Exhibit 2
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
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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
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Section 5.5. Update Schedules........................................................... 24
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
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(g) Accountants' Letter............................................................... 37
(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
Schedule 3.7 Undisclosed Liabilities
Schedule 3.8 Changes
Schedule 3.9 Dividends, Distributions and Stock Purchases
Schedule 3.10 Taxes
Schedule 3.11 Title to and Condition of Assets
Schedule 3.12 Contracts
Schedule 3.13 Litigations and Governmental Directives
Schedule 3.14 Compliance with Laws; Governmental Authorizations
Schedule 3.15 Insurance
Schedule 3.16 Financial Institutions Bonds
Schedule 3.17 Labor Relations and Employment Agreements
Schedule 3.18 Employee Benefit Plans
Schedule 3.19 Related Party Transactions
Schedule 3.20 Finders
Schedule 3.22 Environmental Matters
Schedule 3.26 Loan Portfolio
Schedule 3.27 Investment Portfolio
Schedule 4.5 Subsidiaries
Schedule 4.7 Undisclosed Liabilities
Schedule 4.8 Dividends, Distributions and Stock Purchases
Schedule 4.9 Litigation and Governmental Directives
Schedule 4.10 Compliance with Laws; Governmental Authorizations
Schedule 4.14 Environmental Matters
Schedule 4.19 Taxes
Schedule 6.8 Drovers Bank Director Fees
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INDEX OF EXHIBITS
Exhibit A Form of Warrant Agreement
Exhibit B Form of Warrant
Exhibit C Form of Employment Agreement
Exhibit D Form of Opinion of DBC's Counsel
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
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
"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:
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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
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 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 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 Bylaws of FFC as in effect at the Effective Time.
Section 1.5 Directors and Officers. The directors and officers of the
Surviving Corporation shall be the directors and officers of 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
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
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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
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
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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.
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
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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.
(e) Expenses: All costs and expenses associated with the
foregoing surrender and exchange procedure shall be borne by FFC.
Section 2.3. Treatment of Outstanding DBC Options.
(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
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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.
(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
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
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 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
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 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".
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF DBC
DBC represents and warrants to FFC, as of the date of this Agreement, as
follows:
Section 3.1. Authority. The execution and delivery of this Agreement,
the Warrant Agreement and the Warrant and the performance of the transactions
contemplated herein and therein have been authorized by the Board of Directors
of 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
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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 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,
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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.
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
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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,
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
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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;
(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
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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 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
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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 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
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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 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
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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 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
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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.
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
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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 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
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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 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
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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 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
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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 (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
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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 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
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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.
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."
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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 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
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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 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
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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, 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.
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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 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
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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
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change at any time after giving such notice.
(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;
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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 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
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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
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
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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 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
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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) 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)
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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 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
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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 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.
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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.
(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
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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.
(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
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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).
(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
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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.
(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
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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.
(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
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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.
(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
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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:
(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,
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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.
(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.
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(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 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
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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 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
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(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
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.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers all as of the day and year first
above written.
XXXXXX FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxxx, Xx.
-------------------------------------
Xxxxx X. Xxxxxx, Xx., President and
Chief Executive Officer
Attest: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxx, Secretary
DROVERS BANCSHARES CORPORATION
By: /s/ A. Xxxxxxx Xxxx
-------------------------------------
A. Xxxxxxx Xxxx, Chairman,
President and
Chief Executive Officer
Attest: /s/ Xxxx X. Xxxxxxx
-------------------------------------
Xxxx X. Xxxxxxx, Secretary
EXHIBIT A
WARRANT AGREEMENT
THIS WARRANT AGREEMENT is made as of December 27, 2000 by and between
XXXXXX FINANCIAL CORPORATION, a Pennsylvania corporation ("FFC") and DROVERS
BANCSHARES CORPORATION, a Pennsylvania corporation ("DBC").
W I T N E S S E T H:
WHEREAS, FFC and DBC are entering into an Agreement and Plan of Merger on
the date hereof (the "MERGER AGREEMENT") (capitalized terms used herein which
are not otherwise defined herein shall have the meanings ascribed to them in the
Merger Agreement);
WHEREAS, it is a condition to execution of the Merger Agreement, that DBC
issue to FFC, on the terms and conditions set forth herein, a warrant entitling
FFC to purchase up to an aggregate of 1,250,000 shares of DBC's common stock, no
par value per share (the "COMMON STOCK");and
WHEREAS, DBC wishes to issue to FFC the warrant described below in
connection with the Merger Agreement.
NOW, THEREFORE, in consideration of the execution of the Merger Agreement
and the premises herein contained, and intending to be legally bound, FFC and
DBC agree as follows:
1. Issuance of Warrant. Concurrently with the execution of this Agreement,
DBC shall issue to FFC a warrant in the form attached as Schedule 1 hereto (the
"WARRANT", which term as used herein shall include any warrant or warrants
issued upon transfer or exchange of the original Warrant) to purchase up to
1,250,000shares of Common Stock (equal to approximately 19.9% of the outstanding
Common Stock taking into consideration shares of Common Stock issuable upon
exercise of the Warrant but excluding any other unissued shares of such
corporation which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion or option rights, or otherwise),
subject to adjustment as provided in this Agreement and in the Warrant. The
Warrant shall be exercisable at a purchase price of $19.75 per share, i.e., the
last sale price of the Common Stock on December 26, 2000, as reported by NASDAQ,
subject to adjustment as provided in the Warrant (the "EXERCISE PRICE"). So long
as the Warrant is outstanding and unexercised, DBC shall at all times maintain
and reserve, free from preemptive rights, such number of authorized but unissued
shares of the Common Stock as may be necessary so that the Warrant may be
exercised, without any additional authorization of the Common Stock, after
giving effect to all other options, warrants, convertible securities and other
rights to acquire shares of the Common Stock. DBC represents and warrants that
it has duly authorized the execution and delivery of the Warrant and this
Agreement and the issuance of the Common Stock upon exercise of the Warrant. DBC
covenants that the shares of the Common Stock issuable upon exercise of the
Warrant shall be, when so issued, duly authorized, validly issued, fully paid
and nonassessable and subject to no preemptive rights. The Warrant and the
shares of the Common Stock to be issued upon exercise of the Warrant are
hereinafter collectively referred to, from time to time, as the "SECURITIES." So
long as the Warrant is owned by FFC, the Warrant will in no event be exercised
for more than that
number of shares of the Common Stock equal to 1,250,000 (subject to adjustment
as provided in the Warrant) less the number of shares of Common Stock at the
time owned by FFC.
2. Assignment, Transfer, or Exercise of Warrant. FFC will not sell, assign,
transfer or exercise the Warrant, in whole or in part, without the prior written
consent of DBC except upon or after the occurrence of any of the following prior
to termination of the Warrant under Section 9 therein: (i) a breach by DBC of
any covenant set forth in the Merger Agreement and which would permit a
termination of the Merger Agreement by FFC pursuant to Section 8.1(b)(i) which
occurs following a bona fide proposal from any financially capable person (other
than FFC) to engage in an Acquisition Transaction; (ii) the failure of DBC's
shareholders to approve the Merger Agreement at a meeting called for such
purpose if at the time of such meeting there has been an announcement by any
financially capable Person (other than FFC) of a bona fide offer or proposal to
effect an Acquisition Transaction and such offer or proposal has not been
publicly withdrawn prior to mailing of the notice of the DBC shareholder
meeting; (iii) the acquisition by any Person of Beneficial Ownership of 25% or
more of the Common Stock (before giving effect to any exercise of the Warrant);
(iv)(A) any Person (other than FFC) shall have commenced a tender or exchange
offer, or shall have filed an application with an appropriate bank regulatory
authority with respect to an Acquisition Transaction and, (B) within six (6)
months from such offer or filing, such person consummates an Acquisition
Transaction; (v) DBC shall have entered into an agreement, letter of intent, or
other understanding with any Person (other than FFC) providing for such Person
to engage in an Acquisition Transaction; and/or (vi) termination of the Merger
Agreement by FFC under Section 8.1(b)(iii) or termination of the Merger
Agreement by DBC under Section 8.1(c)(iii). As used in this Paragraph 2, the
terms "BENEFICIAL OWNERSHIP" and "PERSON" shall have the respective meanings set
forth in Paragraph 7(f). For purposes of this Agreement, "ACQUISITION
TRANSACTION" shall mean (x) a merger or consolidation of statutory share
exchange or any similar transaction involving DBC or a DBC Subsidiary, (y) a
purchase, lease or other acquisition of all or substantially all of the assets
of DBC or a DBC Subsidiary or (z) a purchase or other acquisition of beneficial
ownership of securities representing 25% or more of the voting power of DBC or a
DBC Subsidiary.
3. Registration Rights. If, at any time within one year after the Warrant
may be exercised or sold, DBC shall receive a written request therefor from FFC,
DBC shall prepare and file a registration statement (the "REGISTRATION
STATEMENT") under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
covering the Warrant and/or the Common Stock issued or issuable upon exercise of
the Warrant (the "SECURITIES"), and shall use its best efforts to cause the
Registration Statement to become effective and remain current for such period
not in excess of 180 days from the day such registration statement first becomes
effective as may be reasonably necessary to affect such sale or other
disposition. Without the prior written consent of FFC, neither DBC nor any other
holder of securities of DBC may include such securities in the Registration
Statement. The foregoing notwithstanding, if, at the time of any request by FFC
for registration of Common Stock as provided above, DBC is in registration with
respect to an underwritten public offering by DBC of shares of Common Stock, and
if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering, the offer and sale of the Common Stock covered by this Warrant
Agreement would interfere with the successful marketing of the shares of Common
Stock offered by DBC, the number
-2-
of shares of Common Stock otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of shares of Common Stock to be included in such
offering for the account of FFC shall constitute at least 25% of the total
number of shares to be sold by FFC and DBC in the aggregate; and provided
further, however, that if such reduction occurs, then DBC shall file a
registration statement for the balance as promptly as practicable thereafter as
to which no reduction pursuant to this Section 3 shall be permitted or occur and
FFC shall thereafter be entitled to one additional registration and the one (1)
year period referred to in the first sentence of this section shall be increased
to two (2) years. FFC shall provide all information reasonably requested by DBC
for inclusion in any registration statement to be filed hereunder. If requested
by FFC in connection with such registration, DBC shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect to representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for DBC.
4. Duties of DBC upon Registration. If and whenever DBC is required by the
provisions of Paragraph 3 of this Agreement to effect the registration of any of
the Securities under the Securities Act, DBC shall:
(a) prepare and file with the Securities and Exchange Commission (the
"SEC") such amendments to the Registration Statement and supplements to the
prospectus contained therein as may be necessary to keep the Registration
Statement effective and current;
(b) furnish to FFC and to the underwriters of the Securities being
registered such reasonable number of copies of the Registration Statement, the
preliminary prospectus and final prospectus contained therein, and such other
documents as FFC or such underwriters may reasonably request in order to
facilitate the public offering of the Securities;
(c) use its best efforts to register or qualify the Securities covered by
the Registration Statement under the state securities or blue sky laws of such
jurisdictions as FFC or such underwriters may reasonably request;
(d) notify FFC, promptly after DBC shall receive notice thereof, of the
time when the Registration Statement has become effective or any supplement or
amendment to any prospectus forming a part of the Registration Statement has
been filed;
(e) notify FFC promptly of any request by the SEC for the amending or
supplementing of the Registration Statement or the prospectus contained therein,
or for additional information;
(f) prepare and file with the SEC, promptly upon the request of FFC, any
amendments or supplements to the Registration Statement or the prospectus
contained therein which, in the opinion of counsel for FFC, are required under
the Securities Act or the rules and regulations promulgated by the SEC
thereunder in connection with the public offering of the Securities;
-3-
(g) prepare and promptly file with the SEC such amendments of or
supplements to the Registration Statement or the prospectus contained therein as
may be necessary to correct any statements or omissions if, at the time when a
prospectus relating to such Securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which such
prospectus as then in effect would include an untrue statement of a material
fact or would omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(h) advise FFC, promptly after DBC shall receive notice or obtain knowledge
of the issuance of any stop order by the SEC suspending the effectiveness of the
Registration Statement, or the initiation or threatening of any proceeding for
that purpose, and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued; and
(i) at the request of FFC, furnish on the date or dates provided for in the
underwriting agreement: (i) an opinion or opinions of counsel for DBC for the
purposes of such registration, addressed to the underwriters and to FFC,
covering such matters as such underwriters and FFC may reasonably request and as
are customarily covered by issuer's counsel at that time; and (ii) a letter or
letters from the independent accountants for DBC, addressed to the underwriters
and to FFC, covering such matters as such underwriters or FFC may reasonably
request, in which letters such accountants shall state (without limiting the
generality of the foregoing) that they are independent accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of DBC included in the
Registration Statement or any amendment or supplement thereto comply in all
material respects with the applicable accounting requirements of the Securities
Act.
5. Expenses of Registration. With respect to the registration requested
pursuant to Paragraph 3 of this Agreement, (a) DBC shall bear all registration,
filing and NASD fees, printing and engraving expenses, fees and disbursements of
its counsel and accountants and all legal fees and disbursements and other
expenses of DBC to comply with state securities or blue sky laws of any
jurisdictions in which the Securities to be offered are to be registered or
qualified; and (b) FFC shall bear all fees and disbursements of its counsel and
accountants, underwriting discounts and commissions, transfer taxes for FFC and
any other expenses incurred by FFC.
6. Indemnification. In connection with any Registration Statement or any
amendment or supplement thereto:
(a) DBC shall indemnify and hold harmless FFC, any underwriter (as defined
in the Securities Act) for FFC, and each person, if any, who controls FFC or
such underwriter (within the meaning of the Securities Act) from and against any
and all loss, damage, liability, cost or expense to which FFC or any such
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such loss, damage, liability, cost or expense arises out
of or is caused by any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any prospectus or
preliminary prospectus contained therein or any amendment or supplement thereto,
or arises out of or is based upon the omission or alleged
-4-
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that DBC will not
be liable in any such case to the extent that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by FFC, such underwriter or such controlling person in
writing specifically for use in the preparation thereof.
(b) FFC shall indemnify and hold harmless DBC, any underwriter (as defined
in the Securities Act), and each person, if any, who controls DBC or such
underwriter (within the meaning of the Securities Act) from and against any and
all loss, damage, liability, cost or expense to which DBC or any such
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such loss, damage, liability, cost or expense arises out
of or is caused by any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, any prospectus or preliminary
prospectus contained therein or any amendment or supplement thereto, or arises
out of or is based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in conformity with written information furnished by
FFC specifically for use in the preparation thereof.
(c) Promptly after receipt by any party which is entitled to be
indemnified, pursuant to the provisions of subparagraph (a) or (b) of this
Paragraph 6, of any claim in writing or of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to the provisions of subparagraph (a) or (b) of this
Paragraph 6, promptly notify the indemnifying party of the receipt of such claim
or notice of the commencement of such action, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may otherwise
have to any indemnified party hereunder. In case any such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to participate
in and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any action include both the indemnified party or parties and the
indemnifying party and there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing any indemnified party,
such indemnified party shall have the right to select separate counsel to
participate in the defense of such indemnified party. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party, pursuant to the provisions of subparagraph (a) or (b) of this Paragraph
6, for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof, other than reasonable costs of
investigation, unless (i) such indemnified party shall have employed separate
counsel in accordance with the provisions of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of
-5-
the commencement of the action, or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party.
(d) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as specified therein, any party entitled
to indemnification by the terms thereof shall be entitled to obtain contribution
with respect to its liabilities and expenses, except to the extent that
contribution is not permitted under Section 11(f) of the Securities Act. In
determining the amount of contribution to which the respective parties are
entitled there shall be considered the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and/or prevent any statement or omission, and any
other equitable considerations appropriate under the circumstances. FFC and DBC
agree that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation even if the underwriters and FFC
as a group were considered a single entity for such purpose.
7. Redemption and Repurchase Rights.
(a) From and after the date on which any event described in Paragraph 2 of
this Agreement occurs, the Holder as defined in the Warrant (which shall include
a former Holder), who has exercised the Warrant in whole or in part shall have
the right to require DBC to purchase some or all of the shares of Common Stock
for which the Warrant was exercised at a redemption price per share (the
"REDEMPTION PRICE") equal to the highest of: (i) 110% of the Exercise Price,
(ii) the highest price paid or agreed to be paid for any share of Common Stock
by an Acquiring Person (as defined below) during the one year period immediately
preceding the date of redemption, and (iii) in the event of a sale of all or
substantially all of DBC's assets or all or substantially all of a subsidiary of
DBC's assets: (x) the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of DBC as determined by a
recognized investment banking firm selected by such Holder, divided by (y) the
number of shares of Common Stock then outstanding. If the price paid consists in
whole or in part of securities or assets other than cash, the value of such
securities or assets shall be their then current market value as determined by a
recognized investment banking firm selected by the Holder and reasonably
acceptable to DBC.
(b) From and after the date on which any event described in Paragraph 2 of
this Agreement occurs, the Holder as defined in the Warrant (which shall include
a former Holder), shall have the right to require DBC to repurchase all or any
portion of the Warrant at a price (the "WARRANT REPURCHASE PRICE") equal to the
product obtained by multiplying: (i) the number of shares of Common Stock
represented by the portion of the Warrant that the Holder is requiring DBC to
repurchase, times (ii) the excess of the Redemption Price over the Exercise
Price.
(c) The Holder's right, pursuant to this Paragraph 7, to require DBC to
repurchase a portion or all of the Warrant, and/or to require DBC to purchase
some or all of the shares of Common Stock for which the Warrant was exercised,
shall expire on the close of business on the 180th day following the occurrence
of any event described in Paragraph 2.
-6-
(d) The Holder may exercise its right, pursuant to this Paragraph 7, to
require DBC to repurchase all or a portion of the Warrant, and/or to require DBC
to purchase some or all of the shares of Common Stock for which the Warrant was
exercised, by surrendering for such purpose to DBC, at its principal office
within the time period specified in the preceding subparagraph, the Warrant
and/or a certificate or certificates representing the number of shares to be
purchased accompanied by a written notice stating that it elects to require DBC
to repurchase the Warrant or a portion thereof and/or to purchase all or a
specified number of such shares in accordance with the provisions of this
Paragraph 7. As promptly as practicable, and in any event within five business
days after the surrender of the Warrant and/or such certificates and the receipt
of such notice relating thereto, DBC shall deliver or cause to be delivered to
the Holder: (i) the applicable Redemption Price (in immediately available funds)
for the shares of Common Stock which it is not then prohibited under applicable
law or regulation from purchasing, and/or (ii) the applicable Warrant Repurchase
Price, and/or (iii) if the Holder has given DBC notice that less than the whole
Warrant is to be repurchased and/or less than the full number of shares of
Common Stock evidenced by the surrendered certificate or certificates are to be
purchased, a new certificate or certificates, of like tenor, for the number of
shares of Common Stock evidenced by such surrendered certificate or certificates
less the number shares of Common Stock purchased and/or a new Warrant reflecting
the fact that only a portion of the Warrant was repurchased.
(e) To the extent that DBC is prohibited under applicable law or
regulation, or as a result of administrative or judicial action, from
repurchasing the Warrant and/or purchasing the Common Stock as to which the
Holder has given notice of repurchase and/or redemption, DBC shall immediately
so notify the Holder and thereafter deliver or cause to be delivered, from time
to time to the Holder, the portion of the Warrant Repurchase Price and/or the
Redemption Price which it is no longer prohibited from delivering, within five
business days after the date on which DBC is no longer so prohibited; provided,
however, that to the extent that DBC is at the time and after the expiration of
25 months, so prohibited from delivering the Warrant Repurchase Price and/or the
Redemption Price, in full (and DBC hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals as promptly as practicable),
DBC shall deliver to the Holder a new Warrant (expiring one year after delivery)
evidencing the right of the Holder to purchase that number of shares of Common
Stock representing the portion of the Warrant which DBC is then so prohibited
from repurchasing, and/or DBC shall deliver to the Holder a certificate for the
shares of Common Stock which DBC is then so prohibited from purchase, and DBC
shall have no further obligation to repurchase such new Warrant or purchase such
Common Stock; and provided further, that upon receipt of such notice and until
five days thereafter the Holder may revoke its notice of repurchase of the
Warrant and/or redemption of Common Stock by written notice to DBC at its
principal office stating that the Holder elects to revoke its election to
exercise its right to require DBC to repurchase the Warrant and/or purchase the
Common Stock, whereupon DBC will promptly redeliver to the Holder the Warrant
and/or the certificates representing shares of Common Stock surrendered to DBC
for purposes of such repurchase and/or redemption, and DBC shall have no further
obligation to repurchase such Warrant and/or purchase such Common Stock.
(f) As used in this Agreement the following terms have the meanings
indicated:
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(1) "ACQUIRING PERSON" shall mean any "PERSON" (hereinafter defined)
who or which is the "BENEFICIAL OWNER" (hereinafter defined) of 25% or more of
the Common Stock;
(2) A "PERSON" shall mean any individual, firm, corporation or other
entity and shall also include any syndicate or group deemed to be a "PERSON" by
operation of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended;
(3) A Person shall be a "BENEFICIAL OWNER", and shall have "BENEFICIAL
OWNERSHIP," of all securities:
(i) which such Person or any of its Affiliates (as hereinafter
defined) beneficially owns, directly or indirectly; and
(ii) which such Person or any of its Affiliates or Associates has
(1) the right to acquire (whether such right is exercisable immediately or only
after the passage of time or otherwise) pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (2) the right to vote pursuant to any
proxy, power of attorney, voting trust, agreement, arrangement or understanding;
and
(4) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the regulations promulgated by the SEC
under the Securities and Exchange Act of 1934, as amended.
8. Remedies. Without limiting the foregoing or any remedies available to
FFC, it is specifically acknowledged that FFC would not have an adequate remedy
at law for any breach of this Warrant Agreement and shall be entitled to
specific performance of DBC's obligations under, and injunctive relief against
any actual or threatened violation of the obligations of any Person subject to,
this Agreement.
9. Miscellaneous.
(a) The representations, warranties, and covenants of DBC set forth in the
Merger Agreement are hereby incorporated by reference in and made a part of this
Agreement, as if set forth in full herein.
(b) This Agreement, the Warrant and the Merger Agreement set forth the
entire understanding and agreement of the parties hereto and supersede any and
all prior agreements, arrangements and understandings, whether written or oral,
relating to the subject matter hereof and thereof. No amendment, supplement,
modification, waiver, or termination of this Agreement shall be valid and
binding unless executed in writing by both parties.
(c) This Agreement shall be deemed to have been made in, and shall be
governed by and interpreted in accordance with the substantive laws of, the
Commonwealth of Pennsylvania.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
XXXXXX FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxxx, Xx.
--------------------------------------
Xxxxx X. Xxxxxx, Xx., President and Chief
Executive Officer
Attest: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxx, Secretary
DROVERS BANCSHARES CORPORATION
By: /s/ A. Xxxxxxx Xxxx
--------------------------------------
A. Xxxxxxx Xxxx, Chairman, President and
Chief Executive Officer
Attest: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Xxxx X. Xxxxxxx, Secretary
EXHIBIT B
WARRANT
TO PURCHASE UP TO 1,250,000 SHARES OF THE
COMMON STOCK, NO PAR VALUE,
OF
DROVERS BANCSHARES CORPORATION
This is to certify that, for value received, XXXXXX FINANCIAL CORPORATION
("FFC") or any permitted transferee (FFC or such transferee being hereinafter
called the "HOLDER") is entitled to purchase, subject to the provisions of this
Warrant, from DROVERS BANCSHARES CORPORATION, a Pennsylvania corporation
("DBC"), at any time on or after the date hereof, an aggregate of up to
1,250,000 fully paid and non-assessable shares of common stock, no par value
(the "COMMON STOCK"), of DBC at a price per share equal to $19.75, subject to
adjustment as herein provided (the "EXERCISE PRICE").
1. Exercise of Warrant. Subject to the provisions hereof and the
limitations set forth in Paragraph 2 of a Warrant Agreement of even date
herewith by and between FFC and DBC (the "WARRANT AGREEMENT"), which Warrant
Agreement was entered into in connection with the Merger Agreement of even date
between FFC and DBC (the "MERGER AGREEMENT"), this Warrant may be exercised in
whole or in part or sold, assigned or transferred at any time or from time to
time on or after the date hereof. This Warrant shall be exercised by
presentation and surrender hereof to DBC at the principal office of DBC,
accompanied by (i) a written notice of exercise, (ii) payment to DBC, for the
account of DBC, of the Exercise Price for the number of shares of Common Stock
specified in such notice, and (iii) a certificate of the Holder specifying the
event or events which have occurred and entitle the Holder to exercise this
Warrant. The Exercise Price for the number of shares of Common Stock specified
in the notice shall be payable in immediately available funds.
Upon such presentation and surrender, DBC shall issue promptly (and within
one business day if requested by the Holder) to the Holder or its assignee,
transferee or designee the number of shares of Common Stock to which the Holder
is entitled hereunder. DBC covenants and warrants that such shares of Common
Stock, when so issued, will be duly authorized, validly issued, fully paid and
non-assessable, and free and clear of all liens and encumbrances.
If this Warrant should be exercised in part only, DBC shall, upon surrender
of this Warrant for cancellation, execute and deliver a new Warrant evidencing
the rights of the Holder thereof to purchase the balance of the shares of Common
Stock issuable hereunder. Upon receipt by DBC of this Warrant, in proper form
for exercise, and subject to the limitations set forth in paragraph 2 of the
Warrant Agreement, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of DBC may then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to the Holder.
DBC shall pay all expenses, and any and all United States federal, state and
local taxes and other charges, that may be payable in connection with the
preparation,
issue and delivery of stock certificates pursuant to this Paragraph
1 in the name of the Holder or its assignee, transferee or designee.
2. Reservation of Shares; Preservation of Rights of Holder.
DBC shall at all times, while this Warrant is outstanding and unexercised,
maintain and reserve, free from preemptive rights, such number of authorized but
unissued shares of Common Stock as may be necessary so that this Warrant may be
exercised without any additional authorization of Common Stock after giving
effect to all other options, warrants, convertible securities and other rights
to acquire shares of Common Stock at the time outstanding. DBC further agrees
that (i) it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act or omission, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed hereunder
or under the Warrant Agreement by DBC, (ii) it will promptly take all action
(including (A) complying with all pre-merger notification, reporting and waiting
period requirements specified in 15 U.S.C. (S)18a and the regulations
promulgated thereunder and (B) in the event that, under Section 3 of the Bank
Holding Company Act of 1956, as amended (12 U.S.C. (S)1842(a)(3)), or the Change
in Bank Control Act of 1978, as amended (12 U.S.C. (S)1817(j)), prior approval
of the Board of Governors of the Federal Reserve System (the "BOARD") is
necessary before this Warrant may be exercised, cooperating fully with the
Holder in preparing any and all such applications and providing such information
to the Board as the Board may require) in order to permit the Holder to exercise
this Warrant and DBC duly and effectively to issue shares of its Common Stock
hereunder, and (iii) it will promptly take all action necessary to protect the
rights of the Holder against dilution as provided herein.
3. Fractional Shares. DBC shall not be required to issue fractional shares
of Common Stock upon exercise of this Warrant but shall pay for any fractional
shares in cash or by check at the Exercise Price.
4. Exchange or Loss of Warrant. This Warrant is exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof at
the principal office of DBC for other warrants of different denominations
entitling the Holder to purchase in the aggregate the same number of shares of
Common Stock issuable hereunder. The term "WARRANT" as used herein includes any
warrants for which this Warrant may be exchanged. Upon receipt by DBC of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, DBC will execute and deliver a new Warrant of like
tenor and date.
5. Repurchase. The Holder shall have the right to require DBC to repurchase
all or any shares of Common Stock for which this Warrant was exercised or all or
any portion of this Warrant under the terms and subject to the conditions of
Paragraph 7 of the Warrant Agreement.
6. Adjustment. The number of shares of Common Stock issuable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time as provided in this Paragraph 6.
-2-
(A) Stock Dividends, etc.
(1) Stock Dividends. In case DBC shall pay or make a dividend or
other distribution on any class of capital stock of DBC in Common Stock, the
number of shares of Common Stock issuable upon exercise of this Warrant shall be
increased by multiplying such number of shares by a fraction of which the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the day immediately preceding the date of such distribution
and the numerator shall be the sum of such number of shares and the total number
of shares of Common Stock constituting such dividend or other distribution, such
increase to become effective immediately after the opening of business on the
day following such distribution.
(2) Subdivisions. In case outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common Stock, the number of
shares of Common Stock issuable upon exercise of this Warrant at the opening of
business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the number of shares of Common Stock issuable upon
exercise of this Warrant at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
decreased, such increase or decrease, as the case may be, to become effective
immediately after the opening of business on the day following the date upon
which such subdivision or combination becomes effective.
(3) Reclassifications. The reclassification of Common Stock into
securities (other than Common Stock) and/or cash and/or other consideration
shall be deemed to involve a subdivision or combination, as the case may be, of
the number of shares of Common Stock outstanding immediately prior to such
reclassification into the number or amount of securities and/or cash and/or
other consideration outstanding immediately thereafter and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective," or "the day upon which such combination becomes effective,"
as the case may be, within the meaning of clause (2) above.
(4) Optional Adjustments. DBC may make such increases in the
number of shares of Common Stock issuable upon exercise of this Warrant, in
addition to those required by this subparagraph (A), as shall be determined by
its Board of Directors to be advisable in order to avoid taxation so far as
practicable of any dividend of stock or stock rights or any event treated as
such for federal income tax purposes to the recipients.
(5) Adjustment to Exercise Price. Whenever the number of shares of
Common Stock issuable upon exercise of this Warrant is adjusted as provided in
this Paragraph 6(A), the Exercise Price shall be adjusted by a fraction in which
the numerator is equal to the number of shares of Common Stock issuable prior to
the adjustment and the denominator is equal to the number of shares of Common
Stock issuable after the adjustment.
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(B) Certain Sales of Common Stock.
(1) Adjustment to Shares Issuable. If and whenever DBC sells or
otherwise issues (other than under circumstances in which Paragraph 6(A) applies
or pursuant to options to purchase Common Stock that are outstanding on the date
hereof or subsequently issued pursuant to DBC stock option or stock purchase
plans (including the dividend reinvestment plan in effect on the date hereof),
any shares of Common Stock, the number of shares of Common Stock issuable upon
exercise of this Warrant shall be increased by multiplying such number of shares
by a fraction, the denominator of which shall be the number shares of Common
Stock outstanding at the close of business on the day immediately preceding the
date of such sale or issuance and the numerator of which shall be the sum of
such number of shares and the total number of shares constituting such sale or
other issuance, such increase to become effective immediately after the opening
of business on the day following such sale or issuance.
(2) Adjustment to Exercise Price. If and whenever DBC sells or
otherwise issues any shares of Common Stock (excluding any stock dividend or
other issuance not for consideration to which Paragraph 6(A) applies or pursuant
to options to purchase Common Stock that are outstanding on the date hereof or
subsequently issued pursuant to DBC stock option or stock purchase plans
(including the dividend reinvestment plan) in effect on the date hereof), for a
consideration per share which is less than the Exercise Price at the time of
such sale or other issuance, then in each such case the Exercise Price shall be
forthwith changed (but only if a reduction would result) to the price
(calculated to the nearest cent) determined by dividing: (i) an amount equal to
the sum of (aa) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, multiplied by the then effective Exercise Price,
plus (bb) the total consideration, if any, received and deemed received by DBC
upon such issue or sale, by (ii) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
(C) Definition. For purposes of this Paragraph 6, the term "COMMON
STOCK" shall include (1) any shares of DBC of any class or series which has no
preference or priority in the payment of dividends or in the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of DBC and which is not subject to redemption by DBC, and (2) any rights or
options to subscribe for or to purchase shares of Common Stock or any stock or
securities convertible into or exchangeable for shares of Common Stock (such
convertible or exchangeable stock or securities being hereinafter called
"CONVERTIBLE SECURITIES"), whether or not such rights or options or the right to
convert or exchange any such Convertible Securities are immediately exercisable.
For purposes of any adjustments made under Paragraph 6(A) or 6(B) as a result of
the distribution, sale or other issuance of rights or options or Convertible
Securities, the number of Shares of Common Stock outstanding after or as a
result of the occurrence of events described in Paragraph 6(A)(1) or 6(B)(1)
shall be calculated by assuming that all such rights, options or Convertible
Securities have been exercised for the maximum number of shares issuable
thereunder. If an adjustment is made at any time because of the subsequent
issuance of any right or option described in clause (2) of the first sentence of
this Section (C), no adjustment shall be made when shares are subsequently
issued; provided further, that no adjustment shall be made for issuances
pursuant to options to purchase Common Stock that are outstanding on the date
hereof or
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subsequent issuances of Common Stock pursuant to DBC stock option or stock
purchase plans (including the dividend reinvestment plan) in effect on the date
hereof.
7. Notice. (A) Whenever the number of shares of Common Stock for which this
Warrant is exercisable is adjusted as provided in Paragraph 6, DBC shall
promptly compute such adjustment and mail to the Holder a certificate, signed by
the principal financial officer of DBC, setting forth the number of shares of
Common Stock for which this Warrant is exercisable as a result of such
adjustment having become effective.
(B) Upon the occurrence of any event which results in the Holder
having the right to require DBC to repurchase shares of Common Stock for which
this Warrant was exercised or this Warrant, as provided in Paragraph 7 of the
Warrant Agreement, DBC shall promptly notify the Holder of such event; and DBC
shall promptly compute the Redemption Price or the Warrant Repurchase Price and
furnish to the Holder a certificate, signed by the principal financial officer
of DBC, setting forth the Redemption Price or the Warrant Repurchase Price, as
applicable, and the basis and computation thereof.
8. Rights of the Holder. (A) Without limiting the foregoing or any remedies
available to the Holder, it is specifically acknowledged that the Holder would
not have an adequate remedy at law for any breach of the provisions of this
Warrant and shall be entitled to specific performance of DBC's obligations
under, and injunctive relief against any actual or threatened violation of the
obligations of any Person (as defined in Paragraph 7 of the Warrant Agreement)
subject to, this Warrant.
(B) The Holder shall not, by virtue of its status as Holder, be entitled
to any rights of a shareholder in DBC.
9. Termination. This Warrant and the rights conferred hereby shall
terminate (i) upon the Effective Time of the Merger provided for in the Merger
Agreement, (ii) upon a valid termination of the Merger Agreement (except a
termination pursuant to Section 8.1(b)(iii) of the Merger Agreement) unless an
event described in Paragraph 2 of the Warrant Agreement (including the
occurrence of an event described in paragraph (iv)(A) therein) occurs prior to
such termination in which case this Warrant and the rights conferred hereby,
shall not terminate until 12 months after the occurrence of such event, or (iii)
to the extent this Warrant has not previously been exercised, 12 months after
the occurrence of an event described in Paragraph 2 of the Warrant Agreement
(unless termination of the Merger Agreement in accordance with its terms (other
than under Section 8.1(b)(iii) thereof) occurs prior to the occurrence of such
event, in which case (ii) above shall apply).
10. Governing Law. This Warrant shall be deemed to have been delivered in,
and shall be governed by and interpreted in accordance with the substantive laws
of, the Commonwealth of Pennsylvania. In the event of any inconsistency between
this Warrant and the terms of the Warrant Agreement, the terms of the Warrant
Agreement shall govern.
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Dated: December 27, 2000
DROVERS BANCSHARES CORPORATION
By: /s/ A. Xxxxxxx Xxxx
------------------------
A. Xxxxxxx Xxxx, Chairman, President and
Chief Executive Officer
Attest: /s/ Xxxx X. Xxxxxxx
------------------------
Xxxx X. Xxxxxxx, Secretary
EXHIBIT C
EMPLOYMENT AGREEMENT
Employment Agreement dated as of December 27, 2000, between Xxxxxx Bank, a
Pennsylvania bank and trust company (the "Bank"), and A. Xxxxxxx Xxxx (the
"Executive").
BACKGROUND
Executive is currently employed as the Chairman, President and Chief
Executive Officer of The Drovers & Mechanics Bank ("Drovers Bank"). Drovers
Bank's parent, Drovers Bancshares Corporation ("DBC"), and Xxxxxx Financial
Corporation ("FFC") have entered into an Agreement and Plan of Merger of even
date (the "Merger Agreement") providing for the merger (the "Merger") of DBC
with and into FFC. Following the effective date of the Merger, the Bank, a
wholly-owned subsidiary of FFC into which Drovers Bank is to be merged following
the Merger, desires to employ Executive, and Executive desires to be employed by
the Bank, on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
SECTION 1. CAPACITY AND DUTIES.
1.1. Employment: Acceptance of Employment. The Bank hereby employs
Executive and Executive hereby agrees to continue employment by the Bank for the
period and upon the terms and conditions hereinafter set forth.
1.2. Capacity and Duties.
(a) Executive shall serve as Chairman, President and Chief
Executive Officer of the division of the Bank to be known as "Drovers Bank, a
division of Xxxxxx Bank", or similar designation authorized by the Pennsylvania
Department of Banking (and to which the Federal Deposit Insurance Corporation
has no objection) or any successor thereto (the "Drovers Division"). Executive
shall perform such other duties and shall have such authority consistent with
his position as may from time to time reasonably be specified by the President
and Chief Executive Officer of the Bank (the "President"). Executive shall
report directly to the President and shall perform his duties for the Bank
principally at the Bank's offices located in, or at such other locations
determined by the President within a 25 mile radius of, York, Pennsylvania,
except for periodic travel that may be necessary or appropriate in connection
with the performance of Executive's duties hereunder.
(b) Executive shall devote his full working time, energy, skill
and best efforts to the performance of his duties hereunder, in a manner that
will faithfully and diligently further the business and interests of the Bank,
and shall not be employed by or participate or engage in or be a part of in any
manner the management or operation of any business enterprise
other than the Bank without the prior written consent of the President, which
consent may be granted or withheld in his or her sole discretion.
SECTION 2. TERM OF EMPLOYMENT.
2.1. Term. The term of Executive's employment hereunder shall
commence on the effective date of the Merger and shall terminate on the first
business day of the month following Executive's sixty-fifth (65th) birthday,
unless further extended or sooner terminated in accordance with the provisions
hereof.
SECTION 3. COMPENSATION.
3.1. Basic Compensation. As compensation for Executive's services
during the year during which the Merger becomes effective, the Bank shall pay to
Executive a salary at the annual rate equal to $380,000 (inclusive of any
holiday bonus paid by the Bank), payable in periodic installments in accordance
with the Bank's regular payroll practices in effect from time to time. For years
subsequent to such year, Executive's salary shall be at least in the amount of
his salary for such initial year with such increases, if any, as may be
established by the President in consultation with Executive. Executive's annual
salary, as determined in accordance with this Section 3.1, is hereinafter
referred to as his "Base Salary".
3.2. Employee Benefits. In addition to the compensation provided for
in Section 3.1, Executive shall be entitled during the term of his employment to
participate in such of the Bank's employee retirement and welfare benefit plans
and other benefit programs, including but not limited to medical and disability
benefit programs and stock option plans, as may from time to time be provided
for similarly situated executive officers of FFC's subsidiary banks (such
benefits shall be, in the aggregate, no less favorable than the benefits
currently being received by Executive from DBC and Drovers Bank).
3.3. Vacation. Executive shall be entitled to six (6) weeks paid vacation
during each year under the term of his employment with the Bank.
3.4. Expense Reimbursement. During the term of his employment, the Bank
shall reimburse Executive for all reasonable expenses incurred by him in
connection with the performance of his duties hereunder in accordance with its
regular reimbursement policies as in effect from time to time and upon receipt
of itemized vouchers therefor and such other supporting information as the Bank
may reasonably require.
SECTION 4. TERMINATION OF EMPLOYMENT.
4.1. Voluntary Termination. In the event Executive's employment is
voluntarily terminated by Executive not for Good Reason prior to occurrence of
an event listed in Subsections (a), (b), (e) or (f) of Section 4.3 herein, the
Bank shall be obligated to continue to pay all of the consideration provided in
Section 3.1 and Section 3.2 above for the shorter of (a) three years from the
date of termination or (b) the then remaining term of this Agreement. Upon
making the
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payments described in this Section 4.1, the Bank shall have no further
obligation to Executive hereunder.
4.2. Termination Without Cause; Termination for Good Reason.
(a) In the event:
(i) Executive's employment is terminated by the Bank for any
reason other than "Cause", (as defined herein); or
(ii) Executive's employment is terminated by Executive for
"Good Reason" (as defined herein);
then the Bank shall continue to pay Executive all of the consideration provided
for in Section 3.1 above during the remainder of the term of this Agreement,
subject to the applicable provisions thereof. Executive shall also continue to
receive employee benefits cited in Section 3.2.
(b) As used in this Section 4, the terms "persons" and
"beneficial owners" have the same meanings as such terms under Section 13(d) of
the Securities Exchange Act of 1934 and the rules and regulations thereunder.
(c) As used herein, the term "Good Reason" shall mean the
following:
(i) material breach of the Bank's material obligations under
this Agreement, provided that the Bank has not remedied such breach after notice
and a reasonable opportunity to cure;
(ii) any decrease in Executive's Base Salary as increased
during his term of employment pursuant to this Agreement (except for decreases
that are in conjunction with decreases in executive salaries generally), any
material reduction in Executive's duties or authority, and any material
reduction in Executive's employee benefits below those required to be provided
from time to time pursuant to Section 3.2 and 3.3; or
(iii) The Bank requiring Executive to be based at a location
outside a 25 mile radius of York, Pennsylvania, except for reasonably required
travel on the Bank's business.
4.3. Termination for Cause. Executive's employment hereunder shall
terminate immediately upon notice that the President is terminating Executive
for "Cause" (as defined herein), in which event the Bank shall not thereafter be
obligated to make any further payments hereunder other than amounts (including
salary, expense reimbursement, etc.) accrued under this Agreement as of the date
of such termination in accordance with generally accepted accounting principles.
As used herein, "Cause" shall mean the following, provided that, in the case of
circumstances described in clauses (c) through (d) below, Executive has failed
to remedy the circumstances to the satisfaction of the President within 30 days
following notice thereof to Executive:
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(a) fraud committed in connection with Executive's
employment, dishonesty, theft, misappropriation or embezzlement of the Bank's
funds;
(b) conviction of any felony, crime involving fraud or
misrepresentation, or of any other crime (whether or not connected with his
employment) the effect of which is likely to adversely affect the Bank or its
affiliates;
(c) repeated and consistent failure of Executive to be
present at work during normal business hours unless the absence is because of a
disability as described in Section 4.4;
(d) insubordination, gross incompetence or misconduct in the
performance of, or gross neglect of, Executive's duties hereunder;
(e) use of alcohol or other drugs which interferes with the
performance by Executive of his duties; or
(f) conduct on the part of Executive that brings public
discredit or injures the reputation of the Bank, the Drovers Division or FFC.
4.4. Benefits Following Death or Disability. If Executive should die or
become permanently disable, (as determined under the Bank's long-term disability
plan or if no such plan then exists by a physician selected by the Bank's Board
of Directors) during the term of this Agreement, payments, pursuant to Section
3.1 and benefits pursuant to Section 3.2 hereto, shall continue to be made to
the disabled Executive or to the Executive's designated beneficiary, as
applicable, for a period equal to the shorter of (a) three (3) years from the
date Executive's employment is terminated by the Bank due to disability or, as
applicable three (3) years from the termination of employment due to death, or
(b) the remaining term of this Agreement.
4.5. Death or Disability Following Termination of Employment. Executive's
disability or death following his termination pursuant to Section 4.1 or Section
4.2 shall not effect his, or if applicable, the right of his beneficiaries to
receive the payments for the balance of the period described in Section 4.1 or
Section 4.2 as applicable.
4.6. Beneficiary Designation. Executive may, at any time, by written notice
to the Bank, name one or more beneficiaries of any benefits which may become
payable by the Bank pursuant to this Agreement. If Executive fails to designate
a beneficiary any benefits to be paid pursuant to this Agreement shall be paid
to Executive's estate.
4.7. COBRA. In the event the Executive's termination pursuant to Section
4.1 or Section 4.2 hereto, Executive's right to elect continuation of health and
medical coverage pursuant to Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA") shall commence upon the completion of the payment of
benefits to Executive Pursuant to those sections, respectively.
SECTION 5. RESTRICTIVE COVENANTS.
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5.1. Confidentiality. Executive acknowledges a duty of confidentiality owed
to the Bank and shall not, at any time during or after his employment by the
Bank, retain in writing, use, divulge, furnish, or make accessible to anyone,
without the express authorization of the President, any trade secret, private or
confidential information or knowledge of the Bank or any of its affiliates
obtained or acquired by him while so employed. All computer software, business
cards, customer lists, price lists, contract forms, catalogs, books, records,
files and know-how acquired while an employee of the Bank, are acknowledged to
be the property of the Bank and shall not be duplicated, removed from the Bank's
possession or made use of other than in pursuit of the Bank's business and, upon
termination of employment for any reason, Executive shall deliver to the Bank,
without further demand, all copies thereof which are then in his possession or
under his control.
5.2. Non-Competition and Nonsolicitation. Executive shall not, during the
term of employment hereunder and for a period of two (2) years thereafter
(unless following Executive's termination of employment this Section 5.2 is
validly terminated under Section 5.4 herein), directly or indirectly:
(a) engage, anywhere in a county in which a branch office of the Bank
is then located, in commercial banking;
(b) be or become an officer, director or employee or agent of, or a
consultant to or give financial or other assistance to any person or entity
considering engaging in commercial banking or so engaged;
(c) seek in competition with the business of the Bank or FFC to
procure orders from or do business with any customer of the Bank or FFC;
(d) solicit, or contact with a view to the engagement or employment
by, any person or entity of any person who is an employee of the Bank or FFC;
(e) seek to contract with or engage (in such a way as to adversely
affect or interfere with the business of the Bank or FFC) any person or entity
who has been contracted with or engaged to provide goods or services to the
Bank; or
(f) engage in or participate in any effort or act to induce any of the
customers, associates, consultants, or employees of the Bank, FFC or any of
their affiliates to take any action which might be disadvantageous to the Bank,
FFC or any of their affiliates; provided, however, that nothing herein shall
prohibit the Executive and his affiliates from owning, as passive investors, in
the aggregate not more than 5% of the outstanding publicly traded stock of any
corporation so engaged.
For the purpose of the foregoing, FFC shall be deemed to refer to FFC and
all of its present or future affiliates.
5.3. Injunctive and Other Relief.
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(a) Executive acknowledges and agrees that the covenants contained
herein are fair and reasonable in light of the consideration paid hereunder, and
that damages alone shall not be an adequate remedy for any breach by Executive
of his covenants which then apply and accordingly expressly agrees that, in
addition to any other remedies which the Bank may have, the Bank shall be
entitled to injunctive relief in any court of competent jurisdiction for any
breach or threatened breach of any such covenants by Executive. Nothing
contained herein shall prevent or delay the Bank from seeking, in any court of
competent jurisdiction, specific performance or other equitable remedies in the
event of any breach or intended breach by Executive of any of its obligations
hereunder.
(b) Notwithstanding the equitable relief available to the Bank, the
Executive, in the event of a breach of his covenants contained in Section 5
hereof, understands and agrees that the uncertainties and delay inherent in the
legal process would result in a continuing breach for some period of time, and
therefore, continuing injury to the Bank until and unless the Bank can obtain
such equitable relief. Therefore, in addition to such equitable relief, the Bank
shall be entitled to monetary damages for any such period of breach until the
termination of such breach, in an amount deemed reasonable to cover all actual
and consequential losses, plus all monies received by Executive as a result of
said breach and all costs and attorney's fees incurred by the Bank in enforcing
this Agreement. If Executive should use or reveal to any other person or entity
any confidential information, this will be considered a continuing violation on
a daily basis for so long a period of time as such confidential information is
made use of by Executive or any such other person or entity.
5.4. Election of Terminate Benefits. If Executive's employment has been
terminated pursuant to Section 4.1 or Section 4.2 hereto, Executive may elect to
terminate the continuation of benefit payments pursuant to Section 4.1 and 4.2
respectively by delivering written notice to the Bank in which event the
restrictions set forth in Sections 5.2(a), (b) and (c) shall immediately expire
and have no further force and effect. Executive's election pursuant to this
Section 5.4 shall not effect the Bank's rights of confidentiality pursuant to
Section 5.1 hereto. Executive's election pursuant to this Section 5.4 shall not
effect his rights to benefits under any other arrangements or programs of the
Bank, including the plans described in Section 6.10 hereto.
SECTION 6. MISCELLANEOUS.
6.1. Invalidity. If any provision hereof is determined to be invalid or
unenforceable by a court of competent jurisdiction, Executive shall negotiate in
good faith to provide the Bank with protection as nearly equivalent to that
found to be invalid or unenforceable and if any such provision shall be so
determined to be invalid or unenforceable by reason of the duration or
geographical scope of the covenants contained therein, such duration or
geographical scope, or both, shall be considered to be reduced to a duration or
geographical scope to the extend necessary to cure such invalidity.
6.2. Assignment: Benefit. This Agreement shall not be assignable by
Executive, and shall be assignable by the Bank only to any affiliate or to any
person or entity which may become a successor in interest (by purchase of assets
or stock, or by merger, or otherwise) to the Bank in the business or a portion
of the business presently operated by it. Subject to the foregoing,
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this Agreement and the rights and obligations set forth herein shall inure to
the benefit of, and be binding upon, the parties hereto and each of their
respective permitted successors, assigns, heirs, executors and administrators.
6.3. Notices. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram, fax or telecopy (confirmed by U. S. mail), receipt
acknowledged, addressed as set forth below or to such other person and/or at
such other address as may be furnished in writing by any party hereto to the
other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of any party to serve process in any
other manner permitted by law.
(a) If to the Bank:
Xxxxxx Bank
Xxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention:
-----------------
(b) If to Executive:
A. Xxxxxxx Xxxx
00 Xxxxxx Xxxxx
Xxxx, XX 00000
6.4. Entire Agreement and Modification. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and except for the agreements and plans described in Section
6.10 supersedes all prior agreements and understandings with respect thereto.
The existing AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT, dated September
30, 1999, between DBC and Drovers Bank and Executive shall be terminated, with
no further rights or obligations thereunder due to or from either party, as of
the effective date of the Merger. Any amendment, modification, or waiver of this
Agreement shall not be effective unless in writing and agreed and executed by
the Bank and the Executive. Neither the failure nor any delay on the part of any
party to exercise any right, remedy, power or privilege shall preclude any other
or further exercise of the same or of any other right, remedy, power, or
privilege with respect to any occurrence and such failure or delay to exercise
any right shall be construed as a waiver of any right, remedy, power, or
privilege with respect to any other occurrence.
6.5. Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania (and United States federal law, to the extent applicable), without
giving effect to otherwise applicable principles of conflicts of law.
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6.6. Headings; Counterparts. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two or more counterparts, each of which shall be deemed to be
an original and all of which, when taken together, shall be deemed to constitute
but one and the same Agreement.
6.7. Further Assurances. Each of the parties hereto shall execute such
further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.
6.8. Section 280G. Notwithstanding any other provisions of this Agreement
or any other agreement entered into by Executive and the Bank, except any
agreement which expressly modifies this Section 6.8 ("Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Bank for the direct or indirect provision of
compensation to Executive (including groups of participants or beneficiaries of
which Executive is a member), whether or not such compensation is deferred, is
in cash, or is in the form of a benefit to or for Executive (a "Benefit Plan"),
Executive shall not have any right to receive any payment or other benefit under
this Agreement, any Other Agreement, or any Benefit Plan if such payment or
benefit, taking into account all other payments or benefits to or for Executive
under this Agreement, all Other Agreements, and all Benefit Plans, would cause
any payment to Executive under this Agreement to be considered a "parachute
payment" within the meaning of Section 280G of the Internal Revenue Code as then
in effect (a "Parachute Payment"). In the event that the receipt of any such
payment or benefit under this Agreement, any Other Agreement, or any Benefit
Plan would cause Executive to be considered to have received a Parachute Payment
under this Agreement or any Other Agreement, then Executive shall have the
right, in Executive's sole discretion, to designate those payments or benefits
under this Agreement, any Other Agreements and/or any Benefit Plans, which
should be reduced, amended or eliminated so as to avoid having the payment to
Executive under this Agreement or any Other Agreement to be deemed to be a
Parachute Payment.
6.9. Attorneys' Fees and Related Expenses. All attorneys' fees and related
expenses incurred by Executive in connection with or relating to enforcement by
him of his rights under this Agreement shall be paid in full by the Bank
provided Executive prevails in connection with enforcing his rights under this
Agreement.
6.10. Other Plans. The Bank hereby acknowledges that DBC and Drovers Bank
and Executive are parties to a Salary Continuation Agreement, an Executive Bonus
Agreement and that Executive is a participant in a Group Term Replacement Plan
(Split Dollar Life Insurance) and medical reimbursement plan provided by DBC and
Drovers Bank for Executive. The Bank hereby acknowledges and agrees that this
Agreement is not intended to reduce, restrict or eliminate any benefit to which
Executive is entitled under these plans and agreements. The Bank acknowledges
and agrees, as successor in interest to Drovers Bank, that it has, by virtue of
the merger, assumed the obligations to Executive Pursuant to these plans and
agreements and that these plans and agreements shall continue in effect
following Executive's employment with the Bank.
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6.11. Mitigation. Executive shall not be required to mitigate the amount of
any payment or benefit provided for in Section 4 hereto by seeking employment or
otherwise and the Bank shall not be entitled to setoff against the amount of any
payments made pursuant to Section 4 hereto with respect to any compensation
earned by Executive arising from other employment.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
XXXXXX BANK
By:
------------------------
Title:
------------------------
------------------------
A. Xxxxxxx Xxxx
EXHIBIT D
_____________________, 2001
Xxxxxx Financial Corporation
Xxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
RE: Merger of Drovers Bancshares Corporation with and into
Xxxxxx Financial Corporation
Ladies and Gentlemen:
We have acted as counsel to Drovers Bancshares Corporation ("DBC") in
connection with the negotiation and consummation of an Agreement and Plan of
Merger dated December 27, 2000 (the "Agreement"), by and between DBC and Xxxxxx
Financial Corporation ("FFC").
Upon consummation of the Agreement: (i) DBC will merge with and into FFC
(the "Merger"), (ii) FFC will survive the Merger, and (iii) each of the issued
and outstanding shares of the common stock of DBC, no par value per share (the
"DBC Common Stock") will be converted into 1.24 shares of the $2.50 par value
common stock of FFC.
The opinions contained in this letter are provided to you pursuant to
Section 7.2(c) of the Agreement. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
In our capacity as counsel to DBC, we have reviewed the following:
(a) The Agreement;
(b) The Warrant Agreement dated December ____, 2000 between DBC and FFC
(the "Warrant Agreement") pursuant to which FFC acquired a Warrant to purchase
___________ shares of DBC Common Stock (the "Warrant");
(c) The Articles of Merger dated ____________________, 2001, to be filed
with the Department of State of Pennsylvania;
(d) The Articles of Incorporation (certified by the Pennsylvania Department
of State) and Bylaws, each as amended, of DBC;
(e) The Articles of Incorporation (certified by the Pennsylvania Department
of State) and Bylaws, each as amended, of The Drovers & Mechanics Bank, DBC's
sole banking subsidiary ("Drovers Bank");
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(f) Resolutions adopted by the Board of Directors of DBC on December ____,
2000, relating to the adoption and approval of the Agreement, the Warrant
Agreement, the Warrant, and related matters;
(g) Minutes of the special/annual meeting of DBC's shareholders held on
____________________, 2001 at which the Agreement was adopted and approved.
(h) A certificate of the Secretary of DBC dated as of the date hereof
verifying certain factual matters;
(i) A certificate of DBC's transfer agent dated as of the date hereof as to
the number of outstanding shares of DBC Common Stock as of ____________;
(j) A Closing Certificate of the President and Chief Executive Officer and
the Secretary of DBC, dated as of the date hereof issued pursuant to Section 7.2
(j) of the Agreement;
(k) A certificate from the Pennsylvania Department of State dated
____________________, 2001, stating that DBC is incorporated and subsisting as a
corporation under the laws of the Commonwealth of Pennsylvania;
(l) A certificate from the Pennsylvania Department of State dated
________________, 2001, stating that Drovers Bank is a Pennsylvania bank
incorporated and subsisting under the laws of the Commonwealth of Pennsylvania;
(m) A certificate from the Federal Reserve Bank of Philadelphia (the
"Reserve Bank"), dated ____________________, 2001, stating that DBC is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "BHCA");
(n) A certificate from the Pennsylvania Department dated
____________________, 2001, stating that Drovers Bank has a certificate of
authority to conduct business as a Pennsylvania chartered bank and trust
company;
(o) A certificate from the Federal Deposit Insurance Corporation, dated
____________________, 2001, stating that Drovers Bank is an insured bank under
the Federal Deposit Insurance Act, as amended;
(p) A letter from the Reserve Bank to _________________________, dated
____________________, 2001, approving the Merger.
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(q) A notice from the Pennsylvania Department, dated ____________________,
2001, approving the Merger;
(r) The Form S-4 Registration Statement (File No. ____________) filed by
FFC with the Securities and Exchange Commission (the "SEC"), including the Proxy
Statement/Prospectus contained therein (the "Proxy Statement/Prospectus"), and
declared effective by the SEC on ____________________, 2001; and
(s) Such other documents and materials as we have deemed necessary for the
rendering of the following opinions.
Our opinions set forth herein are subject to the following conditions,
qualifications and assumptions:
A. The conditions precedent to the obligations of the parties as set forth
in the Agreement will have been satisfied, or will have been waived by the party
or parties which are intended to benefit from such conditions, at the time of
the Merger, and the Merger will be effected in strict accordance with the terms
of the Agreement as modified to give effect to any binding waivers of conditions
precedent.
B. All factual matters set forth in certificates of officers of FFC or DBC
that are or have been (i) provided to the FDIC, the Pennsylvania Department and
the Reserve Bank in connection with the applications for approval of the Merger,
or (ii) provided in connection with the Closing (as defined in Section 9.1 of
the Agreement) of the transactions contemplated in the Agreement, are true and
correct, and all signatures on such certificates are the genuine signatures of
duly authorized officers.
C. The laws covered by the opinions set forth below are limited to the laws
of the United States and the laws of the Commonwealth of Pennsylvania and we
express no opinion concerning the laws of any other jurisdiction.
D. The opinions contained herein are solely as of the Effective Date, and
we expressly disclaim any responsibility to modify or supplement said opinions
in light of changes in law or in fact that may occur after the Effective Date.
E. The opinions hereinafter expressed are qualified to the extent that (1)
the enforceability or validity of any provision of the Agreement or any right
granted thereunder may be subject to or affected by any bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar law relating to or
affecting the rights of creditors generally, which law may be in effect from
time to time; (2) the remedy of specific performance or any other remedy
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may be unavailable in any jurisdiction or may be withheld as a matter of
judicial discretion; and (3) equitable principles may be applied in construing
or enforcing the provisions of the Agreement or of any other instrument or
document (regardless of whether enforcement is sought in a proceeding in equity
or at law).
F. In delivering the following opinions, we are assuming that you and each
such other person have all requisite power and authority and have taken all
necessary corporate or other action to enter into the Agreement and to effect
such transactions. In particular, for the purposes of this opinion, we are
assuming that FFC has all requisite power and authority, and has taken any and
all necessary corporate, Board of Directors and stockholders action to execute
and deliver the Agreement and all other agreements and documents provided for
therein to which FFC is a party and that FFC has the power to perform their
respective obligations thereunder. For the purposes of this opinion, we have
also assumed that the Agreement and all other agreements and documents provided
for therein to which FFC is a party are binding and enforceable obligations of
FFC in accordance with their respective terms. In connection with this opinion,
we have also assumed the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or other copies, and the authenticity of the originals of such copies.
G. In delivering the following opinions, we expressly exclude any opinions
with respect to choice of law matters or the antitrust laws of the United States
or the Commonwealth of Pennsylvania.
H. A matter stated below to be "to our knowledge" refers only to the
current actual knowledge of the attorneys currently with this firm who have
rendered legal services to DBC in connection with the Merger, and reflects the
fact that, while we have not been informed (based upon the foregoing examination
or as a result of our representation of DBC) that the matter stated is factually
incorrect, we have made no independent factual investigation with respect to
such matter (other than as described above).
I. The opinions contained herein may be relied upon solely by you and only
in connection with the transactions contemplated in the Agreement and may not
otherwise be used or relied upon by you or any other person for any purpose
whatsoever, without in each instance our prior written consent. The opinions
contained herein are limited to the matters specifically addressed in said
opinions, and no other opinion may be inferred beyond the matters expressly
addressed therein.
Based upon, and subject to, the foregoing, we are of the opinion that:
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(1) DBC is a business corporation that is incorporated and subsisting under
the laws of the Commonwealth of Pennsylvania;
(2) DBC is a bank holding company registered under the BHCA and has
corporate power and authority to own and hold its properties and to carry on its
business as described in the Proxy Statement/Prospectus;
(3) Drovers Bank is a Pennsylvania state-chartered bank that is
incorporated and subsisting under the laws of the Commonwealth of Pennsylvania
and has corporate power and authority to own and hold its properties and to
carry on its business as described in the Proxy Statement/Prospectus;
(4) Drovers Bank is an insured bank under the provisions of the Federal
Deposit Insurance Act;
(5) The authorized capital of DBC consists exclusively of 15,000,000 shares
of DBC Common Stock, no par value per share.
(6) To our knowledge, __________ shares of DBC Common Stock are issued and
outstanding and, except for __________ shares of DBC Common Stock reserved for
issuance upon the exercise of stock options granted under DBC's Stock Option
Plans, said options to be converted to options to acquire stock in FFC pursuant
to the terms of the Agreement, and ___________ shares of DBC's Common Stock
reserved for issuance upon the exercise of the Warrant, there are no outstanding
obligations, options or rights of any kind entitling other persons to purchase
or sell any shares of DBC's Common Stock and there are no outstanding securities
or other instruments of any kind that are convertible into such shares;
(7) The authorized capital of Drovers Bank consists exclusively of
__________ shares of common stock, par value $_______ per share (the "Drovers
Bank Common Stock"), of which to our knowledge, ________ shares are issued and
outstanding, and no shares are held as treasury shares;
(8) To our knowledge, all outstanding shares of Drovers Bank Common Stock
are owned beneficially and of record by DBC;
(9) To our knowledge, there are no outstanding obligations, options, or
rights of any kind entitling other persons to purchase or sell any shares of
Drovers Bank Common Stock and there are no outstanding securities or other
instruments of any kind convertible into such shares;
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(10) The Agreement has been duly executed and delivered by DBC and,
assuming due authorization, execution, and delivery by FFC, constitutes a valid
and binding obligation of DBC;
(11) The performance of the Agreement by DBC will not violate the Articles
of Incorporation or Bylaws, as amended, of DBC or Drovers Bank, any applicable
statute, rule, regulation of the United States or the Commonwealth of
Pennsylvania, or, to our knowledge, any order, decree, directive, consent
agreement, memorandum of understanding, or Material Contract to which DBC or
Drovers Bank is a party or by which any of their properties are bound;
(12) To our knowledge, there is no action, suit, or proceeding pending or
threatened of the kind contemplated under Section 7.1(f) of the Agreement;
(13) To our knowledge, there is no action, suit or proceeding pending or
threatened against DBC or Drovers Bank (except as already described to FFC in
Schedule 3.13 to the Merger Agreement) that, if determined adversely to DBC or
Drovers Bank would have a material and adverse effect upon the condition
(financial or otherwise), assets, liabilities or business operations of DBC or
Drovers Bank; and
(14) No consent, approval, authorization, or order of any federal, state,
or local court or governmental authority is required to be obtained by DBC in
connection with the consummation of the Merger, other than such consents,
approvals, authorizations, and orders as have already been obtained prior to the
Closing.
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Very truly yours,
By:
-----------------------
EXHIBIT E
____________________, 2001
Drovers Bancshares Corporation
00 Xxxxx Xxxxxx Xxxxxx
Xxxx, XX 00000
RE: Merger of Drovers Bancshares Corporation with
and into Xxxxxx Financial Corporation
Ladies and Gentlemen:
We have acted as counsel to Xxxxxx Financial Corporation ("FFC") in
connection with the negotiation and consummation of an Agreement and Plan of
Merger dated December 27, 2000 (the "Agreement"), by and between FFC and Drovers
Bancshares Corporation ("DBC").
Upon consummation of the Agreement: (i) DBC will merge with and into FFC
(the "Merger"), (ii) FFC will survive the Merger, and (iii) each of the issued
and outstanding shares of the common stock of DBC, no par value per share (the
"DBC Common Stock") will be converted into 1.24 shares of the $2.50 par value
common stock of FFC (the "FFC Common Stock") as set forth in the Agreement.
The opinions contained in this letter are provided to you pursuant to
Section 7.3(c) of the Agreement. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
In our capacity as counsel to FFC, we have reviewed the following
documents:
(a) The Agreement;
(b) The Warrant Agreement dated December ____, 2000 between DBC and FFC,
pursuant to which FFC acquired a Warrant to purchase _________ shares of DBC
Common Stock;
(c) The Articles of Merger dated _____________________, 2001, to be filed
with the Department of State of the Commonwealth of Pennsylvania.
(d) The Articles of Incorporation and Bylaws, each as amended, of FFC;
(e) Resolutions adopted by the Board of Directors of FFC on December 19,
2000, with respect to the Agreement and related matters;
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(f) A certificate of the Secretary of FFC, dated as of the date hereof
verifying certain factual matters;
(g) A closing certificate of the President and Chief Executive Officer and
the Secretary of FFC, dated as of the date hereof issued pursuant to Section
7.2(j) of the Agreement;
(h) A Certificate from the Pennsylvania Department of State, dated
____________________, 2001, stating that FFC is incorporated and subsisting as a
business corporation under the laws of the Commonwealth of Pennsylvania, and
enclosing the Amended and Restated Articles of Incorporation of FFC that has
been filed with said Department;
(i) A certificate from the Federal Reserve Bank of Philadelphia (the
"Reserve Bank"), dated ____________________, 2001, stating that FFC is a
registered financial holding company under the federal Bank Holding Company Act
of 1956, as amended (the "BHCA"), and has filed all reports required thereunder;
(j) A letter from the Reserve Bank to ____________________ dated
____________________, 2001, approving the Merger;
(k) A notice from the Pennsylvania Department of Banking (the "Pennsylvania
Department") dated ____________________, 2001, approving the Merger;
(l) The Form S-4 Registration Statement (File No. ___________) filed by FFC
with the Securities and Exchange Commission (the "SEC"), including the Proxy
Statement/Prospectus contained therein (the "Prospectus"), and declared
effective by the SEC on ____________________, 2001; and
(m) A certificate of FFC's transfer agent dated as of the date hereof as to
the number of outstanding shares of FFC Common Stock as of
_______________________; and
(n) Such other documents and materials as we have deemed necessary for the
rendering of the opinions contained therein.
In addition, in preparing the opinions set forth below, we have relied on
the fact that no notice of objection to the Merger has been received from the
Maryland Department of Labor, Licensing and Regulation, Division of Financial
Regulation (the "Maryland Division"), notice of the Merger having been provided
to the Maryland Division by letter of ____________________, 2001, from Xxxx X.
Xxxxxxxx.
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Our opinions set forth herein are subject to the following conditions,
qualifications and assumptions:
A. The conditions precedent to the obligations of the parties as set forth
in the Agreement will have been satisfied, or will have been waived by the party
or parties which are intended to benefit from such conditions, at the time of
the Merger, and the Merger will be effected in strict accordance with the terms
of the Agreement as modified to give effect to any binding waivers of conditions
precedent.
B. All factual matters set forth in certificates of officers of FFC or DBC
that are or have been (i) provided to the Reserve Bank, the FDIC and the
Pennsylvania Department in connection with the applications for approval of the
Merger, or (ii) provided in connection with the Closing (as defined in Section
9.1 of the Agreement) of the transactions contemplated in the Agreement, are
true and correct, and all signatures on such certificates are the genuine
signatures of duly authorized officers.
C. The laws covered by the opinions set forth below are limited to the laws
of the United States and the laws of the Commonwealth of Pennsylvania, and we
express no opinion concerning the laws of any other jurisdiction.
D. The opinions contained herein are solely as of the Effective Date, and
we expressly disclaim any responsibility to modify or supplement said opinions
in light of changes in law or in fact that may occur after the Effective Date.
E. The opinions hereinafter expressed are qualified to the extent that (1)
the enforceability or validity of any provision of the Agreement or any right
granted thereunder may be subject to or affected by any bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar law relating to or
affecting the rights of creditors generally, which law may be in effect from
time to time; (2) the remedy of specific performance or any other remedy may be
unavailable in any jurisdiction or may be withheld as a matter of judicial
discretion; and (3) equitable principles may be applied in construing or
enforcing the provisions of the Merger Agreement or of any other instrument or
document (regardless of whether enforcement is sought in a proceeding in equity
or at law).
F. In delivering the following opinions, we are assuming that you and each
such other person have all requisite power and authority and have taken all
necessary corporate or other action to enter into the Agreement and to effect
such transactions. In particular, for the purposes of this opinion, we are
assuming that DBC has all requisite power and authority, and has taken any and
all necessary corporate, Board of Directors and stockholders action to execute
and deliver the Agreement and all other agreements and documents provided for
therein to which
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DBC is a party and that DBC has the power to perform their respective
obligations thereunder. For the purposes of this opinion, we have also assumed
that the Agreement and all other agreements and documents provided for therein
to which DBC is a party are binding and enforceable obligations of DBC in
accordance with their respective terms. In connection with this opinion, we have
also assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or other copies, and the authenticity of the originals of such copies.
G. In delivering the following opinions, we expressly exclude any opinions
with respect to choice of law matters or the antitrust laws of the United States
or the Commonwealth of Pennsylvania.
H. A matter stated below to be "to our knowledge" refers only to the
current actual knowledge of the attorneys currently with this firm who have
rendered legal services to FFC in connection with the Merger, and reflects the
fact that, while we have not been informed (based upon the foregoing examination
or as a result of our representation of FFC) that the matter stated is factually
incorrect, we have made no independent factual investigation with respect to
such matter (other than as described above).
I. The opinions contained herein may be relied upon solely by you and only
in connection with the transactions contemplated in the Agreement and may not
otherwise be used or relied upon by you or any other person for any purpose
whatsoever, without in each instance our prior written consent. The opinions
contained herein are limited to the matters specifically addressed in said
opinions, and no other opinion may be inferred beyond the matters expressly
addressed therein.
Based upon, and subject to, the foregoing, we are of the opinion that:
1. FFC is a business corporation that is validly existing and subsisting
under the laws of the Commonwealth of Pennsylvania;
2. FFC is a registered financial holding company under the BHCA and has the
corporate power and authority to own and hold its properties and to carry on its
business as described in the Proxy Statement/Prospectus;
3. FFC has the corporate power and authority to execute and deliver the
Agreement and to carry out the transactions contemplated therein, and all
corporate actions required to be taken by FFC to authorize the execution and
delivery of the Agreement and the performance of the transactions contemplated
therein have been taken;
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4. The authorized capital of FFC consists exclusively of 400,000,000 shares
of FFC Common Stock, $2.50 par value per share, and 10,000,000 shares of
preferred stock without par value.
5. To our knowledge, ______________ shares of FFC Common Stock are issued
and outstanding and, except for ______________ shares of FFC Common Stock
reserved for issuance upon the exercise of stock options and ___________ shares
of FFC's Common Stock reserved for issuance under FFC's Shareholders Rights
Plan, there are no outstanding obligations, options or rights of any kind
entitling other persons to purchase or sell any shares of FFC's Common Stock and
there are no outstanding securities or other instruments of any kind that are
convertible into such shares.
6. The Agreement has been duly authorized, executed and delivered by FFC
and, assuming due authorization, execution and delivery by DBC, the Agreement
constitutes a valid and binding obligation of FFC;
7. To our knowledge, there is no action, suit or proceeding pending or
threatened of the kind contemplated under Section 7.1(f) of the Agreement;
8. The shares of FFC Common Stock to be issued under the Agreement have
been duly authorized and, when issued, will be validly issued, fully paid and
nonassessable; and
9. No consent, approval, authorization or order of any federal, state or
local court or governmental authority is required to be obtained by FFC in
connection with the consummation of the transactions contemplated in the
Agreement, other than such consents, approvals, authorizations and orders as
have been obtained prior to the Closing.
10. The performance of the Agreement by FFC will not violate the Articles
of Incorporation or Bylaws, as amended, of FFC, any applicable statute, rule,
regulation of the United States or the Commonwealth of Pennsylvania, or, to our
knowledge, order, decree, directive, consent agreement, memorandum of
understanding, or material contract to which FFC is a party or by which any of
its properties are bound.
The opinions contained herein may be relied upon solely by you and only in
connection with the transactions contemplated in the Agreement and may not
otherwise be used or relied upon by you or any other person for any purpose
whatsoever, without in each instance our prior written consent. The opinions
contained herein are limited to the matters specifically addressed in said
opinions, and no other opinion may be inferred beyond the matters expressly
addressed therein.
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Very truly yours,
BARLEY, SNYDER, XXXXX & XXXXX, LLC
By:
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