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EXHIBIT 2(a)
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AMENDMENT NO. 1 TO AGREEMENT AND
PLAN OF REORGANIZATION
BY AND BETWEEN
CHARTER FEDERAL SAVINGS BANK
AND
FIRST AMERICAN CORPORATION
This Amendment No. 1 ("Amendment") to the Agreement and
Plan of Reorganization By and Between Charter Federal Savings Bank ("Charter")
and First American Corporation ("FAC") dated as of May 17, 1995 ("Agreement"),
is made and entered into as of October 11, 1995.
W I T N E S S E T H:
WHEREAS, FAC and Charter have previously entered into the
Agreement; and
WHEREAS, since the execution of the Agreement, Charter has
filed a lawsuit in the United States Court of Federal Claims ("Claims Court")
against the United States Government ("United States") seeking damages for
breach of contract and unlawful taking of property arising out of the
revocation by the United States of Charter's right to treat supervisory
goodwill as an asset for regulatory capital purposes ("Goodwill Lawsuit"); and
WHEREAS, the United States Court of Appeals for the Federal
Circuit subsequently ruled in favor of a litigant in a goodwill lawsuit; and
WHEREAS, Charter desires that the amount of consideration
to be distributed to Charter stockholders be adjusted to take into
consideration the potential recovery of damages in the Goodwill Lawsuit, and in
consideration of FAC's agreement to so adjust such consideration, Charter has
agreed to the deletion of its right under Section 10.1(h) of the Agreement to
terminate the Agreement if the FAC Market Value is above $43.50; and
WHEREAS, Charter and FAC wish to clarify in certain other
provisions of the Agreement their mutual intention to proceed expeditiously
with the transactions contemplated by the Agreement;
NOW THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
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1. Capitalized Terms. Capitalized terms not specifically
defined herein shall have the meanings ascribed to them in the Agreement.
2. Effect of Amendment. This Amendment shall become
effective as of the date hereof. Except as expressly provided herein, all of
the terms and conditions of the Agreement shall remain unchanged and in full
force and effect.
3. Additional Defined Terms. The capitalized terms set
forth below (in their singular and plural forms as applicable) shall have the
following meanings:
"Charter Stockholders" shall mean the holders of record of
shares of Charter Common Stock as of the Effective Time, except for shares of
Charter Common Stock to be canceled pursuant to Section 3.3 of the Agreement.
"Goodwill Litigation" shall mean Charter Federal Savings
Bank v. United States, Civil Action No. 95-513C, filed on August 7, 1995, in
the United States Court of Federal Claims, in which Charter alleges that the
United States breached certain contractual commitments regarding the
computation of its regulatory capital and deprived Charter of certain of its
property rights without just compensation in violation of the United States
Constitution.
"Goodwill Litigation Recovery" shall mean the sum of the
cash payments, if any, actually received by Charter or its successor during the
period beginning on the Effective Time and ending on the fifth anniversary of
the Effective Time, in respect of the Goodwill Litigation pursuant to a final,
nonappealable judgment in, or final settlement of, the Goodwill Litigation.
"Net Goodwill Litigation Recovery" shall mean the excess,
if any, of the Goodwill Litigation Recovery over the sum of -- (i) the
aggregate expenses incurred from May 17, 1995 in prosecuting the Goodwill
Litigation including, without limitation, legal and accounting fees and
disbursements and the fees and expenses of any agents employed in connection
with the Goodwill Litigation; (ii) the expenses incurred by FAC in connection
with the preparation and negotiation of this Amendment, including, without
limitation, legal and accounting fees and disbursements and the fees and
expenses of any agents employed in connection therewith; and (iii) the product
of (a) the excess of
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the Goodwill Litigation Recovery over the aggregate expenses incurred in
prosecuting the Goodwill Litigation, and (b) the sum of the highest corporate
federal income tax rate in effect for any year in which a payment constituting
a Goodwill Litigation Recovery is received and the highest corporate Virginia
income tax rate in effect for any such year.
"Per Share Recovery Ratio" shall mean the number of shares
of FAC Common Stock obtained by dividing (A) by (B), where (A) equals 50% of
Net Goodwill Litigation Recovery divided by the number of shares of Charter
Common Stock issued and outstanding immediately prior to the Effective Time,
and (B) equals the average per share closing price of FAC Common Stock on The
NASDAQ Stock Market, as reported in The Wall Street Journal, on the date of
receipt by Charter of the last payment constituting Goodwill Litigation
Recovery.
For example, if the Net Goodwill Litigation Recovery is
$5,000,000, the number of shares of Charter Common Stock issued and outstanding
immediately prior to the Effective Time is 2,000,000, and the value of one
share of FAC Common Stock on the date of receipt by Charter of the last payment
constituting Goodwill Litigation Recovery is $45.00, then the Per Share
Recovery Ratio would be 0.0278.
4. Control of Litigation.
FAC, as the owner of Charter as a wholly owned subsidiary
after the Effective Time, shall have sole and exclusive direction and control
of the conduct of the Goodwill Litigation and in its discretion may, among
other things, dispose of the Goodwill Litigation in a manner that does not
result in any cash or other recovery. The Charter Stockholders will not have
any rights to receive payment in respect of the Goodwill Litigation except to
the extent expressly provided in the Agreement, as amended hereby.
5. Contingent Consideration. The following Section 3.1A
is hereby added immediately after Section 3.1 and immediately before Section
3.2 of the Agreement:
3.1A Contingent Consideration. (a) Subject to
paragraph (b) of this Section 3.1A, in addition to the
shares of FAC Common Stock to be issued in exchange for
shares of Charter Common Stock pursuant to the provisions
of
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Section 3.1(c) of this Agreement, each Charter Stockholder
shall be entitled to receive an additional number of shares
of FAC Common Stock, rounded down to the nearest number of
whole shares, equal to the product of the number of shares
of Charter Common Stock held by such Charter Stockholder
immediately prior to the Effective Time and the Per Share
Recovery Ratio. Shares of FAC Common Stock, if any,
described in this Section 3.1A are hereinafter referred to
as "Contingent Shares." In the event that the
circumstances described in paragraph (b) of this Section
3.1A arise, then each Charter Stockholder shall be entitled
to receive the consideration described in such paragraph
(b), if any, in lieu of any FAC Common Stock.
(b) In the event that (i) a consolidation,
merger or acquisition of FAC with, into or by another
corporation ("Acquiror"), other than a transaction pursuant
to which FAC is the surviving entity and which does not
result in a reclassification of the outstanding shares of
FAC Common Stock into shares of other stock, cash or other
securities or property has been consummated prior to the
fifth anniversary of the Effective Time, and (ii) the last
payment constituting Goodwill Litigation Recovery is
received after the consummation of a transaction described
in (i) above but before the fifth anniversary of the
Effective Time, then each Charter Stockholder shall be
entitled to receive, at the election of Acquiror, either
cash or shares of the Acquiror's capital stock, or a
combination of cash and shares of the Acquiror's capital
stock, having a value equaling the product of (A) fifty
percent (50%) of Net Goodwill Litigation Recovery divided
by the number of shares of Charter Common Stock issued and
outstanding immediately prior to the Effective Time and (B)
the number of shares of Charter Common Stock held by such
Charter Stockholder immediately prior to the Effective Time
("Acquiror Consideration"); provided, however, that no
Acquiror Consideration shall be distributable to the
Charter Stockholders unless the aggregate value of such
Acquiror Consideration would equal or exceed the product of
Two Dollars ($2.00) and the number of shares of Charter
Common Stock issued and outstanding immediately prior to
the
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Effective Time. To the extent that any Acquiror
Consideration is paid in Acquiror capital stock, such stock
will be valued based on the last reported sales price per
share or average per share closing price of such stock as
reported in The Wall Street Journal on the date of receipt
by Charter of the last payment constituting Goodwill
Litigation Recovery.
(c) Notwithstanding any other provision of
this Agreement --
(i) under no circumstances shall the total number of
Contingent Shares to be issued to Charter
Stockholders pursuant to Section 3.1A(a), if any,
exceed the number of shares of FAC Common Stock
issued pursuant to the provisions of Section 3.1(c)
(the "Maximum Number"); in the event the number of
Contingent Shares would, absent the provisions of
this Section 3.1A(c), exceed the Maximum Number, the
number of Contingent Shares to be distributed to
each Charter Stockholder shall be equal to the
product of the Maximum Number and a fraction, the
numerator of which is the number of shares of
Charter Common Stock held by such Charter
Stockholder immediately prior to the Effective Time
and the denominator of which is the total number of
shares of Charter Common Stock held by all Charter
Stockholders immediately prior to the Effective
Time; and
(ii) under no circumstances shall the total value of
Acquiror Consideration to be distributed to Charter
Stockholders pursuant to Section 3.1A(b), if any,
have an aggregate value in excess of the product of
(A) the number of shares of FAC Common Stock issued
pursuant to the provisions of Section 3.1(c) and (B)
the last reported sales price of one share of FAC
Common Stock as reported in The Wall Street Journal
on the date of the Effective Time (the "Maximum
Value"); in the event that the total value of
Acquiror Consideration would, absent the provisions
of this Section 3.1A(c), exceed the Maximum Value,
the amount of Acquiror Consideration to be
distributed to each Charter
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Stockholder shall be equal to the product of the
Maximum Value and a fraction, the numerator of which
is the number of shares of Charter Common Stock held
by such Charter Stockholder immediately prior to the
Effective Time and the denominator of which is the
total number of shares of Charter Common Stock held
by all Charter Stockholders immediately prior to the
Effective Time.
(d) The contingent consideration provided
under this Section 3.1A shall not be transferable,
assignable or alienable, except by will or the laws of
descent and distribution, until such time as the Contingent
Shares or Acquiror Consideration, if any, have been issued
or distributed. Any attempt by a Charter Stockholder to
assign any rights to receive Contingent Shares or Acquiror
Consideration shall be null and void.
(e) Contingent Shares or Acquiror
Consideration, if any, shall be distributed to Charter
Stockholders pursuant to the rules and provisions of
Section 4.1(b) and Section 4.1(c).
(f) Notwithstanding any other provision of
this Agreement, the provisions of Section 3.4 of this
Agreement shall apply only to shares of FAC Common Stock
received in exchange for shares of Charter Common Stock
pursuant to the provisions of Section 3.1(c) of this
Agreement. No fractional shares of FAC Common Stock or
Acquiror capital stock shall be distributed pursuant to the
provisions of this Section 3.1A and no cash shall be paid
in lieu thereof. Rather, the number of Contingent Shares
or shares of Acquiror capital stock to be distributed to
each Charter Stockholder shall be rounded down to the
nearest whole number of shares.
(g) Charter Stockholders will not be
entitled to dividends, voting rights, or any other rights
as stockholders with respect to any shares of stock prior
to the issuance of such shares, if any, pursuant to this
Section 3.1A.
6. Procedures.
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a. Section 4.1 of the Agreement is hereby redesignated as
subsection (a) of Section 4.1 of the Agreement. All references to "Section
3.1" in subsection (a) of Section 4.1 are hereby amended to read "Section
3.1(c)."
b. New subsections (b) and (c) are hereby added to Section
4.1 of the Agreement as follows:
(b) Within forty-five (45) days of receipt by
Charter of the last payment constituting Goodwill
Litigation Recovery, FAC or Acquiror shall issue and
deliver the Contingent Shares or Acquiror Consideration to
a transfer agent to be designated by FAC or Acquiror (the
"Transfer Agent").
(c) Within twenty (20) days of receipt by Charter
of the last payment constituting Goodwill Litigation
Recovery, the Transfer Agent shall mail to each Charter
Stockholder at the address shown for such stockholder on
Charter's books and records at the Effective Time such
blank documentation and related certificates and materials
as may be necessary in the reasonable judgment of the
Transfer Agent to ensure the delivery of the Contingent
Shares or Acquiror Consideration to the Charter
Stockholders and to ensure compliance with all applicable
laws and regulations. Within thirty (30) days after the
Transfer Agent has received all required documentation from
a Charter Stockholder, properly completed in form and
substance satisfactory to the Transfer Agent, the Transfer
Agent shall cause the delivery to such Charter Stockholder
of his, her or its Contingent Shares or Acquiror
Consideration. Notwithstanding any other provision of this
Agreement, neither FAC, Acquiror, the Surviving Bank, the
Exchange Agent nor the Transfer Agent shall be liable to a
holder of Charter Common Stock or FAC Common Stock, as the
case may be, for any property, including any Contingent
Shares or Acquiror Consideration delivered in good faith to
a public official pursuant to any applicable abandoned
property, escheat or similar Law.
7. Rights of Former Charter Stockholders. The reference
to Section 3.1 in Section 4.2 of the Agreement is hereby modified to refer to
Section 3.1(c).
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8. Environmental Matters. The penultimate sentence of
Subparagraph (b)(i) of Section 7.1 of the Agreement is hereby deleted in its
entirety.
9. Affirmative Covenants of Charter.
a. Section 7.1(b) is hereby amended by adding a
parenthetical phrase to the lead-in language thereof so that the lead-in reads
as follows:
(b) Charter agrees to take or cause to be taken commencing
as soon as practicable following the execution of this
Agreement, and continuing thereafter as appropriate (and in
the case of (ii) and (iii) such obligations shall not be
fully implemented until the day prior to the Effective
Time), the following affirmative actions prior to the
Effective Time:
b. The last sentence of Section 7.1(f) is hereby amended
by inserting the following words at the end thereof:
and in no event until the day prior to the Effective Time.
10. Tax Matters. The following new Section 8.8 is
inserted in substitution of Section 8.8 of the Agreement:
The Parties agree to use their reasonable efforts to obtain
a written opinion of Arnold & Porter reasonably acceptable
to the Parties to the effect that, for federal income tax
purposes, (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code, (ii) to the extent Charter Common Stock is
exchanged in the Merger for FAC Common Stock (including any
Contingent Shares) no gain or loss will be recognized by
the stockholders of Charter except to the extent any
Contingent Shares constitute a payment of interest
(including imputed interest), (iii) gain or loss, if any,
will be recognized by Charter Stockholders upon their
receipt of cash in lieu of fractional shares of FAC Common
Stock, and (iv) each of Charter, FAC, and Charter Interim
will be a party to that reorganization within the meaning
of Section 368(b) of the Internal Revenue Code ("Tax
Opinions"). In rendering such Tax Opinions,
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counsel shall be entitled to rely upon representations of
officers of Charter and FAC reasonably satisfactory in form
and substance to such counsel. The Parties understand that
(i) Arnold & Porter's opinion will be premised on, among
other things, the assumption that any consideration paid
pursuant to Section 3.1A will consist solely of FAC Common
Stock, and (ii) if any consideration paid pursuant to
Section 3.1A is not FAC Common Stock, then the Merger may
not qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. Except for
any action that may be taken relating to the provisions of
Section 3.1A (or any provision of this Agreement related to
the implementation of the provisions of Section 3.1A), each
of the Parties undertakes and agrees to use its reasonable
efforts to cause the Merger, and to take no action which
would cause the Merger not, to qualify for treatment as a
"reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code for Federal income tax purposes.
11. Deletion of Certain Termination Rights. Subparagraphs
(g) and (h) of Section 10.1 of the Agreement are hereby deleted in their
entirety.
12. Non-Survival of Representations and Covenants. The
following sentence shall be added at the end of Section 10.3 of the Agreement:
Without limiting the generality of the foregoing, Sections
3.1A and 4.1 of this Agreement, as amended, shall survive
the Effective Time.
13. Expenses. The last sentence of Section 11.2 of the
Agreement is hereby deleted in its entirety.
14. November 30, 1995 Closing. FAC and Charter each agree
to use its best efforts to cause the Merger to become effective by December 1,
1995, and Charter agrees with FAC that, if all conditions precedent specified
in Article Nine of the Agreement have been satisfied by November 30, 1995, the
Closing of the Merger will take place on November 30, 1995, and the Merger and
other transactions contemplated by the Agreement shall become effective on
December 1, 1995, or as soon thereafter as practicable.
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15. Plan of Merger. The Plan of Merger to be entered into
as of the Effective Time shall contain provisions consistent with the
Agreement, as amended hereby.
IN WITNESS WHEREOF, each of FAC and Charter has caused this
Amendment to be executed on its behalf and its corporate seal to be hereunto
affixed and attested thereunto by its authorized officer as of the day and year
first above written.
ATTEST: CHARTER FEDERAL SAVINGS BANK
By:/s/ Katherine L. Hale By:/s/ Cecil R. McCullar
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Secretary Cecil R. McCullar
President and Chief
Executive Officer
[CORPORATE SEAL]
ATTEST: FIRST AMERICAN CORPORATION
By:/s/ Mary Neil Price By: /s/ Dennis C. Bottorff
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Assistant Secretary Dennis C. Bottorff
Chairman of the Board
and Chief Executive
Officer
[CORPORATE SEAL]