Exhibit 99.2
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
DROVERS BANCSHARES CORPORATION
AND
XXXXXX FINANCIAL CORPORATION
TABLE OF CONTENTS
ARTICLE I. THE MERGER............................................................................................2
Section 1.1. Merger......................................................................................2
Section 1.2. Name........................................................................................2
Section 1.3. Articles of Incorporation...................................................................2
Section 1.4. Bylaws......................................................................................2
Section 1.5 Directors and Officers......................................................................2
ARTICLE II. CONVERSION OF SHARES AND EXCHANGE OF STOCK CERTIFICATES..............................................2
Section 2.1. Conversion of Shares........................................................................2
(a) General.............................................................................................2
(b) Antidilution Provision..............................................................................3
(c) No Fractional Shares................................................................................3
(d) Cancelled DBC Shares................................................................................3
(e) Closing Market Price................................................................................3
Section 2.2. Exchange of Stock Certificates..............................................................4
(a) Exchange Agent......................................................................................4
(b) Surrender of Certificates...........................................................................4
(c) Dividend Withholding................................................................................4
(d) Failure to Surrender Certificates...................................................................4
(e) Expenses............................................................................................5
Section 2.3. Treatment of Outstanding DBC Options........................................................5
Section 2.4. Reservation of Shares.......................................................................6
Section 2.5. Taking Necessary Action.....................................................................6
Section 2.6. Press Releases, Etc.........................................................................6
Section 2.7. FFC Common Stock............................................................................6
Section 2.8. Rights of Dissenting Shareholders of DBC....................................................6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DBC...............................................................6
Section 3.1. Authority...................................................................................7
Section 3.2. Organization and Standing...................................................................7
Section 3.3. Subsidiaries................................................................................7
Section 3.4. Capitalization..............................................................................7
Section 3.5. Charter, Bylaws and Minute Books............................................................8
Section 3.6. Financial Statements........................................................................8
Section 3.7. Absence of Undisclosed Liabilities..........................................................9
Section 3.8. Absence of Changes..........................................................................9
Section 3.9. Dividends, Distributions and Stock Purchases................................................9
Section 3.10. Taxes.......................................................................................9
Section 3.11. Title to and Condition of Assets............................................................9
Section 3.12. Contracts..................................................................................10
Section 3.13. Litigation and Governmental Directives.....................................................11
Section 3.14. Compliance with Laws; Governmental Authorizations..........................................12
Section 3.15. Insurance..................................................................................12
Section 3.16. Financial Institutions Bonds...............................................................12
Section 3.17. Labor Relations and Employment Agreements..................................................12
Section 3.18. Employee Benefit Plans.....................................................................13
Section 3.19. Related Party Transactions.................................................................13
Section 3.20. No Finder..................................................................................13
Section 3.21. Complete and Accurate Disclosure...........................................................14
Section 3.22. Environmental Matters......................................................................14
Section 3.23. Proxy Statement/Prospectus.................................................................14
Section 3.24. SEC Filings................................................................................15
Section 3.25. Reports....................................................................................15
Section 3.26. Loan Portfolio of Drovers Bank.............................................................15
Section 3.27. Investment Portfolio.......................................................................16
Section 3.28. Regulatory Examinations....................................................................16
Section 3.29. Beneficial Ownership of FFC Common Stock...................................................16
Section 3.30. Fairness Opinion...........................................................................16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF FFC...............................................................16
Section 4.1. Authority..................................................................................16
Section 4.2. Organization and Standing..................................................................17
Section 4.3. Capitalization.............................................................................17
Section 4.4. Articles of Incorporation and Bylaws.......................................................17
Section 4.5. Subsidiaries...............................................................................17
Section 4.6. Financial Statements.......................................................................18
Section 4.7. Absence of Undisclosed Liabilities.........................................................18
Section 4.8. Absence of Changes.........................................................................18
Section 4.9. Litigation and Governmental Directives.....................................................18
Section 4.10. Compliance with Laws; Governmental Authorizations..........................................19
Section 4.11. Complete and Accurate Disclosure...........................................................19
Section 4.12. Labor Relations............................................................................19
Section 4.13. Employee Benefits Plans....................................................................19
Section 4.14. Environmental Matters......................................................................20
Section 4.15. SEC Filings................................................................................20
Section 4.16. Proxy Statement/Prospectus.................................................................20
Section 4.17. Regulatory Approvals.......................................................................20
Section 4.18. No Finder..................................................................................21
Section 4.19. Taxes......................................................................................21
Section 4.20. Title to and Condition of Assets...........................................................21
Section 4.21. Contracts..................................................................................21
Section 4.22. Insurance..................................................................................21
Section 4.23. Reports....................................................................................22
ARTICLE V. COVENANTS OF DBC.....................................................................................22
Section 5.1. Conduct of Business........................................................................22
Section 5.2. Best Efforts...............................................................................24
Section 5.3. Access to Properties and Records...........................................................24
Section 5.4. Subsequent Financial Statements............................................................24
Section 5.5. Update Schedules...........................................................................24
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Section 5.6. Notice.....................................................................................24
Section 5.7. No Solicitation............................................................................25
Section 5.8. Affiliate Letters..........................................................................27
Section 5.9. No Purchases or Sales of FFC Common Stock During Price Determination Period................27
Section 5.10. Dividends..................................................................................27
Section 5.11. Accounting Treatment.......................................................................28
ARTICLE VI. COVENANTS OF FFC....................................................................................28
Section 6.1. Best Efforts...............................................................................28
(a) Applications for Regulatory Approval...............................................................28
(b) Registration Statement.............................................................................28
(c) State Securities Laws..............................................................................29
(d) Stock Listing......................................................................................29
(e) Adopt Amendments...................................................................................29
(f) Tax Treatment......................................................................................29
Section 6.2. Access to Properties and Records...........................................................29
Section 6.3. Subsequent Financial Statements............................................................29
Section 6.4. Update Schedules...........................................................................29
Section 6.5. Notice.....................................................................................29
Section 6.6. Employment Arrangements....................................................................30
Section 6.7. No Purchase or Sales of FFC Common Stock During Price Determination Period.................31
Section 6.8 Drovers Division and Drovers Regional Directors............................................31
Section 6.9 Insurance..................................................................................32
Section 6.10. Appointment of FFC and Xxxxxx Bank Directors...............................................33
Combined Financial Statements...............................................................................33
Assumption of DBC Debentures................................................................................33
ARTICLE VII. CONDITIONS PRECEDENT...............................................................................33
Section 7.1. Common Conditions..........................................................................33
(a) Shareholder Approval...............................................................................33
(b) Regulatory Approvals...............................................................................34
(c) Stock Listing......................................................................................34
(d) Tax Opinion........................................................................................34
(e) Registration Statement.............................................................................35
(f) No Suits...........................................................................................35
(g) Pooling............................................................................................35
Section 7.2. Conditions Precedent to Obligations of FFC.................................................35
(a) Accuracy of Representations and Warranties.........................................................35
(b) Covenants Performed................................................................................36
(c) Opinion of Counsel for DBC.........................................................................36
(d) Affiliate Agreements...............................................................................36
(e) DBC Options........................................................................................36
(f) No Material Adverse Change.........................................................................36
(g) Accountants' Letter................................................................................37
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(h) Federal and State Securities and Antitrust Laws....................................................37
(i) Environmental Matters..............................................................................38
(j) Closing Documents..................................................................................38
(k) Dissenting Stockholders............................................................................38
Section 7.3. Conditions Precedent to the Obligations of DBC.............................................38
(a) Accuracy of Representations and Warranties.........................................................38
(b) Covenants Performed................................................................................38
(c) Opinion of Counsel for FFC.........................................................................38
(d) FFC Options........................................................................................38
(e) No Material Adverse Change.........................................................................39
(f) Fairness Opinion...................................................................................39
(g) Closing Documents..................................................................................39
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER.................................................................39
Section 8.1. Termination................................................................................39
(a) Mutual Consent.....................................................................................40
(b) Unilateral Action by FFC...........................................................................40
(c) Unilateral Action By DBC...........................................................................40
(d) Market Price of FFC Common Stock...................................................................40
Section 8.2. Effect of Termination......................................................................41
(a) Effect.............................................................................................41
(b) Limited Liability..................................................................................41
(c) Confidentiality....................................................................................41
Section 8.3. Amendment..................................................................................41
Section 8.4. Waiver.....................................................................................41
ARTICLE IX. CLOSING AND EFFECTIVE TIME..........................................................................42
Section 9.1. Closing....................................................................................42
Section 9.2. Effective Time.............................................................................42
ARTICLE X. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................................................42
Section 10.1. No Survival................................................................................42
ARTICLE XI. GENERAL PROVISIONS..................................................................................42
Section 11.1. Expenses...................................................................................42
Section 11.2. Other Mergers and Acquisitions.............................................................42
Section 11.3. Notices....................................................................................43
Section 11.4. Counterparts...............................................................................44
Section 11.5. Governing Law..............................................................................44
Section 11.6. Parties in Interest........................................................................44
Section 11.7. Entire Agreement...........................................................................44
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INDEX OF SCHEDULES
Schedule 2.3 DBC Options
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Schedule 3.7 Undisclosed Liabilities
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Schedule 3.8 Changes
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Schedule 3.9 Dividends, Distributions and Stock Purchases
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Schedule 3.10 Taxes
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Schedule 3.11 Title to and Condition of Assets
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Schedule 3.12 Contracts
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Schedule 3.13 Litigations and Governmental Directives
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Schedule 3.14 Compliance with Laws; Governmental Authorizations
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Schedule 3.15 Insurance
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Schedule 3.16 Financial Institutions Bonds
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Schedule 3.17 Labor Relations and Employment Agreements
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Schedule 3.18 Employee Benefit Plans
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Schedule 3.19 Related Party Transactions
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Schedule 3.20 Finders
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Schedule 3.22 Environmental Matters
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Schedule 3.26 Loan Portfolio
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Schedule 3.27 Investment Portfolio
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Schedule 4.5 Subsidiaries
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Schedule 4.7 Undisclosed Liabilities
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Schedule 4.8 Dividends, Distributions and Stock Purchases
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Schedule 4.9 Litigation and Governmental Directives
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Schedule 4.10 Compliance with Laws; Governmental Authorizations
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Schedule 4.14 Environmental Matters
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Schedule 4.19 Taxes
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Schedule 6.8 Drovers Bank Director Fees
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INDEX OF EXHIBITS
Exhibit A Form of Warrant Agreement
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Exhibit B Form of Warrant
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Exhibit C Form of Employment Agreement
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Exhibit D Form of Opinion of DBC's Counsel
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Exhibit E Form of Opinion of FFC's Counsel
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER made as of the 27th day of December, 2000, by
and between XXXXXX FINANCIAL CORPORATION, a Pennsylvania business corporation
having its administrative headquarters at One Penn Square, P. O. Xxx 0000,
Xxxxxxxxx, Xxxxxxxxxxxx 00000 ("FFC"), and DROVERS BANCSHARES CORPORATION, a
Pennsylvania business corporation having its administrative headquarters at 00
Xxxxx Xxxxxx Xxxxxx, Xxxx, Xxxxxxxxxxxx 00000 ("DBC").
BACKGROUND:
FFC is a financial holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). DBC is a bank holding company
registered under the BHC Act which is the parent of The Drovers & Mechanics Bank
("Drovers Bank"). In addition to Drovers Bank, DBC has two wholly-owned
subsidiaries: Drovers Realty Company and Drovers Capital Trust I. Drovers Bank
has two-wholly-owned subsidiaries: 00 Xxxxx Xxxxxx Xxxxxx, Inc. and Drovers
Investment Company and owns 60% of the membership interests in Drovers
Settlement Services LLC. Drovers Bank and all of such subsidiaries are
collectively referred to herein as "DBC Subsidiaries". FFC and DBC wish to merge
with each other. 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) DBC will be merged with and into FFC, (ii) FFC will survive the
Merger, and (iii) all of the outstanding shares of the common stock of DBC, no
par value per share ("DBC Common Stock"), will be converted into shares of the
common stock of FFC, par value $2.50 per share ("FFC Common Stock").
Simultaneously with the effectiveness of the Merger and subject to
appropriate documentation and regulatory approvals, FFC shall cause Drovers Bank
to merge (the "Bank Merger") with and into Xxxxxx Bank, an existing bank
subsidiary of FFC, and transfer the trust business of Drovers to Xxxxxx
Financial Advisors, N.A. ("Advisors"), an affiliate of FFC, immediately after
the Bank Merger (the "Trust Business Transfer") (the Bank Merger, the Trust
Business Transfer, along with any branch consolidations and/or closures deemed
desirable by FFC, is referred to herein as the "Restructuring").
Simultaneously with the execution of this Agreement, the parties are
entering into a Warrant Agreement in substantially the form of Exhibit A
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attached hereto (the "Warrant Agreement"), which provides for the delivery by
DBC of a warrant in substantially the form of Exhibit B attached hereto (the
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"Warrant") entitling FFC to purchase shares of the DBC Common Stock in certain
circumstances.
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, DBC shall merge with
and into FFC in accordance with the following:
Section 1.1. Merger. At the Effective Time (as defined in Section 9.2
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herein) (i) DBC shall merge with and into FFC pursuant to the provisions of the
Pennsylvania Business Corporation Law of 1988, as amended (the "BCL"), whereupon
the separate existence of DBC shall cease and FFC shall be the surviving
corporation (hereinafter sometimes referred to as the "Surviving Corporation"),
and (ii) the DBC Common Stock will be converted into FFC Common Stock pursuant
to the provisions of Article II hereof.
Section 1.2. Name. The name of the Surviving Corporation shall be "Xxxxxx
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Financial Corporation". The address of the principal office of the Surviving
Corporation will be Xxx Xxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxxxx, Xxxxxxxxxxxx
00000.
Section 1.3. Articles of Incorporation. The Articles of Incorporation of
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the Surviving Corporation shall be the Articles of Incorporation of FFC as in
effect at the Effective Time.
Section 1.4. Bylaws. The Bylaws of the Surviving Corporation shall be the
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Bylaws of FFC as in effect at the Effective Time.
Section 1.5 Directors and Officers. The directors and officers of the
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Surviving Corporation shall be the directors and officers of FFC 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
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Section 9.2 herein) the shares of DBC Common Stock then outstanding shall be
converted into shares of FFC Common Stock, as follows:
(a) General: Subject to the provisions of Sections 2.1(b), 2.1(c)
-------
and 2.1(d) herein, each share of DBC Common Stock issued and outstanding
immediately before the Effective Time, shall, at the Effective Time, be
converted into and become without any action on the part of the holder thereof,
and in exchange therefor FFC shall issue, 1.24 (such number, as it may be
adjusted under Section 2.1(b) herein, the "Conversion Ratio") shares of FFC
Common Stock and the corresponding number of rights associated therewith
pursuant to the Rights Agreement dated June 20, 1989, as amended and restated as
of April 27, 1999, between FFC and Xxxxxx Bank. Each share of DBC Common Stock
to be converted into FFC Common Stock pursuant to this Section 2.1 shall, by
virtue of the Merger and without any action on the part of the holders thereof,
cease to be outstanding, be canceled and retired, and each holder of share
certificates evidencing shares of DBC Common Stock to be converted into the
right to receive FFC Common Stock pursuant to this Section 2.1 shall thereafter
cease to have any rights with respect to the shares represented thereby, except
the right to receive the FFC Common Stock therefor, without interest thereon,
upon the
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surrender of the share certificates evidencing the DBC Common Stock in
accordance with Section 2.2 hereof.
(b) Antidilution Provision: In the event that FFC shall at any
----------------------
time before the Effective Time: (i) issue a dividend in shares of FFC Common
Stock, (ii) combine the outstanding shares of FFC Common Stock into a smaller
number of shares, or (iii) subdivide the outstanding shares of FFC Common Stock
into a greater number of shares, then the Conversion Ratio shall be
proportionately adjusted (calculated to four decimal places), so that each DBC
shareholder shall receive at the Effective Time, in exchange for his shares of
DBC Common Stock, the number of shares of FFC 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 FFC 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 1.24 shares to 1.302 shares).
(c) No Fractional Shares: No fractional shares of FFC 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
shareholder of DBC 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 the Closing Market Price (as defined in Section
2.1(e) herein).
(d) Cancelled DBC Shares. Notwithstanding the provisions of
--------------------
Section 2.1(a) herein, the following shares of DBC Common Stock shall not be
converted into FFC Common Stock, and shall be cancelled, at the Effective Time:
(i) Dissenting Shares (as defined in Section 2.8 herein); (ii) shares of DBC
Common Stock then owned by FFC or any direct or indirect subsidiary of FFC
(except for trust account shares or shares acquired in connection with debts
previously contracted); and (iii) shares of DBC Shares owned by DBC or any
direct or indirect subsidiary of DBC (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 FFC 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 June 30, 2001 were to be the
Effective Date, then the Price Determination Period would be June 14, 15, 18,
19, 20, 21, 22, 25, 26 and 27, 2001). In the event that NASDAQ shall fail to
report closing bid and asked prices for FFC 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 X. X. Xxxxxxxxx & Company, Inc. and by Xxxx, Xxxx & Co.; or (ii) in the
event that both of these firms are not then making a market in FFC Common Stock,
by two brokerage firms then making a market in FFC Common Stock to be selected
by FFC and approved by DBC.
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Section 2.2. Exchange of Stock Certificates. DBC Common Stock certificates
----------- -------------------------------
shall be exchanged for FFC Common Stock certificates in accordance with the
following procedures:
(a) Exchange Agent: The transfer agent of FFC shall act as
--------------
exchange agent (the "Exchange Agent") to receive DBC Common Stock certificates
from the holders thereof and to exchange such stock certificates for FFC Common
Stock certificates and (if applicable) to pay cash for fractional shares of FFC
Common Stock pursuant to Section 2.1(c) herein. FFC shall cause the Exchange
Agent on or promptly after the Effective Date, to mail to each former
shareholder of DBC a notice specifying the procedures to be followed in
surrendering such shareholder's DBC Common Stock certificates.
(b) Surrender of Certificates As promptly as possible after
-------------------------
receipt of the Exchange Agent's notice, each former shareholder of DBC shall
surrender his DBC Common Stock certificates to the Exchange Agent; provided,
--------
that if any former shareholder of DBC shall be unable to surrender his DBC
Common Stock certificates due to loss or mutilation thereof, he may make a
constructive surrender by following procedures comparable to those customarily
used by FFC for issuing replacement certificates to FFC shareholders whose FFC
Common Stock certificates have been lost or mutilated. Upon receiving a proper
actual or constructive surrender of DBC Common Stock certificates from a former
DBC shareholder, the Exchange Agent shall issue to such shareholder, in exchange
therefor, an FFC Common Stock certificate representing the whole number of
shares of FFC Common Stock into which such shareholder's shares of DBC Common
Stock have been converted in accordance with this Article II, together with a
check in the amount of any cash to which such shareholder is entitled, pursuant
to Section 2.1(c) herein, in lieu of the issuance of a fractional share.
(c) Dividend Withholding: Dividends, if any, payable by FFC after
--------------------
the Effective Time to any former shareholder of DBC who has not prior to the
payment date surrendered his DBC Common Stock certificates may, at the option of
FFC, be withheld. Any dividends so withheld shall be paid, without interest, to
such former shareholder of DBC upon proper surrender of his DBC Common Stock
certificates.
(d) Failure to Surrender Certificates: All DBC Common Stock
---------------------------------
certificates must be actually or constructively (as referenced in (b) above)
surrendered to the Exchange Agent within two (2) years after the Effective Date.
In the event that any former shareholder of DBC shall not have properly
surrendered his DBC Common Stock certificates within two (2) years after the
Effective Date, the shares of FFC Common Stock that would otherwise have been
issued to him may, at the option of FFC, be sold and the net proceeds of such
sale, together with the cash (if any) to which he is entitled in lieu of the
issuance of a fractional share and any previously accrued dividends, shall be
held by the Exchange Agent in a noninterest bearing account for his benefit.
From and after any such sale, the sole right of such former shareholder of DBC
shall be the right to collect such net proceeds, cash and accumulated dividends.
Subject to all applicable laws of escheat, such net proceeds, cash and
accumulated dividends shall be paid to such former shareholder of DBC, without
interest, upon proper actual or constructive surrender of his DBC Common Stock
certificates.
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(e) Expenses: All costs and expenses associated with the foregoing
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surrender and exchange procedure shall be borne by FFC.
Section 2.3. Treatment of Outstanding DBC Options.
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(a) At the Effective Time, each holder of an option (collectively,
"DBC Options") to purchase shares of DBC Common Stock that (i) is outstanding at
the Effective Time, (ii) has been granted pursuant to the Drovers Bancshares
Corporation Incentive Stock Option Plan, the Drovers Bancshares Corporation 1995
Stock Option Plan and the Drovers Bancshares Corporation 1999 Non-Employee
Directors Stock Option Plan (collectively, the "DBC Stock Option Plans") and
(iii) would otherwise survive the Effective Time shall be entitled to receive,
in substitution for such DBC Option, an option to acquire shares of FFC Common
Stock on the terms set forth below (each DBC Option as substituted, an "FFC
Stock Option").
(b) An FFC Stock Option shall be a stock option to acquire shares
of FFC Common Stock with the following terms: (i) the number of shares of FFC
Common Stock which may be acquired pursuant to such FFC Stock Option shall be
equal to the product of the number of shares of DBC Common Stock covered by the
DBC Option multiplied by the Conversion Ratio, provided that any fractional
share of FFC Common Stock resulting from such multiplication shall be rounded to
the nearest whole share; (ii) the exercise price per share of FFC Common Stock
shall be equal to the exercise price per share of DBC Common Stock of such DBC
Option, divided by the Conversion Ratio, provided that such exercise price shall
be rounded to the nearest whole cent; (iii) the duration and other terms of such
FFC Option shall be identical to the duration and other terms of such DBC
Option, except that all references to DBC shall be deemed to be references to
FFC and its affiliates, where the context so requires and shall remain
exercisable until the stated expiration date of the corresponding DBC Option;
(iv) FFC shall assume such DBC stock option, whether vested or not vested, as
contemplated by Section 424(a) of the Internal Revenue Code of 1986, as amended
(the "Code"); and (v) to the extent DBC Options qualify as incentive stock
options under Section 422 of the Code, the FFC Options exchanged therefor shall
also so qualify. Subject to the FFC Stock Options and the foregoing, the DBC
Stock Option Plans and all options or other rights to acquire DBC Common Stock
issued thereunder shall terminate at the Effective Time. FFC shall not issue or
pay for any fraction shares otherwise issuable upon exercise of a FFC Stock
Option.
(c) Prior to the Effective Time, FFC shall take appropriate action
to reserve for issuance and, if not previously registered pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), register the number of
shares of FFC Common Stock necessary to satisfy FFC's obligations with respect
to the issuance of FFC Common Stock pursuant to the exercise of FFC Stock
Options and under Section 2.3.
(d) Prior to the Effective Time (to the extent required as
determined by FFC or DBC under applicable law, the terms of the DBC Stock Option
Plans or otherwise), FFC shall receive agreements from each holder of a DBC
Option, pursuant to which each such holder agrees to accept an FFC Option in
substitution for the DBC Option, as of the Effective Time.
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(e) Schedule 2.3 sets forth a listing of each DBC Option as of
------------
the date of this Agreement (copies of which have been provided to FFC),
including the optionee, date of grant, shares of DBC Common Stock subject to
such Option, the exercise price of such Option, expiration date, classification
as an incentive stock option or a nonqualified stock option, vesting schedule
and any special features thereof.
Section 2.4. Reservation of Shares. FFC agrees that (i) prior to the
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Effective Time it will take appropriate action to reserve a sufficient number of
authorized but unissued shares of FFC Common Stock to be issued in accordance
with this Agreement, and (ii) at the Effective Time, FFC will issue shares of
FFC Common Stock to the extent set forth in, and in accordance with, this
Agreement.
Section 2.5. Taking Necessary Action. FFC and DBC shall take all such
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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 and the Restructuring. 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 FFC with full
title to all properties, assets, rights, approvals, immunities and franchises of
DBC, the officers and directors of DBC, at the expense of FFC, shall take all
such necessary action.
Section 2.6. Press Releases, Etc. FFC and DBC agree that all press releases
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or other public communications relating to this Agreement or the transactions
contemplated hereby will require mutual approval by FFC and DBC, 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. FFC Common Stock. Each share of FFC Common Stock that is
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issued and outstanding immediately before the Effective Time shall, on and after
the Effective Time, remain issued and outstanding as one (1) share of FFC Common
Stock, and each holder thereof shall retain his rights therein. The holders of
the shares of FFC 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 FFC Common Stock.
Section 2.8. Rights of Dissenting Shareholders of DBC. The shareholders of
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DBC shall be entitled to and may exercise dissenters' rights if and to the
extent they are entitled to do so under the provisions of Subchapter D of
Chapter 15 of the BCL. Shareholders who have properly exercised their dissenters
rights are referred to herein as "Dissenting Shareholders" and each share of DBC
held by a Dissenting Shareholder is referred to herein as a "Dissenting Share".
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DBC
DBC represents and warrants to FFC, as of the date of this Agreement, as
follows:
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Section 3.1. Authority. The execution and delivery of this Agreement, the
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Warrant Agreement and the Warrant and the performance of the transactions
contemplated herein and therein have been authorized by the Board of Directors
of DBC (its Board of Directors, at a meeting duly called and held, (i) approved
the Merger and this Agreement, and (ii) directed that the Agreement be submitted
for consideration by its shareholders with the recommendation of the Board of
Directors that the shareholders of DBC approve this Agreement and the
transactions contemplated thereby), and, except for the approval of this
Agreement by its shareholders, DBC 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 DBC and, assuming due authorization, execution and delivery by FFC,
constitute valid and binding obligations of DBC. Upon execution and delivery of
the Warrant Agreement and the Warrant, such documents shall constitute binding
obligations of DBC. 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 DBC, (ii) the
Articles of Incorporation or Bylaws of Drovers Bank, (iii) any statute, rule,
regulation, order, decree or directive of any governmental authority or court
applicable to DBC or any DBC Subsidiary, subject to the receipt of all required
governmental approvals, or (iv) any agreement, contract, memorandum of
understanding, indenture or other instrument to which DBC or any DBC Subsidiary
is a party or by which DBC or any DBC Subsidiary or any of their properties are
bound.
Section 3.2. Organization and Standing. DBC is a business corporation that
----------- -------------------------
is duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. DBC 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. Drovers Bank is a banking
corporation that is duly organized, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania. Drovers 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. Drovers 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 DBC Subsidiaries other than Drovers
Bank is a corporation that is duly organized, validly existing and in good
standing under the laws of its state of incorporation. Each of the DBC
Subsidiaries 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. Drovers Bank is a wholly-owned subsidiary of DBC
----------- ------------
and each of the other DBC Subsidiaries is a wholly-owned subsidiary of DBC or
Drovers Bank, as appropriate provided that, in the case of Drovers Capital Trust
I, DBC owns 100% of the common securities of said trust, and provided further
Drovers Settlement Services LLC is a 60% owned subsidiary. Except for the DBC
Subsidiaries, DBC owns no subsidiaries, directly or indirectly.
Section 3.4. Capitalization. The authorized capital of DBC consists
----------- --------------
exclusively of 15,000,000 shares of DBC Common Stock. There are 5,076,703 shares
of DBC Common Stock validly issued, outstanding, fully paid and non-assessable,
and no shares are held as treasury shares. In addition, 266,047 shares of DBC
Common Stock are reserved for issuance upon the exercise of Stock Options
granted under DBC's Stock Option Plans and 1,250,000 shares of DBC Common
-7-
Stock will be reserved for issuance upon exercise of the Warrant. Except for the
DBC Options and the Warrant, there are no outstanding obligations, options or
rights of any kind entitling other persons to acquire shares of DBC Common Stock
and there are no outstanding securities or other instruments of any kind that
are convertible into shares of DBC Common Stock. The authorized capital of
Drovers Bank consists exclusively of 1,000,000 shares of common stock, par value
$5.00 per share (the "Drovers Bank Common Stock"), of which 709,400 shares are
validly issued, outstanding and fully-paid and non-assessable, and no shares are
held as treasury shares. All outstanding shares of Drovers Bank Common Stock are
owned beneficially and of record by DBC. There are no outstanding obligations,
options or rights of any kind entitling other persons to acquire shares of
Drovers Bank Common Stock, and there are no outstanding securities or
instruments of any kind that are convertible into shares of Drovers Bank Common
Stock. All outstanding shares of the capital stock of the other DBC Subsidiaries
are owned beneficially and of record by DBC or Drovers Bank, as appropriate,
except that, in the case of Drovers Capital Trust I, DBC owns 100% of the common
securities and the purchasers thereof own the capital securities issued by said
Trust.. There are no outstanding obligations, options or rights of any kind
entitling other persons to acquire shares of such subsidiaries, and there are no
outstanding securities or instruments of any kind that are convertible into
shares of such subsidiaries. The Common Stock of Drovers Bank the other DBC
Subsidiaries is sometimes collectively referred to herein as the "DBC
Subsidiaries Common Stock".
Section 3.5. Charter, Bylaws and Minute Books. The copies of the
----------- --------------------------------
Certificate of Incorporation and Bylaws (or, with respect to Drovers Capital
Trust I, its Amended and Restated Declaration of Trust) of DBC and the DBC
Subsidiaries that have been delivered to FFC are true, correct and complete.
Except as previously disclosed to FFC in writing, the minute books of DBC and
the DBC Subsidiaries that have been made available to FFC for inspection are
true, correct and complete in all material respects and accurately record the
actions taken by the Boards of Directors and shareholders of DBC and the DBC
Subsidiaries at the meetings documented in such minutes.
Section 3.6. Financial Statements. DBC has delivered to FFC the following
----------- --------------------
financial statements: Statements of Condition at December 31, 1999 and 1998 and
Statements of Income, Statements of Shareholders' Equity, and Consolidated
Statements of Cash Flows of Drovers Bank for the years ended December 31, 1997,
1998 and 1999, certified by Xxxxxxxxx Xxxx, P.C., and set forth in the 1999
Annual Report to Drovers Bank's shareholders and Consolidated Statements of
Condition of DBC at September 30, 2000 and December 31, 1999 and Consolidated
Statements of Income for the three and nine-month periods ended September 30,
2000 and 1999, and Consolidated Statements of Cash Flows for the nine-month
periods ended September 30, 2000 and 1999, as filed with the Securities and
Exchange Commission (the "SEC") in a Quarterly Report on Form 10-Q (the
aforementioned Consolidated Statement of Condition as of September 30, 2000
being hereinafter referred to as the "DBC Balance Sheet"). Each of the foregoing
financial statements fairly present the consolidated financial condition, assets
and liabilities, and results of operations of DBC at their respective dates and
for the respective periods then ended and has been prepared in accordance with
generally accepted accounting principles consistently applied, except as
otherwise noted in a footnote thereto and except for the omission of the notes
from the financial statements applicable to any interim period.
-8-
Section 3.7. Absence of Undisclosed Liabilities. Except as disclosed in
----------- ----------------------------------
Schedule 3.7, or as reflected, noted or adequately reserved against in the DBC
------------
Balance Sheet, at September 30, 2000, DBC had no material liabilities (whether
accrued, absolute, contingent or otherwise) which were required to be reflected,
noted or reserved against in the DBC Balance Sheet under generally accepted
accounting principles. Except as disclosed in Schedule 3.7, DBC and the DBC
------------
Subsidiaries have not incurred, since September 30, 2000, any such liability,
other than liabilities of the same nature as those set forth in the DBC Balance
Sheet, all of which have been reasonably 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 DBC's and the DBC
Subsidiaries' customary business practices.
Section 3.8. Absence of Changes. Since September 30, 2000, DBC and the DBC
----------- ------------------
Subsidiaries have each conducted their businesses in the Ordinary Course of
Business and, except as disclosed in Schedule 3.8, neither DBC nor the DBC
------------
Subsidiaries have undergone any changes in its condition (financial or
otherwise), assets, liabilities, business or operations, other than changes in
the Ordinary Course of Business, which have not been, in the aggregate,
materially adverse as to DBC and the DBC Subsidiaries on a consolidated basis.
Section 3.9. Dividends, Distributions and Stock Purchases. Except as
----------- --------------------------------------------
disclosed in Schedule 3.9, since September 30, 2000, DBC has not declared, set
------------
aside, made or paid any dividend or other distribution in respect of the DBC
Common Stock, or purchased, issued or sold any shares of DBC Common Stock or the
DBC Subsidiaries Common Stock.
Section 3.10. Taxes. DBC and Drovers 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 September 30, 2000. Except
as disclosed in Schedule 3.10: (i) DBC and Drovers 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 DBC nor the
DBC 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 DBC or
Drovers Bank for any year through and including the year ended December 31,
1999. Except as disclosed in Schedule 3.10, neither DBC nor the DBC Subsidiaries
-------------
have 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 3.10, the
-------------
accruals and reserves reflected in the DBC Balance Sheet are adequate to cover
all taxes (including interest and penalties, if any, thereon) that are payable
or accrued as a result of DBC's consolidated operations for all periods prior to
the date of such Balance Sheet.
Section 3.11. Title to and Condition of Assets. Except as disclosed in
------------ --------------------------------
Schedule 3.11, DBC and the DBC Subsidiaries have good and marketable title to
-------------
all material consolidated real and personal properties and assets reflected in
the DBC Balance Sheet or acquired subsequent to September 30, 2000 (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,
-------- -------
-9-
that the representations and warranties contained in this sentence do not cover
liens or encumbrances that: (i) are reflected in the DBC 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 DBC Balance Sheet or acquired subsequent
to September 30, 2000: (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. DBC and the DBC 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
------------ ---------
DBC or the DBC Subsidiaries (other than contracts with customers reasonably
entered into by DBC or the DBC 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 DBC or the DBC Subsidiaries are a party or by which DBC or the DBC
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 DBC
-------------
or the DBC Subsidiaries, as the case may be, and DBC or the DBC 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 DBC is not
aware 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.
(b) Except for the Warrant Agreement and as set forth in
Schedule 3.12, as of the date of this Agreement, neither DBC nor the DBC
-------------
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 not terminable on thirty (30) days
or less notice involving the payment of more than $20,000 per annum, in the case
of any such agreement;
(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;
-10-
(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 $25,000;
(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 DBC and/or
Drovers Bank or committing to dispose of some or all of the capital stock or
substantially all of the assets of DBC and/or Drovers Bank; or
(viii) collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization.
(c) Neither DBC nor Drovers Bank is in default under or in
violation of any provision of any note, bond, indenture, mortgage, deed of
trust, loan agreement, lease or Material Contract to which it is a party or to
which any of its respective properties or assets is subject.
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 DBC or the DBC
Subsidiaries, threatened, that involves DBC or the DBC Subsidiaries or any of
their properties and that, if determined adversely, would materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of DBC or the DBC Subsidiaries; (ii)
there are no outstanding orders, writs, injunctions, judgments, decrees,
regulations, directives, consent agreements or memoranda of understanding issued
by any federal, state or local court or governmental authority or arbitration
tribunal issued against or with the consent of DBC or the DBC Subsidiaries that
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of DBC or the DBC
Subsidiaries or that in any manner restrict the right of DBC or the DBC
Subsidiaries to carry on their businesses as presently conducted taken as a
whole; and (iii) neither DBC nor the DBC Subsidiaries are aware of any fact or
condition presently existing that might give rise to any litigation,
investigation or proceeding which, if determined adversely to either DBC or the
DBC Subsidiaries, would materially and adversely affect the consolidated
condition (financial or otherwise), assets, liabilities, business, operations or
future prospects of DBC or the DBC Subsidiaries or would restrict in any manner
the right of DBC or the DBC Subsidiaries to
-11-
carry on their businesses as presently conducted taken as a whole. All
litigation (except for bankruptcy proceedings in which DBC or the DBC
Subsidiaries have filed proofs of claim) in which DBC or the DBC 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 $50,000 is identified in Schedule 3.13. In this
-------------
Agreement, the terms "Knowledge of DBC or Drovers Bank" and "Knowledge of DBC
and the DBC Subsidiaries" shall mean the actual knowledge of the officers of DBC
or any member of the Board of Directors of DBC.
Section 3.14. Compliance with Laws; Governmental Authorizations. Except as
------------ -------------------------------------------------
disclosed in Schedule 3.14 or where noncompliance would not have a material and
-------------
adverse effect upon the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of DBC or the DBC Subsidiaries: (i) DBC
and the DBC 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 DBC or the DBC
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 DBC or the DBC
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 3.15. Insurance. All policies of insurance relating to DBC's and
------------ ---------
DBC Subsidiaries' operations (except for title insurance policies), including
without limitation all financial institutions bonds, held by or on behalf of DBC
or the DBC 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, 1994, Drovers
------------ ----------------------------
Bank has continuously maintained in full force and effect one or more financial
institutions bonds listed in Schedule 3.16 insuring Drovers Bank against acts of
-------------
dishonesty by each of its employees. No claim has been made under any such bond
and Drovers Bank is not aware of any fact or condition presently existing which
might form the basis of a claim under any such bond. Drovers Bank has received
no notice that its present 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 DBC nor
------------ -----------------------------------------
any of the DBC Subsidiaries are a party to or bound by any collective bargaining
agreement. DBC and the DBC Subsidiaries enjoy good working relationships with
their employees, and there are no labor disputes pending, or to the Knowledge of
DBC or Drovers Bank threatened, that might materially and adversely affect the
condition (financial or otherwise), assets, liabilities, business, operations or
prospects of DBC or the DBC Subsidiaries. Except as disclosed in Schedule 3.17,
-------------
neither DBC nor the DBC Subsidiaries have any employment contract, change of
control, severance agreement, deferred compensation agreement, consulting
agreement or similar obligation (including the Employment Agreement between A.
Xxxxxxx Xxxx, Chairman, President and Chief Executive
-12-
Officer of DBC, and Xxxxxx Bank in the form of Exhibit C hereto which is being
---------
executed on the date hereof and which shall become effective at the Effective
Time, an "Employment Obligation") with any director, officer, employee, agent or
consultant. Except as disclosed in Schedule 3.17, as of the Effective Time (as
-------------
defined in Section 9.2 herein), neither DBC nor the DBC Subsidiary will have any
liability for employee termination rights arising out of any Employment
Obligation.
Section 3.18. Employee Benefit Plans. All employee benefit plans, contracts
------------ ----------------------
or arrangements to which DBC or the DBC Subsidiaries are a party or by which DBC
or the DBC Subsidiaries are bound, including without limitation all pension,
retirement, deferred compensation, savings, incentive, bonus, profit sharing,
stock purchase, stock option, life insurance, death or survivor's benefit,
health insurance, sickness, disability, medical, surgical, hospital, severance,
layoff or vacation plans, contracts or arrangements (collectively the "DBC
Benefit Plans"), but not including the Employment Obligations described in
Section 3.17, are identified in Schedule 3.18. Each of the DBC 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 "DBC 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. No "prohibited
transaction" (as such term is defined in Section 4975 of the Code or in ERISA)
and not otherwise exempt under ERISA or the Code has occurred in respect of the
DBC Pension Plans. There have been no material breaches of fiduciary duty by any
fiduciary under or with respect to the DBC Pension Plans or any other DBC
Benefit Plan which is an employee welfare benefit plan as defined in ERISA, and
no claim is pending or, to the Knowledge of DBC, threatened with respect to any
DBC Benefit Plan other than claims for benefits made in the Ordinary Course of
Business. Neither DBC nor the DBC Subsidiaries have incurred any material
penalty imposed by the Code or by ERISA with respect to the DBC Pension Plans or
any other DBC Benefit Plan. There has not been any audit of any DBC Benefit Plan
by the Department of Labor or the IRS.
Section 3.19. Related Party Transactions. Except as disclosed in
------------ --------------------------
Schedule 3.19, neither DBC nor any of the DBC Subsidiaries have any contract,
-------------
extension of credit, business arrangement or other relationship 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, 1999) of DBC or any
of the DBC Subsidiaries; (ii) any shareholder owning five percent (5%) or more
of the outstanding DBC Common Stock; and (iii) any "associate" (as defined in
Rule 405 under the 0000 Xxx) 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.
Section 3.20. No Finder. Except as disclosed in Schedule 3.20, neither DBC
------------ --------- -------------
nor any of the DBC Subsidiaries have paid or become obligated to pay any fee or
commission of any kind
-13-
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 DBC, the DBC Subsidiaries, the DBC Common Stock, the
DBC Subsidiaries' Common Stock, and the involvement of DBC and the DBC
Subsidiaries in the transactions contemplated hereby) nor any financial
statement, schedule (including without limitation its Schedules to this
Agreement), certificate, or other statement or document delivered by DBC or the
DBC Subsidiaries to FFC in connection herewith contains 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
necessary to make the statements contained herein or therein not false or
misleading.
Section 3.22. Environmental Matters. Except as disclosed in Schedule 3.22,
------------ --------------------- -------------
or as reflected, noted or adequately reserved against in the DBC Balance Sheet,
to the knowledge of DBC, neither DBC nor any of the DBC Subsidiaries have any
environmental contaminant, pollutant, toxic or hazardous waste or other similar
substance 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 creditor's right) or leased by DBC or any of the DBC Subsidiaries
and which is required to be reflected, noted or adequately reserved against in
DBC's consolidated financial statements under generally accepted accounting
principles. In particular, without limiting the generality of the foregoing
sentence, except as disclosed in Schedule 3.22, neither DBC nor any of the DBC
-------------
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 limitation any real
estate acquired by means of foreclosure or exercise of any other creditor's
right) or leased by DBC or any of the DBC Subsidiaries; (ii) any electrical
transformers, fluorescent light fixtures with ballasts or other equipment
containing PCB's 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 creditor's right) or leased by DBC or any of the DBC
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 creditor's right) or leased by DBC or any of the DBC
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
shareholders of DBC 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 DBC, the DBC Subsidiaries, DBC Common Stock, the DBC
Subsidiaries Common Stock and all actions taken and statements made by DBC and
the DBC Subsidiaries in connection with the transactions contemplated herein
(except for information provided by FFC to DBC or the DBC Subsidiaries) will:
(i) comply in all material respects with applicable provisions of the 1933 Act,
and the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
applicable
-14-
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 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 3.24. SEC Filings. No registration statement, offering circular,
------------ -----------
proxy statement, schedule or report filed and not withdrawn by DBC or Drovers
Bank with the SEC or the Federal Deposit Insurance Corporation (the "FDIC"), as
applicable, 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. DBC and Drovers 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 Corporation
(the "FDIC"), the Pennsylvania Department of Banking (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 material adverse
impact on DBC and the DBC Subsidiaries on a consolidated basis. DBC has
furnished FFC with, or made available to FFC, copies of all such filings made in
the last three fiscal years and in the period from January 1, 2000 through the
date of this Agreement. DBC is required to file reports with the SEC pursuant to
Section 12 of the 1934 Act, and DBC has made all appropriate filings under the
1934 Act and the rules and regulations promulgated thereunder. The DBC Common
Stock is traded on NASDAQ under the symbol "DROV."
Section 3.26. Loan Portfolio of Drovers Bank.
------------ ------------------------------
(a) Attached hereto as Schedule 3.26 is a list of (i) all
-------------
outstanding commercial relationships, i.e. commercial loans, commercial loan
commitments and commercial letters of credit, of Drovers Bank in excess of
$3,000,000, (ii) all loans of Drovers Bank classified by Drovers Bank or any
regulatory authority as "Monitor," "Substandard," "Doubtful" or "Loss," (iii)
all commercial and mortgage loans of Drovers Bank classified as "non-accrual,"
and (iv) all commercial loans of Drovers Bank classified as "in substance
foreclosed."
(b) Drovers Bank has adequately reserved for or charged off loans
in accordance with applicable regulatory requirements and Drovers Bank's reserve
for loan losses is adequate in all material respects.
-15-
Section 3.27. Investment Portfolio. Attached hereto as Schedule 3.27 is a
------------ -------------------- -------------
list of all securities held by DBC and the DBC Subsidiaries for investment,
showing the holder, principal amount, book value and market value of each
security as of a recent date, and of all short-term investments held by it as of
September 30, 2000. These securities are free and clear of all liens, pledges
and encumbrances, except as shown on Schedule 3.27.
-------------
Section 3.28. Regulatory Examinations.
------------ -----------------------
(a) Except for normal examinations conducted by a regulatory
agency in the Ordinary Course of Business, no regulatory agency has initiated
any proceeding or investigation into the business or operations of DBC or any of
the DBC Subsidiaries. Neither DBC nor any of the DBC Subsidiaries have received
any objection from any regulatory agency to DBC's or any of the DBC
Subsidiaries' response to any violation, criticism or exception with respect to
any report or statement relating to any examinations of DBC and any of the DBC
Subsidiaries which would have a materially adverse effect on DBC and any of the
DBC Subsidiaries on a consolidated basis.
(b) Neither DBC nor any of the DBC 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 materially adverse effect on DBC and any of the DBC Subsidiaries on a
consolidated basis.
Section 3.29. Beneficial Ownership of FFC Common Stock. DBC and the DBC
------------ ----------------------------------------
Subsidiaries do not, and prior to the Effective Time, DBC and the DBC
Subsidiaries will not, own beneficially (within the meaning of SEC Rule
13-d-3(d)(1)) more than five percent (5%) of the outstanding shares of FFC
Common Stock.
Section 3.30. Fairness Opinion. DBC's Board of Directors has received a
------------ ----------------
written opinion from Sandler X'Xxxxx & Partners, L.P., a copy of which has been
furnished to FFC to be confirmed in writing prior to the publication of the
Proxy Statement/Prospectus (a copy of such confirming written opinion being
provided simultaneously to FFC at the time of receipt), to the effect that the
Conversion Ratio, at the time of execution of this Agreement, is fair to DBC's
shareholders from a financial point of view.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF FFC
FFC represents and warrants to DBC, 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 FFC, and no other corporate action on the part of FFC
is necessary to authorize this Agreement or the consummation by FFC of the
transactions contemplated herein. This Agreement has been duly executed and
delivered by FFC and, assuming due authorization, execution and delivery by DBC,
constitutes a valid and binding obligation of FFC. The execution, delivery and
-16-
consummation of this Agreement will not constitute a violation or breach of or
default under the Articles of Incorporation or Bylaws of FFC or any statute,
rule, regulation, order, decree, directive, agreement, indenture or other
instrument to which FFC is a party or by which FFC or any of its properties are
bound.
Section 4.2. Organization and Standing. FFC is a business corporation that
----------- -------------------------
is duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. FFC 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 present business.
Section 4.3. Capitalization. The authorized capital of FFC consists
----------- --------------
exclusively of 400,000,000 shares of FFC Common Stock and 10,000,000 shares of
preferred stock without par value (the "FFC Preferred Stock"). As of December
23, 2000, there were 71,924,771 shares of FFC Common Stock validly issued,
outstanding, fully paid and non-assessable and 899,668 shares are held as
treasury shares. No shares of FFC Preferred Stock have been issued as of the
date of this Agreement, and FFC has no present intention to issue any shares of
FFC Preferred Stock. As of December 23, 2000, there are no outstanding
obligations, options or rights of any kind entitling other persons to acquire
shares of FFC Common Stock or shares of FFC Preferred Stock and there are no
outstanding securities or other instruments of any kind convertible into shares
of FFC Common Stock or into shares of FFC Preferred Stock, except as follows:
(i) 1,778,808 shares of FFC Common Stock were issuable upon the exercise of
outstanding stock options granted under the FFC Incentive Stock Option Plan and
the FFC Employee Stock Purchase Plan and (ii) there were outstanding 71,924,771
Rights representing the right under certain circumstances to purchase shares of
FFC Common Stock pursuant to the terms of a Shareholder Rights Agreement, dated
June 20, 1989, as amended and restated as of April 27, 1999 ("the FFC
Shareholder Rights Agreement"), entered into between FFC and Xxxxxx Bank and
(iii) shares of FFC Common Stock reserved from time to time for issuance
pursuant to FFC's Employee Stock Purchase and Dividend Reinvestment Plans. All
shares of FFC Common Stock that are issued in the Merger shall include purchase
Rights under the FFC Shareholder Rights Agreement unless, prior to the Effective
Date, all Rights issued under said Agreement shall have been redeemed by FFC
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 FFC
that have been delivered to DBC are true, correct and complete.
Section 4.5. Subsidiaries. Schedule 4.5 contains a list of all subsidiaries
----------- ------------ ------------
("Subsidiaries") which FFC owns, directly or indirectly. Except as otherwise
disclosed on Schedule 4.5: (i) FFC owns, directly or indirectly, all of the
------------
outstanding shares of capital stock of each 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 FFC or any Subsidiary) to acquire
shares of capital stock of any Subsidiary, and (B) there are no outstanding
securities or other instruments of any kind held by persons (other than FFC or
any Subsidiary) that are convertible into shares of capital stock of any
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction pursuant to which it is
incorporated. Each Subsidiary has full power and lawful
-17-
authority to own and hold its properties and to carry on its business as
presently conducted. Each Subsidiary which is a banking institution is an
insured bank under the provisions of the FDI Act.
Section 4.6. Financial Statements. FFC has delivered to DBC the following
----------- --------------------
financial statements: Consolidated Balance Sheets at December 31, 1999 and 1998
and Consolidated Statements of Income, Consolidated Statements of Shareholders'
Equity, and Consolidated Statements of Cash Flows for the years ended December
31, 1999, 1998 and 1997, certified by Xxxxxx Xxxxxxxx LLP and set forth in the
Annual Report to the shareholders of FFC for the year ended December 31, 1999
and Consolidated Balance Sheets as of September 30, 2000, Consolidated
Statements of Income for the three-month and nine-month periods ended September
30, 2000, and Consolidated Statements of Cash Flows for the nine-months ended
September 30, 2000 and 1999, as filed with the SEC in a Quarterly Report on Form
10-Q (the Consolidated Balance Sheet as of September 30, 2000 being hereinafter
referred to as the "FFC Balance Sheet"). Each of the foregoing financial
statements fairly presents the consolidated financial position, assets,
liabilities and results of operations of FFC at their respective dates and for
the respective periods then ended and has been prepared in accordance with
generally accepted accounting principles consistently applied, except as
otherwise noted in a footnote thereto.
Section 4.7. Absence of Undisclosed Liabilities. Except as disclosed in
----------- ----------------------------------
Schedule 4.7 or as reflected, noted or adequately reserved against in the FFC
Balance Sheet, at September 30, 2000 FFC had no material liabilities (whether
accrued, absolute, contingent or otherwise) which were required to be reflected,
noted or reserved against in the FFC Balance Sheet under generally accepted
accounting principles. Except as described in Schedule 4.7, since September 30,
------------
2000 FFC has not incurred any such liability other than liabilities of the same
nature as those set forth in the FFC Balance Sheet, all of which have been
reasonably incurred in the ordinary course of business.
Section 4.8. Absence of Changes; Dividends, Etc.. Since September 30, 2000
----------- -----------------------------------
(a) there has not been any material and adverse change in the condition
(financial or otherwise), assets, liabilities, business, operations or future
prospects of FFC and the FFC Subsidiaries on a consolidated basis and (b) except
as disclosed in Schedule 4.8, FFC has not declared, set aside, made or paid any
------------
dividend or other distribution in respect of the FFC Common Stock, or purchased,
issued or sold any shares of FFC Common Stock or the FFC 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 FFC threatened, that involves FFC or its properties and
that, if determined adversely to FFC, would materially and adversely affect the
condition (financial or otherwise), assets, liabilities, business, operations or
future prospects of FFC; (ii) there are no outstanding orders, writs,
injunctions, judgments, decrees, regulations, directives, consent agreements or
memoranda of understanding issued by any federal, state or local court or
governmental authority or of any arbitration tribunal against FFC which
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of FFC or restrict in any
manner the right of FFC to carry on its business as presently conducted; and
(iii) FFC is not aware of any fact or condition presently existing that might
give rise to any litigation, investigation or proceeding which, if
-18-
determined adversely to FFC, would materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business, operations or future
prospects of FFC or restrict in any manner the right of FFC 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 material and
-------------
adverse effect upon the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of FFC: (i) FFC and each of its
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 FFC and each of its
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 FFC, FFC Common Stock, and the involvement of FFC in
the transactions contemplated hereby) nor any financial statement, schedule
(including, without limitation, its Schedules to this Agreement), certificate or
other statement or document delivered by FFC to DBC in connection herewith
contains any statement which, at the time and under the circumstances under
which it is made, is false or misleading with respect to any material fact or
omits to state any material fact necessary to make the statements contained
herein or therein not false or misleading. In particular, without limiting the
generality of the foregoing sentence, the information provided and the
representations made by FFC to DBC in connection with the Registration Statement
(as defined in Section 6.1(b)), both at the time such information and
representations are provided and made and at the time of the Closing, will be
true and accurate in all material respects and will not contain any false or
misleading statement with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order (i) to make
the statements made not false or misleading, or (ii) to correct any statement
contained in an earlier communication with respect to such information or
representations which has become false or misleading.
Section 4.12. Labor Relations. Neither FFC nor any of its Subsidiaries is a
------------ ---------------
party to or bound by any collective bargaining agreement. FFC and each of its
Subsidiaries enjoy good working relationships with their employees, and there
are no labor disputes pending, or to the knowledge of FFC or any Subsidiary
threatened, that might materially and adversely affect the condition (financial
or otherwise), assets, liabilities, business, operations or prospects of FFC.
Section 4.13. Employee Benefits Plans. FFC's contributory profit-sharing
------------ -----------------------
plan, defined benefits pension plan and 401(k) plan (hereinafter collectively
referred to as the "FFC 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
-19-
(the "PBGC"). No "prohibited transaction" or "reportable event" (as such terms
are defined in the Code or ERISA) has occurred with respect to the FFC Pension
Plans or any other employee benefit plan to which FFC or any of its subsidiaries
are a party or by which FFC or any of its subsidiaries are bound (each
hereinafter called an "FFC Benefit Plan"). There have been no breaches of
fiduciary duty by any fiduciary under or with respect to the FFC Pension Plans
or any other FFC Benefit Plan, and no claim is pending or threatened with
respect to any FCC Benefit Plan other than claims for benefits made in the
Ordinary Course of Business. Neither FCC or any of its 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 FFC Pension
Plans or any other FFC Benefit Plan. There has not been any audit of any FCC
Benefit Plan by the Department of Labor, the IRS or the PBGC since 1990.
Section 4.14. Environmental Matters. Except as disclosed in Schedule 4.14
------------ --------------------- -------------
or as reflected, noted or adequately reserved against in the FFC Balance Sheet,
FFC 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
real estate acquired by means of foreclosure or other exercise of any creditor's
right) or leased by FFC and which is required to be reflected, noted or
adequately reserved against in FFC's consolidated financial statements under
generally accepted accounting principles.
Section 4.15. SEC Filings. No registration statement, offering circular,
------------ -----------
proxy statement, schedule or report filed and not withdrawn by FFC 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 shareholders of DBC 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 FFC, FFC Common Stock, and actions taken and statements
made by FFC in connection with the transactions contemplated herein (other than
information provided by DBC or Drovers Bank to FFC), will: (i) comply in all
material respects with applicable provisions of the 1933 Act and 1934 Act and
the pertinent 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. FFC 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
-20-
by such regulatory authorities or why such regulatory approvals should be
conditioned on any requirement which would be a significant impediment to FFC's
ability to carry on its business.
Section 4.18. No Finder. FFC has not paid or become obligated to pay any
------------ ---------
fee or commission of any kind whatsoever to any broker, finder, advisor or other
intermediary for, on account of, or in connection with the transactions
contemplated in this Agreement.
Section 4.19. Taxes. FFC has filed, or 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 September 30, 1999.
Except as disclosed in Schedule 4.19, (i) FFC has 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, and (ii) FFC has not received any notice
of deficiency or assessment of additional taxes. Except as disclosed in
Schedule 4.19, the accruals and reserves reflected in the FFC Balance Sheet are
-------------
adequate to cover all material taxes (including interest and penalties, if any,
thereon) that are payable or accrued as a result of FFC's consolidated
operations for all periods prior to the date of such Balance Sheet.
Section 4.20. Title to and Condition of Assets. FFC has good and marketable
------------ --------------------------------
title to all material consolidated real and personal properties and assets
reflected in the FFC Balance Sheet or acquired subsequent to September 30, 2000
(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 FFC 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.
Section 4.21. Contracts. All FFC Material Contracts are enforceable against
------------ ---------
FFC, and FFC 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. "FFC
Material Contracts" shall be defined as each written or oral contract entered
into by FFC (other than contracts with customers reasonably entered into by FFC
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 FFC or FFC Subsidiaries
are a party or by which FFC or any of the FFC Subsidiaries or any of their
properties may be bound.
Section 4.22. Insurance. All policies of insurance covering operations of
------------ ---------
FFC which are, in the aggregate, material (except for title insurance policies),
including without limitation all financial institutions bonds, held by or on
behalf of FFC are in full force and effect, and no notices of cancellation have
been received in connection therewith.
-21-
Section 4.23. Reports. FFC has filed all material reports, registrations
------------ -------
and statements that are required to be filed with the FRB, the FDIC, 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 4.23 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 material
adverse impact on FFC and the FFC Subsidiaries on a consolidated basis. FFC has
furnished DBC with, or made available to DBC, copies of all such filings made in
the last three fiscal years and in the period from January 1, 2000 to the date
of this Agreement. FFC is required to file reports with the SEC pursuant to
Section 12 of the 1934 Act, and FFC has made all appropriate filings under the
1934 Act and the rules and regulations promulgated thereunder. The FFC Common
Stock is traded on NASDAQ under the symbol "FULT."
ARTICLE V. COVENANTS OF DBC
From the date of this Agreement until the Effective Time, DBC covenants and
agrees to do, and shall cause the DBC Subsidiaries to do, the following:
Section 5.1. Conduct of Business. Except as otherwise consented to by FFC
----------- -------------------
in writing which consent will not be unreasonably withheld or delayed, DBC and
the DBC 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 their present officers and employees, and to maintain
their relationships with customers, suppliers and others having business
dealings with DBC or any of the DBC 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 DBC or any of the DBC
Subsidiaries; (v) keep in full force and effect all insurance policies now
carried by DBC or any of the DBC Subsidiaries; (vi) perform in all material
respects each of their obligations under all Material Contracts (as defined in
Section 3.12 herein) to which DBC or any of the DBC 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 understanding and other federal, state, and local
governmental directives applicable to DBC or any of the DBC Subsidiaries and to
the conduct of their businesses; (ix) not amend DBC's or any of the DBC
Subsidiaries' Articles of Incorporation or Bylaws; (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 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; (xii) not knowingly
take or
-22-
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 DBC Common Stock; (xiv)
not authorize, purchase (other than open market purchases to obtain DBC Common
Stock or issuance of shares for distribution pursuant to DBC's dividend
reinvestment plan or employee stock purchase plan prior to January 5, 2001 and
issuance of stock options to acquire shares of DBC Common Stock to certain of
DBC's directors in the first quarter of 2001 in consideration for deferred
directors fees, pursuant to the provisions of the Drovers Bancshares Corporation
1999 Non-Employee Directors Stock Option Plan), redeem, issue (except upon the
exercise of outstanding options under the DBC Stock Option Plans) or sell (or
grant options or rights to purchase or sell) any shares of DBC Common Stock or
any other equity or debt securities of DBC (other than the distribution, under
DBC's dividend reinvestment plan, of shares acquired in open market purchases,
or the Warrant or the DBC 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 DBC Benefit Plan, except as required by law (as defined
in Section 3.18 herein) for, or enter into or amend any Employment Obligation
(as defined in Section 3.17 herein) with any officer, director, employee or
consultant of DBC or any of the DBC Subsidiaries, except that DBC and the DBC
Subsidiaries may grant reasonable salary increases and bonuses to their officers
and employees in the Ordinary Course of Business to the extent consistent with
their past practice, and are consistent, in magnitude and otherwise, with the
past practices of DBC and the DBC Subsidiaries; (xvi) not enter into any related
party transaction of the kind contemplated in Section 3.19 herein except in the
Ordinary Course of Business consistent with past practice (as disclosed on
Schedule 3.19); (xvii) in determining the additions to loan loss reserves and
the loan write-offs, writedowns and other adjustments that reasonably should be
made by Drovers Bank during the fiscal year ending December 31, 2000, DBC and
the DBC Subsidiaries shall consult with FFC and shall act in accordance with
generally accepted accounting principles and DBC's and the DBC Subsidiaries'
customary business practices; (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) that is or may
reasonably be expected to have a material adverse effect on DBC and the DBC
Subsidiaries except in the Ordinary Course of Business consistent with past
practice; (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) except as permitted by (xi)
above, not make application for the opening or closing of any, or open or close
any, branches or automated banking facility; (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; or
(xxiii) not take any other action similar to the foregoing which would have the
effect of frustrating the purposes of
-23-
this Agreement or the Merger or cause the Merger not to qualify for pooling-of-
interests accounting treatment or as a tax-free reorganization under Section 368
of the Code.
Section 5.2. Best Efforts. DBC and the DBC Subsidiaries shall cooperate
----------- ------------
with FFC and shall use their 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 and the
Restructuring. In particular, without limiting the generality of the foregoing
sentence, DBC and the DBC Subsidiaries shall: (i) cooperate with FFC 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
FFC in making DBC's and the DBC Subsidiaries' employees reasonably available for
training by FFC at DBC's and the DBC Subsidiaries' facilities prior to the
Effective Time, to the extent that such training is deemed reasonably necessary
by FFC to ensure that DBC's and the DBC Subsidiaries' facilities will be
properly operated in accordance with FFC's policies after the Merger.
Section 5.3. Access to Properties and Records. DBC and the DBC Subsidiaries
----------- --------------------------------
shall give to FFC 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 DBC
and the DBC Subsidiaries as FFC may reasonably request, subject to the
obligation of FFC and its authorized employees and representatives to maintain
the confidentiality of all nonpublic information concerning DBC and the DBC
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, DBC and the DBC Subsidiaries shall
promptly prepare and deliver to FFC as soon as practicable all internal monthly
and quarterly financial statements, all quarterly and annual reports to
shareholders and all reports to regulatory authorities prepared by or for either
DBC or any of the DBC Subsidiaries (including, without limitation, delivery of
DBC's audited annual financial statements for 2000 as soon as they are
available) (which additional financial statements and reports are hereinafter
collectively referred to as the "Additional DBC Financial Statements"). The
representations and warranties set forth in Sections 3.6, 3.7 and 3.8 shall
apply to the Additional DBC Financial Statements.
Section 5.5. Update Schedules. DBC or any of the DBC Subsidiaries shall
----------- -----------------
promptly disclose to FFC in writing any material change, addition, deletion or
other modification to the information set forth in its Schedules hereto.
Section 5.6. Notice. DBC or any of the DBC Subsidiaries shall promptly
----------- ------
notify FFC 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 FFC in order to ensure
the accuracy of the representations and warranties set forth in this Agreement
or which otherwise could materially and adversely affect the condition
(financial or otherwise), assets,
-24-
liabilities, business operations or future prospects of DBC or any of the DBC
Subsidiaries or restrict in any manner their ability to carry on their
respective businesses as presently conducted.
Section 5.7. No Solicitation.
----------- ---------------
(a) DBC and the DBC 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
(including by way of furnishing non-public information), or take any other
action to facilitate, 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 DBC determines
in good faith, based on the written advice of outside counsel, that failure to
do so would be reasonably likely to constitute a breach of its fiduciary duties
under applicable law, DBC, 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) is reasonably likely to lead to a Superior Proposal, may (x)
furnish non-public information with respect to DBC or the DBC 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 DBC or any of the DBC Subsidiaries or any investment
banker, financial advisor, attorney, accountant, or other representative of DBC
or any of the DBC Subsidiaries, whether or not acting on behalf of DBC or any of
its subsidiaries, shall be deemed to be a breach of this Section by DBC.
(b) DBC shall call a meeting of its shareholders 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 shareholders at the
meeting, including recommending the approval of this Agreement by DBC's
shareholders; provided, however, that DBC's Board of Directors shall not be
required to take any action otherwise required by this sentence that it has
determined in good faith, based on the advice of outside counsel, would be
reasonably likely to constitute a breach of its fiduciary duties under
applicable law.
(c) The Board of Directors of DBC shall not (1) fail to recommend
this Agreement, withdraw or modify, or propose to withdraw or modify, in a
manner adverse to FFC, 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 DBC to enter into any letter of intent, agreement in principle,
acquisition agreement or other agreement with respect to an Acquisition Proposal
unless (x) the Board of Directors of DBC shall have determined in good faith,
based on the written advice of outside counsel, that failure to do so would be
reasonably likely to constitute a breach of its fiduciary duties under
applicable law and (y) the applicable Acquisition Proposal is a Superior
Proposal.
(d) Nothing contained in this Section shall prohibit DBC from at
any time taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the
-25-
Securities Exchange Act of 1934, as amended, provided, however, that neither DBC
nor its Board of Directors shall, except as permitted by paragraph (b) of this
section, propose to approve or recommend, an Acquisition Proposal.
(e) DBC shall promptly (but in any event within one day) advise
FFC 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. DBC will, to the extent reasonably practicable, keep FFC fully informed
of the status and details (including amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry.
(f) (i) In the event the Board of Directors of DBC takes any of
the actions set forth in clauses (1), (2) and/or (3) of Section 5.7(c) in
compliance with the standards in (x) and (y) therein, such action shall allow
termination of this Agreement by FFC 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
DBC takes any of the actions set forth in clauses (1), (2) and/or (3) of Section
5.7(c) without compliance with the standards in (x) and (y) therein, such action
shall constitute a breach allowing termination of this Agreement by FFC under
Section 8.1(c)(iii) herein which shall be treated in the same manner as
termination by FFC under Section 8.1(b)(i) herein and shall allow exercise of
the Warrant.
(ii) This Agreement may be terminated by DBC prior to the
shareholders meeting of DBC if (A) the Board of Directors of DBC shall have
determined in good faith based on the advice of outside counsel that failure to
do so would be reasonably likely to constitute a breach of its fiduciary duties
to DBC's shareholders under applicable 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 has authorized, subject to complying
with the terms of this Agreement, DBC to enter into a binding written agreement
for a transaction that constitutes a Superior Proposal and DBC notifies FFC in
writing that it intends to enter into such agreement, attaching the most current
version of such agreement to such notice; (C) FFC does not make, within five (5)
business days after receipt of DBC's written notice of its intention to enter
into a binding agreement for a Superior Proposal, any offer that the Board of
Directors reasonably and in good faith determines, after consultation with its
financial and legal advisors, is at least as favorable to the shareholders of
DBC as the Superior Proposal and during such period DBC reasonably considers and
discusses in good faith all proposals submitted by FFC and, without limiting the
foregoing, meets with, and causes its financial and legal advisors to meet with,
FFC and its advisors from time to time as required by FFC to consider and
discuss in good faith FFC's proposals, and (D) prior to DBC's termination
pursuant to this Section 5.7(f)(ii), DBC confirms in writing that such
termination allows exercise of the Warrant. DBC 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 FFC has received the notice to FFC required by
clause (B) and (y) to notify FFC promptly if its intention to enter into a
binding agreement referred to in its notice to FFC shall change at any time
after giving such notice.
-26-
(g) 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 DBC or any of the DBC Subsidiaries, or a merger,
consolidation or other business combination involving an acquisition of DBC or
any of the DBC Subsidiaries or any proposal to acquire in any manner a
substantial equity interest in or a substantial portion of the assets of DBC or
any of the DBC Subsidiaries.
(ii) A "Superior Proposal" shall be an Acquisition Proposal
that the Board of Directors of DBC 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 and after
taking into account the strategic benefits anticipated to be derived from the
Merger and the long-term prospects of DBC and the DBC Subsidiaries as a combined
company), would, if consummated, result in a transaction more favorable to the
shareholders of DBC 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. DBC shall use its best efforts to deliver
----------- -----------------
or cause to be delivered to FFC, at or before the Closing, a letter from each of
the officers and directors of DBC (and shall use its best efforts to obtain and
deliver such a letter from each shareholder of DBC) 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 0000 Xxx) of DBC, in form and substance
satisfactory to FFC, under the terms of which each such officer, director or
shareholder 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 FFC
Common Stock to be received by such person pursuant to this Agreement.
Section 5.9. No Purchases or Sales of FFC Common Stock During Price
----------- ------------------------------------------------------
Determination Period. DBC and the DBC 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 shareholder of DBC who may
be deemed an "affiliate" (as defined in SEC Rules 145 and 405) of DBC 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 FFC Common Stock or any options,
rights or other securities convertible into shares of FFC Common Stock during
the Price Determination Period.
Section 5.10. Dividends. DBC shall not declare or pay a cash dividend on
------------ ---------
the DBC Common Stock; provided, however, that DBC may declare and pay a dividend
on the DBC Common Stock on each of (i) March 30, 2001 in the amount of $.13 per
share, (ii) June 29, 2001 in the amount of $.14 per share, 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 FFC Common Stock scheduled to be
-27-
paid on July 15, 2001; (iii) September 28, 2001 in the amount of $.14 per share,
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 FFC Common Stock scheduled to
be paid on October 15, 2001 (it being the intent of FFC and DBC that DBC be
permitted to pay a dividend on the DBC Common Stock on the dates indicated in
subsections (ii), (iii) and (iv) above only if the shareholders of DBC, upon
becoming shareholders of FFC, would not be entitled to receive a dividend on the
FFC Common Stock on the payment dates indicated in such subsections).
Section 5.11. Accounting Treatment. DBC acknowledges that FFC intends to
------------ --------------------
treat the Merger as a "pooling-of-interest" for financial reporting purposes.
DBC shall not take (and shall use its best efforts not to permit any of the
directors, officers, employees, stockholders, agents, consultants or other
representatives of DBC to take) any action that would preclude FFC from treating
such business combination as a "pooling-of-interests" for financial reporting
purposes.
ARTICLE VI. COVENANTS OF FFC
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, FFC
covenants and agrees to do the following:
Section 6.1. Best Efforts. FFC shall cooperate with DBC and the DBC
----------- ------------
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 and the
Restructuring. In particular, without limiting the generality of the foregoing
sentence, FFC agrees to do the following:
(a) Applications for Regulatory Approval: FFC shall promptly
------------------------------------
prepare and file, with the cooperation and assistance of (and after review by)
DBC 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, the Pennsylvania Banking
Code of 1965, as amended and the Federal Deposit Insurance Act, as amended.
(b) Registration Statement: FFC shall promptly prepare, with the
----------------------
cooperation and assistance of (and after review by) DBC and its counsel and
accountants, and file with the SEC a registration statement (the "Registration
Statement") for the purpose of registering the shares of FFC Common Stock to be
issued to shareholders of DBC 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 the shares of FFC's Common
Stock to be issued to the shareholders of DBC, and the soliciting of the proxies
of DBC's shareholders in favor of the Merger, under the provisions of this
Agreement. FFC may rely upon all information provided to it by DBC and Drovers
Bank in this connection and FFC 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
FFC in reliance upon any
-28-
information provided to FFC by DBC or the DBC Subsidiaries or by any of their
officers, agents or representatives.
(c) State Securities Laws: FFC, with the cooperation and
---------------------
assistance of DBC 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: FFC, with the cooperation and assistance of DBC
-------------
and its counsel and accountants, shall promptly take all such actions as may be
necessary or appropriate in order to list the shares of FFC Common Stock to be
issued in the Merger on NASDAQ.
(e) Adopt Amendments: FFC shall not adopt any amendments to its
----------------
charter or bylaws or other organizational documents that would alter the terms
of FFC's Common Stock or could reasonably be expected to have a material adverse
effect on the ability of FFC to perform its obligations under this Agreement.
(f) Tax Treatment. FFC 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. FFC shall give to DBC and to
----------- --------------------------------
its authorized employees and representatives (including without limitation DBC's
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 FFC as DBC may reasonably
request, subject to the obligation of DBC and its authorized employees and
representatives to maintain the confidentiality of all nonpublic information
concerning FFC obtained by reason of such access.
Section 6.3. Subsequent Financial Statements. Between the date of signing
----------- -------------------------------
of this Agreement and the Effective Time, FFC shall promptly prepare and deliver
to DBC as soon as practicable each Quarterly Report to FFC's shareholders and
any Annual Report to FFC's shareholders normally prepared by FFC. The
representations and warranties set forth in Sections 4.6, 4.7 and 4.8 herein
shall apply to the financial statements (hereinafter collectively referred to as
the "Additional FFC Financial Statements") set forth in the foregoing Quarterly
Reports and any Annual Report to FFC's shareholders.
Section 6.4. Update Schedules. FFC shall promptly disclose to DBC in
----------- ----------------
writing any change, addition, deletion or other modification to the information
set forth in its Schedules to this Agreement.
Section 6.5. Notice. FFC shall promptly notify DBC in writing of any
----------- ------
actions, claims, investigations or other developments which, if pending or in
existence on the date of this Agreement, would have been required to be
disclosed to DBC in order to ensure the accuracy of the representations and
warranties set forth in this Agreement or which otherwise could materially and
adversely affect the condition (financial or otherwise), assets, liabilities,
business, operations or
-29-
future prospects of FFC or restrict in any manner the right of FFC to carry on
its business as presently conducted.
Section 6.6. Employment Arrangements.
----------- -----------------------
(a) From and after the Effective Time, (i) FFC, Xxxxxx Bank,
Advisors or another subsidiary of FFC (the "FFC Employers") shall: (A) to
satisfy each of the Employment Obligations (as defined in Section 3.17 herein),
(B) use its best efforts to retain each present full-time employee of DBC and
the DBC Subsidiaries at such employee's current position (or, if offered to, and
accepted by, an employee, a position for which the employee is qualified with
the FFC Employers at a salary commensurate with the position), (C) pay
compensation to each person who was employed as of the Effective Time and who
continues to be employed by the FFC Employers on and after the Effective Time,
that is at least equal to the aggregate compensation that such person was
receiving from DBC or the DBC Subsidiaries prior to the Effective Time (unless
there is a material change in the duties and responsibilities of such employee),
(ii) in the event that the FFC Employers shall continue to employ officers or
employees of DBC and the DBC Subsidiaries as of the Effective Time, the FFC
Employers shall employ such persons on the Effective Time as "at will"
employees, and (iii) in the event the FFC Employers are not willing to employ,
or terminate the employment (other than as a result of unsatisfactory
performance of their respective duties and provided that a requirement to
regularly perform duties at a location which is more than 25 miles from both an
employee's principal place of employment with DBC and Drovers Bank and his
residence as of the date of this Agreement may be treated as a termination of
employment of such employee) of any officers or employees of DBC or the DBC
Subsidiaries as of the Effective Time, the FFC Employers shall pay severance
benefits to such employee (other than employees who receive payments under an
Employment Obligation) as follows: (A) in the event employment is terminated on
or prior to the date which is one year after the Effective Date, two week's
salary plus one week's salary for each year of service with DBC or the DBC
Subsidiaries, with a maximum of fifty-two week's salary; or (B) in the event
employment is terminated thereafter, in accordance with the then existing
severance policy of the Bank or its successor.
(b) On and after the Effective Time, (i) the FFC Employers shall
continue to maintain the Drovers and Mechanics Bank Salary Deferral Plan and the
Drovers and Mechanics Bank Pension Plan (the "DBC Retirement Plans") for all
employees of DBC and the DBC Subsidiaries who are participants in the DBC
Retirement Plans as of the Effective Time and who become employees of the FFC
Employers, provided however, FFC Employers shall be obligated to continue the
Drovers Retirement Plans for those former DBC and DBC Subsidiaries' employee
participants until the earlier of: (A) the date that the Drovers Retirement
Plans can no longer satisfy applicable qualified retirement plan discrimination
testing under the Code (taking into consideration all methods available for
satisfying discrimination testing applicable to qualified retirement plans under
the Code), or (B) the last day of the plan year of the Drovers Retirement Plans
in which it is determined that the minimum required cash contribution, as
determined under the Code for the Drovers and Mechanics Bank pension plan and
the matching contribution under the Drovers and Mechanics Bank Salary Deferral
Plan (based on the formula as of the Effective Time), exceed 10% of the
participant covered payroll; thereafter DBC and DBC Subsidiaries' employees
shall participate under the retirement plans provided by the FFC Employers for
FFC employees; and (ii)
-30-
with respect to non-retirement plan employee benefits, the FFC Employers shall
provide employee benefits for all employees of DBC and the DBC Subsidiaries who
become employees of the FFC Employers which are substantially equivalent to or
better than, in the aggregate, the non-retirement plan employee benefits
provided by DBC and the DBC Subsidiaries to the employees immediately prior to
the Effective Time. DBC and the DBC Subsidiaries' employees who became employed
by the FFC Employers shall receive service credit for vesting and eligibility
purposes under the employee benefit plans of FFC for their service with DBC and
the DBC Subsidiaries up through the Effective Time, provided, however, with
respect to vesting and eligibility service credit under the FFC retirement
plans, vesting and eligibility credit shall only be required at the point in
time it is determined that the DBC and DBC Subsidiaries' employees are to
participate in the FFC retirement plans.
Section 6.7. No Purchase or Sales of FFC Common Stock During Price
----------- -----------------------------------------------------
Determination Period. Neither FFC nor any Subsidiary of FFC, nor any executive
--------------------
officer or director of FFC or any Subsidiary of FFC, nor any shareholder of FFC
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 0000 Xxx) of FFC, 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 FFC Common Stock or any options,
rights or other securities convertible into shares of FFC Common Stock during
the Price Determination Period; provided, however, that FFC may purchase shares
of FFC Common Stock in the ordinary course of business during the Price
Determination Period pursuant to FFC's Benefit Plans or FFC's Dividend
Reinvestment Plan.
Section 6.8. Drovers Division and Drovers Regional Directors.
----------- -----------------------------------------------
(a) For a period of at least three (3) years after the Effective
Date, FFC shall (subject to the right of FFC and the Drovers Regional Directors
to terminate such obligations under this Section 6.8(a) pursuant to subsections
(c) and (d) below) (i) operate the former business of Drovers Bank as the York
Division of Xxxxxx Bank (subject to the Trust Business Transfer and such
consolidations and/or closures of branch offices of Xxxxxx Bank and Drovers Bank
as deemed desirable by FFC) (the "Drovers Division") under the name "Drovers
Bank, a division of Xxxxxx Bank" or similar designation authorized by the
Department (and to which the FDIC has no objection); and (ii) appoint the
present directors of Drovers Bank who indicate their desire to serve (the
"Drovers Regional Directors") on the board of the Drovers Division (the
"Regional Board"), provided, that, after such three-year period, each Regional
Director shall be subject to FFC's mandatory retirement rules for directors.
(b) For a period of three (3) years after the Effective Date
(subject to the right of FFC and to Drovers Regional Directors to terminate such
obligations under this Section 6.8(b) under subsections (c) and (d) below), each
non-employee Drovers Regional Director and each director of FFC or Xxxxxx Bank
shall continue to receive aggregate director's fees from FFC or Xxxxxx Bank in
an amount not less than the fees he or she was receiving from DBC and the DBC
Subsidiaries prior to the Effective Date (the current fees being set forth on
Schedule 6.8 and to remain unchanged through the Effective Date) or, if higher,
------------
the fees paid by FFC or Xxxxxx Bank, as applicable, to its directors, provided
that, in the event an individual ceases to act as a director of the
-31-
Regional Board, FFC or Xxxxxx Bank, the foregoing obligation to maintain
existing fees and benefits shall not apply to successors in such positions.
(c) FFC shall have the right to terminate its obligations under
subsections (a) and (b) of this Section 6.8 as a result of (i) regulatory
requirements, (ii) safe and sound banking practices, or (iii) the exercise of
their fiduciary duties by FFC's directors.
(d) Notwithstanding anything herein to the contrary, the Drovers
Regional Directors, in their exercise of their fiduciary duty as to the best
interests of Xxxxxx Bank and FFC, may, by a majority vote of such directors,
modify or waive any or all of the foregoing provisions in subsections (a) and
(b) of this Section 6.8.
Section 6.9 Insurance; Indemnification.
--------------------------
(a) For three years after the Effective Date, FFC shall (and
Drovers Bank shall cooperate in these efforts) obtain and maintain (a) "tail"
coverage relating to DBC's existing directors and officers liability insurance
policy (provided that such insurance shall be in such amount and carry such
premium as may be reasonably acceptable to FFC (not to exceed 150% of the
current premium for DBC's existing directors and officers liability insurance
policy) and that FFC 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 (other than relating to this Agreement
and the transactions contemplated hereby) and covering persons who are covered
by such insurance immediately prior to the Effective Date and (b) provide the
Drovers Bank Continuing Directors with coverage under a directors and officers
liability policy or policies similar to the coverage provided to directors of
other subsidiaries of FFC.
(b) From and after the Effective Date, FFC 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 or
director of DBC or a DBC 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 FFC, 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 DBC or a DBC
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
to the date hereof or amended prior to the Effective Date and under the Articles
of Incorporation or Bylaws of DBC or a DBC Subsidiary as in effect as of the
date hereof (and FFC 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 and FFC's Articles of Incorporation and
Bylaws). Any Indemnified Party wishing to claim indemnification under this
provision, upon learning of any claim, shall notify
-32-
FFC (but the failure to so notify FFC shall not relieve FFC from any liability
which FFC may have under this section except to the extent FFC is materially
prejudiced thereby). In the defense of any action covered by this Section
6.9(b), FFC 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 FFC 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). FFC shall have an obligation
to advance funds to satisfy an obligation of FFC or any successor to FFC under
this Section 6.9(b) to the same extent that FFC would be obligated to advance
funds under the indemnification provisions of its Articles of Incorporation
and/or Bylaws.
Section 6.10. Appointment of FFC and Xxxxxx Bank Directors. FFC shall, on
------------ --------------------------------------------
or promptly after the Effective Date, appoint to (i) FFC's Board of Directors
two of DBC's current directors and (ii) Xxxxxx Bank's Board of Directors three
other of DBC's current directors (in each case, designated, subject to the
reasonable approval of FFC, by vote of DBC's Board of Directors prior to the
Effective Date) to serve as directors of FFC or Xxxxxx Bank, as applicable. The
two (2) present directors of DBC designated to serve on the FFC Board would be
offered at least one full three-year term as a director of FFC. The three other
present directors of DBC designated to serve on the Xxxxxx Bank Board would be
offered at least three consecutive one-year terms as a director of Xxxxxx Bank.
FFC and Xxxxxx Bank have mandatory retirement policies for directors who attain
age 70; however, they would "grandfather" all present directors of DBC from the
application of such policy for a three year period after the Effective Date
unless a director would have otherwise been obligated to retire from the Board
of DBC under any policy it currently has in effect.
Section 6.11. Combined Financial Statements. FFC shall use its best efforts
------------ -----------------------------
to file with the SEC 30-days of combined financial statements in accordance with
Rule 145 within 45 days of the Effective Date or as soon as practical
thereafter.
Section 6.12. Assumption of DBC Debentures. FFC agrees that, effective
------------ ----------------------------
with the Effective Date and without any further action being required, it shall
assume DBC's 9.25% Junior Subordinated Deferrable Interest Debentures due
September 30, 2029 and all of DBC's obligations under the related Indenture.
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) Shareholder Approval: This Agreement shall have been duly
--------------------
authorized, approved and adopted by the shareholders of DBC.
-33-
(b) Regulatory Approvals: The approval of each federal and state
--------------------
regulatory authority having jurisdiction over the transactions contemplated by
this Agreement (including the Merger and the Restructuring), including without
limitation, the Federal Reserve Board, the Department and the Federal Deposit
Insurance Corporation, 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
FFC of a portion of the business of FFC, or any subsidiary of FFC or (B) any
divestiture by DBC or the DBC Subsidiaries of a portion of their businesses
which FFC in its good faith judgment believes will have a significant adverse
impact on the business or prospects of DBC or the DBC Subsidiaries, as the case
may be, or (ii) impose any condition upon FFC, or any of its subsidiaries, which
in FFC's good faith judgment (x) would be materially burdensome to FFC and its
subsidiaries taken as a whole, (y) would significantly increase the costs
incurred or that will be incurred by FFC as a result of consummating the Merger
or (z) would prevent FFC from obtaining any material benefit contemplated by it
to be attained as a result of the Merger.
(c) Stock Listing. The shares of FFC Common Stock to be issued in
-------------
the Merger shall have been authorized for listing on NASDAQ.
(d) Tax Opinion. Each of FFC and DBC shall have received an
-----------
opinion of FFC's counsel, Barley, Snyder, Xxxxx & Xxxxx, LLC, reasonably
acceptable to FFC and DBC, addressed to FFC and DBC, with respect to federal tax
laws or regulations, to the effect that:
(1) The Merger will constitute reorganizations within the
meaning of Section 368(a)(1)(A) of the Code;
(2) No gain or loss will be recognized by FFC or Xxxxxx Bank
by reason of the Merger;
(3) The bases of the assets of DBC in the hands of FFC will be
the same as the bases of such assets in the hands of DBC immediately prior to
the Merger;
(4) The holding period of the assets of DBC in the hands of
FFC will include the period during which such assets were held by DBC prior to
the Merger;
(5) A holder of DBC Common Stock who receives shares of FFC
Common Stock in exchange for his DBC Common Stock pursuant to the reorganization
(except with respect to cash received in lieu of fractional shares of FFC Common
Stock deemed issued as described below) will not recognize any gain or loss upon
the exchange.
(6) A holder of DBC Common Stock who receives cash in lieu of
a fractional share of FFC Common Stock will be treated as if he received a
fractional share of FFC Common Stock pursuant to the reorganization which FFC
then redeemed for cash. The holder of DBC Common Stock will recognize capital
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.
-34-
(7) The tax basis of the FFC Common Stock to be received by
the shareholders of DBC pursuant to the terms of this Agreement will include the
holding period of the DBC Common Stock surrendered in exchange therefor,
provided that such DBC Common Stock is held as a capital interest at the
Effective Time.
(8) The holding period of the shares of FFC Common Stock to be
received by the shareholders of DBC will include the period during which they
held the shares of DBC Common Stock surrendered, provided the shares of DBC
Common Stock are held as a capital asset on the date of the exchange.
(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 shareholders of
DBC; 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 FFC agrees to defend and indemnify DBC and
-------- -------
Drovers 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,
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 DBC to
consummate this Agreement.
(g) Pooling. FFC and DBC shall have been advised in writing by
-------
Xxxxxx Xxxxxxxx, LLP on the Effective Date that the Merger should be treated as
a pooling transaction for financial accounting purposes.
Section 7.2. Conditions Precedent to Obligations of FFC. The obligations of
----------- ------------------------------------------
FFC 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 FFC in accordance with the
provisions of Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the
------------------------------------------
representations and warranties of DBC as set forth in this Agreement, all of the
information contained in Schedules hereto and all DBC Closing Documents (as
defined in Section 7.2(j)) 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).
-35-
(b) Covenants Performed: DBC 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 DBC: FFC shall have received an
--------------------------
opinion, dated the Effective Time, from Xxxxxx & Sinon, LLP, counsel to DBC, in
substantially the form of Exhibit C 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 DBC, FFC, affiliates of the foregoing, and others.
(d) Affiliate Agreements: Shareholders of DBC who are or will be
--------------------
affiliates of DBC or FFC for the purposes of Accounting Series Release No. 135
and the 1933 Act shall have entered into agreements with FFC, in form and
substance satisfactory to FFC, reasonably necessary to assure (i) compliance
with Rule 145 under the 1933 Act and (ii) the ability of FFC to use
pooling-of-interests accounting for the Merger if FFC has elected such treatment
pursuant to this Agreement.
(e) DBC Options: As may be required by Section 2.3 herein, all
-----------
holders of DBC Options shall have delivered documentation reasonably
satisfactory to FFC substituting the FFC Options for the DBC Stock Options.
(f) No Material Adverse Change: FFC (together with its
--------------------------
accountants, if the advice of such accountants is deemed necessary or desirable
by FFC) shall have established to its reasonable satisfaction that, since the
date of this Agreement, there shall not have been any material and adverse
change in the condition (financial or otherwise), assets, liabilities, business
or operations or future prospects of DBC and the DBC Subsidiaries on a
consolidated basis taken as a whole. In particular, without limiting the
generality of the foregoing sentence, the Additional DBC Financial Statements
(as defined in Section 5.4) shall indicate that the consolidated financial
condition, assets, liabilities and results of operations of DBC 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 DBC Balance Sheet. 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 financial position, business or results of
operations or future prospects of DBC or (ii) the ability of DBC to perform its
obligations under this Agreement, provided that "material and adverse change"
shall not be deemed to include the impact of (a) changes in banking and similar
laws of general applicability or interpretations thereof by courts or
governmental authorities, (b) changes in GAAP or regulatory accounting
principles generally applicable to banks and their holding companies, (c)
actions or omissions of DBC taken at the direction or behest of FFC with the
prior written consent of FFC, including any action or actions, individually or
in the aggregate, taken by DBC or the DBC Subsidiaries, (d) changes in economic
conditions generally affecting financial institutions including changes in the
general level of interest rates, and (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 DBC, including
reasonable expenses incurred by DBC in consummating the transactions
contemplated by the Agreement. At the Closing, DBC shall deliver to FFC a
certificate confirming the absence of a material adverse change described
herein.
-36-
(g) Accountants' Letter. Subject to the requirements of Statement
-------------------
of Auditing Standards No. 72 of the American Institute of Certified Public
Accountants, Xxxxxx Xxxxxxxx LLP, or such other accounting firm as is acceptable
to FFC, shall have furnished to FFC an "agreed upon procedures" letter, dated
the Effective Date, in form and substance satisfactory to FFC to the effect
that:
(1) In their opinion, the consolidated financial statements of
DBC 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
(2) 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 statements of DBC , inspection of the minute books of DBC and
the DBC Subsidiaries since December 31, 2000, inquiries of officials of DBC and
the DBC 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 Statements of Condition,
Consolidated Statements of Income, Consolidated Statements of Shareholders'
Equity and Consolidated Statements of Cash Flows of DBC included in the
Registration Statement are not in conformity with generally accepted accounting
principles 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 changes in the
consolidated shareholders' equity of DBC as compared with amounts shown in the
balance sheet as of December 31, 2000 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, 2001 to such specified
date, there were any decreases in the consolidated total or per share amounts of
net interest income, consolidated net interest income after provision for loan
losses, consolidated other income or consolidated net income of DBC 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) Federal and State Securities and Antitrust Laws: FFC and its
-----------------------------------------------
counsel shall have determined to their satisfaction that, as of the Closing, 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.
-37-
(i) Environmental Matters: No environmental problem of the kind
---------------------
contemplated in Section 3.22 and not disclosed in Schedule 3.22 shall have been
-------------
discovered which would, or which potentially could, materially and adversely
affect the condition (financial or otherwise), assets, liabilities, business,
operations or future prospects of either DBC or Drovers Bank.
(j) Closing Documents: DBC shall have delivered to FFC: (i) a
-----------------
certificate signed by DBC's Chairman and President and Chief Executive Officer
and by its Secretary (or other officers reasonably acceptable to FFC) verifying
that all of the representations and warranties of DBC set forth in this
Agreement are true and correct in all material respects as of the Closing and
that DBC has performed in all material respects each of the covenants required
to be performed by it under this Agreement; (ii) all consents and authorizations
of landlords and other persons that are necessary to permit this Agreement to be
consummated without violation of any lease or other agreement to which DBC or
Drovers Bank is a party or by which they or any of their properties are bound;
and (iii) such other certificates and documents as FFC and its counsel may
reasonably request (all of the foregoing certificates and other documents being
herein referred to as the "DBC Closing Documents").
(k) Dissenting Stockholders. Dissenters' rights shall have been
-----------------------
exercised with respect to less than ten percent (10%) of the outstanding shares
of DBC Common Stock.
Section 7.3. Conditions Precedent to the Obligations of DBC. The obligation
----------- ----------------------------------------------
of DBC 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 DBC in accordance with the
provisions of Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the
------------------------------------------
representations and warranties of FFC as set forth in this Agreement, all of the
information contained in its Schedules hereto and all FFC Closing Documents (as
defined in Section 7.3(g) of 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).
(b) Covenants Performed: FFC 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 FFC.
(c) Opinion of Counsel for FFC: DBC shall have received an opinion
--------------------------
from Barley, Snyder, Xxxxx & Xxxxx, LLC, counsel to FFC, dated the Effective
Time, in substantially the form of Exhibit D 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 FFC, DBC, affiliates of the foregoing, and
others.
(d) FFC Options: FFC Options shall have been substituted for the
-----------
DBC Options pursuant to Section 2.3 herein.
-38-
(e) No Material Adverse Change: DBC (together with its
--------------------------
accountants, if the advice of such accountants is deemed necessary or desirable
by DBC) shall have established to its reasonable satisfaction that, since the
date of this Agreement, there shall not have been any material and adverse
change in the condition (financial or otherwise), assets, liabilities, business
or operations or future prospects of FFC. In particular, without limiting the
generality of the foregoing sentence, the Additional FFC Financial Statements
(as defined in Section 6.3) shall indicate that the consolidated financial
condition, assets, liabilities and results of operations of FFC 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 FFC Balance Sheet. 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 financial position, business or results of
operations or future prospects of FFC or (ii) the ability of FFC to perform its
obligations under this Agreement, provided that "material and adverse change"
shall not be deemed to include the impact of (a) changes in banking and similar
laws of general applicability or interpretations thereof by courts or
governmental authorities, (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
including 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 FFC, including reasonable expenses incurred by FFC in
consummating the transactions contemplated by the Agreement. At the Closing, FFC
shall deliver to DBC a certificate confirming the absence of a material adverse
change described herein.
(f) Fairness Opinion: DBC shall have obtained from Sandler,
----------------
X'Xxxxx & Partners, L.P., or from another independent financial advisor selected
by the Board of Directors of DBC, an opinion dated within five (5) days of the
Proxy Statement/Prospectus to be furnished to the Board of Directors of DBC
stating that the Conversion Ratio contemplated by this Agreement is fair to the
shareholders of DBC from a financial point of view.
(g) Closing Documents: FFC shall have delivered to DBC: (i) a
-----------------
certificate signed by FFC's Chairman and Chief Executive Officer (or other
officer reasonably acceptable to DBC) verifying that all of the representations
and warranties of FFC set forth in this Agreement are true and correct in all
material respects as of the Closing and that FFC has performed in all material
respects each of the covenants required to be performed by FFC; and (ii) such
other certificates and documents as DBC and its counsel may reasonably request
(all of the foregoing certificates and documents being herein referred to as the
"FFC 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 shareholders of DBC) as follows:
-39-
(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 DBC and FFC, followed by written notices given to the
other party.
(b) Unilateral Action by FFC: This Agreement may be terminated
------------------------
unilaterally by the affirmative vote of the Board of Directors of FFC, followed
by written notice given promptly to DBC, if: (i) there has been a material
breach by DBC of any representation, warranty or material failure 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
FFC to DBC; (ii) any condition precedent to FFC's obligations as set forth in
Article VII of this Agreement remains unsatisfied, through no fault of FFC, on
September 30, 2001; or (iii) FFC's Board of Directors makes an election provided
for in Section 5.7(f)(i) herein.
(c) Unilateral Action By DBC: This Agreement may be terminated
------------------------
unilaterally by the affirmative vote of a majority of the Board of Directors of
DBC, followed by written notice given promptly to FFC, if: (i) there has been a
material breach by FFC of any representation, warranty or material failure 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 DBC to FFC; (ii) any condition precedent to DBC's obligations as set
forth in Article VII of this Agreement remains unsatisfied, through no fault of
DBC, on September 30, 2001 or (iii) DBC's Board of Directors makes an election
provided for in, and subject to the conditions of, Section 5.7(f)(ii) herein.
(d) Market Price of FFC Common Stock. (i) DBC 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 $19.50, i.e. .85 multiplied
by the Starting Price (the "Floor Price"). Notwithstanding the foregoing, FFC,
through a resolution adopted by its Board of Directors, shall have the option to
cause DBC to amend this Agreement (and, upon such amendment, DBC 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
$17.20 and the Floor Price is $19.50, FFC would have the option to increase the
Conversion Ratio to 1.4058 (1.24 x 19.50/17.20) in lieu of terminating this
Agreement.
(ii) FFC shall have the right to terminate this Agreement,
through a resolution adopted by its Board of Directors, if the Closing Market
Price is greater than $26.38, i.e. 1.15 multiplied by the Starting Price (the
"Ceiling Price"). Notwithstanding the foregoing, DBC through a resolution
adopted by its Board of Directors shall have the option to cause FFC to amend
this Agreement (and, upon such amendment, FFC shall not have the right to
terminate this Agreement) to decrease the Conversion Ratio to a level,
calculated to four decimal places, equal to the Conversion Ratio multiplied by
the quotient of the Ceiling Price (the numerator) over the Closing Market Price
(the denominator). For example, if the Closing Market Price is $28.67 and the
Ceiling Price is $26.38, DBC would have the option to decrease the Conversion
Ratio to 1.1410 (1.24 x 26.38/28.67) in lieu of terminating this Agreement.
-40-
(iii) For purposes of this Section 8.1(d), "Starting Price"
shall mean $22.9375, i.e. the last sale price for FFC Common Stock on December
26, 2000 as reported on NASDAQ.
(iv) The Starting Price, the Closing Market Price and the
other amounts above shall be appropriately adjusted for an event described in
Section 2.1(d) 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.
(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 party's directors, officers, shareholders,
agents or representatives, except that if this Agreement is terminated by FFC by
reason of a material breach by DBC, or if this Agreement is terminated by DBC by
reason of a material breach by FFC, and such breach involves an intentional,
willful or grossly negligent misrepresentation or breach of covenant, the
breaching party (i.e., FFC or DBC) 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
party's directors, officers, shareholders, 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 FFC nor DBC nor Drovers 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 shareholders of
DBC), but only by a written instrument duly authorized, executed and delivered
by FFC and by DBC; provided, however, that, except as set forth in Section
-------- -------
8.1(d) herein any amendment to the provisions of Section 2.1 herein relating to
the consideration to be received by the former shareholders of DBC in exchange
for their shares of DBC Common Stock shall not take effect until such amendment
has been approved, adopted or ratified by the shareholders of DBC in accordance
with applicable provisions of the BCL.
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
-41-
thereof at any time before the Effective Time (whether before or after the
authorization, approval and adoption of this Agreement by the shareholders of
DBC) 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 FFC at Xxx Xxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxx, within thirty (30) days after the receipt of all required
regulatory and shareholder approvals and after the expiration of all applicable
waiting periods on a date to be agreed upon by the parties, at which time the
parties shall deliver the DBC Closing Documents, the FFC Closing Documents, the
opinions of counsel required by Sections 7.1(d), 7.2(c) and 7.3(c) herein, and
such other 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, FFC and DBC 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"). The Merger shall
become effective on 11:59 p.m. on the day on which the Closing occurs and
Articles of Merger are filed with the Department of State 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 DBC and of
------------ -----------
FFC 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 FFC.
Section 11.2. Other Mergers and Acquisitions. Subject to the right of DBC
------------ ------------------------------
to refuse to consummate this Agreement pursuant to Section 8.1(c)(i) herein by
reason of a material breach by
-42-
FFC of the warranty and representation set forth in Section 4.7 herein, nothing
set forth in this Agreement shall be construed: (i) to preclude FFC from
acquiring, or to limit in any way the right of FFC 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 FFC Common Stock or otherwise; (ii) to preclude FFC from issuing, or
to limit in any way the right of FFC to issue, prior to or following the
Effective Time, FFC Common Stock, FFC Preferred Stock or any other equity or
debt securities; or (iii) to preclude FFC from taking, or to limit in any way
the right of FFC 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 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 FFC, to:
Xxxxx X. Xxxxxx, Xx., President and Chief Executive Officer
Xxxxxx Financial Corporation
Xxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, Xxxxxxxxxxxx 00000
With a copy to:
Xxxx X. Xxxxxxxx, Esquire
Barley, Snyder, Xxxxx & Xxxxx, LLC
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
(b) If to DBC, to:
A. Xxxxxxx Xxxx, Chairman, President and
Chief Executive Officer
Drovers Bancshares Corporation
00 Xxxxx Xxxxxx Xxxxxx
Xxxx, Xxxxxxxxxxxx 00000
With a copy to:
Xxxxxxx X. Xxxxx, Esquire
Xxxxxx & Sinon, LLP
Xxx Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
-43-
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.
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 under this Agreement without the prior
written consent of the other party. Other than the right to receive the
consideration payable as a result of the Merger pursuant to Article II hereof,
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. Entire Agreement. This Agreement, 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.
-44-
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.
XXXXXX FINANCIAL CORPORATION
By:
------------------------------------------
Xxxxx X. Xxxxxx, Xx., President and Chief
Executive Officer
Attest:
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Xxxxxxx X. Xxxxxxx, Secretary
DROVERS BANCSHARES CORPORATION
By:
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A. Xxxxxxx Xxxx, Chairman, President and
Chief Executive Officer
Attest:
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Xxxx X. Xxxxxxx, Secretary
