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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FEBRUARY 23, 2000
Date of Report (Date of earliest event reported)
SKYLANDS FINANCIAL CORPORATION
(Exact name of bank as specified in its charter)
NEW JERSEY
(State or other jurisdiction of incorporation or organization)
22-3644018
(IRS Employer Identification No.)
176 MOUNTAIN AVENUE
INDEPENDENCE TOWNSHIP, NEW JERSEY 07840
(Current address of principal office)
24-26 CROSSROADS CENTER
INDEPENDENCE TOWNSHIP, NEW JERSEY 07840
(Former address of principal office as of last report)
908-850-9010
(Bank's telephone number, including area code)
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Item 5. Other Events
On February 23, 2000, the Registrant signed a definitive Agreement and Plan
of Merger (the "Agreement") with Fulton Financial Corporation ("Fulton"), under
the terms of which Registrant will be merged with and into Fulton ("Merger"),
and all of the outstanding shares of the common stock of Registrant, par value
$2.50 per share ("SFC Common Stock") will be converted into shares of the common
stock of Fulton, par value $2.50 per share ("FFC Common Stock"). FFC has total
assets of approximately $6.1 billion, and Registrant has total assets of
approximately $225 million.
Under the terms of the Agreement, shares of SFC Common Stock will be
exchanged for shares of FFC Common Stock on the effective date of the Merger,
based on a conversion ratio of 0.78 shares of FFC Common Stock for each share of
SFC Common Stock and options to acquire 308,084 shares outstanding. Each holder
of an option to acquire SFC Common Stock which is outstanding on the effective
date of the acquisition is to receive an option to acquire shares of FFC Common
Stock, with the number of shares subject to such option and the exercise price
adjusted to take the conversion ratio into consideration. By separate Warrant
Agreement and Warrant, Fulton has the right to acquire 625,000 shares of SFC
Common Stock under certain conditions.
SFC Common Stock is traded on the NASDAQ Small Cap Market, under the symbol
"SKCB." The closing bid price for SFC Common Stock on NASDAQ was $10.25 on
February 22, 2000 (the day prior to the public announcement of the Merger). The
closing price for FFC Common Stock on NASDAQ was $16.125 on February 22, 2000.
Consummation of the Agreement is subject to various conditions, including,
among others, (i) the approval of the Merger by the Federal Reserve Board and
the New Jersey Department of Banking and Insurance; (ii) the approval of the
Merger by the shareholders of Registrant; and (iii) the absence of any material
adverse change in the financial condition or operating results of Registrant.
Registrant and Fulton have the right to terminate the Agreement based on a
decline or an increase, respectively, in the market value of FFC Common Stock.
Specifically, Registrant has the right to terminate the Agreement if the Closing
Market Price of FFC Common Stock (defined as the lowest average of any ten (10)
consecutive trading days during the twenty (20) trading days prior to closing)
is less than $13.74 (subject to Fulton's option to increase appropriately the
conversion ratio). Fulton has the right to terminate the Agreement if the
Closing Market price is greater than $20.20 (subject to Registrant's option to
reduce appropriately the conversion ratio).
Assuming that all conditions are satisfied without unexpected delay, it is
anticipated that the effective date of the Merger will occur during the third
quarter of 2000.
Pursuant to General Instruction F to Form 8-K, the press release dated
February 23, 2000 announcing execution of the Agreement, which is attached
hereto as Exhibit 99.1, is hereby incorporated herein by reference.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibit 2.1 - Agreement and Plan of Merger, dated as of February 23, 2000, by
and between Registrant and Fulton Financial Corporation
Exhibit 2.2 - Warrant Agreement, dated as of February 24, 2000, by and between
Registrant and Fulton Financial Corporation.
Exhibit 2.3 - Warrant, dated as of February 24, 2000.
Exhibit 99.1 - Press Release, dated February 23, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Dated: March 6, 2000
SKYLANDS FINANCIAL CORPORATION
By: /s/ Edward W. Mahnken, Jr.
--------------------------------------------
Edward W. Mahnken, Jr.
Vice President and Chief Financial Officer
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EXHIBIT INDEX
Exhibit 2.1 - Agreement and Plan of Merger, dated as of February 23, 2000, by
and between Registrant and Fulton Financial Corporation
Exhibit 2.2 - Warrant Agreement, dated as of February 24, 2000, by and between
Registrant and Fulton Financial Corporation.
Exhibit 2.3 - Warrant, dated as of February 24, 2000.
Exhibit 99.1 - Press Release, dated February 23, 2000.
NWK3: 482534.03
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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SKYLANDS FINANCIAL CORPORATION
AND
FULTON FINANCIAL CORPORATION
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TABLE OF CONTENTS
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ARTICLE I. THE MERGER....................................................................................1
Section 1.1. Merger................................................................................1
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........................................................................2
(c) No Fractional Shares..........................................................................3
(d) Closing Market Price..........................................................................3
Section 2.2. Exchange of Stock Certificates........................................................3
(a) Exchange Agent................................................................................3
(b) Surrender of Certificates.....................................................................3
(c) Dividend Withholding..........................................................................4
(d) Failure to Surrender Certificates.............................................................4
(e) Expenses......................................................................................4
Section 2.3. Treatment of Outstanding SFC Options..................................................4
Section 2.4. Reservation of Shares.................................................................5
Section 2.5. Taking Necessary Action...............................................................5
Section 2.6. Press Releases........................................................................6
Section 2.7. FFC Common Stock..........................................................................6
Section 2.8. No Right of Dissent.......................................................................6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SFC.......................................................6
Section 3.1. Authority.............................................................................6
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....................................................8
Section 3.8. Absence of Changes....................................................................8
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............................................................................9
Section 3.13. Litigation and Governmental Directives..............................................11
Section 3.14. Compliance with Laws; Governmental Authorizations...................................11
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..............................................................12
Section 3.19. Related Party Transactions..........................................................13
Section 3.20. No Finder...........................................................................13
Section 3.21. Complete and Accurate Disclosure....................................................13
Section 3.22. Environmental Matters...............................................................13
Section 3.23. Proxy Statement/Prospectus..........................................................14
Section 3.24. SEC Filings.........................................................................14
Section 3.25. Reports.............................................................................14
Section 3.26. Loan Portfolio of SCB...............................................................15
Section 3.27. Investment Portfolio................................................................15
Section 3.28. Regulatory Examinations.............................................................15
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...........................................................16
Section 4.3. Capitalization......................................................................16
Section 4.4. Articles of Incorporation and Bylaws................................................17
Section 4.5. Subsidiaries........................................................................17
Section 4.6. Financial Statements................................................................17
Section 4.7. Absence of Undisclosed Liabilities..................................................17
Section 4.8. Absence of Changes..................................................................18
Section 4.9. Litigation and Governmental Directives..............................................18
Section 4.10. Compliance with Laws; Governmental Authorizations...................................18
Section 4.11. Complete and Accurate Disclosure....................................................18
Section 4.12. Labor Relations.....................................................................19
Section 4.13. Employee Benefits Plans.............................................................19
Section 4.14. Environmental Matters...............................................................19
Section 4.15. SEC Filings.........................................................................19
Section 4.16. Proxy Statement/Prospectus..........................................................20
Section 4.17. Regulatory Approvals................................................................20
Section 4.18. No Finder...........................................................................20
Section 4.19. Taxes...............................................................................20
Section 4.20. Title to and Condition of Assets....................................................20
Section 4.21. Contracts...........................................................................21
Section 4.22. Insurance...........................................................................21
Section 4.23. Reports.............................................................................21
ARTICLE V. COVENANTS OF SFC............................................................................21
Section 5.1. Conduct of Business.................................................................21
Section 5.2. Best Efforts........................................................................23
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Section 5.3. Access to Properties and Records.....................................................23
Section 5.4. Subsequent Financial Statements......................................................24
Section 5.5. Update Schedules.....................................................................24
Section 5.6. Notice...............................................................................24
Section 5.7. No Solicitation......................................................................24
Section 5.8. Affiliate Letters....................................................................26
Section 5.9. No Purchases or Sales of FFC Common Stock During Price Determination Period..........26
Section 5.10. Dividends............................................................................26
ARTICLE VI. COVENANTS OF FFC............................................................................27
Section 6.1. Best Efforts.........................................................................27
(a) Applications for Regulatory Approval.........................................................27
(b) Registration Statement.......................................................................27
(c) State Securities Laws........................................................................27
(d) Stock Listing................................................................................27
(e) Adopt Amendments.............................................................................27
Section 6.2. Access to Properties and Records.....................................................28
Section 6.3. Subsequent Financial Statements......................................................28
Section 6.4. Update Schedules.....................................................................28
Section 6.5. Notice...............................................................................28
Section 6.6. Employment Arrangements..............................................................28
Section 6.7. No Purchase or Sales of FFC Common Stock During Price Determination Period...........29
Section 6.8 Continuation of SCB's Structure, Name and Directors..................................29
Section 6.9 Insurance............................................................................30
ARTICLE VII. CONDITIONS PRECEDENT.......................................................................31
Section 7.1. Common Conditions.....................................................................31
(a) Shareholder Approval.........................................................................31
(b) Regulatory Approvals.........................................................................31
(c) Stock Listing................................................................................31
(d) Tax Opinion .................................................................................31
(e) Registration Statement.......................................................................32
(f) No Suits ....................................................................................33
(g) Interim Condition............................................................................32
Section 7.2. Conditions Precedent to Obligations of FFC...........................................33
(a) Accuracy of Representations and Warranties...................................................33
(b) Covenants Performed..........................................................................33
(c) Opinion of Counsel for SFC...................................................................33
(d) Affiliate Agreements.........................................................................33
(e) SFC Options .................................................................................33
(f) No Material Adverse Change...................................................................33
(g) Accountants' Letter..........................................................................34
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(g) Accountants' Letter..........................................................................35
(h) Federal and State Securities and Antitrust Laws..............................................35
(i) Environmental Matters........................................................................35
(j) Closing Documents............................................................................35
Section 7.3. Conditions Precedent to the Obligations of SFC.......................................35
(a) Accuracy of Representations and Warranties...................................................36
(b) Covenants Performed..........................................................................36
(c) Opinion of Counsel for FFC...................................................................36
(d) FFC Options .................................................................................36
(e) No Material Adverse Change...................................................................36
(e) Fairness Opinion.............................................................................37
(f) Closing Documents............................................................................37
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER.........................................................37
Section 8.1. Termination..........................................................................37
(a) Mutual Consent...............................................................................37
(b) Unilateral Action by FFC.....................................................................37
(c) Unilateral Action By SFC.....................................................................37
(d) Market Price of FFC Common Stock.............................................................38
Section 8.2. Effect of Termination................................................................38
(a) Effect .................................................................................38
(b) Limited Liability............................................................................38
(c) Confidentiality..............................................................................39
Section 8.3. Amendment............................................................................39
Section 8.4. Waiver...............................................................................39
ARTICLE IX. CLOSING AND EFFECTIVE TIME..................................................................39
Section 9.1. Closing..............................................................................39
Section 9.2. Effective Time.......................................................................39
ARTICLE X. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES...............................................40
Section 10.1. No Survival.........................................................................40
ARTICLE XI. GENERAL PROVISIONS..........................................................................40
Section 11.1. Expenses............................................................................40
Section 11.2. Other Mergers and Acquisitions......................................................40
Section 11.3. Notices.............................................................................40
Section 11.4. Counterparts.......................................................................41
Section 11.5. Governing Law.......................................................................41
Section 11.6. Parties in Interest.................................................................41
Section 11.7. Entire Agreement....................................................................41
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INDEX OF SCHEDULES
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Schedule 2.3 SFC Options
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Schedule 3.7 Undisclosed Liabilities
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Schedule 3.8 Changes
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Schedule 3.9 Dividends, Distributions and Stock Purchases
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Schedule 3.10 Taxes
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Schedule 3.11 Title to and Condition of Assets
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Schedule 3.12 Contracts
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Schedule 3.13 Litigations and Governmental Directives
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Schedule 3.14 Compliance with Laws; Governmental Authorizations
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Schedule 3.15 Insurance
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Schedule 3.16 Financial Institutions Bonds
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Schedule 3.17 Labor Relations and Employment Agreements
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Schedule 3.18 Employee Benefit Plans
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Schedule 3.19 Related Party Transactions
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Schedule 3.20 Finders
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Schedule 3.22 Environmental Matters
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Schedule 3.26 Loan Portfolio
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Schedule 3.27 Investment Portfolio
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Schedule 4.5 Subsidiaries
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Schedule 4.7 Undisclosed Liabilities
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Schedule 4.9 Litigation and Governmental Directives
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Schedule 4.10 Compliance with Laws; Governmental Authorizations
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Schedule 4.14 Environmental Matters
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Schedule 6.8 SCB Director Fees and Benefits
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INDEX OF EXHIBITS
Exhibit A Form of Warrant Agreement
Exhibit B Form of Warrant
Exhibit C Form of Opinion of SFC's Counsel
Exhibit D 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 23rd day of February, 2000, by
and between FULTON FINANCIAL CORPORATION, a Pennsylvania business corporation
having its administrative headquarters at One Penn Square, P. O. Box 4887,
Lancaster, Pennsylvania 17604 ("FFC"), and SKYLANDS FINANCIAL CORPORATION, a New
Jersey business corporation having its administrative headquarters at 176
Mountain Avenue, Hackettstown, New Jersey 07840 ("SFC").
BACKGROUND:
FFC is a bank holding company registered under the Bank Holding Company Act
of 1956, as amended (the "BHC Act"). SFC is a bank holding company registered
under the BHC Act which is the parent of Skylands Community Bank ("SCB"). SCB is
the parent of Skylands Community Investment Co., Inc. ("SCI"). FFC and SFC 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) SFC 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 SFC, $2.50 par value per share ("SFC 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 execution of this Agreement, the parties are to
enter into a Warrant Agreement in substantially the form of Exhibit A attached
hereto (the "Warrant Agreement"), which provides for the delivery by SFC of a
warrant in substantially the form of Exhibit B attached hereto (the "Warrant")
entitling FFC to purchase shares of the SFC Common Stock in certain
circumstances.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound, the parties hereby agree as follows:
ARTICLE I. THE MERGER
Subject to the terms and conditions of this Agreement, SFC 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) SFC shall merge with and into FFC pursuant to the provisions of the
Pennsylvania Business Corporation Law of 1988 and the New Jersey Business
Corporation Act, whereupon the separate existence of SFC shall cease and FFC
shall be the surviving corporation (hereinafter sometimes referred to as the
"Surviving Corporation"), and (ii) the SFC Common Stock will be converted into
FFC Common Stock pursuant to the provisions of Article II hereof.
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Section 1.2. Name. The name of the Surviving Corporation shall be "Fulton
Financial Corporation". The address of the principal office of the Surviving
Corporation will be One Penn Square, P.O. Box 4887, Lancaster, Pennsylvania
17604.
Section 1.3. Articles of Incorporation. The Articles of Incorporation of
the Surviving Corporation shall be the Articles of Incorporation of 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 SFC 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 SFC Common Stock issued and outstanding immediately
before the Effective Time, (ii) shares of SFC 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), which shall be
cancelled, and (iii) shares of SFC Common Stock owned by SFC or any direct or
indirect subsidiary of SFC, (except for trust account shares or shares acquired
in connection with debts previously contracted), which shall be cancelled)
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, .78
(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 with the Rights Agreement dated June 20, 1989, as amended and
restated as of April 27. 1999, between FFC and Fulton Bank. Each share of SFC
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 SFC Common Stock to be converted into
the right to receive FFC Common Stock pursuant to this Section 2.1 shall
thereafter cease to have any rights with respect to the shares represented
thereby, except the right to receive the FFC Common Stock therefor, without
interest thereon, upon the surrender of the share certificates evidencing the
SFC 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
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proportionately adjusted (calculated to four decimal places), so that each SFC
shareholder shall receive at the Effective Time, in exchange for his shares of
SFC 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 .78 shares to .8190 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 SFC 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(d) herein).
(d) 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 during the twenty (20) 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") resulting in the lowest average, the foregoing period of
twenty (20) trading days being hereinafter sometimes referred to as the "Price
Determination Period" (For example, if September 30, 2000 were to be the
Effective Date, then the Price Determination Period would be August 31, 2000 and
September 1, 2, 5, 6, 7, 8, 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 25, 26 and
27, 2000). In the event that NASDAQ shall fail to report closing bid and asked
prices for FFC Common Stock for any trading day during the Price Determination
Period, the closing bid and asked prices for that day shall be equal to the
average of the closing bid and asked prices as quoted: (i) by F. J. Morrissey &
Company, Inc. and by Ryan, Beck & Co.; or (ii) in the event that both of these
firms are not then making a market in FFC Common Stock, by two brokerage firms
then making a market in FFC Common Stock to be selected by FFC and approved by
SFC.
Section 2.2. Exchange of Stock Certificates. SFC 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 SFC 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 SFC
a notice specifying the procedures to be followed in surrendering such
shareholder's SFC Common Stock certificates.
(b) Surrender of Certificates: As promptly as possible after receipt
of the Exchange Agent's notice, each former shareholder of SFC shall surrender
his SFC Common Stock certificates (which may be certificates for shares of
common stock of SCB) to the Exchange Agent;
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provided, that if any former shareholder of SFC shall be unable to surrender his
SFC 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 SFC Common Stock certificates from a former
SFC 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 SFC 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 SFC who has not prior to the payment
date surrendered his SFC 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 SFC upon proper surrender of his SFC Common Stock
certificates.
(d) Failure to Surrender Certificates: All SFC 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 SFC shall not have properly
surrendered his SFC 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 SFC
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 SFC, without
interest, upon proper actual or constructive surrender of his SFC 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 SFC Options.
(a) Each holder of an option (collectively, "SFC Options") to
purchase shares of SFC Common Stock that (i) is outstanding at the Effective
Time, (ii) has been granted pursuant to the 1994 Amended and Restated Stock
Option Plan, 1991 Non-Qualified Stock Option Plan, as amended, 1996 Incentive
Stock Option Plan and 1997 Incentive Stock Option Plan (collectively, the "SFC
Stock Option Plans") and (iii) would otherwise survive the Effective Time shall
be entitled to receive, in cancellation of such SFC Option, an option to acquire
shares of FFC Common Stock on the terms set forth below (an "FFC Stock Option").
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(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 SFC Common Stock covered by the
SFC 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 SFC Common Stock of such SFC
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 SFC
Option, except that all references to SFC 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 SFC Option;
(iv) FFC shall assume such SFC 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 SFC Options qualify as incentive stock
options under Section 422 of the Code, the FFC Options exchanged therefor shall
also so qualify. Subject to the foregoing, the SFC Stock Option Plans and all
options or other rights to acquire SFC Common Stock issued thereunder shall
terminate at the Effective Time.
(c) FFC shall not issue or pay for any fractional shares otherwise
issuable upon exercise of a FFC Stock Option. Prior to the Effective Time, FFC
shall take appropriate action to reserve for issuance and, if not previously
registered pursuant to the Securities Act of 1933, as amended (the "1933 Act"),
register the number of shares of FFC Common Stock necessary to satisfy FFC's
obligations with respect to the issuance of FFC Common Stock pursuant to the
exercise of FFC Stock Options and under Section 2.3.
(d) Prior to the Effective Time (to the extent required as determined
by FFC and SFC), FFC shall receive agreements from each holder of a SFC Option,
pursuant to which each such holder agrees to accept such FFC Options in exchange
for the cancellation of such SFC Options, as of the Effective Time.
(e) Schedule 2.3 sets forth a listing of each SFC Option as of the
date of this Agreement (copies of which have been provided to FFC), including
the optionee, date of grant, shares of SFC 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 SFC 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
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to obtain the regulatory approvals required to consummate the Merger. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest FFC with full title to
all properties, assets, rights, approvals, immunities and franchises of SFC, the
officers and directors of SFC, at the expense of FFC, shall take all such
necessary action.
Section 2.6. Releases. FFC and SFC 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 SFC, 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. No Right of Dissent. Pursuant to Section 14A:11-1(1)(a)(i)(B)
of the New Jersey Business Corporation Act, the shareholders of SFC shall not be
entitled to exercise dissenters' rights
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SFC
SFC 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 SFC (its Board of Directors, at a meeting duly called and held, by a vote of
at least 80% of the full Board, (i) determined that the Merger is advisable and
in the best interests of SFC and its shareholders 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 SFC approve
this Agreement and the transactions contemplated thereby), and, except for the
approval of this Agreement by its shareholders, SFC 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 SFC and, assuming due authorization, execution and
delivery by FFC, constitute valid and binding obligations of SFC. Upon execution
and delivery of the Warrant Agreement and the Warrant, such documents shall
constitute binding obligations of SFC. 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 Certificate of Incorporation or
Bylaws of SFC, (ii) the Certificate of Incorporation or Bylaws of SCB, (iii) any
statute, rule, regulation, order, decree or directive of any governmental
authority or court applicable to SFC or SCB, subject to the receipt of all
required
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governmental approvals, or (iv) any agreement, contract, memorandum of
understanding, indenture or other instrument to which SFC or SCB is a party or
by which SFC or SCB or any of their properties are bound.
Section 3.2. Organization and Standing. SFC is a business corporation that
is duly organized, validly existing and in good standing under the laws of the
State of New Jersey. SFC 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. SCB is a banking corporation that is duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. SCB 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. SCB has full power and lawful authority to own and hold its
properties and to carry on its business as presently conducted. SCI is a
business corporation that is duly organized, validly existing and in good
standing under the laws of the State of New Jersey. SCI 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. SCB is a wholly-owned direct subsidiary of SFC
and SCI is a wholly-owned subsidiary of SCB. Except for SCB and SCI (the "SFC
Subsidiaries"), SFC owns no active subsidiaries, directly or indirectly.
Section 3.4. Capitalization. The authorized capital of SFC consists
exclusively of 10,000,000 shares of SFC Common Stock and 1,000,000 shares of
serial preferred stock, $10.00 par value per share. There are 2,550,994 shares
of SFC Common Stock validly issued, outstanding, fully paid and non-assessable,
and no shares are held as treasury shares. There are no shares of preferred
stock issued. In addition, 308,084 shares of SFC Common Stock are reserved for
issuance upon the exercise of Stock Options granted under SFC's Stock Option
Plans and 625,000 shares of SFC Common Stock will be reserved for issuance upon
exercise of the Warrant. Except for the SFC Options and the Warrant, there are
no outstanding obligations, options or rights of any kind entitling other
persons to acquire shares of SFC Common Stock and there are no outstanding
securities or other instruments of any kind that are convertible into shares of
SFC Common Stock. The authorized capital of SCB consists exclusively of
10,000,000 shares of common stock, par value $2.50 per share (the "SCB Common
Stock"), of which 1,000 shares are validly issued, outstanding and fully-paid
and non-assessable, and no shares are held as treasury shares. All outstanding
shares of SCB Common Stock are owned beneficially and of record by SFC. There
are no outstanding obligations, options or rights of any kind entitling other
persons to acquire shares of SCB Common Stock, and there are no outstanding
securities or instruments of any kind that are convertible into shares of SCB
Common Stock. The authorized capital of SCI consists exclusively of 1,000 shares
of common stock, without par value (the "SCI Common Stock"), of which 100 shares
are validly issued, outstanding and fully-paid, non-assessable, and no shares
are held as treasury shares. All outstanding shares of SCI Common Stock are
owned beneficially and of record by SCB. There are not outstanding obligations,
options or rights of any kind entitling other persons to acquire shares of SCI
Common Stock, and there are no outstanding securities or instruments of any kind
that are convertible into shares of SCI Common Stock. The Common Stock of SCB
and SCI is sometimes collectively referred to herein as the "SFC Subsidiaries
Common Stock".
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Section 3.5. Charter, Bylaws and Minute Books. The copies of the
Certificate of Incorporation and Bylaws of SFC and the SFC Subsidiaries that
have been delivered to FFC are true, correct and complete. Except as previously
disclosed to FFC in writing, the minute books of SFC and the SFC 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 SFC and the SFC Subsidiaries at the
meetings documented in such minutes.
Section 3.6. Financial Statements. SFC has delivered to FFC the following
financial statements: Statements of Condition at December 31, 1998 and 1997 and
Statements of Income, Statements of Shareholders' Equity, and Consolidated
Statements of Cash Flows of SCB for the years ended December 31, 1996, 1997 and
1998, certified by Arthur Andersen, LLP, and set forth in the 1998 Annual Report
to SCB's shareholders and Consolidated Statements of Condition of SFC at
September 30, 1999 and December 31, 1998 and Consolidated Statements of Income
for the three and nine-month periods ended September 30, 1999 and 1998,
Consolidated Statements of Changes in Shareholders' Equity for the nine-month
periods ended September 30, 1999 and 1998 and Consolidated Statements of Cash
Flows for the nine-month periods ended September 30, 1999 and 1998, as filed
with the Securities and Exchange Commission (the "SEC") in a Quarterly Report on
Form 10-QSB (the aforementioned Consolidated Statement of Condition as of
September 30, 1999 being hereinafter referred to as the "SFC Balance Sheet").
Each of the foregoing financial statements fairly present the consolidated
financial condition, assets and liabilities, and results of operations of SFC
and SCB 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 SFC
Balance Sheet, at September 30, 1999, SFC had no material liabilities (whether
accrued, absolute, contingent or otherwise) which were required to be reflected,
noted or reserved against in the SFC Balance Sheet under generally accepted
accounting principles. Except as disclosed in Schedule 3.7, SFC and the SFC
Subsidiaries have not incurred, since September 30, 1999, any such liability,
other than liabilities of the same nature as those set forth in the SFC 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 SFC's and the SFC
Subsidiaries' customary business practices.
Section 3.8. Absence of Changes. Since September 30, 1999, SFC and the SFC
Subsidiaries have each conducted their businesses in the Ordinary Course of
Business and, except as disclosed in Schedule 3.8, neither SFC nor the SFC
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 SFC and the SFC Subsidiaries on a consolidated basis.
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<PAGE> 16
Section 3.9. Dividends, Distributions and Stock Purchases. Except as
disclosed in Schedule 3.9, since September 30, 1999, SFC has not declared, set
aside, made or paid any dividend or other distribution in respect of the SFC
Common Stock, or purchased, issued or sold any shares of SFC Common Stock or the
SFC Subsidiaries Common Stock.
Section 3.10. Taxes. SFC and SCB 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, 1999. Except as
disclosed in Schedule 3.10: (i) SFC and SCB 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 SFC nor the SFC Subsidiaries
have received any notice of deficiency or assessment of additional taxes, and no
tax audits are in process; and (iii) the Internal Revenue Service (the "IRS")
has not commenced or given notice of an intention to commence any examination or
audit of the federal income tax returns of SFC or SCB for any year through and
including the year ended December 31, 1998. Except as disclosed in Schedule
3.10, neither SFC nor the SFC 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
SFC Balance Sheet are adequate to cover all taxes (including interest and
penalties, if any, thereon) that are payable or accrued as a result of SFC'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, SFC and the SFC Subsidiaries have good and marketable title to
all material consolidated real and personal properties and assets reflected in
the SFC Balance Sheet or acquired subsequent to September 30, 1999 (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 SFC 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 SFC Balance Sheet or acquired subsequent
to September 30, 1999: (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. SFC and the SFC 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
SFC or the SFC Subsidiaries (other than contracts with customers reasonably
entered into by SFC or SCB in the
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Ordinary Course of Business) which involves aggregate payments or receipts in
excess of $75,000 per year, including without limitation every employment
contract, employee benefit plan, agreement, lease, license, indenture, mortgage
and other commitment to which either SFC or the SFC Subsidiaries are a party or
by which SFC or the SFC Subsidiaries or any of their properties may be bound
(collectively referred to herein as "Material Contracts") is identified in
Schedule 3.12. Except as disclosed in Schedule 3.12, all Material Contracts are
enforceable against SFC or the SFC Subsidiaries, as the case may be and, SFC or
the SFC 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 SFC 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 SFC nor the SFC 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);
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(vii) agreement, contract or understanding, other than this
Agreement, and the Warrant Agreement, regarding the capital stock of SFC and/or
SCB or committing to dispose of some or all of the capital stock or
substantially all of the assets of SFC and/or SCB; or
(viii) collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization.
(c) Neither SFC nor SCB is in default under or in violation of any
provision of any note, bond, indenture, mortgage, deed of trust, loan agreement,
lease or Material Contract to which it is a party or to which any of its
respective properties or assets is subject.
Section 3.13. Litigation and Governmental Directives. Except as disclosed
in Schedule 3.13, (i) there is no litigation, investigation or proceeding
pending, or to the Knowledge of SFC or the SFC Subsidiaries (as the term is
defined below) threatened, that involves SFC or the SFC 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 SFC or the SFC 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 SFC or the SFC Subsidiaries that
materially and adversely affect the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of SFC or the SFC
Subsidiaries or that in any manner restrict the right of SFC or the SFC
Subsidiaries to carry on their businesses as presently conducted taken as a
whole; and (iii) neither SFC nor the SFC 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 SFC or the
SFC Subsidiaries, would materially and adversely affect the consolidated
condition (financial or otherwise), assets, liabilities, business, operations or
future prospects of SFC or the SFC Subsidiaries or would restrict in any manner
the right of SFC or the SFC Subsidiaries to carry on their businesses as
presently conducted taken as a whole. All litigation (except for bankruptcy
proceedings in which SFC or the SFC Subsidiaries have filed proofs of claim) in
which SFC or the SFC 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 SFC or
SCB" and "Knowledge of SFC and the SFC Subsidiaries" shall mean the actual
knowledge of Michael Halpin, Edward Mahnken, Dan Marcmann, Bruce Schott or any
member of the Board of Directors of SFC.
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 SFC or the SFC
Subsidiaries: (i) SFC and the SFC 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 SFC or the SFC Subsidiaries or to any
of their properties; and (ii) all material permits, concessions, grants,
franchises, licenses and other
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governmental authorizations and approvals necessary for the conduct of the
business of SFC or the SFC 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 SFC's and
SFC Subsidiaries' operations (except for title insurance policies), including
without limitation all financial institutions bonds, held by or on behalf of SFC
or the SFC 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, 1993, SCB has
continuously maintained in full force and effect one or more financial
institutions bonds listed in Schedule 3.16 insuring SCB against acts of
dishonesty by each of its employees. No claim has been made under any such bond
and SCB is not aware of any fact or condition presently existing which might
form the basis of a claim under any such bond. SCB 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 SFC nor
any of the SFC Subsidiaries are a party to or bound by any collective bargaining
agreement. SFC and the SFC Subsidiaries enjoy good working relationships with
their employees, and there are no labor disputes pending, or to the Knowledge of
SFC or SCB threatened, that might materially and adversely affect the condition
(financial or otherwise), assets, liabilities, business or operations of SFC or
the SFC Subsidiaries. Except as disclosed in Schedule 3.17, neither SFC nor the
SFC Subsidiaries have any employment contract, severance agreement, deferred
compensation agreement, consulting agreement or similar obligation (including
the amendments referred to in Section 7.1(g), an "Employment Obligation") with
any director, officer, employee, agent or consultant. For the purposes of this
Agreement, Messrs. Halpin, Marcmann, Schott and Poolas shall be referred to
herein as the "Contract Employees.". Except as disclosed in Schedule 3.17, as of
the Effective Time (as defined in Section 9.2 herein), neither SFC nor the SFC
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 SFC or the SFC Subsidiaries are a party or by which SFC
or the SFC 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 "SFC
Benefit Plans"), but not including the Employment Obligations described in
Section 3.17, are identified in Schedule 3.18. Each of the SFC 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 an "SFC Pension Plan") is exempt from tax under
Sections 401 and 501 of the Code, 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
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<PAGE> 20
Code or in ERISA) and not otherwise exempt under ERISA or the Code has occurred
in respect of the SFC Pension Plans. There have been no material breaches of
fiduciary duty by any fiduciary under or with respect to the SFC Pension Plans
or any other SFC Benefit Plan which is an employee welfare benefit plan as
defined in ERISA, and no claim is pending or, to the Knowledge of SFC,
threatened with respect to any SFC Benefit Plan other than claims for benefits
made in the Ordinary Course of Business. Neither SFC nor the SFC Subsidiaries
have incurred any material penalty imposed by the Code or by ERISA with respect
to the SFC Pension Plans or any other SFC Benefit Plan. There has not been any
audit of any SFC Benefit Plan by the Department of Labor or the IRS.
Section 3.19. Related Party Transactions. Except as disclosed in Schedule
3.19, neither SFC nor any of the SFC 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, 1998) of SFC or any of
the SFC Subsidiaries; (ii) any shareholder owning five percent (5%) or more of
the outstanding SFC Common Stock; and (iii) any "associate" (as defined in Rule
405 under the 1933 Act) of the foregoing persons or any business in which any of
the foregoing persons is an officer, director, employee or five percent (5%) or
greater equity owner. Each such contract or extension of credit disclosed in
Schedule 3.19, except as otherwise specifically described therein, has been made
in the Ordinary Course of Business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
arms' length transactions with other persons that do not involve more than a
normal risk of collectability or present other unfavorable features.
Section 3.20. No Finder. Except as disclosed in Schedule 3.20, neither SFC
nor any of the SFC Subsidiaries have paid or become obligated to pay any fee or
commission of any kind whatsoever to any 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 SFC, the SFC Subsidiaries, SFC Common Stock, the SFC
Subsidiaries' Common Stock, and the involvement of SFC and the SFC 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 SFC or the SFC 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 SFC Balance Sheet,
neither SFC nor any of the SFC 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 SFC or any of the SFC Subsidiaries and which is
required to be reflected, noted or adequately reserved against
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in SFC's consolidated financial statements under generally accepted accounting
principles. In particular, without limiting the generality of the foregoing
sentence, except as disclosed in Schedule 3.22, neither SFC nor any of the SFC
Subsidiaries have: (i) any materials containing asbestos have been used or
incorporated 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 SFC or any of the SFC Subsidiaries; (ii)
any electrical transformers, fluorescent light fixtures with ballasts or other
equipment containing PCB's are or have been 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 SFC or any of the SFC Subsidiaries; or (iii) any underground
storage tanks for the storage of gasoline, petroleum products or other toxic or
hazardous wastes or similar substances are or have ever been 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 SFC or any of the SFC 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 SFC 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 SFC, the SFC Subsidiaries, SFC Common Stock, the SFC
Subsidiaries Common Stock and all actions taken and statements made by SFC and
the SFC Subsidiaries in connection with the transactions contemplated herein
(except for information provided by FFC to SFC or the SFC 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 SFC or SCB 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. SFC and SCB have filed all material reports,
registrations and statements that are required to be filed with the Federal
Reserve Board (the "FRB"), the FDIC, the New Jersey Department of Banking and
Insurance (the "Department") and any other applicable federal, state or local
governmental or regulatory authorities and such reports, registrations and
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statements referred to in this Section 3.25 were, as of their respective dates,
in compliance in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the governmental or regulatory authority
with which they were filed; provided, however, that the failure to file any such
report, registration, or statement or the failure of any report, registration or
statement to comply with the applicable regulatory standard shall not be deemed
to be a breach of the foregoing representation unless such failure has or may
have a material adverse impact on SFC and the SFC Subsidiaries on a consolidated
basis. SFC 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. SFC is required to file reports with
the SEC pursuant to Section 12 of the 1934 Act, and SFC and SCB have made all
appropriate filings under the 1934 Act and the rules and regulations promulgated
thereunder. The SFC Common Stock is traded on the NASDAQ Small Cap Market under
the symbol "SKCB."
Section 3.26. Loan Portfolio of SCB.
(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 SCB (ii) all loans of SCB classified by SCB or
any regulatory authority as "Monitor," "Substandard," "Doubtful" or "Loss,"
(iii) all commercial and mortgage loans of SCB classified as "non-accrual," and
(iv) all commercial loans of SCB classified as "in substance foreclosed."
(b) SCB has adequately reserved for or charged off loans in
accordance with applicable regulatory requirements and SCB'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 SFC and the SFC 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, 1999. 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 SFC or any of the
SFC Subsidiaries. Neither SFC nor any of the SFC Subsidiaries have received any
objection from any regulatory agency to SFC's or any of the SFC Subsidiaries'
response to any violation, criticism or exception with respect to any report or
statement relating to any examinations of SFC and any of the SFC Subsidiaries
which would have a materially adverse effect on SFC and any of the SFC
Subsidiaries on a consolidated basis.
(b) Neither SFC nor any of the SFC Subsidiaries are required to
divest any assets currently held by it or discontinue any activity currently
conducted as a result of the Federal Deposit Insurance Corporation Improvement
Act of 1991, any regulations promulgated
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thereunder, or otherwise which would have a materially adverse effect on SFC and
any of the SFC Subsidiaries on a consolidated basis.
Section 3.29. Beneficial Ownership of FFC Common Stock. SFC and the SFC
Subsidiaries do not, and prior to the Effective Time, SFC and the SFC
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. SFC's Board of Directors has received a
written opinion, 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 Exchange Ratio, at the time of execution of
this Agreement, is fair to SFC's shareholders from a financial point of view.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF FFC
FFC represents and warrants to SFC, 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 SFC,
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 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 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
31, 1999, there were 68,459,473 shares of FFC Common Stock validly issued,
outstanding, fully paid and non-assessable and 857,136 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 December 31, 1999, there are no outstanding obligations,
options or rights of any kind entitling other persons to acquire shares of FFC
Common Stock or shares of FFC Preferred Stock and there are no outstanding
securities or other instruments of any kind convertible into shares of FFC
Common Stock or into shares of FFC Preferred Stock, except as follows: (i)
1,477,914 shares of
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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 68,499,473 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, entered into between FFC and
Fulton 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.
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 SFC 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 SFC the following
financial statements: Consolidated Balance Sheets at December 31, 1998 and 1997
and Consolidated Statements of Income, Consolidated Statements of Shareholders'
Equity, and Consolidated Statements of Cash Flows for the years ended December
31, 1998, 1997 and 1996, certified by Arthur Andersen LLP and set forth in the
Annual Report to the shareholders of FFC for the year ended December 31, 1998
and Consolidated Balance Sheets as of September 30, 1999, Consolidated
Statements of Income for the three-month and nine-month periods ended September
30, 1999, and Consolidated Statements of Cash Flows for the nine-months ended
September 30, 1999 and 1998, as filed with the SEC in a Quarterly Report on Form
10-Q (the Consolidated Balance Sheet as of September 30, 1999 being hereinafter
referred to as the "FFC Balance Sheet"). Each of the foregoing financial
statements fairly presents the consolidated financial position, assets,
liabilities and results of operations of FFC at their respective dates and for
the respective periods then ended and has been prepared in accordance with
generally accepted accounting principles consistently applied, except as
otherwise noted in a footnote thereto.
Section 4.7. Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 4.7 or as reflected, noted or adequately reserved against in the FFC
Balance Sheet, at September 30, 1999 FFC had no material liabilities (whether
accrued, absolute, contingent or otherwise) which are required to be reflected,
noted or reserved against therein under generally accepted accounting principles
or which are in any case or in the aggregate material. Except as described in
Schedule 4.7, since September 30, 1999 FFC has not incurred any such liability
other than liabilities of the
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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. Since September 30, 1999 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.
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 each of its
Subsidiaries as presently conducted have been duly obtained and are in full
force and effect, and there are not 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 SFC 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 SFC 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
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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 or operations 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 PBGC. No
"prohibited transaction" or "reportable event" (as such terms are defined in the
Code or ERISA) has occurred with respect to the FFC Pension Plans or any other
employee benefit plan to which FFC or any of its subsidiaries are a party or by
which FFC or any of its subsidiaries are bound (each hereinafter called an "FFC
Benefit Plan"). There have been no breaches of fiduciary duty by any fiduciary
under or with respect to the FFC Pension Plans or any other FFC Benefit Plan,
and no claim is pending or threatened with respect to any FCC Benefit Plan other
than claims for benefits made in the Ordinary Course of Business. Neither FCC or
any of its subsidiaries have incurred any liability for any tax imposed by
Section 4975 of the Code or for any penalty imposed by the Code or by ERISA with
respect to the FFC Pension Plans or any other FFC Benefit Plan. There has not
been any audit of any FCC Benefit Plan by the Department of Labor, the IRS or
the PBGC since 1990.
Section 4.14. Environmental Matters. Except as disclosed in Schedule 4.14
or as reflected, noted or adequately reserved against in the FFC Balance Sheet,
FFC has no material liability relating to any environmental contaminant,
pollutant, toxic or hazardous waste or other similar substance that has been
used, generated, stored, processed, disposed of or discharged onto any of the
real estate now or previously owned or acquired (including without limitation
real estate acquired by means of foreclosure or other exercise of any creditor's
right) or leased by FFC and which is required to be reflected, noted or
adequately reserved against in FFC's consolidated financial statements under
generally accepted accounting principles.
Section 4.15. SEC Filings. No registration statement, offering circular,
proxy statement, schedule or report filed and not withdrawn by FFC with the SEC
under the 1933 Act or the 1934 Act, on the date of effectiveness (in the case of
any registration statement or offering circular) or on the date of filing (in
the case of any report or schedule) or on the date of mailing (in the case of
any proxy statement), contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
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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 SFC 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 SFC or SCB 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 filed by it as of September 30, 1999. To
the best of FFC's knowledge, (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. To the best of FFC's knowledge,
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, 1999
(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 to
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.
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Section 4.21. Contracts. To the best of FFC's knowledge, 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. To the best of FFC's knowledge, 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
Pennsylvania Department of Banking, 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 SFC with, or made available to SFC, copies of all such
filings made in the last three fiscal years and in the period from January 1,
2000 to the date of this Agreement. FFC is required to file reports with the SEC
pursuant to Section 12 of the 1934 Act, and FFC has made all appropriate filings
under the 1934 Act and the rules and regulations promulgated thereunder. The FFC
Common Stock is traded on NASDAQ under the symbol "FULT."
ARTICLE V. COVENANTS OF SFC
From the date of this Agreement until the Effective Time, SFC covenants and
agrees to do, and shall cause the SFC 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, SFC and
the SFC Subsidiaries shall: (i) use all reasonable efforts to carry on their
respective businesses in, and only in, the Ordinary Course of Business; (ii) to
the extent consistent with prudent business judgment, 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 SFC or any of the
SFC Subsidiaries; (iii) maintain all of their structures, equipment and other
real property and tangible personal property in good repair, order and
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condition, except for ordinary wear and tear and damage by unavoidable casualty;
(iv) to the extent consistent with prudent business judgment, use all reasonable
efforts to preserve or collect all material claims and causes of action
belonging to SFC or any of the SFC Subsidiaries; (v) to the extent consistent
with prudent business judgment, keep in full force and effect all insurance
policies now carried by SFC or any of the SFC Subsidiaries; (vi) to the extent
consistent with prudent business judgment, perform in all material respects each
of their obligations under all Material Contracts (as defined in Section 3.12
herein) to which SFC or any of the SFC 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 SFC or any of the SFC Subsidiaries and to
the conduct of their businesses; (ix) not amend SFC's or any of the SFC
Subsidiaries' Certificate 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)
except for the establishment by SCB of a new branch office in Roxbury, New
Jersey, and the capital expenditure of approximately $800,000 in connection
therewith, in accordance with the information related thereto provided to FFC
prior to the date of this Agreement, 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, $75,000), 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 SFC Common Stock; (xiv)
not authorize, purchase (other than open market purchases to obtain SFC Common
Stock for distribution pursuant to SFC's dividend reinvestment plan), redeem,
issue (except upon the exercise of outstanding options under the SFC Stock
Option Plans) or sell (or grant options or rights to purchase or sell) any
shares of SFC Common Stock or any other equity or debt securities of SFC (other
than the distribution, under SFC's dividend reinvestment plan, of shares
acquired in open market purchases, or the Warrant or the SFC 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 SFC 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
(except as contemplated by Section 7.1(g)), any officer, director, employee or
consultant of SFC or any of the SFC Subsidiaries, except that SFC and the SFC
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, provided that SFC and the SFC Subsidiaries shall be
permitted to pay a pro rated portion of its customary bonuses to its employees
prior to the Effective Date to the extent such bonuses are consistent with the
budget for SFC and the SFC Subsidiaries provided to FFC prior to the date of
this Agreement and are consistent, in magnitude and otherwise, with the past
practices of SFC and the SFC 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
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reserves and the loan write-offs, writedowns and other adjustments that
reasonably should be made by SCB during the fiscal year ending December 31,
2000, SFC and the SFC Subsidiaries shall consult with FFC and shall act in
accordance with generally accepted accounting principles and SFC's and the SFC
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 SFC and the SFC Subsidiaries except in the Ordinary Course of Business
consistent with past practice (provided that FFC shall not unreasonably withhold
or delay its consent to such transactions); (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 as a tax-free
reorganization under Section 368 of the Code.
Section 5.2. Best Efforts. SFC and the SFC Subsidiaries shall cooperate
with FFC and shall use their best efforts to do or cause to be done all things
necessary or appropriate on its part in order to fulfill the conditions
precedent set forth in Article VII of this Agreement and to consummate the
transactions contemplated by this Agreement, including the Merger. In
particular, without limiting the generality of the foregoing sentence, SFC and
the SFC 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)); (ii) subject to Section 5.7 herein, call a meeting
of its shareholders and 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 that meeting, including recommending the approval of this
Agreement by SFC's shareholders; and (iii) cooperate with FFC in making SFC's
and the SFC Subsidiaries' employees reasonably available for training by FFC at
SFC's and the SFC Subsidiaries' facilities prior to the Effective Time, to the
extent that such training is deemed reasonably necessary by FFC to ensure that
SFC's and the SFC Subsidiaries' facilities will be properly operated in
accordance with FFC's policies after the Merger.
Section 5.3. Access to Properties and Records. SFC and the SFC 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 SFC
and the SFC Subsidiaries as FFC may reasonably request, subject to the
obligation of FFC and
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its authorized employees and representatives to maintain the confidentiality of
all nonpublic information concerning SFC and the SFC 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, SFC and the SFC 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
SFC or any of the SFC Subsidiaries (including, without limitation, delivery of
SFC's audited financial statements for 1999 as soon as they are available)
(which additional financial statements and reports are hereinafter collectively
referred to as the "Additional SFC Financial Statements"). The representations
and warranties set forth in Sections 3.6, 3.7 and 3.8 shall apply to the
Additional SFC Financial Statements.
Section 5.5. Update Schedules. SFC or any of the SFC 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. SFC or any of the SFC 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 SFC or any of the SFC Subsidiaries or restrict in any manner their
ability to carry on their respective businesses as presently conducted.
Section 5.7. No Solicitation.
(a) SFC and the SFC 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 SFC 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 to SFC's shareholders
under applicable law, SFC, 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 SFC or the SFC 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 SFC or any of the SFC Subsidiaries or any investment
banker, financial advisor, attorney, accountant, or other representative of SFC
or any of the SFC Subsidiaries, whether or not acting on behalf of SFC or any of
its subsidiaries, shall be deemed to be a breach of this Section by SFC.
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(b) The Board of Directors of SFC shall not (1) 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 SFC 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 SFC
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 to SFC's shareholders under applicable law and (y) the
applicable Acquisition Proposal is a Superior Proposal. In the event the Board
of Directors of SFC takes any of the actions set forth in clauses (1), (2)
and/or (3) in compliance with the standards in (x) and (y) above, such action
shall allow termination by FFC under Section 8.1(b)(iii) herein. In the event
the Board of Directors of SFC takes any of the actions set forth in clauses (1),
(2) and/or (3) above without compliance with the standards in (x) and (y) above,
such action shall constitute a breach allowing termination by FFC under Section
8.1(b)(i) herein.
(c) Nothing contained in this Section shall prohibit SFC 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 SFC nor its Board of Directors shall, except as
permitted by paragraph (b) of this section, propose to approve or recommend, an
Acquisition Proposal.
(d) SFC 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. SFC 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.
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 SFC or any of the SFC Subsidiaries, or a merger,
consolidation or other business combination involving an acquisition of SFC or
any of the SFC Subsidiaries or any proposal to acquire in any manner a
substantial equity interest in or a substantial portion of the assets of SFC or
any of the SFC Subsidiaries.
(ii) A "Superior Proposal" shall be an Acquisition Proposal that
the Board of Directors of SFC 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 SFC
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and the SFC Subsidiaries as a combined company), would, if consummated, result
in a transaction more favorable to the shareholders of SFC 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. SFC shall deliver or cause to be delivered
to FFC, at or before the Closing, a letter from each of the officers and
directors of SFC (and shall use its best efforts to obtain and deliver such a
letter from each shareholder of SFC) who may be deemed to be an "affiliate" (as
that term is defined for purposes of Rules 145 and 405 promulgated by the SEC
under the 1933 Act) of SFC, 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. SFC and the SFC 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 SFC who may
be deemed an "affiliate" (as defined in SEC Rules 145 and 405) of SFC 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. SFC shall not declare or pay a cash dividend on
the SFC Common Stock; provided, however, that SFC may declare and pay a dividend
of up to $.03 per share of SFC Common Stock (and up to $.04 per share of SFC
Common Stock if SFC and the SFC Subsidiaries results of operations are
consistent with the budget for SFC and the SFC Subsidiaries provided to FFC
prior to the date of this Agreement) on (i) March 31, 2000, (ii) June 30, 2000,
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, 2000; (iii) September 30, 2000, 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,
2000; and (iv) December 31, 2000, 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 January 15, 2001 (it
being the intent of FFC and SFC that SFC be permitted to pay a dividend on the
SFC Common Stock on the dates indicated in subsections (ii), (iii) and (iv)
above only if the shareholders of SFC, 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).
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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 SFC and the SFC
Subsidiaries and shall use its best efforts to do or cause to be done all things
necessary or appropriate on its part in order to fulfill the conditions
precedent set forth in Article VII of this Agreement and to consummate the
transactions contemplated by this Agreement, including the Merger. In
particular, without limiting the generality of the foregoing sentence, 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) SFC 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, the New Jersey Banking Act of 1948, 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) SFC 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 SFC 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 SFC, and the soliciting of the proxies
of SFC's shareholders in favor of the Merger, under the provisions of this
Agreement. FFC may rely upon all information provided to it by SFC and SCB 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 SFC or the SFC
Subsidiaries or by any of their officers, agents or representatives.
(c) State Securities Laws: FFC, with the cooperation and assistance
of SFC 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 SFC
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.
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Section 6.2. Access to Properties and Records. FFC shall give to SFC and to
its authorized employees and representatives (including without limitation SFC'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 SFC may reasonably
request, subject to the obligation of SFC 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 SFC 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 SFC 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 SFC in writing of any
actions, claims, investigations or other developments which, if pending or in
existence on the date of this Agreement, would have been required to be
disclosed to SFC 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 shall cause each of
the SFC Subsidiaries or their respective successors: (A) to satisfy each of the
Employment Obligations (as defined, and amended as set forth, in Section 3.17
herein), (B) use their best efforts to retain each present full-time employee of
SCB at such employee's current position (or, if offered to, and accepted by, an
employee, a position for which the employee is qualified with FFC or an FFC
subsidiary bank 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 SFC on and after the Effective Time, that is at
least equal to the aggregate compensation that such person was receiving from
SFC or the SFC 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 FFC causes the SFC Subsidiaries or their successors to continue to
employ officers or employees of SFC and the SFC Subsidiaries as of the Effective
Time, the SFC Subsidiaries or their
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successors shall employ such persons on the Effective Time who are not Contract
Employees (as that term is defined in Section 3.17 herein) will be employed as
"at will" employees, (iii) officers and employees of SFC and/or the SFC
Subsidiaries who continue employment with SFC and/or the SFC Subsidiaries or
their successors after the Effective Time and who are Contract Employees (as
that term is defined in Section 3.17 herein) will be employed pursuant to the
terms and conditions of their respective Employment Obligations, and (iv) in the
event the SFC Subsidiaries or their successors do not employ, or terminate the
employment (other than as a result of unsatisfactory performance of their
respective duties) of any officers or employees of SFC or the SFC Subsidiaries
as of the Time who are not Contract Employees, FFC shall cause the SFC
Subsidiaries or their successors to pay severance benefits to such employee as
follows: (A) in the event employment is terminated on or prior to the date which
is one year after the Effective Date, one week's salary plus an additional one
week's salary for each year of service with SFC or the SFC Subsidiaries; or (B)
in the event employment is terminated thereafter, in accordance with the then
existing severance policy of SCB or its successor.
(b) On and after the Effective Time, (i) FFC shall cause the SFC
Subsidiaries or their successors to satisfy the SFC Subsidiaries' obligations
under the SFC Benefit Plans; (ii) for a period of at least three (3) years after
the Effective Date, FFC shall cause the SFC Subsidiaries or their successors to
provide employee benefits to each such person who is an employee, on the
Effective Time, that are substantially equivalent in the aggregate to the
benefits under the SFC Benefit Plans prior to the Effective Time. For vesting
and eligibility purposes for employee benefits under each SFC Benefit Plan
and/or any employee benefit plan established by FFC after the Effective Date,
employees and/or directors, former employees and directors, if applicable, of
the SFC Subsidiaries shall receive credit for years of service with the SFC
Subsidiaries; and (iii) FFC may discontinue and terminate (A) the SCB Benefit
Plans (subject to the provisions of Section 6.8(e) herein) and (B) the SFC Stock
Option Plans subject to Section 2.3.
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 1933 Act) 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 Continuation of SCB's Structure, Name and Directors.
(a) For a period of three (3) years after the Effective Date, FFC
shall (subject to the right of FFC and the SCB Continuing Directors to terminate
such obligations under this Section 6.8(a) under subsections (c) and (d) below)
(i) preserve the business structure of SCB as a New Jersey bank; (ii) preserve
the present name of SCB; and (iii) continue in office the present directors of
SCB who indicate their desire to serve (the "SCB Continuing Directors"),
provided, that (A) for such three year period, each non-employee SCB Continuing
Director shall continue to receive director's fees from SCB on the same basis as
prior to the Effective Date and shall continue to receive such other incidental
benefits as he or she was receiving from SCB prior to the Effective
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Date (the current fees and benefits being set forth on Schedule 6.8 and to
remain unchanged through the Effective Date, such benefits to include existing
health insurance coverage for SFC's Chairman of the Board as of the date of this
Agreement (the "Current Chairman") provided that the applicable plan allows such
continued coverage and the Chairman pays the cost of such coverage), provided
that, in the event an individual SCB Continuing Director ceases to act as a
director or as Chairman of SCB's Board of Directors or any committee thereof,
the foregoing obligation to maintain existing fees and benefits shall not apply
to successors (including other SCB Continuing Directors in the cases of
chairmanships) in such positions and (B) after such three-year period, each SCB
Continuing 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 the SCB Continuing Directors to terminate such
obligations under this Section 6.8(b) under subsections (c) and (d) below), (i)
the Chairman of the Board of SCB shall be the Current Chairman or, if for any
reason he shall cease to serve, such member of the Board of Directors of SCB as
shall be elected by the Board of Directors of SCB (provided that FFC shall
consent to such successor (such consent not to be unreasonably withheld) and the
compensation arrangements with the Current Chairman shall not apply to such
successor), and (ii) the Board of Directors of SCB (or any committee thereof
appointed by the Board of Directors of SCB) shall have the exclusive right to
nominate persons for election to the Board of Directors of SCB (provided that
FFC shall consent to such directors (such consent not to be unreasonably
withheld)).
(c) Subject to subsection (e) below, 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 considerations, (ii) safe and sound banking practices,
(iii) the exercise of their fiduciary duties by FFC's directors; or (iv) the
direct or indirect acquisition by FFC of a financial institution which is larger
than SCB (in terms of asset size) with a location or locations in (A) any of the
counties in which SCB currently maintains offices or (B) any other county which
is contiguous to any counties referred to in (A).
(d) Notwithstanding anything herein to the contrary, the SCB
Continuing Directors, in their exercise of their fiduciary duty as to the best
interests of SCB and FFC, may, by a majority vote of such directors, modify or
waive any or all of the foregoing provisions in subsection (a) of this Section
6.8.
(e) In the case of termination of its obligations pursuant to
paragraph (c)(iv) above, FFC shall cause SCB to continue to make the payments
under Section 6.8(a) herein which would otherwise be made to the Current
Chairman for the three year period after the Effective Date.
Section 6.9 Insurance. For three years after the Effective Date, FFC shall
(and SCB shall cooperate in these efforts) obtain and maintain (a) "tail"
coverage relating to SFC'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 the current
premium for SFC'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
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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 SCB 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.
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 SFC.
(b) Regulatory Approvals: The approval of each federal and state
regulatory authority having jurisdiction over the transactions contemplated by
this Agreement (including the Merger), including without limitation, the Federal
Reserve Board, Pennsylvania Department of Banking, 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 SFC or the SFC 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 SFC or the SFC
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 SFC shall have received an opinion
of FFC's counsel, Barley, Snyder, Senft & Cohen, LLC, reasonably acceptable to
FFC and SFC, addressed to FFC and SFC, with respect to federal tax laws or
regulations, to the effect that:
(1) The Merger will constitute a reorganization within the
meaning of Section 368(a)(1)(A) of the Code;
(2) No gain or loss will be recognized by FFC, SFC or SCB by
reason of the Merger;
(3) The bases of the assets of SFC in the hands of FFC will be
the same as the bases of such assets in the hands of SFC immediately prior to
the Merger;
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(4) The holding period of the assets of SFC in the hands of FFC
will include the period during which such assets were held by SFC prior to the
Merger;
(5) A holder of SFC Common Stock who receives shares of FFC
Common Stock in exchange for his SFC Common Stock pursuant to the reorganization
(except with respect to each 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 SFC 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 and FFC then
redeemed such fractional share for the cash. The holder of SFC 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 SFC pursuant to the terms of this Agreement will include the
holding period of the SFC Common Stock surrendered in exchange therefor,
provided that such SFC 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 SFC will include the period during which they
held the shares of SFC Common Stock surrendered, provided the shares of SFC
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 SFC;
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 SFC and
SCB 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 SFC to
consummate this Agreement.
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(g) Interim Condition. On or prior to March 8, 2000 (and effective as
of the Effective Time), (i) each of Michael Halpin, Dan E. Marcmann and Bruce L.
Schott shall execute an amendment to his existing employment(s) with SFC and/or
the SFC Subsidiaries so as to, among other things, consent to certain respective
changes in his duties, powers and functions following the Merger and waiving any
right to resign from employment and/or obtain "change of control" or severance
payments as a result of the Merger, and (ii) Edward Poolas shall have entered
into an employment agreement with SCB. Such amendments and agreement shall be in
form mutually acceptable to FFC and such employees (the "Interim Condition").
Section 7.2. Conditions Precedent to Obligations of FFC. The obligations of
FFC to consummate this Agreement shall be subject to the satisfaction of each of
the following conditions prior to or as of the Closing, except to the extent
that any such condition shall have been waived by FFC in accordance with the
provisions of Section 8.4 herein:
(a) Accuracy of Representations and Warranties: All of the
representations and warranties of SFC as set forth in this Agreement, all of the
information contained in Schedules hereto and all SFC 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), except to the extent that any misrepresentations and breaches of warranty
at the Closing shall not in the aggregate be material to SFC and the SFC
Subsidiaries taken as a whole.
(b) Covenants Performed: SFC 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 SFC: FFC shall have received an opinion,
dated the Effective Time, from McCarter & English, LLP, counsel to SFC, 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 SFC, FFC, affiliates of the foregoing, and others.
(d) Affiliate Agreements: Shareholders of SFC who are or will be
affiliates of SFC 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 compliance with
Rule 145 under the 1933 Act.
(e) SFC Options: All holders of SFC Options shall have delivered
documentation reasonably satisfactory to FFC canceling the SFC Options in
exchange for FFC Stock Options pursuant to Section 2.3 herein.
(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
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operations or future prospects of SFC or the SFC Subsidiaries. In particular,
without limiting the generality of the foregoing sentence, the Additional SFC
Financial Statements (as defined in Section 5.4) shall indicate that the
consolidated financial condition, assets, liabilities and results of operations
of SFC 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 SFC 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 SFC or (ii) the ability
of SFC 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 SFC 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 SFC or the SFC 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 SFC, including
reasonable expenses incurred by SFC in consummating the transactions
contemplated by the Agreement. At the Closing, SFC 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, Arthur Andersen 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
SFC examined by them and included in the Registration Statement comply as to
form in all material respects with the applicable accounting requirements of the
1993 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 SFC, inspection of the minute books of SFC and
the SFC Subsidiaries since December 31, 1999, inquiries of officials of SFC and
the SFC 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 SFC included in the
Registration Statement are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent
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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 SFC as compared with amounts shown in the
balance sheet as of December 31, 1999 included in the Registration Statement,
except in each cash for such changes, increases or decreases which the
Registration Statement disclosures 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, 2000 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 SFC 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 or
operations of either SFC or SCB.
(j) Closing Documents: SFC shall have delivered to FFC: (i) a
certificate signed by SFC'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 SFC set forth in this
Agreement are true and correct in all material respects as of the Closing and
that SFC 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 SFC or
SCB 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 "SFC Closing Documents").
(k) Section 7.3. Conditions Precedent to the Obligations of SFC. The
obligation of SFC 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 SFC in
accordance with the provisions of Section 8.4 herein:
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(a) Accuracy of Representations and Warranties: All of the
representations and warranties of FFC as set forth in this Agreement, all of the
information contained in its Schedules hereto and all FFC Closing Documents (as
defined in Section 7.3(g) of this Agreement) shall be true and correct in all
material respects as of the Closing as if made on such date (or on the date to
which it relates in the case of any representation or warranty which expressly
relates to an earlier date), except to the extent that any misrepresentations
and breaches of warranty at the Closing shall not in the aggregate be material
to FFC and its subsidiaries taken as a whole.
(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: SFC shall have received an opinion
from Barley, Snyder, Senft & Cohen, 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, SFC, affiliates of the foregoing, and
others.
(d) FFC Options: FFC Options shall be substituted in cancellation of
the SFC Options pursuant to Section 2.3 herein.
(e) No Material Adverse Change: SFC (together with its accountants,
if the advice of such accountants is deemed necessary or desirable by SFC) 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 SFC a
certificate confirming the absence of a material adverse change described
herein.
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(f) Fairness Opinion: SFC shall have obtained from McConnell, Budd &
Downes, or from another independent financial advisor selected by the Board of
Directors of SFC, an opinion dated within five (5) days of the Proxy
Statement/Prospectus to be furnished to the Board of Directors of SFC stating
that the Conversion Ratio contemplated by this Agreement is fair to the
shareholders of SFC from a financial point of view.
(g) Closing Documents: FFC shall have delivered to SFC: (i) a
certificate signed by FFC's President and Chief Executive Officer (or other
officer reasonably acceptable to SFC) 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 SFC 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 SFC) 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 SFC 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 SFC, if: (i) there has been a material
breach by SFC 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 SFC; (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
December 31, 2000; (iii) in the event the Board of Directors takes any of the
actions set forth in clauses (1), (2) and/or (3) of Section 5.7(b) herein in
compliance with the standards in (x) and (y) therein; (iv) in the event that,
prior to 9:00 a.m. on February 24, 2000, SFC does not execute and deliver the
Warrant Agreement and the Warrant (provided that SFC shall be under no
obligation to do so and the failure to do so will only permit termination of
this Agreement by FFC and shall not be a breach of this Agreement) or (v) in the
event the Interim Condition is not satisfied on or before March 8, 2000.
(c) Unilateral Action By SFC: This Agreement may be terminated
unilaterally by the affirmative vote of a majority of the Board of Directors of
SFC, 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 SFC to FFC; or (ii) any condition precedent to SFC's obligations as set
forth in Article VII of this Agreement remains unsatisfied, through no fault of
SFC, on December 31, 2000.
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(d) Market Price of FFC Common Stock. (i) SFC shall have the right to
terminate this Agreement if the Closing Market Price is less than $13.74, i.e.
.85 multiplied by the Starting Price (the "Floor Price"). Notwithstanding the
foregoing, FFC shall have the option to cause SFC to amend this Agreement (and,
upon such amendment, SFC shall not have the right to terminate this Agreement)
to increase the Conversion Ratio to a level, calculated to four decimal places,
equal to the Conversion Ratio multiplied by the quotient of the Floor Price (the
numerator) over the Closing Market Price (the denominator). For example, if the
Closing Market Price is $12.00 and the Floor Price is $13.74, FFC would have the
option to increase the Conversion Ratio to .8931 (.78 x 13.74/12.00) in lieu of
terminating this Agreement.
(ii) FFC shall have the right to terminate this Agreement if the
Closing Market Price is greater than $20.20, i.e. 1.25 multiplied by the
Starting Price (the "Ceiling Price"). Notwithstanding the foregoing, SFC 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 $22.00 and the Ceiling Price is $20.20, SFC would have the
option to decrease the Conversion Ratio to .7162 (.78 x 20.20/22.00) in lieu of
terminating this Agreement.
(iii) For purposes of this Section 8.1(d), "Starting Price" shall
mean $16.16, i.e. the average of the per share closing bid and asked prices for
FFC Common Stock on February 22, 2000 as reported on NASDAQ.
(iv) The Starting Price and the Closing Market Price 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 SFC, or if this Agreement is terminated by SFC 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
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.
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(c) Confidentiality. In the event of a termination of this Agreement,
neither FFC nor SFC nor SCB 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
SFC), but only by a written instrument duly authorized, executed and delivered
by FFC and by SFC; 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 SFC in exchange
for their shares of SFC Common Stock shall not take effect until such amendment
has been approved, adopted or ratified by the shareholders of SFC in accordance
with applicable New Jersey law.
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 SFC) 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 One Penn Square, Lancaster,
Pennsylvania, 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 SFC 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 SFC will cause Articles of Merger (the "Articles of
Merger") to be delivered and properly filed with the Department of State of the
Commonwealth of Pennsylvania (the "Department of State") and the Office of the
Treasurer of the State of New Jersey (the "Treasurer"). 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 and the Treasurer 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.
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ARTICLE X. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 10.1. No Survival. The representations and warranties of SFC 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 SFC
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:
Rufus A. Fulton, Jr., President and Chief Executive Officer
Fulton Financial Corporation
One Penn Square
P.O. Box 4887
Lancaster, Pennsylvania 17604
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With a copy to:
Paul G. Mattaini, Esquire
Barley, Snyder, Senft & Cohen, LLC
126 East King Street
Lancaster, Pennsylvania 17602
(b) If to SFC, to:
Skylands Financial Corporation
176 Mountain Avenue
Hackettstown, New Jersey 07840
With a copy to:
Todd M. Poland, Esquire
McCarter & English, LLP
Four Gateway Center
100 Mulberry Street
P.O. Box 652
Newark, New Jersey 07101-0652
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.
FULTON FINANCIAL CORPORATION
By:
---------------------------------------
Rufus A. Fulton, Jr., President and Chief
Executive Officer
Attest:
---------------------------------------
William R. Colmery, Secretary
SKYLANDS FINANCIAL CORPORATION
By:
---------------------------------------
Michael Halpin, President and Chief
Executive Officer
By:
---------------------------------------
Dennis H. O'Rourke, Chairman
Attest:
---------------------------------------
Norman S. Baron, Secretary
<PAGE> 1
EXHIBIT A
WARRANT AGREEMENT
THIS WARRANT AGREEMENT is made as of February 24, 2000 by and between
Fulton Financial Corporation, a Pennsylvania corporation ("FFC") and Skylands
Financial Corporation, a New Jersey corporation ("SFC").
W I T N E S S E T H:
WHEREAS, FFC and SFC entered into an Agreement and Plan of Merger dated as
of February 23, 2000 (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 the Merger Agreement, that SFC issue to FFC,
on the terms and conditions set forth herein, a warrant entitling FFC to
purchase up to an aggregate of 625,000 shares of SFC's common stock, $2.50 par
value per share (the "Common Stock");and
WHEREAS, SFC 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
SFC agree as follows:
1. Issuance of Warrant. Concurrently with the execution of this
Agreement, SFC 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 625,000 shares of Common Stock, subject to adjustment as provided in this
Agreement and in the Warrant. The Warrant shall be exercisable at a purchase
price of $10.25 per share, subject to adjustment as provided in the Warrant (the
"Exercise Price"). So long as the Warrant is outstanding and unexercised, SFC
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.
SFC 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. SFC 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 625,000 (subject to adjustment as provided in the Warrant) less
the number of shares of Common Stock at the time owned by FFC.
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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 SFC except upon or after the occurrence of any of the
following prior to termination of the Warrant under Section 9 therein: (i) a
breach of any covenant set forth in the Merger Agreement by SFC 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 SFC'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 ; (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) SFC 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)(i) or (iii) thereof as a result of SFC's Board of Directors
taking any of the actions described in clauses (1), (2) and/or (3) of Section
5.7(b) of the Merger Agreement. As used in this Paragraph 2, the terms
"Beneficial Ownership" and "Person" shall have the respective meanings set forth
in Paragraph 7(f). For purposes of this Agreement, "Acquisition Transaction"
shall mean (x) a merger or consolidation of statutory share exchange or any
similar transaction involving SFC or an SFC Subsidiary, (y) a purchase, lease or
other acquisition of all or substantially all of the assets of SFC or an SFC
Subsidiary or (z) a purchase or other acquisition of beneficial ownership of
securities representing 25% or more of the voting power of SFC or an SFC
Subsidiary.
3. Registration Rights. If, at any time within one year after the Warrant
may be exercised or sold, SFC shall receive a written request therefor from FFC,
SFC 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 SFC nor any other
holder of securities of SFC 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, SFC is in registration with
respect to an underwritten public offering by SFC 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 SFC, the number 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%
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<PAGE> 3
of the total number of shares to be sold by FFC and SFC in the aggregate; and
provided further, however, that if such reduction occurs, then SFC 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 SFC
for inclusion in any registration statement to be filed hereunder. If requested
by FFC in connection with such registration, SFC 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 SFC.
4. Duties of SFC upon Registration. If and whenever SFC is required by
the provisions of Paragraph 3 of this Agreement to effect the registration of
any of the Securities under the Securities Act, SFC 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 SFC 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;
(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
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<PAGE> 4
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 SFC 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 SFC
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 SFC, 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 SFC 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) SFC 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 SFC 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) SFC 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 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 SFC will not be liable in any such
case to the extent that any such loss,
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<PAGE> 5
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 SFC, any underwriter (as
defined in the Securities Act), and each person, if any, who controls SFC or
such underwriter (within the meaning of the Securities Act) from and against any
and all loss, damage, liability, cost or expense to which SFC 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 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.
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<PAGE> 6
(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 SFC
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 SFC 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 SFC's assets or all or substantially all of a subsidiary of
FFC'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 SFC 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 SFC.
(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 SFC 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 SFC 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 SFC to
repurchase a portion or all of the Warrant, and/or to require SFC 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.
(d) The Holder may exercise its right, pursuant to this Paragraph 7, to
require SFC to repurchase all or a portion of the Warrant, and/or to require SFC
to purchase some or all of the shares of Common Stock for which the Warrant was
exercised, by surrendering for such purpose to SFC, at its principal office
within the time period specified in the preceding
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<PAGE> 7
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 SFC 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, SFC 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 SFC
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 SFC 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, SFC 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 SFC is no longer so prohibited; provided,
however, that to the extent that SFC 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 SFC hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals as promptly as practicable),
SFC 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 SFC is then so prohibited
from repurchasing, and/or SFC shall deliver to the Holder a certificate for the
shares of Common Stock which SFC is then so prohibited from purchase, and SFC
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 SFC at its
principal office stating that the Holder elects to revoke its election to
exercise its right to require SFC to repurchase the Warrant and/or purchase the
Common Stock, whereupon SFC will promptly redeliver to the Holder the Warrant
and/or the certificates representing shares of Common Stock surrendered to SFC
for purposes of such repurchase and/or redemption, and SFC 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:
(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;
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<PAGE> 8
(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 SFC'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 SFC 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.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
FULTON FINANCIAL CORPORATION
By:
-----------------------------------------
Rufus A. Fulton, Jr., President and Chief
Executive Officer
Attest:
----------------------------------------
William R. Colmery, Secretary
SKYLANDS FINANCIAL CORPORATION
By:
----------------------------------------
Michael Halpin, President and Chief
Executive Officer
Attest:
---------------------------------------
Norman B. Baron, Secretary
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<PAGE> 1
EXHIBIT B
WARRANT
TO PURCHASE UP TO 625,000 SHARES OF THE
COMMON STOCK, $2.50 PAR VALUE,
OF
SKYLANDS FINANCIAL CORPORATION
This is to certify that, for value received, Fulton 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 Skylands Financial Corporation, a New Jersey
corporation ("SFC"), at any time on or after the date hereof, an aggregate of up
to 625,000 fully paid and non-assessable shares of common stock, $2.50 par value
(the "Common Stock"), of SFC at a price per share equal to $10.25, 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 SFC (the "Warrant Agreement"), which Warrant
Agreement was entered into in connection with the Merger Agreement dated as of
February 23, 2000 between FFC and SFC (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 SFC at the principal office of SFC,
accompanied by (i) a written notice of exercise, (ii) payment to SFC, for the
account of SFC, 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, SFC 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. SFC 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, SFC 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 SFC 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 SFC may then be closed or that
certificates representing such shares of Common Stock shall not then be
<PAGE> 2
actually delivered to the Holder. SFC 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.
SFC 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. SFC
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 SFC, (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.
Section 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. Section 1842(a)(3)), or the Change in Bank Control Act of 1978, as
amended (12 U.S.C. Section 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 SFC 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. SFC 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 SFC 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
SFC 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, SFC will execute and deliver a new Warrant of like
tenor and date.
5. Repurchase. The Holder shall have the right to require SFC 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.
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<PAGE> 3
6. Adjustment. The number of shares of Common Stock issuable upon
the exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time as provided in this Paragraph 6.
(A) Stock Dividends, etc.
(1) Stock Dividends. In case SFC shall pay or make a
dividend or other distribution on any class of capital stock of SFC 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. SFC 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
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<PAGE> 4
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.
(B) Certain Sales of Common Stock.
(1) Adjustment to Shares Issuable. If and whenever SFC
sells or otherwise issues (other than under circumstances in which Paragraph
6(A) applies) any shares of Common Stock, the number of shares of Common Stock
issuable upon exercise of this Warrant shall be increased by multiplying such
number of shares by a fraction, the denominator of which shall be the number
shares of Common Stock outstanding at the close of business on the day
immediately preceding the date of such sale or issuance and the numerator of
which shall be the sum of such number of shares and the total number of shares
constituting such sale or other issuance, such increase to become effective
immediately after the opening of business on the day following such sale or
issuance.
(2) Adjustment to Exercise Price. If and whenever SFC
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) 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 SFC 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 SFC 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 SFC and which is not subject to redemption by SFC, 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.
7. Notice. (A) Whenever the number of shares of Common Stock for
which this Warrant is exercisable is adjusted as provided in Paragraph 6, SFC
shall promptly compute such adjustment and mail to the Holder a certificate,
signed by the principal financial officer of SFC, setting forth the number of
shares of Common Stock for which this Warrant is exercisable as a result of such
adjustment having become effective.
-4-
<PAGE> 5
(B) Upon the occurrence of any event which results in the
Holder having the right to require SFC to repurchase shares of Common Stock for
which this Warrant was exercised or this Warrant, as provided in Paragraph 7 of
the Warrant Agreement, SFC shall promptly notify the Holder of such event; and
SFC 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 SFC, 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 SFC'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 SFC.
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, except to the extent that
New Jersey law governs certain aspects of this Warrant as it relates to SFC. 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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<PAGE> 6
Dated: February 24, 2000
SKYLANDS FINANCIAL CORPORATION
By:
------------------------------------
Michael Halpin, President and Chief
Executive Officer
Attest:
--------------------------------
Norman S. Baron, Secretary
<PAGE> 1
FOR IMMEDIATE RELEASE Skylands Financial Contact: Michael Halpin
Full text available for PR NEWSWIRE (908) 850-9010
Fulton Financial Contact: Laura J. Wakeley
Office: (717) 291-2831
Skylands Financial Corporation
To Affiliate with Fulton Financial Corporation
(February 23) -Fulton Financial Corporation (NASDAQ: FULT), the fourth largest
bank holding company based in Pennsylvania, with assets of $6.1 billion, and
Skylands Financial Corporation (NASDAQ Small Cap: SKCB); based in Hackettstown,
New Jersey have signed a definitive agreement to merge. Skylands Financial's
sole banking subsidiary is Skylands Community Bank, which will operate as a
subsidiary of Fulton Financial after the transaction.
Rufus A. Fulton, Jr., chairman, president and chief executive officer of Fulton
Financial Corporation, and Michael Halpin, president and chief executive officer
of Skylands Financial Corporation, made the merger announcement jointly today.
Halpin said of Skylands' affiliation with Fulton Financial, "This merger with
Fulton Financial is truly a winning situation for our customers and our
community. We'll still retain the Skylands Community Bank name and our own
management team and directors. We will make our decisions locally and remain
actively and personally involved with the communities and customers we serve,"
he said. "But we'll also be able to offer our customers a higher lending
capacity and additional products including investment management and cash
management services. We will also be able to continue to grow the Skylands
Community Bank franchise in the northwestern New Jersey region."
"This merger is a natural extension of our franchise," said Fulton. "It is
consistent with our strategy to acquire well-managed banks in high growth areas,
and Skylands Financial's employees fit in well with our own corporate culture."
According to the merger agreement, each share of Skylands Financial's common
stock outstanding at the time of the merger will be exchanged for .78 shares of
Fulton Financial common stock. Based on the $16.125 per share closing price of
Fulton Financial on February 22nd, the value per share of Skylands Financial's
stock is $12.58. This price equates to 13.7 times estimated trailing 12-month
earnings and a multiple of 2.01 times Skylands' book value as of December 31,
1999. As of year end, Skylands had outstanding 2.5 million shares of common
stock, and options for approximately 308,000 additional shares.
<PAGE> 2
In connection with this merger, the board of directors of Fulton Financial
Corporation has approved a special stock repurchase program to buy back two
million shares of its stock, which is approximately the number of shares that
would be issued through the acquisition. The board previously approved, on
December 21, 1999, a plan to repurchase one million shares of its own stock.
Fulton Financial will acquire all issued and outstanding shares of common stock
of Skylands Financial.
Skylands Financial, with $225 million in assets, is based in Hackettstown and
operates eight community banking offices in Morris, Warren and Sussex Counties.
The acquisition is subject to approval by bank regulatory authorities and
Skylands Financial shareholders. It is expected to close during the third
quarter of 2000.
Fulton Financial currently operates more than 150 banking offices in
Pennsylvania, Maryland, Delaware and New Jersey through eleven affiliate banks:
Fulton Bank, Lancaster; Lebanon Valley Farmers Bank, Lebanon; Swineford National
Bank, Middleburg; Lafayette Ambassador Bank, Easton; FNB Bank, N.A., Danville;
Great Valley Bank, Reading; Hagerstown, Trust, Hagerstown Trust, Hagerstown, MD;
Delaware National Bank, Georgetown, DE; The Bank of Gloucester County, Woodbury,
NJ; The Woodstown, National Bank and Trust Co., Woodstown, NJ and The Peoples
Bank of Elkton, Elkton, MD.
