate Stock Elections
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Section 2.2(b)(iii) |
Articles of Merger
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Section 9.2 |
Bankruptcy and Equity Exceptions
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Section 3.1 |
BCL
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Section 1.1 |
BHC Act
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Background |
Cash Consideration
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Section 2.1(b) |
Cash Election
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Section 2.2(a)(i) |
Cash/Stock Election
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Section 2.2(a)(i) |
Cash Test Amount
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Section 2.1(b) |
Claim
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Section 6.9(b) |
Closing
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Section 9.1 |
Closing Market Price
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Section 2.1(e) |
Code
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Section 2.3(b) |
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Columbia
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Introduction |
Columbia Balance Sheet
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Section 3.6(a) |
Columbia Bank Common Stock
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Section 3.4 |
Columbia Bank Continuing Directors
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Section 6.11(a) |
Columbia Benefit Plans
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Section 3.18 |
Columbia Closing Documents
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Section 7.2(i) |
Columbia Common Stock
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Background |
Columbia Material Adverse Effect
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Section 3.8 |
Columbia Options
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Section 2.3(a) |
Columbia Pension Plan
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Section 3.18 |
Columbia SEC Reports
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Section 3.6(e) |
Columbia Share
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Section 2.1(a) |
Columbia Stock Option Plans
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Section 2.3(a) |
Columbia Subsidiaries
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Background |
Columbia Subsidiaries Common Equity
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Section 3.4 |
Columbia Trust Preferred Securities
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Background |
Contract Employees
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Section 3.17 |
Conversion Ratio
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Section 2.1(b) |
Department
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Section 3.25 |
Department of Assessments and Taxation
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Section 9.2 |
Department of State
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Section 9.2 |
EDGAR
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Section 3.6(e) |
Effective Date
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Section 9.2 |
Effective Time
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Section 9.2 |
Employment Agreements
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Section 3.17 |
Employment Obligation
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Section 3.17 |
Election
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Section 2.2(a)(i) |
Election Deadline
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Section 2.2(a)(iv) |
ERISA
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Section 3.18 |
Exchange Agent
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Section 2.2(a)(iv) |
FDI Act
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Section 3.2 |
FDIC
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Section 3.25 |
Filed Fulton SEC Reports
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Section 4.6(e) |
Filed Columbia SEC Reports
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Section 3.6(e) |
Filing Offices
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Section 9.2 |
Floor Price
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Section 8.1(c)(i) |
Form of Election
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Section 2.2(a)(ii) |
FRB
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Section 3.25 |
Fulton
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Introduction |
Fulton Balance Sheet
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Section 4.6(a) |
Fulton Benefit Plan
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Section 4.13 |
Fulton Closing Documents
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Section 7.3(h) |
Fulton Common Stock
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Background |
Fulton Employers
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Section 6.8(a) |
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Fulton Material Adverse Effect
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Section 4.8 |
Fulton Material Contracts
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Section 4.21 |
Fulton Pension Plans
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Section 4.13 |
Fulton Preferred Stock
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Section 4.3 |
Fulton Rights
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Section 2.1(b) |
Fulton Rights Agreement
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Section 2.1(b) |
Fulton SEC Reports
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Section 4.6(e) |
Fulton Share Value
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Section 2.1(b) |
Fulton Stock Consideration
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Section 2.1(b) |
Fulton Stock Option
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Section 2.3(a) |
Fulton Subsidiaries
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Section 4.5 |
GAAP
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Section 3.6(a) |
GCL
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Section 1.1 |
Governmental Entity
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Section 3.13 |
Indemnified Liabilities
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Section 6.9(b) |
Indemnified Parties
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Section 6.9(b) |
IRS
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Section 3.10 |
Knowledge of Columbia or The Columbia Bank,
Knowledge of Columbia and the Columbia Subsidiaries
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Section 3.13 |
Letter of Transmittal
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Section 2.2(e) |
Material Contracts
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Section 3.12(a) |
Maximum Cash Percentage
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Section 2.2(b)(i) |
Merger
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Background |
Merger Consideration
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Section 2.1(a) |
Minimum Cash Percentage
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Section 2.2(b)(i) |
NASDAQ
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Section 2.1(e) |
Non-Electing Shares
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Section 2.2(b)(vi) |
Offering
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Section 7.1(e) |
Ordinary Course of Business
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Section 3.7 |
Ordinary Course of Business of Fulton
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Section 4.7 |
Outstanding Shares
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Section 2.1(b) |
PBGC
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Section 4.13 |
Pennsylvania Department
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Section 4.23 |
Pre-Announcement Date
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Section 8.1(c)(iii) |
Price Determination Period
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Section 2.1(e) |
Pro-rated Cash Percentage
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Section 2.2(b)(iii)(C) |
Pro-rated Stock Percentage
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Section 2.2(b)(iv)(C) |
Proxy Statement/Prospectus
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Section 6.1(b) |
Registration Statement
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Section 6.1(b) |
Remaining Cash Percentage
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Section 2.2(b)(iv)(C) |
Remaining Stock Percentage
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Section 2.2(b)(iii)(C) |
SEC
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Section 2.2(a)(iv) |
SOX Act
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Section 3.6(c) |
Starting Price
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Section 8.1(c)(iii) |
Stock Election
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Section 2.2(a)(i) |
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Stock Test Amount
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Section 2.1(b) |
Superior Proposal
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Section 5.7(f)(ii) |
Surviving Corporation
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Section 1.1 |
The Columbia Bank
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Background |
Unclaimed Shares
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Section 2.2(f)(iii) |
Voting Agreements
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Background |
Warrant
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Background |
Warrant Agreement
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Background |
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly
authorized officers all as of the day and year first above written.
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Fulton Financial Corporation |
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By: |
/s/ RUFUS A. FULTON, JR. |
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Rufus A. Fulton, Jr.
Chairman and Chief Executive Officer |
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Attest: |
/s/ GEORGE R. BARR, JR. |
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George R. Barr, Jr.
Secretary |
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Columbia Bancorp |
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By: |
/s/ JOHN M. BOND, JR. |
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John M. Bond, Jr.
Chairman and Chief Executive Officer |
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Attest: |
/s/ SIBYL S. MALATRAS |
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Sibyl S. Malatras |
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Secretary |
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EXHIBIT B
AMENDED AND RESTATED WARRANT AGREEMENT AND WARRANT
EXHIBIT B
AMENDED
AND RESTATED
WARRANT AGREEMENT
THIS
AMENDED AND RESTATED WARRANT AGREEMENT is made as of August 5, 2005, by and between Fulton Financial
Corporation, a Pennsylvania corporation (Fulton) and Columbia Bancorp, a Maryland corporation
(Columbia).
W I T N E S S E T H:
WHEREAS, Fulton and Columbia have entered into an Agreement and Plan of Merger, dated July 26,
2005 (the Merger Agreement); and
WHEREAS, in connection with Fultons entry into the Merger Agreement and in consideration of
such entry, Columbia issued to Fulton a
warrant entitling Fulton to purchase up to an aggregate of 1,881,809 shares of Columbias common
stock, $.01 par value per share (the Common Stock);
WHEREAS,
the parties desire to amend and restate the original Agreement to add
a new Section 11 (the original Agreement, as amended, is
referred to as this "Agreement").
NOW, THEREFORE, in consideration of the execution of the Merger Agreement and the premises
herein contained, and intending to be legally bound, Fulton and Columbia agree as follows:
1. Issuance of Warrant. Concurrently with the execution of this Agreement, Columbia
shall issue to Fulton a warrant in the form attached as Exhibit A hereto (the Warrant, which term
as used herein shall include any warrant or warrants issued upon transfer or exchange of the
original Warrant) to purchase up to 1,881,809 shares of Common Stock, subject to adjustment as
provided in this Agreement and in the Warrant. The Warrant shall be exercisable at a purchase
price of $37.26 per share, subject to adjustment as provided in the Warrant (the Exercise Price).
So long as the Warrant is outstanding and unexercised, Columbia shall at all times maintain and
reserve, free from preemptive rights, such number of authorized but unissued shares of Common Stock
as may be necessary so that the Warrant may be exercised, without any additional authorization of
Common Stock, after giving effect to all other options, warrants, convertible securities and other
rights to acquire shares of Common Stock. Columbia represents and warrants that it has duly
authorized the execution and delivery of the Warrant and this Agreement and the issuance of Common
Stock upon exercise of the Warrant. Columbia covenants that the shares of Common Stock issuable
upon exercise of the Warrant shall be, when so issued, duly authorized, validly issued, fully paid
and nonassessable and subject to no preemptive rights. The Warrant and the shares of Common Stock
to be issued upon exercise of the Warrant are hereinafter collectively referred to, from time to
time, as the Securities. So long as the Warrant is owned by Fulton, the Warrant will in no event
be exercised for more than that number of shares of Common Stock equal to 1,881,809 (subject to
adjustment as provided in the Warrant) less the number of shares of Common Stock at the time owned
by Fulton.
2. Assignment, Transfer, or Exercise of Warrant. Fulton will not sell, assign,
transfer or exercise the Warrant, in whole or in part, without the prior written consent of
Columbia except upon or after the occurrence of any of the following: (i) a breach of any
representation,
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warranty, or covenant set forth in the Merger Agreement by Columbia which would permit a
termination of the Merger Agreement by Fulton pursuant to Section 8.1(b)(i) thereof following an
offer or filing described in subparagraph (iv) below; (ii) the failure of Columbias stockholders
to approve the Merger Agreement at a meeting called for such purpose if at the time of such meeting
there has been an announcement by any Person (other than Fulton) of an offer or proposal to acquire
25% or more of the Common Stock (before giving effect to any exercise of the Warrant), or to
acquire, merge or consolidate with Columbia, or to purchase all or substantially all of Columbias
assets (including, without limitation, any shares of any subsidiary of Columbia or all or
substantially all of any such subsidiarys assets) and, within ten business days after such
announcement, the Board of Directors of Columbia either fails to recommend against acceptance of
such offer by Columbias stockholders or takes no position with respect thereto; (iii) the
acquisition by any Person of Beneficial Ownership of 25% or more of the Common Stock (before giving
effect to any exercise of the Warrant); (iv) any Person (other than Fulton) shall have commenced a
tender or exchange offer, or shall have filed an application with an appropriate bank regulatory
authority with respect to a publicly announced offer, to purchase or acquire securities of Columbia
such that, upon consummation of such offer, such Person would have Beneficial Ownership of 25% or
more of the Common Stock (before giving effect to any exercise of the Warrant) and, within 12
months from such offer or filing, such person consummates an acquisition described in subparagraph
(iii) above; (v) Columbia shall have entered into an agreement, letter of intent or other
understanding (except for a confidentiality agreement which would be permitted by Section 5.7(a)(x)
of the Merger Agreement) with any Person (other than Fulton) providing for such Person (A) to
acquire, merge, consolidate or enter into a statutory share exchange with Columbia or to purchase
all or substantially all of Columbias assets (including without limitation any shares of any
subsidiary of Columbia or all or substantially all of any such subsidiarys assets); or (B) to
negotiate with Columbia with respect to any of the events or transactions mentioned in the
preceding clause (A) except for those negotiations which would be permitted by Section 5.7(a)(y) of
the Merger Agreement; or (vi) termination, or attempted termination, of the Merger Agreement by
Columbia under Section 8.1(c)(iii) of the Merger Agreement. As used in this Paragraph 2, the terms
Beneficial Ownership and Person shall have the respective meanings set forth in Paragraph 7(f).
The Warrant shall terminate in accordance with its terms.
3. Registration Rights. If, at any time within two years after the Warrant may be
exercised or sold, Columbia shall receive a written request therefor from Fulton, Columbia shall
prepare and file a shelf registration statement (the Registration Statement) under the Securities
Act of 1933, as amended (the Securities Act), covering the Warrant (provided that no such
registration shall be required with respect to the Warrant following the termination of the Warrant
in accordance with its terms) and/or the Common Stock issued or issuable upon exercise of the
Warrant (the Securities), and shall use its best efforts to cause the Registration Statement to
become effective and remain current for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to affect such sale
or other disposition. Without the prior written consent of Fulton, neither Columbia nor any other
holder of securities of Columbia may include such securities in the Registration Statement.
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4. Duties of Columbia upon Registration. If and whenever Columbia is required by the
provisions of Paragraph 3 of this Agreement to effect the registration of any of the Securities
under the Securities Act, Columbia shall:
(a) prepare and file with the Securities and Exchange Commission (the SEC) such amendments
to the Registration Statement and supplements to the prospectus contained therein as may be
necessary to keep the Registration Statement effective and current;
(b) furnish to Fulton and to the underwriters of the Securities being registered such
reasonable number of copies of the Registration Statement, the preliminary prospectus and final
prospectus contained therein, and such other documents as Fulton or such underwriters may
reasonably request in order to facilitate the public offering of the Securities;
(c) use its best efforts to register or qualify the Securities covered by the Registration
Statement under the state securities or blue sky laws of such jurisdictions as Fulton or such
underwriters may reasonably request;
(d) notify Fulton, promptly after Columbia shall receive notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment to any prospectus
forming a part of the Registration Statement has been filed;
(e) notify Fulton promptly of any request by the SEC for the amending or supplementing of the
Registration Statement or the prospectus contained therein, or for additional information;
(f) prepare and file with the SEC, promptly upon the request of Fulton, any amendments or
supplements to the Registration Statement or the prospectus contained therein which, in the opinion
of counsel for Fulton, are required under the Securities Act or the rules and regulations
promulgated by the SEC thereunder in connection with the public offering of the Securities;
(g) prepare and promptly file with the SEC such amendments of or supplements to the
Registration Statement or the prospectus contained therein as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such Securities is required
to be delivered under the Securities Act, any event shall have occurred as the result of which such
prospectus as then in effect would include an untrue statement of a material fact or would omit to
state any material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading;
(h) advise Fulton, promptly after Columbia shall receive notice or obtain knowledge of the
issuance of any stop order by the SEC suspending the effectiveness of the Registration Statement,
or the initiation or threatening of any proceeding for that purpose, and promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order
should be issued; and
(i) at the request of Fulton, furnish on the date or dates provided for in the underwriting
agreement: (i) an opinion or opinions of counsel for Columbia for the purposes of
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such registration, addressed to the underwriters and to Fulton, covering such matters as such
underwriters and Fulton may reasonably request and as are customarily covered by issuers counsel
at that time; and (ii) a letter or letters from the independent accountants for Columbia, addressed
to the underwriters and to Fulton, covering such matters as such underwriters or Fulton may
reasonably request, in which letters such accountants shall state (without limiting the generality
of the foregoing) that they are independent accountants within the meaning of the Securities Act
and that, in the opinion of such accountants, the financial statements and other financial data of
Columbia included in the Registration Statement or any amendment or supplement thereto comply in
all material respects with the applicable accounting requirements of the Securities Act.
5. Expenses of Registration. With respect to the registration requested pursuant to
Paragraph 3 of this Agreement, (a) Columbia shall bear all registration, filing and NASD fees,
printing and engraving expenses, fees and disbursements of its counsel and accountants and all
legal fees and disbursements and other expenses of Columbia to comply with state securities or blue
sky laws of any jurisdictions in which the Securities to be offered are to be registered or
qualified; and (b) Fulton shall bear all fees and disbursements of its counsel and accountants,
underwriting discounts and commissions, transfer taxes for Fulton and any other expenses incurred
by Fulton.
6. Indemnification. In connection with any Registration Statement or any amendment or
supplement thereto:
(a) Columbia shall indemnify and hold harmless Fulton, any underwriter (as defined in the
Securities Act) for Fulton, and each person, if any, who controls Fulton or such underwriter
(within the meaning of the Securities Act) from and against any and all loss, damage, liability,
cost or expense to which Fulton or any such underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such loss, damage, liability, cost or expense
arises out of or is caused by any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any prospectus or preliminary prospectus contained therein
or any amendment or supplement thereto, or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were made, not
misleading; provided, however, that Columbia will not be liable in any such case to the extent that
any such loss, damage, liability, cost or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in conformity with
information furnished by Fulton, such underwriter or such controlling person in writing
specifically for use in the preparation thereof.
(b) Fulton shall indemnify and hold harmless Columbia, any underwriter (as defined in the
Securities Act), and each person, if any, who controls Columbia or such underwriter (within the
meaning of the Securities Act) from and against any and all loss, damage, liability, cost or
expense to which Columbia or any such underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such loss, damage, liability, cost or expense arises
out of or is caused by any untrue or alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus or preliminary prospectus contained
B-4
therein or any amendment or supplement thereto, or arises out of or is based upon the omission
or the alleged omission to state therein a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in reliance upon and in
conformity with written information furnished by Fulton specifically for use in the preparation
thereof.
(c) Promptly after receipt by any party which is entitled to be indemnified, pursuant to the
provisions of subparagraph (a) or (b) of this Paragraph 6, of any claim in writing or of notice of
the commencement of any action involving the subject matter of the foregoing indemnity provisions,
such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to the provisions of subparagraph (a) or (b) of this Paragraph 6, promptly notify
the indemnifying party of the receipt of such claim or notice of the commencement of such action,
but the omission to so notify the indemnifying party will not relieve it from any liability which
it may otherwise have to any indemnified party hereunder. In case any such action is brought
against any indemnified party and it notifies the indemnifying party of the commencement thereof,
the indemnifying party shall have the right to participate in and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if the defendants in any
action include both the indemnified party or parties and the indemnifying party and there is a
conflict of interest which would prevent counsel for the indemnifying party from also representing
any indemnified party, such indemnified party shall have the right to select separate counsel to
participate in the defense of such indemnified party. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party, pursuant to the provisions of subparagraph (a) or (b)
of this Paragraph 6, for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof, other than reasonable costs of investigation, unless
(i) such indemnified party shall have employed separate counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed counsel satisfactory
to the indemnified party to represent the indemnified party within a reasonable time after the
notice of the commencement of the action, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the indemnifying party.
(d) If recovery is not available under the foregoing indemnification provisions, for any
reason other than as specified therein, any party entitled to indemnification by the terms thereof
shall be entitled to obtain contribution with respect to its liabilities and expenses, except to
the extent that contribution is not permitted under Section 11(f) of the Securities Act. In
determining the amount of contribution to which the respective parties are entitled there shall be
considered the parties relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and/or prevent any statement or
omission, and any other equitable considerations appropriate under the circumstances. Fulton and
Columbia agree that it would not be equitable if the amount of such contribution were determined by
pro rata or per capita allocation even if the underwriters and Fulton as a group were considered a
single entity for such purpose.
B-5
7. Redemption and Repurchase Rights.
(a) From and after the date on which any event described in Paragraph 2 of this Agreement
occurs which permits the exercise of the Warrant, the Holder as defined in the Warrant (which shall
include a former Holder), who has exercised the Warrant in whole or in part shall have the right to
require Columbia to redeem some or all of the shares of Common Stock for which the Warrant was
exercised at a redemption price per share (the Redemption Price) equal to the highest of: (i)
110% of the Exercise Price, (ii) the highest price paid or agreed to be paid for any share of
Common Stock by an Acquiring Person (as defined below) during the one year period immediately
preceding the date of redemption, and (iii) in the event of a sale of all or substantially all of
Columbias assets or all or substantially all of a subsidiary of Columbias assets: (x) the sum of
the price paid in such sale for such assets and the current market value of the remaining assets of
Columbia as determined by a recognized investment banking firm selected by such Holder, divided by
(y) the number of shares of Common Stock then outstanding. If the price paid consists in whole or
in part of securities or assets other than cash, the value of such securities or assets shall be
their then current market value as determined by a recognized investment banking firm selected by
the Holder and reasonably acceptable to Columbia.
(b) From and after the date on which any event described in Paragraph 2 of this Agreement
occurs which permits the exercise of the Warrant, the Holder as defined in the Warrant (which shall
include a former Holder), shall have the right to require Columbia to repurchase all or any portion
of the Warrant at a price (the Warrant Repurchase Price) equal to the product obtained by
multiplying: (i) the number of shares of Common Stock represented by the portion of the Warrant
that the Holder is requiring Columbia to repurchase, times (ii) the excess of the Redemption Price
over the Exercise Price.
(c) The Holders right, pursuant to this Paragraph 7, to require Columbia to repurchase a
portion or all of the Warrant, and/or to require Columbia to redeem some or all of the shares of
Common Stock for which the Warrant was exercised, shall expire on the close of business on the 60th
day following the occurrence of any event described in Paragraph 2 which permits the exercise of
the Warrant.
(d) The Holder may exercise its right, pursuant to this Paragraph 7, to require Columbia to
repurchase all or a portion of the Warrant, and/or to require Columbia to redeem some or all of the
shares of Common Stock for which the Warrant was exercised, by surrendering for such purpose to
Columbia, at its principal office within the time period specified in the preceding subparagraph,
the Warrant and/or a certificate or certificates representing the number of shares to be redeemed
accompanied by a written notice stating that it elects to require Columbia to repurchase the
Warrant or a portion thereof and/or to redeem all or a specified number of such shares in
accordance with the provisions of this Paragraph 7. As promptly as practicable, and in any event
within five business days after the surrender of the Warrant and/or such certificates and the
receipt of such notice relating thereto, Columbia shall deliver or cause to be delivered to the
Holder: (i) the applicable Redemption Price (in immediately available funds) for the shares of
Common Stock which it is not then prohibited under applicable law or regulation from redeeming,
and/or (ii) the applicable Warrant Repurchase Price, and/or (iii) if the
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Holder has given Columbia notice that less than the whole Warrant is to be repurchased and/or
less than the full number of shares of Common Stock evidenced by the surrendered certificate or
certificates are to be redeemed, a new certificate or certificates, of like tenor, for the number
of shares of Common Stock evidenced by such surrendered certificate or certificates less the number
shares of Common Stock redeemed and/or a new Warrant reflecting the fact that only a portion of the
Warrant was repurchased.
(e) To the extent that Columbia is prohibited under applicable law or regulation, or as a
result of administrative or judicial action, from repurchasing the Warrant and/or redeeming the
Common Stock as to which the Holder has given notice of repurchase and/or redemption, Columbia
shall immediately so notify the Holder and thereafter deliver or cause to be delivered, from time
to time to the Holder, the portion of the Warrant Repurchase Price and/or the Redemption Price
which it is no longer prohibited from delivering, within five business days after the date on which
Columbia is no longer so prohibited; provided, however, that to the extent that Columbia is at the
time and after the expiration of 25 months, so prohibited from delivering the Warrant Repurchase
Price and/or the Redemption Price, in full (and Columbia hereby undertakes to use its best efforts
to obtain all required regulatory and legal approvals as promptly as practicable), Columbia shall
deliver to the Holder a new Warrant (expiring one year after delivery) evidencing the right of the
Holder to purchase that number of shares of Common Stock representing the portion of the Warrant
which Columbia is then so prohibited from repurchasing, and/or Columbia shall deliver to the Holder
a certificate for the shares of Common Stock which Columbia is then so prohibited from redeeming,
and Columbia shall have no further obligation to repurchase such new Warrant or redeem such Common
Stock; and provided further, that upon receipt of such notice and until five days thereafter the
Holder may revoke its notice of repurchase of the Warrant and/or redemption of Common Stock by
written notice to Columbia at its principal office stating that the Holder elects to revoke its
election to exercise its right to require Columbia to repurchase the Warrant and/or redeem the
Common Stock, whereupon Columbia will promptly redeliver to the Holder the Warrant and/or the
certificates representing shares of Common Stock surrendered to Columbia for purposes of such
repurchase and/or redemption, and Columbia shall have no further obligation to repurchase such
Warrant and/or redeem such Common Stock.
(f) As used in this Agreement the following terms have the meanings indicated:
(1) Acquiring Person shall mean any Person (hereinafter defined) who or which
is the Beneficial Owner (hereinafter defined) of 25% or more of the Common Stock
(before giving effect to any exercise of the Warrant);
(2) A Person shall mean any individual, firm, corporation or other entity and
shall also include any syndicate or group deemed to be a Person by operation of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended;
(3) A Person shall be a Beneficial Owner, and shall have Beneficial Ownership,
of all securities:
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(i) which such Person or any of its Affiliates (as hereinafter defined)
beneficially owns, directly or indirectly; and
(ii) which such Person or any of its Affiliates or Associates has (1) the right
to acquire (whether such right is exercisable immediately or only after the passage
of time or otherwise) pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (2) the right to vote pursuant to any proxy, power of attorney, voting
trust, agreement, arrangement or understanding; and
(4) Affiliate and Associate shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the regulations promulgated by the SEC under the Securities and
Exchange Act of 1934, as amended.
8. Remedies. Without limiting the foregoing or any remedies available to Fulton, it
is specifically acknowledged that Fulton would not have an adequate remedy at law for any breach of
this Warrant Agreement and shall be entitled to specific performance of Columbias obligations
under, and injunctive relief against any actual or threatened violation of the obligations of any
Person subject to, this Agreement.
9. Limitation of Holders Profit
(a) Notwithstanding any other provision of the Warrant, this Agreement or the Merger
Agreement, in no event shall Holders Total Profit (as defined below) exceed $21,900,000 (Maximum
Profit), and, if it otherwise would exceed such amount, Holder, at its sole discretion, shall
either (i) reduce the number of shares subject to the Warrant, (ii) deliver to Columbia, for
cancellation, shares of Common Stock, (iii) pay cash to Columbia, (iv) reduce the amount of the
consideration paid pursuant to Section 7 of this Agreement or (v) any combination of the foregoing,
so that Holders actually realized Total Profit shall not exceed the Maximum Profit after taking
into account the foregoing actions. Notwithstanding any other provision of the Warrant, this
Agreement or the Merger Agreement, the Warrant may not be exercised for a number of shares as
would, as of the date of exercise, result in a Notional Total Profit (as defined below) of more
than the Maximum Profit and, if exercise of the Warrant would otherwise result in the Notional
Total Profit exceeding such amount, Holder, in its discretion, may take any of the actions
specified in this Section 9(a) so that the Notional Total Profit shall not exceed the Maximum
Profit; provided, however, that nothing in this sentence shall restrict any subsequent exercise of
the Warrant which at such time complies with this sentence.
(b) For purposes of this Agreement, Total Profit shall mean: (i) the aggregate amount
(before taxes) of (A) the excess of (x) the net cash amounts or fair market value of any property
received by Holder pursuant to a sale of shares of Common Stock issued upon exercise of the Warrant
(Warrant Shares), other than to a wholly-owned Subsidiary of Holder, or a repurchase of Warrant
Shares by Columbia pursuant to Section 7 of this Agreement, after payment of applicable brokerage
or sales commissions and discounts, over (y) Holders aggregate purchase price for such Warrant
Shares, plus (B) all amounts received by Holder upon the repurchase of the Warrant by Columbia
pursuant to Section 7 of this Agreement, minus (ii)
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all amounts of cash previously paid to Columbia pursuant to Section 9(a) plus the value of the
Warrant Shares previously delivered to Columbia for cancellation pursuant to Section 9(a), which
value shall be deemed to be the aggregate Exercise Price paid for such Warrant Shares. For
purposes of this Agreement, Notional Total Profit with respect to any number of shares as to
which Holder may propose to exercise the Warrant shall be the Total Profit, determined as of the
date of such proposed exercise assuming that the Warrant were exercised on such date for such
number of shares, and assuming that such shares, together with all other Warrant Shares held by
Holder and its affiliates as of such date, were sold for cash at the closing market price for the
Common Stock as of the close of business on the preceding trading day (less customary brokerage
commissions). For purposes of this Section 9, transactions by a wholly-owned Subsidiary transferee
of Holder in respect of the Warrant or Warrant Shares transferred to it shall be treated as if made
by Holder.
10. Miscellaneous.
(a) The representations, warranties, and covenants of Columbia set forth in the Merger
Agreement are hereby incorporated by reference in and made a part of this Agreement, as if set
forth in full herein.
(b) This Agreement, the Warrant and the Merger Agreement set forth the entire understanding
and agreement of the parties hereto and supersede any and all prior agreements, arrangements and
understandings, whether written or oral, relating to the subject matter hereof and thereof. No
amendment, supplement, modification, waiver, or termination of this Agreement shall be valid and
binding unless executed in writing by both parties.
(c) This Agreement shall be deemed to have been made in, and shall be governed by and
interpreted in accordance with the substantive laws of, the Commonwealth of Pennsylvania.
(d) The covenants in this Agreement are severable, and if any covenant or portion thereof is
held to be invalid or unenforceable for any reason, such covenant or portion thereof shall be
modified or adjusted by a court or other tribunal exercising its equitable powers to the extent
necessary to cure such invalidity or unenforceability, and all other covenants and provisions shall
remain valid and enforceable.
11. Limitation
on Beneficial Ownership and Exercise Price. Notwithstanding anything in
this Agreement or the Warrant to the contrary, (1) in no event will the Warrant be exercisable for
a number of shares of Common Stock that would cause the Holders beneficial ownership of the Common
Stock to exceed 19.9% of the sum of (a) the number of shares issuable upon exercise of the Warrant
and (b) the issued and outstanding shares of Common Stock, and (2) if, as a result of the
adjustments contemplated by Section 6(B) of the Warrant, the Exercise Price would be reduced below
$37.26, then in no event will the Warrant be exercisable for a number of shares of Common Stock
that would cause the Holders beneficial ownership of the Common Stock to exceed 19.9% of the
number of issued and outstanding shares of Common Stock as of July 26, 2005.
[Signature Page Follows]
B-9
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
duly authorized officers as of the day and year first above written.
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Fulton Financial Corporation |
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By: |
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/s/ R. SCOTT SMITH, JR. |
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R. Scott Smith, Jr. |
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President and Chief Operating Officer |
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Attest: |
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/s/
GEORGE R. BARR |
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George R. Barr, Secretary |
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Columbia Bancorp |
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By: |
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/s/ JOHN A. SCALDARA, JR. |
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John A. Scaldara, Jr. |
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President and Chief Operating Officer |
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Attest:
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/s/ SIBYL S. MALATRAS |
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Sibyl S. Malatras |
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Secretary |
B-10
WARRANT
to Purchase up to 1,881,809 Shares of the
Common Stock, $.01 Par Value Per Share,
of
COLUMBIA BANCORP
This is to certify that, for value received, Fulton Financial Corporation (Fulton) or any
permitted transferee (Fulton or such transferee being hereinafter called the Holder) is entitled
to purchase, subject to the provisions of this Warrant, from Columbia Bancorp, a Maryland
corporation (Columbia), at any time on or after the date hereof, an aggregate of up to 1,881,809
fully paid and non-assessable shares of common stock, $.01 par value (the Common Stock), of
Columbia at a price per share equal to $37.26, subject to adjustment as herein provided (the
Exercise Price).
1. Exercise of Warrant. Subject to the provisions hereof and the limitations set
forth in Paragraphs 2 and 9 of a Warrant Agreement of even date herewith by and between Fulton and
Columbia (the Warrant Agreement), which Warrant Agreement was entered pursuant to an Agreement
and Plan of Merger dated July 26, 2005, between Fulton and Columbia (the Merger Agreement), this
Warrant may be exercised in whole or in part or sold, assigned or transferred at any time or from
time to time on or after the date hereof. This Warrant shall be exercised by presentation and
surrender hereof to Columbia at the principal office of Columbia, accompanied by (i) a written
notice of exercise, (ii) payment to Columbia, for the account of Columbia, of the Exercise Price
for the number of shares of Common Stock specified in such notice, and (iii) a certificate of the
Holder specifying the event or events which have occurred and entitle the Holder to exercise this
Warrant. The Exercise Price for the number of shares of Common Stock specified in the notice shall
be payable in immediately available funds.
Upon such presentation and surrender, Columbia shall issue promptly (and within one business
day if reasonably requested by the Holder) to the Holder or its assignee, transferee or designee
the number of shares of Common Stock to which the Holder is entitled hereunder. Columbia covenants
and warrants that such shares of Common Stock, when so issued, will be duly authorized, validly
issued, fully paid and non-assessable, and free and clear of all liens and encumbrances.
If this Warrant is exercised in part only, Columbia shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the shares of Common Stock issuable hereunder. Upon receipt by Columbia of
this Warrant, in proper form for exercise, and subject to the limitations set forth in Paragraphs 2
and 9 of the Warrant Agreement, the Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding that the
B-11
stock transfer books of Columbia may then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder. Columbia shall pay all
expenses, and any and all United States federal, state and local taxes and other charges, that may
be payable in connection with the preparation, issuance and delivery of stock certificates pursuant
to this Paragraph 1 in the name of the Holder or its assignee, transferee or designee.
2. Reservation of Shares; Preservation of Rights of Holder.
Columbia shall at all times while this Warrant is outstanding and unexercised, maintain and
reserve, free from preemptive rights, such number of authorized but unissued shares of Common Stock
as may be necessary so that this Warrant may be exercised without any additional authorization of
Common Stock after giving effect to all other options, warrants, convertible securities and other
rights to acquire shares of Common Stock at the time outstanding. Columbia further agrees that (i)
it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act or omission, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed or performed
hereunder or under the Warrant Agreement by Columbia, (ii) it will promptly take all action
(including (A) complying with all pre-merger notification, reporting and waiting period
requirements specified in 15 U.S.C. §18a and the regulations promulgated thereunder and (B) in the
event that, under Section 3 of the Bank Holding Company Act of 1956, as amended (12 U.S.C.
§1842(a)(3)), or the Change in Bank Control Act of 1978, as amended (12 U.S.C. §1817(j)), prior
approval of the Board of Governors of the Federal Reserve System (the Board) is necessary before
this Warrant may be exercised, cooperating fully with the Holder in preparing any and all such
applications and providing such information to the Board as the Board may require) in order to
permit the Holder to exercise this Warrant and Columbia duly and effectively to issue shares of its
Common Stock hereunder, and (iii) it will promptly take all action reasonably necessary to protect
the rights of the Holder against dilution as provided herein.
3. Fractional Shares. Columbia shall not be required to issue any fractional shares
of Common Stock upon exercise of this Warrant. In lieu of any fractional shares, the Holder shall
be entitled to receive an amount in cash equal to the amount of such fraction multiplied by the
Exercise Price.
4. Exchange or Loss of Warrant. This Warrant is exchangeable, without expense, at the
option of the Holder, upon presentation and surrender hereof at the principal office of Columbia
for other warrants of different denominations entitling the Holder to purchase in the aggregate the
same number of shares of Common Stock issuable hereunder. The term Warrant as used herein
includes any warrants for which this Warrant may be exchanged. Upon receipt by Columbia of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant, if mutilated, Columbia will
execute and deliver a new Warrant of like tenor and date.
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5. Repurchase. The Holder shall have the right to require Columbia to repurchase all
or any portion of this Warrant under the terms and subject to the conditions of Paragraph 7 of the
Warrant Agreement.
6. Adjustment. The number of shares of Common Stock issuable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment from time to time as provided in
this Paragraph 6.
(A) Stock Dividends, etc.
(1) Stock Dividends. In case Columbia shall pay or make a dividend or other
distribution on any class of capital stock of Columbia payable in Common Stock, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be increased by multiplying
such number of shares by a fraction of which the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the day immediately preceding the date of such
distribution and the numerator shall be the sum of such number of shares and the total number of
shares of Common Stock constituting such dividend or other distribution, such increase to become
effective immediately after the opening of business on the day following such distribution.
(2) Subdivisions. In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the number of shares of Common Stock issuable upon
exercise of this Warrant at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number of shares of Common
Stock, the number of shares of Common Stock issuable upon exercise of this Warrant at the opening
of business on the day following the day upon which such combination becomes effective shall be
proportionately decreased, such increase or decrease, as the case may be, to become effective
immediately after the opening of business on the day following the date upon which such subdivision
or combination becomes effective.
(3) Reclassifications. The reclassification of Common Stock into securities (other
than Common Stock) and/or cash and/or other consideration shall be deemed to involve a subdivision
or combination, as the case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number or amount of securities and/or cash and/or other
consideration outstanding immediately thereafter and the effective date of such reclassification
shall be deemed to be the day upon which such subdivision becomes effective, or the day upon
which such combination becomes effective, as the case may be, within the meaning of clause (2)
above.
(4) Optional Adjustments. Columbia may make such increases in the number of shares of
Common Stock issuable upon exercise of this Warrant, in addition to those required by this
subparagraph (A), as shall be determined by its Board of Directors to be advisable in order to
avoid taxation so far as practicable of any dividend of stock or stock rights or any event treated
as such for federal income tax purposes to the recipients, subject to applicable Nasdaq stockholder
approval requirements.
B-13
(5) Adjustment to Exercise Price. Whenever the number of shares of Common Stock
issuable upon exercise of this Warrant is adjusted as provided in this Paragraph 6(A), the Exercise
Price shall be adjusted by a fraction in which the numerator is equal to the number of shares of
Common Stock issuable prior to the adjustment and the denominator is equal to the number of shares
of Common Stock issuable after the adjustment, rounded to the nearest cent.
(B) Certain Sales of Common Stock.
(1) Adjustment to Shares Issuable. If and whenever Columbia sells or otherwise issues
(other than under circumstances in which Paragraph 6(A) applies) any shares of Common Stock, the
number of shares of Common Stock issuable upon exercise of this Warrant shall be increased by
multiplying such number of shares by a fraction, the denominator of which shall be the number
shares of Common Stock outstanding at the close of business on the day immediately preceding the
date of such sale or issuance and the numerator of which shall be the sum of such number of shares
and the total number of shares constituting such sale or other issuance, such increase to become
effective immediately after the opening of business on the day following such sale or issuance.
(2) Adjustment to Exercise Price. If and whenever Columbia sells or otherwise issues
any shares of Common Stock (excluding any stock dividend or other issuance not for consideration to
which Paragraph 6(A) applies or shares of Common Stock issued or issuable in connection with awards
granted under the Columbia Stock Option Plans) for a consideration per share which is less than the
Exercise Price at the time of such sale or other issuance, then in each such case the Exercise
Price shall be forthwith changed (but only if a reduction would result) to the price (calculated to
the nearest cent) determined by dividing: (i) an amount equal to the sum of (aa) the number of
shares of Common Stock outstanding immediately prior to such issue or sale, multiplied by the then
effective Exercise Price, plus (bb) the total consideration, if any, received and deemed received
by Columbia upon such issue or sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
(C) Definition. For purposes of this Paragraph 6, the term Common Stock shall
include (1) any shares of Columbia of any class or series which has no preference or priority in
the payment of dividends or in the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of Columbia and which is not subject to redemption by
Columbia, and (2) any rights or options to subscribe for or to purchase shares of Common Stock or
any stock or securities convertible into or exchangeable for shares of Common Stock (such
convertible or exchangeable stock or securities being hereinafter called Convertible Securities),
whether or not such rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable. For purposes of any adjustments made under Paragraph 6(A)
or 6(B) as a result of the distribution, sale or other issuance of rights or options or Convertible
Securities, the number of Shares of Common Stock outstanding after or as a result of the occurrence
of events described in Paragraph 6(A)(1) or 6(B)(1) shall be calculated by assuming that all such
rights, options or Convertible Securities have been exercised for the maximum number of shares
issuable thereunder.
B-14
7. Notice.
(A) Whenever the number of shares of Common Stock for which this Warrant is exercisable is
adjusted as provided in Paragraph 6, Columbia shall promptly compute such adjustment and mail to
the Holder a certificate, signed by the principal financial officer of Columbia, setting forth the
number of shares of Common Stock for which this Warrant is exercisable as a result of such
adjustment having become effective.
(B) Upon the occurrence of any event which results in the Holder having the right to require
Columbia to repurchase this Warrant, as provided in Paragraph 7 of the Warrant Agreement, Columbia
shall promptly notify the Holder of such event; and Columbia shall promptly compute the Warrant
Repurchase Price, as adjusted by Paragraph 9 of the Warrant Agreement, and furnish to the Holder a
certificate, signed by the principal financial officer of Columbia, setting forth the Warrant
Repurchase Price, as adjusted, and the basis and computation thereof.
8. Rights of the Holder.
(A) Without limiting the foregoing or any remedies available to the Holder, it is specifically
acknowledged that the Holder would not have an adequate remedy at law for any breach of the
provisions of this Warrant and shall be entitled to specific performance of Columbias obligations
under, and injunctive relief against any actual or threatened violation of the obligations of any
Person (as defined in Paragraph 7 of the Warrant Agreement) subject to, this Warrant.
(B) The Holder shall not, by virtue of its status as Holder, be entitled to any rights of a
stockholder in Columbia.
9. Termination. This Warrant and the rights conferred hereby shall terminate (i) upon
the Effective Time of the Merger provided for in the Merger Agreement, (ii) upon a valid
termination of the Merger Agreement (except a termination pursuant to Section 8.1(b)(iii) of the
Merger Agreement) unless an event described in Paragraph 2 of the Warrant Agreement permitting
exercise of the Warrant occurs prior to such termination, in which case this Warrant and the rights
conferred hereby shall not terminate until 12 months after the occurrence of such event, (iii) to
the extent this Warrant has not previously been exercised, 12 months after the occurrence of an
event described in Paragraph 2 of the Warrant Agreement permitting exercise of the Warrant (unless
termination of the Merger Agreement in accordance with its terms (other than under Section
8.1(b)(iii) thereof) occurs prior to the occurrence of such event, in which case (ii) above shall
apply) or (iv) 12 months after the occurrence of a valid termination under Section 8.1(b)(iii) of
the Merger Agreement.
10. Governing Law. This Warrant shall be deemed to have been delivered in, and shall
be governed by and interpreted in accordance with the substantive laws of, the Commonwealth of
Pennsylvania, except to the extent that Maryland law governs certain aspects of this Warrant as it
relates to Columbia. In the event of any inconsistency between this Warrant and the terms of the
Warrant Agreement, the terms of the Warrant Agreement shall govern.
B-15
Dated: July 26, 2005
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COLUMBIA BANCORP |
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By: |
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/s/ JOHN M. BOND, JR. |
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John M. Bond, Jr. |
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President and Chief Executive Officer |
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Attest: |
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/s/ SIBYL S. MALATRAS |
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Sibyl S. Malatras |
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Secretary |
B-16
EXHIBIT C
OPINION OF FINANCIAL ADVISOR
COLUMBIA BANCORP
Columbia, Maryland
FAIRNESS OPINION
As of July 26, 2005
This letter sets forth Danielson Associates Inc.s (Danielson Associates) opinion as to the
fairness of the offer by Fulton Financial Corporation (Fulton) of Lancaster, Pennsylvania to
acquire all of the outstanding common stock and options to buy shares of the common stock of
Columbia Bancorp (Columbia) of Columbia, Maryland for approximately $311 million. The fair sale
value is defined at the price at which all of the shares of Columbias common stock and options to
buy common stock would change hands between a willing seller and a willing buyer with each having a
reasonable knowledge of the relevant facts. In opining as to the fairness of the offer, it also
had to be determined if Fultons common stock that is to be exchanged for Columbias common stock
and options to buy common stock is fairly valued.
In preparing this opinion, Columbias and Fultons past performances and present financial
conditions were analyzed and their businesses and future prospects were reviewed. Other financial
analyses were also made as deemed appropriate such as comparable transactions and investment value
calculations. In addition, any unique considerations were considered.
This opinion is based partly on data supplied to Danielson Associates by Columbia, but it
relied on some public information all of which is believed to be reliable, but the completeness and
the accuracy of such information cannot be guaranteed. In particular, the opinion assumed there
were no major asset quality problems at Columbia and Fulton beyond what was stated in recent
reports to the regulatory agencies.
In determining the fair sale value of Columbia, primary emphasis was on prices paid relative
to earnings for banking organizations that had similar market, structural and financial
characteristics. These prices also were related to equity capital, or book as it is frequently
called.
Based on Columbias recent performance, its future prospects and comparisons with similar
transactions, it is our opinion that the Fulton offer of about $311 million, or $42.78 per share
adjusted for options, through an exchange of Fultons common stock, which is fairly valued, and
cash for all of Columbias outstanding common stock and options to buy Columbia common stock, is
fair to Columbia and its shareholders from a financial point of view.
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Respectfully submitted, |
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/s/ Arnold G. Danielson |
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Arnold G. Danielson |
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Chairman |
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Danielson Associates Inc. |
C-1
EXHIBIT D
FORM OF ELECTION FORM/LETTER OF TRANSMITTAL
D-1
THIS IS NOT A PROXY. PLEASE DO NOT SEND THIS FORM IN THE ENVELOPE WITH
YOUR PROXY CARD. INSTEAD, PLEASE RETURN THE COMPLETED FORM TO
FULTON FINANCIAL ADVISORS, N.A., THE EXCHANGE AGENT, IN THE ENCLOSED
ENVELOPE BEFORE THE ELECTION DEADLINE, WHICH IS [Election Deadline]
(THE ELECTION DEADLINE).
COLUMBIA BANCORP
7162 COLUMBIA GATEWAY DRIVE
COLUMBIA, MARYLAND 21046
ELECTION FORM/LETTER OF TRANSMITTAL
Dear Columbia Bancorp Stockholder:
We are sending you this Election Form/Letter of Transmittal in connection with a merger transaction
in which Fulton Financial Corporation proposes to acquire Columbia Bancorp. You should carefully
read the proxy statement/prospectus, previously mailed to you, which discusses the merger in
detail.
As more fully described in the proxy statement/prospectus, if the Columbia Bancorp stockholders
adopt the merger agreement and all of the other merger conditions are satisfied or waived, Columbia
Bancorp stockholders will receive merger consideration for each share of Columbia Bancorp common
stock owned by them.
A completed Election Form/Letter of Transmittal must be received by the exchange agent no later
than 5:00 p.m., New York City time, on [Election Deadline] (the Election Deadline).
This form offers you an opportunity to indicate your preference to receive the following forms of
merger consideration for your shares of Columbia Bancorp common stock:
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with respect to all of your shares of Columbia Bancorp common stock, $42.48 in cash
for each share of Columbia Bancorp common stock owned, |
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with respect to all of your shares of Columbia Bancorp common stock, 2.325 shares of
Fulton common stock for each share of Columbia Bancorp common stock owned; or |
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with respect to 10%, 20%, 30%, 40%, 50%, 60%, 70%, 80% or 90% of your Columbia
Bancorp common stock, $42.48 in cash per share, and with respect to the remainder of
your Columbia Bancorp common stock, 2.325 shares of Fulton common stock for each share
of Columbia Bancorp common stock owned. |
If the exchange agent does not receive a properly completed and signed Election Form/Letter of
Transmittal from you along with the applicable stock certificates covered by this form by the
Election Deadline, you will have failed to make a valid election. Your failure to make a valid
election will result in you being deemed to have made an election to receive cash or stock as
follows:
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If proration is not required, you will receive cash consideration until 50% (the
maximum cash percentage) of Columbia Bancorps outstanding shares have been converted
into cash. If and when the maximum cash percentage is reached, you will thereafter
receive Fulton common stock consideration for your remaining shares. |
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If proration is required because the maximum cash percentage, or 50%, is exceeded,
you will receive Fulton stock consideration. |
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If proration is required because less than 20% of Columbia Bancorps outstanding shares (the minimum cash percentage) have been converted into cash, you will receive
cash consideration. |
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In all other situations you will receive cash consideration. |
D-2
Before generally prorating stockholder elections, shares for which no valid election has been
made will be converted into cash or stock (depending on whether too much cash or too much stock was
elected) as described above under the heading Election Procedures in the proxy
statement/prospectus. If proration is still necessary after the conversion of all non-electing
shares, then all electing shares will be prorated as described above.
See The Merger Proration in the proxy statement/prospectus.
You should make an election on this form, but in certain circumstances, you will not receive the
consideration you elect. For further information regarding potential adjustments to your election,
see The Merger Proration in the accompanying proxy statement/prospectus.
You may revoke an election made by this form by providing notice to the Exchange Agent prior to the
Election Deadline in accordance with the instructions included in Part A.2 of the General
Instructions to this form.
No fractional shares of Fulton common stock will be issued in the merger. Instead, each Columbia
Bancorp stockholder who would otherwise be entitled to receive a fractional share will receive an
amount in cash, rounded to the nearest whole cent, equal to the fractional interest multiplied by
$42.48.
Each Columbia Bancorp stockholder should complete this form and return it along with stock
certificates, or a guarantee of delivery, for the shares covered by this form by mail, overnight
courier or hand delivery, to:
FULTON FINANCIAL ADVISORS, N.A.
Attn: Marylynn Darmstaetter
ONE PENN SQUARE
LANCASTER, PENNSYLVANIA 17602
As a courtesy, the exchange agent may attempt to contact any Columbia Bancorp stockholder who fails
to properly comply with these instructions (and who provides a phone number). However, there is no
guarantee that any such contact will be made. In any event, each Columbia Bancorp stockholder is
solely responsible for properly completing and timely returning the Election Form/Letter of
Transmittal.
If the merger is not completed for any reason, this form will be void and of no effect.
Certificate(s) for shares of Columbia Bancorp common stock previously delivered to the exchange
agent will be promptly returned.
Under Maryland law, Columbia Bancorp stockholders do not have the right to dissent from the merger.
See The Merger No Dissenters Rights in the proxy statement/prospectus.
Please read carefully the accompanying instructions to the Election Form/Letter of Transmittal, as
well as the General Instructions for completing the Election Form/Letter of Transmittal. Then
complete the information as required and return this form, along with all of your Columbia Bancorp
stock certificates, or guarantee of delivery of shares, in the enclosed envelope to the exchange
agent no later than 5:00 p.m., New York City time, on the Election Deadline at the address listed
above. Delivery of this form to an address other than as set forth above will not constitute a
valid delivery. You must sign this form where requested.
The following are the required steps to properly complete this Election Form/Letter of Transmittal:
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Step 1 complete the Election Form; |
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Step 2A locate all of your Columbia Bancorp stock certificates and complete the
letter of transmittal or provide a guarantee of delivery using the attached form; |
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Step 2B if applicable, verify that your certificates are lost; and |
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Step 3 complete the enclosed Form W-9. |
Instructions for each step are set forth in detail below.
D-3
GENERAL INSTRUCTIONS
A. SPECIAL CONDITIONS.
1. TIME IN WHICH TO ELECT. To be effective, a completed election form/letter of transmittal
and your Columbia Bancorp common stock certificate(s) must be received by the exchange agent at the
address set forth on page 2 no later than the Election Deadline. If the merger is approved and
thereafter completed, and if the exchange agent has not received a properly completed election
form/letter of transmittal prior to the Election Deadline, you will be deemed to have made an
election to receive cash or stock consideration, depending on whether and to what extent proration
is necessary.
2. REVOCATION OF ELECTION. An election may be revoked by the person who submitted the election
form/letter of transmittal to the exchange agent by written notice to the exchange agent, or by
withdrawal of the shares of Columbia Bancorp common stock deposited by such person with the
exchange agent, prior to the Election Deadline. A holder may submit a new election form at the time
it revokes an earlier election or at any time after revoking an earlier election, but the exchange
agent MUST receive the revocation and the new election form before the Election Deadline for the
revocation and new election to be effective. If the merger agreement is terminated, each election
form/letter of transmittal will automatically be revoked and the stock certificates tendered will
be promptly returned to you.
B. ELECTION PROCEDURES.
A description of the election procedures is contained in the proxy statement/prospectus under
The Merger Effect of the Merger Election Procedures and is fully set forth in the merger
agreement. All elections are subject to compliance with those procedures. Before making any
election, you should read carefully, among other matters, the information contained in the proxy
statement/prospectus under The Merger Material Federal Income Tax Consequences. See also Risk
Factors Risk Factors Related to the Merger.
As a result of the election procedures, you may receive shares of Fulton common stock and/or
cash in amounts that vary from your election in Step 1. You will not be able to change the number
of shares or the amount of cash allocated to you by the exchange agent pursuant to the election
procedures.
C. RECEIPT OF SHARES OR CASH.
As soon as practicable after the Closing Date, Fulton will instruct the exchange agent to mail
certificate(s) of Fulton common stock and/or cash payments by check to you or as you otherwise
instruct in this election form/letter of transmittal (if you complete the Wiring Instructions in
Step 2A of this form and you are to receive at least $500,000, cash will be sent to you by wire
transfer) as soon as is practicable. If you fail to submit a properly completed election
form/letter of transmittal and stock certificates covered by the election form/letter of
transmittal by the Election Deadline, as set forth above, you will be deemed to have made an
election to receive cash consideration or Fulton common stock consideration, depending on whether
proration is necessary. You will be entitled to receive the applicable merger consideration after
the certificate(s) representing your shares of Columbia Bancorp common stock have been submitted to
the Exchange Agent.
No fractional shares of Fulton common stock will be issued in the merger. Instead, each
Columbia Bancorp stockholder that otherwise would be entitled to receive a fractional share will
receive an amount in cash equal to that fraction multiplied by $42.48.
D. GENERAL.
1. EXECUTION AND DELIVERY. The election form/letter of transmittal must be properly filled in,
dated, and signed in all applicable places, and must be delivered (together with all of the other
required materials) to the exchange agent at the address as set forth on page 2. THE METHOD OF
DELIVERY OF ALL DOCUMENTS IS AT YOUR OPTION AND RISK, BUT IF YOU CHOOSE TO RETURN YOUR MATERIALS BY
MAIL, WE SUGGEST YOU SEND THEM BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED,
USING THE ENCLOSED ENVELOPE.
D-4
2. SIGNATURES. The signature (or signatures, in the case of certificates owned by two or more
joint holders) on the election/letter of transmittal form should correspond exactly with the
name(s) as written on the face of the certificate(s) submitted.
If the election form/letter of transmittal or any stock certificate(s) or stock power(s) is
signed by a trustee, executor administrator, guardian, officer of a corporation, attorney-in-fact,
or any other person acting in a representative or fiduciary capacity, the person signing must give
the signing persons full title in such capacity.
3. NEW CERTIFICATES AND CHECKS IN SAME NAME. If you are receiving any shares of Fulton common
stock, the stock certificate(s) representing such shares of Fulton common stock and/or any check(s)
in respect of shares of Columbia Bancorp common stock shall be registered in, or payable to the
order of, exactly the same name(s) that appears on the certificate(s) representing such shares of
Columbia Bancorp common stock submitted with the election form/letter of transmittal. No
endorsement of certificate(s) or separate stock power(s) is required.
4. GUARANTEE OF SIGNATURE. No signature guarantee is required on this form if it is signed by
the registered holder(s) of the shares of Columbia Bancorp common stock surrendered under this
form, and the shares of Fulton common stock and/or the check are to be issued and/or payable to the
record holder(s) without any change or correction in the name of the record holder(s). In all other
cases, all signatures on this form must be guaranteed. All signatures required to be guaranteed
must be guaranteed by a member firm of a registered national securities exchange or of the NASD,
Inc., or a commercial bank or trust company in the United States. Public notaries cannot execute
acceptable guarantees of signatures. Contact your broker to determine if they can provide such a
guarantee.
5. MISCELLANEOUS.
A single check, or wire transfer, and/or stock certificates of Fulton common stock to be received will be issued to you unless you
have instructed us otherwise in the letter of transmittal.
All questions with respect to the election form/letter of transmittal (including, without
limitation, questions relating to the timeliness or effectiveness of any election or the revocation
of any election, and computations as to any adjustments) will be determined by the exchange agent,
which determination shall be conclusive and binding.
6. BACKUP FEDERAL INCOME TAX WITHHOLDING AND FORM W-9. Under the backup withholding
provisions of U.S. federal income tax law, any payments made to you pursuant to the merger may be
subject to backup withholding of 28%. To prevent backup withholding, Columbia Bancorp stockholders
must complete and sign the Form W-9 included in Step 3 of the election form/letter of transmittal
(located at page D-16) and either (a) provide your correct taxpayer identification number (TIN)
and certify, under penalties of perjury, that the TIN provided is correct (or that you are awaiting
a TIN), and that (i) you have not been notified by the IRS that you have been subjected to backup
withholding as a result of failure to report all interest or dividends or (ii) the IRS has notified
you that you are no longer subject to backup withholding; or (b) provide an adequate basis for
exemption. If the bottom portion of the Form W-9 is signed as indicating that you are awaiting a
TIN, the exchange agent will retain 28% of cash payments made to you during the 60 day period after
the date of the Form W-9. If you furnish the exchange agent with your TIN within 60 days of the
date of the Form W-9, the exchange agent will remit those withheld amounts retained during this
60-day period to you. If, however, you have not provided the exchange agent with your TIN within
this 60-day period, the exchange agent will remit these previously retained amounts to the IRS as
backup withholding. In general, if you are an individual, the TIN is your social security-number.
If the certificates for Columbia Bancorp common stock are registered in more than one name or are
not in the name of the actual owner, consult the Guidelines for Certification of Taxpayer
Identification Number included with Form W-9 beginning on page D-16 for additional guidance on
which number to report. If the exchange agent is not provided with the correct TIN or an adequate
basis for exemption, the holder may be subject to a $50 penalty imposed by the IRS and backup
withholding at a rate of 28%. Certain stockholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and reporting
requirements. In order to satisfy the exchange agent that a foreign individual qualifies as an
exempt recipient, such holder must submit a statement (generally, IRS Form W-8), signed under
penalties of perjury, attesting to that individuals exempt status. A form for this statement can
be obtained from the exchange agent.
D-5
For further information concerning backup withholding and instructions for completing the Form
W-9 (including how to obtain a TIN if you do not have one and how to complete the Form W-9 if stock
is held in more than one name), consult the Guidelines for Certification of Taxpayer Identification
Number on the enclosed Form W-9.
Failure to complete the Form W-9 will not, by itself, cause your shares of Columbia Bancorp
common stock to be deemed invalidly tendered, but may require the exchange agent to withhold 28% of
the amount of any payments made pursuant to the merger. Backup withholding is not an additional
U.S. federal income tax. Rather the U.S. federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the IRS.
D-6
INSTRUCTIONS FOR STEP 1
ELECTION FORM
See Page D-9 and D-10
SHARE IDENTIFICATION. You must identify the shares of Columbia Bancorp common stock that you own.
In the spaces provided, print the name(s) and address(es) of the registered holder(s), and insert
the stock certificate number for each stock certificate you hold as well as the number of shares
represented by the corresponding stock certificate(s). At the bottom of the Number of Shares
Represented By the Certificates column, please insert the total number of shares of Columbia
Bancorp common stock you own.
ELECTION. Indicate the consideration you would like to receive by checking ONE box on the
form
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CASH ELECTION. You may choose to make a 100% cash election with respect to your
shares of Columbia Bancorp common stock (a Cash Election). To make a Cash Election,
you should check the appropriate box on the form. |
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STOCK ELECTION. You may choose to make a 100% stock election with respect to your
shares of Columbia Bancorp common stock (a Stock Election). To make a Stock Election,
you should check the appropriate box on the form. |
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CASH/STOCK ELECTION. You may choose to make a partial cash/ partial stock election
with respect to your shares of Columbia Bancorp common stock (a Cash/Stock Election).
To make a Cash/Stock Election, you should check the appropriate box to indicate one of
the nine possible cash/stock combinations. |
NON-ELECTION. If you fail to make an affirmative election for your shares, or if you fail to
properly complete and submit the election form, you will be deemed to have made a cash election or
stock election, depending on whether and to what extent pro-ration is necessary.
Please review carefully The Merger Effect of the Merger Election Procedures and The Merger -
Effect of the Merger Proration on pages 40 and 40 of the proxy statement/prospectus for an
explanation of the conversion of the shares of Columbia Bancorp common stock. As explained in the
proxy statement/prospectus, you may not receive the form of consideration that you elect.
Once you have completed Step 1, go to Step 2A
INSTRUCTIONS FOR STEP 2A
LETTER OF TRANSMITTAL
Regardless of your election in Step 1, if you are a Columbia Bancorp stockholder, you must
send all of your Columbia Bancorp common stock certificates to the exchange agent with the
following letter of transmittal. See General Instruction A.1.
Please read and sign the letter of transmittal found on page D-11.
If you have all of the stock certificates representing your shares of Columbia Bancorp common
stock as set forth below, sign the letter of transmittal and go to Step 3. See General Instruction
D.2 regarding the proper form of signatures.
If you have lost any or all of the stock certificates representing your shares of Columbia
Bancorp common stock, in addition to signing the letter of transmittal and sending it to the
exchange agent together with any stock certificates you do have as described above, you must
complete Step 2B with respect to any certificates you have lost.
D-7