<PAGE>
[LOGO OF BARLEY, SNYDER, SENFT & COHEN, LLC]
DRAFT
May 22, 2000
As Filed With the Securities and Exchange Commission On May _____, 2000
Registration Statement No. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------------
FULTON FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Pennsylvania 6720 23-2195389
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
One Penn Square
Lancaster, Pennsylvania 17604
717-291-2411
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Rufus A. Fulton, Jr.
Chairman, President and Chief Executive Officer
One Penn Square
Lancaster, Pennsylvania 17604
717-291-2411
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------------------------
Copies to:
Paul G. Mattaini, Esquire Todd M. Poland, Esquire
Barley, Snyder, Senft & Cohen, LLC McCarter & English, LLP
126 East King Street Four Gateway Center
Lancaster, Pennsylvania 17604-2893 P. O. Box 652
Newark, New Jersey 07102-4096
---------------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
---------------------------------------------
If the securities being registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: [_]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier registration
statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box, and list Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title Of Each Class Of Amount To Be Proposed Maximum Offering Proposed Maximum Aggregate Amount Of
Securities To Be Registered Registered(1) Price Per Unit (2)(3) Offering Price (2)(3) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, par value $2.50
per share (and associated
stock purchase rights)(4) 2,325,206 16.25 37,784,598 9,975.13
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</TABLE>
(1) Based on the maximum number of shares of the Registrant's common stock that
may be issued in connection with the proposed merger of Skylands Financial
Corporation with and into the Registrant. In accordance with Rule 416, this
Registration Statement shall also register any additional shares of the
Registrant's common stock which may become issuable to prevent dilution
resulting from stock splits, stock dividends or similar transactions as
provided by the agreement relating to the merger.
(2) Estimated solely for purposes of calculating the registration fee.
(3) Computed in accordance with Rule 457(f)(1), on the basis of the average of
the closing bid and ask price of the common stock of Skylands on May 19,
2000 of $16.25 and based on 2,533,889 shares of Skylands common stock to
be exchanged in the merger and unexercised options to purchase 305,190
shares of Skylands common stock.
(4) Prior to the occurrence of certain events, the stock purchase rights will
not be evidenced separately from the common stock.
---------------------------------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
[SKYLANDS FINANCIAL CORPORATION LETTERHEAD]
________________________, 2000
Dear Shareholder:
You are cordially invited to the annual meeting of shareholders of
Skylands Financial Corporation to be held on ____________________________, 2000,
at ______________ ___.m., at ______________________.
The Board of Directors of Skylands Financial Corporation and Fulton
Financial Corporation have approved an agreement and plan of merger providing
for the acquisition of Skylands by Fulton Financial through a merger. In the
merger, Skylands shareholders will receive .819 shares of Fulton Financial
common stock for each share of Skylands common stock that they hold. Skylands
shareholders generally will not recognize federal income tax gain or loss for
the Fulton Financial common stock that they receive. The attached proxy
statement/prospectus provides you with detailed information about the proposed
merger. I encourage Skylands shareholders to read this entire document
carefully.
At the annual meeting, shareholders of Skylands will be asked to vote
on a proposal to approve the merger agreement and to elect eleven directors to
Skylands' Board of Directors. The merger cannot be completed unless the holders
of a majority of the votes cast at the annual meeting vote to approve the merger
agreement. Thus, your vote is very important. Skylands' Board of Directors
strongly supports this combination of Skylands and Fulton Financial and
enthusiastically recommends that you vote in favor of the merger. Whether or
not you plan to attend the meeting, please take the time to vote by completing
and mailing the enclosed proxy card to Skylands. If you sign, date and mail
your proxy card without indicating how you wish to vote, your proxy will be
counted as a vote in favor of the nominees for director and the merger
agreement.
Sincerely,
Michael Halpin, President
<PAGE>
SKYLANDS FINANCIAL CORPORATION
176 Mountain Avenue
Hackettstown, NJ 07840
---------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON ________, 2000
WE HEREBY GIVE YOU NOTICE that Skylands Financial Corporation will
hold an annual meeting of shareholders on _________, ___________, 2000, at
_______ _.m., local time, at ______________, New Jersey, to consider and vote
upon the following matters, all as more fully described in the accompanying
proxy statement/prospectus:
1. To elect eleven directors to the Board of Directors of
Skylands;
2. The approval and adoption of the Agreement and Plan of Merger
dated February 23, 2000, as amended and restated as of May 1, 2000, between
Fulton Financial Corporation and Skylands, which provides, among other
things, for the merger of Skylands with and into Fulton Financial and the
conversion of each share of common stock of Skylands outstanding
immediately prior to the merger into .819 shares of Fulton Financial common
stock, plus cash in lieu of any fractional share interest;
3. The adjournment of the annual meeting, if necessary, to
permit further solicitation of proxies in the event there are not
sufficient votes at the time of the annual meeting to approve the merger
agreement; and
4. The transaction of such other business as may properly be
brought before the annual meeting.
The Board of Directors of Skylands recommends a vote "FOR" each
proposal and the nominees for election to the Board of Directors.
The Board of Directors of Skylands has fixed the close of business on
_______, 2000, as the record date for determining shareholders entitled to
notice of, and to vote at, the annual meeting. A list of shareholders entitled
to vote at the annual meeting will be available for inspection at Skylands' main
office for a period of ten days prior to the annual meeting and also will be
available for inspection at the annual meeting.
Your vote is important regardless of the number of shares you own.
Whether or not you plan to attend the annual meeting, the Board of Directors of
Skylands urges you to complete, sign, date and return the enclosed proxy card as
soon as possible in the enclosed postage-paid envelope. This will not prevent
you from voting in person at the annual meeting but will assure that your vote
is counted if you are unable to attend. If you are a shareholder whose shares
are not registered in your own name, you will need additional documentation from
your record holder in order to vote personally at the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Norman S. Baron, Secretary
____________________, 2000
<PAGE>
Proxy Statement/ Prospectus
SKYLANDS FINANCIAL CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
________________, 2000
Nasdaq Small Cap Market Symbol: SKCB
--------------------------------------
FULTON FINANCIAL CORPORATION
PROSPECTUS FOR
2,325,206 SHARES OF FULTON FINANCIAL COMMON STOCK
Nasdaq National Market Symbol: FULT
This proxy statement/ prospectus constitutes a proxy statement of
Skylands Financial Corporation in connection with the solicitation of proxies by
the Board of Directors of Skylands for use at the annual meeting of shareholders
to be held at _____, on ____, _____, 2000, at ____ , local time. At the
meeting, Skylands shareholders will be asked to consider and vote on the
following proposals:
1. To elect eleven directors to the Skylands Board of Directors;
2. To approve and adopt the Agreement and Plan of Merger dated
February 23, 2000, as amended and restated as of May 1, 2000, between
Skylands and Fulton Financial Corporation which provides, among other
things, for the merger of Skylands with and into Fulton Financial and the
conversion of each share of common stock of Skylands outstanding
immediately prior to the merger into .819 shares of Fulton Financial common
stock, plus cash in lieu of any fractional share interest;
3. To adjourn the meeting to allow Skylands time to solicit more
votes in favor of the merger agreement if necessary; and
4. The transaction of such other business as may properly be
brought before the annual meeting.
This proxy statement/ prospectus also constitutes a prospectus of
Fulton Financial filed as part of a registration statement filed with the
Securities and Exchange Commission relating to up to 2,325,206 shares of Fulton
Financial common stock being registered for this transaction. On ____________,
2000, the closing price of Fulton Financial's common stock was $______, making
the value of .819 shares of Fulton Financial common stock equal to
$______________ on that date. The closing price of Skylands' common stock on
that date was $______. These prices will fluctuate between now and the closing
of the merger. After the merger, Skylands shareholders will own about 3.09% of
Fulton Financial's outstanding common stock based on the number of shares
outstanding on the date of this proxy statement/prospectus. This proxy
statement/ prospectus does not cover any resales of the Fulton Financial stock
being registered for this transaction by any shareholders deemed to be
affiliates of Fulton Financial or Skylands. Skylands and Fulton Financial have
not authorized any person to make use of this proxy statement/ prospectus in
connection with any such resale.
Skylands and Fulton Financial provided all information related to
their respective companies.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of the proxy statement/prospectus. Any
representation to the contrary is a criminal offense.
These securities are not savings or deposit accounts or other
obligations of any bank or nonbank subsidiary of any of the parties, and they
are not insured by the Federal Deposit Insurance Corporation or any governmental
agency.
The date of this proxy statement/prospectus is _____, 2000.
<PAGE>
You should rely only on the information contained in this document or
to which this document has referred you. Skylands and Fulton Financial have not
authorized anyone to provide you with information that is different. You
should not assume that the information in this proxy statement/ prospectus is
accurate as of any date other than the date on the front of the document.
The proxy statement/prospectus incorporates important business and
financial information about Fulton Financial and Skylands that is not included
in or delivered with the document. This information is available without charge
to security holders upon written or oral request to Skylands or Fulton
Financial.
William R. Colmery, Secretary Edward W. Mahnken, Jr., Assistant Secretary
Fulton Financial Corporation Skylands Financial Corporation
One Penn Square 176 Mountain Avenue
Lancaster, PA 17605 Hackettstown, NJ 07840
717-291-2411 908-850-9010
To obtain timely delivery of requested documents, you must request the
information no later than____________, 2000. In addition, Skylands' Annual
Report to Shareholders for the year ended December 31, 1999 accompanies this
proxy statement/prospectus.
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TABLE OF CONTENTS
Page
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SUMMARY................................................................. 6
Each Skylands Share Will Be Exchanged For .819 Shares Of Fulton
Financial Common Stock............................................... 6
No Federal Income Tax On Shares Received In Merger.................... 6
Skylands Board Unanimously Recommends Shareholder Approval............ 6
Exchange Ratio Is Fair From A Financial Point Of View According To
Skylands' Financial Advisor.......................................... 6
Vote Required To Approve Merger Agreement............................. 6
Annual Meeting To Be Held __________, 2000............................ 7
The Companies......................................................... 7
Copy Of Merger Agreement Attached..................................... 8
Record Date Set At ____, 2000; One Vote Per Share Of Skylands Stock... 9
Conditions That Must Be Satisfied For The Merger To Occur............. 9
Termination And Amendment Of The Merger Agreement..................... 9
No Dissenters' Rights Of Appraisal.................................... 10
Fulton Financial To Use Purchase Accounting Treatment................. 10
Fulton Financial To Continue As Surviving Corporation................. 10
Your Rights As Shareholders Will Change After The Merger.............. 10
Warrant Agreement..................................................... 10
Monetary Benefits To Management In The Merger......................... 10
FORWARD LOOKING INFORMATION............................................. 10
SHARE INFORMATION AND MARKET PRICES..................................... 11
COMPARATIVE PER SHARE DATA.............................................. 12
SELECTED FINANCIAL DATA................................................. 15
THE ANNUAL MEETING...................................................... 18
Date, Time And Place.................................................. 18
Matters To Be Considered At The Annual Meeting........................ 18
Record Date; Stock Entitled To Vote; Quorum........................... 18
Votes Required........................................................ 18
Voting Of Proxies..................................................... 19
Revocability Of Proxies............................................... 19
Solicitation Of Proxies............................................... 19
THE MERGER.............................................................. 20
Background Of The Merger.............................................. 20
Recommendation Of Skylands' Board Of Directors........................ 23
Fulton's Board Of Directors' Reasons For The Merger................... 23
Effect Of The Merger.................................................. 23
Opinion Of Independent Financial Advisor.............................. 23
Effective Date Of The Merger.......................................... 34
Exchange Of Skylands Stock Certificates............................... 34
Conditions To The Merger.............................................. 35
Representations and Warranties........................................ 35
Business Pending The Merger........................................... 36
Dividends............................................................. 37
No Solicitation Of Transactions....................................... 37
Amendment; Waivers.................................................... 38
Termination; Effect Of Termination.................................... 38
Management And Operations After The Merger............................ 39
Employee Benefits And Severance Benefits.............................. 39
Employee Benefits.................................................. 39
Severance Benefits................................................. 40
Accounting Treatment.................................................. 40
Material Federal Income Tax Consequences.............................. 40
Expenses.............................................................. 41
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Resale Of Fulton Financial Common Stock............................... 41
No Dissenters' Rights Of Appraisal.................................... 41
Dividend Reinvestment Plan............................................ 41
Financial Interests Of Directors And Officers......................... 41
Stock Options...................................................... 41
Directors And Officers Insurance................................... 41
Employment And Other Agreements.................................... 42
Warrant Agreement and Warrant......................................... 42
General............................................................ 42
Effect of Warrant Agreement........................................ 42
Terms of Warrant Agreement......................................... 42
INFORMATION ABOUT FULTON FINANCIAL...................................... 44
General............................................................... 44
Market Price Of And Dividends On Fulton Financial Common Stock And
Related Shareholder Matters.......................................... 44
Indemnification....................................................... 45
INFORMATION ABOUT SKYLANDS.............................................. 45
General............................................................... 45
Competition........................................................... 45
Employees............................................................. 46
Market Price Of And Dividends On Skylands Common Stock And Related
Shareholder Matters.................................................. 46
Information Regarding Nominees For Directors of Skylands.............. 47
Certain Legal Proceedings............................................. 48
Family Relationships.................................................. 49
Other Directorships................................................... 49
Reports of Beneficial Ownership....................................... 49
Security Ownership Of Certain Beneficial Owners And Management of
Skylands............................................................. 49
Compensation Of Directors And Principal Officers...................... 51
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End
Option Values........................................................ 51
Transactions with Certain Related Persons............................. 52
Meeting of Skylands' Board of Directors and Committees................ 52
DESCRIPTION OF FULTON FINANCIAL COMMON STOCK............................ 53
General............................................................... 53
Dividend Reinvestment Plan............................................ 54
Securities Laws....................................................... 54
Repurchase Program.................................................... 54
Antitakeover Provisions............................................... 54
COMPARISON OF SHAREHOLDER RIGHTS........................................ 56
ADJOURNMENT............................................................. 57
AUDITORS................................................................ 58
EXPERTS................................................................. 58
LEGAL MATTERS........................................................... 58
OTHER MATTERS........................................................... 58
SHAREHOLDER PROPOSALS................................................... 58
WHERE YOU CAN FIND MORE INFORMATION..................................... 58
EXHIBIT
A. Agreement and Plan of Merger dated February 23, 2000, A-1
as amended and restated as of May 1, 2000
B. Warrant Agreement and Warrant dated February 24, 2000 B-1
C. Opinion of McConnell, Budd & Downes, Inc. C-1
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<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What do I need to do now?
A: Just indicate on your proxy card how you want your shares to be voted, then
sign and mail it in the enclosed prepaid return envelope as soon as possible, so
that your shares may be represented and voted at the annual meeting to be held
on __, 2000.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Maybe. Your broker will vote your shares only if you provide instructions
on how to vote. You should follow the directions provided by your broker.
Without instructions, your shares will not be voted on the merger agreement.
Q: Can I change my vote after I have mailed my signed proxy card?
A: Yes. There are three ways for you to revoke your proxy and change your
vote. First, you may send a written notice to the person to whom you submitted
your proxy stating that you would like to revoke your proxy. Second, you may
complete and submit a new proxy card with a later date. Third, you may vote in
person at the annual meeting. If you have instructed a broker to vote your
shares, you must follow directions received from your broker to change your
vote.
Q: Should I send in my stock certificates now?
A: No. Shortly after the merger is completed, Fulton Financial will send you
written instructions for exchanging your stock certificates. Fulton Financial
will request that you return your Skylands stock certificates at that time.
Q: When do you expect to merge?
A: Fulton Financial and Skylands expect to complete the merger in the third
quarter of 2000. In addition to the approval of Skylands shareholders, Fulton
Financial must also obtain regulatory approval. Fulton Financial and Skylands
expect to receive all necessary approvals no later than the third quarter of
2000.
Q: Who should I call with questions or to obtain additional copies of this
proxy statement/prospectus?
A: You should contact either:
William R. Colmery, Secretary
Fulton Financial Corporation
One Penn Square
Lancaster, PA 17604
717-291-2411
Edward W. Mahnken, Jr., Assistant Secretary
Skylands Financial Corporation
176 Mountain Avenue
Hackettstown, NJ 07840
908-850-9010
Q: If my shares are held in an IRA, who votes those shares?
A. You vote shares held by you in an IRA as though you held those shares
directly.
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<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. It may not contain all of the information that is
important to you. You should read carefully this entire proxy
statement/prospectus and the attached exhibits. See "Where You Can Find More
Information" on page 58 for reference to additional information available to you
regarding Fulton Financial and Skylands.
Each Skylands Share Will Be Exchanged For .819 Shares Of Fulton Financial Common
Stock
If the merger is completed, you will receive .819 shares of Fulton
Financial common stock for each share of Skylands stock you own, plus cash
instead of any fractional share. On _______, 2000, the closing price of Fulton
Financial common stock was $____, making the value of .819 shares of Fulton
Financial common stock equal to $____ on that date. Because the market price of
Fulton Financial stock fluctuates, you will not know when you vote what the
shares will be worth when issued in the merger.
If the price of Fulton Financial common stock is below $13.09 just
before the merger, Skylands may terminate the merger agreement unless Fulton
Financial elects to adjust the exchange ratio upward. Similarly, if the price
of Fulton Financial common stock is above $19.24 just before the merger, Fulton
Financial may terminate the merger agreement unless Skylands elects to adjust
the exchange ratio downward. In either case, neither party would owe the other
any penalty or fee as a result of termination of the merger agreement.
No Federal Income Tax On Shares Received In Merger
Skylands shareholders generally will not recognize gain or loss for
federal income tax purposes for the shares of Fulton Financial common stock they
receive in the merger. Fulton Financial's attorneys have issued a legal opinion
to this effect, which is included as an exhibit to the registration statement
filed with the SEC for the shares to be issued in the merger. Skylands
shareholders will be taxed on cash received instead of any fractional share.
Tax matters are complicated, and tax results may vary among shareholders.
Fulton Financial and Skylands urge you to contact your own tax advisor to
understand fully how the merger will affect you.
Skylands Board Unanimously Recommends Shareholder Approval
The Skylands Board believes that the merger is in the best interests
of Skylands and its shareholders and unanimously recommends that you vote "FOR"
approval of the merger agreement. The Skylands Board also recommends election
of the nominees for the Board of Directors at Skylands named in this proxy
statement/prospectus.
Exchange Ratio Is Fair From A Financial Point Of View According To Skylands'
Financial Advisor
McConnell, Budd & Downes, Inc. ("MB&D") has given an opinion to the
Skylands Board that, as of _________, 2000, the exchange ratio in the merger is
fair from a financial point of view to Skylands' shareholders. The full text of
this opinion is attached as Exhibit C to this proxy statement/prospectus.
Fulton Financial and Skylands encourage you to read the opinion carefully. MB&D
has received $160,000 for serving as financial advisor. If the merger is
completed, MB&D will receive an additional fee, based on 0.90% of the aggregate
value of Skylands common stock exchanged, less the $160,000 in fees already
paid, in exchange for its advice and for providing its fairness opinion.
Vote Required To Approve Merger Agreement
Approval of the merger agreement requires the affirmative vote of the
holders of at least a majority of the votes cast at the annual meeting. Certain
directors and executive officers of Skylands together own about 22.40% of the
shares entitled to be cast at the meeting, and they are expected to vote their
shares in favor of the merger.
Brokers who hold shares of Skylands common stock as nominees will not
have authority to vote such shares with respect to the merger unless
shareholders provide them with voting instructions.
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<PAGE>
The merger does not require the approval of Fulton Financial's
shareholders.
Annual Meeting To Be Held __________, 2000
Skylands will hold the annual meeting of shareholders on ______,
_________, 2000, at ____ .m., local time, at ________, New Jersey.
At the meeting, you will vote on the merger agreement, the election of
eleven directors to Skylands' Board, a proposal to adjourn the meeting to
solicit additional proxies, if necessary, in the event there are not sufficient
votes at the time of the annual meeting to approve the merger agreement, and any
other business that properly arises.
The Companies
Fulton Financial Corporation
One Penn Square
Lancaster, Pennsylvania 17604
717-291-2411
Fulton Financial Corporation is a Pennsylvania business corporation
and a registered bank holding company that maintains its headquarters in
Lancaster, Pennsylvania. As a bank holding company, Fulton Financial engages in
general commercial and retail banking and trust business, and also in related
financial businesses, through its 16 directly-held bank and nonbank
subsidiaries. Fulton Financial's bank subsidiaries currently operate 115
banking offices in Pennsylvania, 16 banking offices in Maryland, five banking
offices in Delaware, and 17 banking offices in New Jersey. As of March 31,
2000, Fulton Financial had consolidated total assets of approximately $6.1
billion.
The principal assets of Fulton Financial are its twelve wholly-owned
bank subsidiaries:
. Fulton Bank, a Pennsylvania bank and trust company which is not a
member of the Federal Reserve System;
. Lebanon Valley Farmers Bank, a Pennsylvania bank and trust company
which is a member of the Federal Reserve System;
. Swineford National Bank, a national banking association which is a
member of the Federal Reserve System;
. Lafayette Ambassador Bank, a Pennsylvania bank and trust company
which is a member of the Federal Reserve System;
. FNB Bank, National Association, a national banking association
which is a member of the Federal Reserve System;
. Great Valley Savings Bank, a Pennsylvania stock savings bank which
is not a member of the Federal Reserve System;
. Hagerstown Trust Company, a Maryland trust company which is not a
member of the Federal Reserve System;
. Delaware National Bank, a national banking association which is a
member of the Federal Reserve System;
. The Bank of Gloucester County, a New Jersey bank which is not a
member of the Federal Reserve System;
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<PAGE>
. The Woodstown National Bank & Trust Company, a national banking
association which is a member of the Federal Reserve System;
. The Peoples Bank of Elkton, a Maryland bank which is not a member
of the Federal Reserve System; and
. Fulton Financial Advisors, N.A., a limited purpose national banking
association with trust powers.
In addition, Fulton Financial has four wholly-owned nonbank direct
subsidiaries:
. Fulton Financial Realty Company, which holds title to or leases
certain properties on which Fulton Bank and Lebanon Valley Farmers Bank maintain
branch offices or other facilities;
. Fulton Life Insurance Company, which engages in the business of
reinsuring credit life, accident and health insurance that is directly related
to extensions of credit by Fulton Financial's bank subsidiaries;
. Central Pennsylvania Financial Corp., which owns certain non-
banking subsidiaries holding interests in real estate and certain limited
partnership interests in partnerships invested in low and moderate income
housing projects; and
. FFC Management, Inc., which owns certain securities.
On April 18, 2000, Fulton Financial declared a 5% stock dividend
payable on May 31, 2000 to shareholders of record on May 8, 2000. All amounts
relating to Fulton Financial common stock in this proxy statement/prospectus
have been restated to reflect this stock dividend.
Skylands Financial Corporation
176 Mountain Road
Hackettstown, NJ 07840
908-850-9010
Skylands, a New Jersey corporation, is the holding company for
Skylands Community Bank, a New Jersey state chartered bank. At March 31, 2000,
Skylands had total consolidated assets of approximately $228 million, deposits
of approximately $207 million and shareholders' equity of approximately $16
million. Skylands Community Bank has eight branches located in Warren, Sussex
and Morris Counties, New Jersey. Skylands Community Bank is engaged principally
in the business of taking deposits and making residential loan mortgages,
commercial loans, consumer loans and home equity and property improvement loans.
Skylands Community Bank has one wholly-owned subsidiary, Skylands Community
Investment Co., Inc., a New Jersey corporation, which owns certain securities.
Copy Of Merger Agreement Attached
The merger agreement, as amended and restated, is attached as Exhibit
A at the back of this proxy statement/prospectus, and Fulton Financial and
Skylands incorporate it in this document by reference. Fulton Financial and
Skylands encourage you to read the merger agreement, as it is the primary legal
document that governs the merger.
Record Date Set At ____, 2000; One Vote Per Share Of Skylands Stock
If you owned shares of Skylands common stock at the close of business
on ______, 2000, you are entitled to vote on the merger agreement, the election
of Skylands directors, an adjournment proposal (if necessary) and any other
matters considered at the meeting. On _______, there were _________ shares of
Skylands common stock outstanding. You will have one vote at the meeting for
each share of Skylands common stock you owned on _______, 2000.
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<PAGE>
Conditions That Must Be Satisfied For The Merger To Occur
The following conditions must be met for Fulton Financial and Skylands
to complete the merger in addition to other customary conditions:
. approval of the merger by Skylands' shareholders;
. the absence of legal restraints that prevent the completion of
the merger;
. receipt of a legal opinion that the merger will be tax-free to
shareholders, except for any cash received in lieu of fractional
shares;
. the continuing accuracy of the parties' representations in the
merger agreement; and
. the continuing effectiveness of the registration statement filed
with the SEC.
Fulton Financial and Skylands cannot complete the merger unless Fulton
obtains the approvals of the Federal Reserve Board and the New Jersey Department
of Banking and Insurance. Fulton Financial has filed the required applications
seeking approval of the merger. Although Fulton Financial and Skylands believe
regulatory approvals will be received in a timely manner, Fulton Financial and
Skylands cannot be certain when or if they will be obtained.
Termination And Amendment Of The Merger Agreement
Skylands and Fulton Financial can mutually agree at any time to
terminate the merger agreement without completing the merger. Either company
can also terminate the merger agreement in the following circumstances:
. if any condition precedent to a party's obligations under the
merger agreement is unsatisfied on December 31, 2000, through no
fault of the other company;
. if the other party has materially breached a representation in the
merger agreement and has not cured such breach within thirty days
of receiving written notice of the breach; or
. the market price of Fulton Financial common stock just before the
merger is greater than $19.24 (in Fulton Financial's case) unless
Skylands elects to decrease the exchange ratio or less than $13.09
(in Skylands' case) unless Fulton Financial elects to increase the
exchange ratio.
In addition, Fulton Financial may terminate the merger agreement if
Skylands' Board of Directors exercises its fiduciary duty with respect to a
proposed acquisition of Skylands by someone other than Fulton Financial.
Fulton Financial and Skylands can agree to amend the merger agreement
in any way, except that after the shareholders' meeting they cannot decrease the
consideration you will receive in the merger except, as noted above, in the
event Skylands' Board of Directors elects to decrease the exchange ratio in the
event the market price of Fulton Financial common stock just before the merger
is greater than $19.24. Either company can waive any of the requirements of the
other company in the merger agreement, except that neither company can waive any
required regulatory approval.
No Dissenters' Rights Of Appraisal
Under New Jersey law, you do not have the right to dissent from the
merger and receive cash equal to the "fair value" of your shares.
Fulton Financial To Use Purchase Accounting Treatment
Fulton Financial will account for the merger as a purchase for
accounting and financial reporting purposes.
-9-
<PAGE>
Fulton Financial To Continue As Surviving Corporation
Fulton Financial will continue as the surviving corporation after the
merger. The Boards of Directors and executive officers of Fulton Financial and
its subsidiaries will not change as a result of the merger.
Your Rights As Shareholders Will Change After The Merger
Upon completion of the merger, you will become a shareholder of Fulton
Financial. Fulton Financial's Articles of Incorporation and Bylaws and
Pennsylvania law determine the rights of Fulton Financial's shareholders. The
rights of shareholders of Fulton Financial differ in certain respects from the
rights of shareholders of Skylands.
Warrant Agreement
In connection with the merger agreement and to discourage other
companies from acquiring Skylands, Skylands granted Fulton Financial a warrant
to purchase up to 625,000 shares of Skylands common stock at an exercise price
of $10.25 per share. Generally, Fulton Financial may exercise this warrant only
if another party seeks to gain control of Skylands. We do not believe that any
of the events which would permit Fulton Financial to exercise the warrant have
occurred as of the date of this proxy statement/prospectus.
The warrant agreement and warrant are attached to this proxy
statement/prospectus as Exhibit B.
Monetary Benefits To Management In The Merger
When considering the recommendation of the Skylands Board, you should
be aware that some directors and officers have interests in the merger which may
conflict with their interests as shareholders. These interests include:
. Some officers of Skylands have entered into agreements with
Skylands that will provide them with employment by Skylands
Community Bank upon completion of the merger;
. Officers and directors hold stock options to purchase Skylands
stock that will convert into options to purchase Fulton Financial
stock. As of ______, 2000, the difference between the aggregate
exercise price and the market value of the shares underlying the
options held by executive officers and directors, which represents
the economic value of the options, was $___ million; and
. Following the merger, Fulton Financial will indemnify, and provide
liability insurance to, directors of Skylands and Skylands
Community Bank.
FORWARD LOOKING INFORMATION
This proxy statement/prospectus contains and incorporates some
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include
statements regarding intent, belief or current expectations about matters
including statements as to "beliefs," "expectations," "anticipations,"
"intentions" or similar words. Forward-looking statements are also statements
that are not statements of historical fact. Forward-looking statements are
subject to risks, uncertainties and assumptions. These include, by their nature:
. the effects of changing economic conditions in Fulton Financial's
and Skylands' market areas and nationally;
. credit risks of commercial, real estate, consumer and other lending
activities;
. significant changes in interest rates;
. changes in federal and state banking laws and regulations which
could impact operations;
-10-
<PAGE>
. funding costs;
. other external developments which could materially affect the
business and operations of Fulton Financial and Skylands; and
. the ability of Fulton Financial to assimilate Skylands after the
merger.
If one or more of these risks or uncertainties occurs or if the
underlying assumptions prove incorrect, actual results, performance or
achievements in 2000 and beyond could differ materially from those expressed in,
or implied by, the forward-looking statements.
SHARE INFORMATION AND MARKET PRICES
Fulton Financial common stock trades on the National Market System of
the NASDAQ Stock Market under the symbol "FULT". Skylands common stock trades
on the NASDAQ Small Cap Market under the trading symbol "SKCB". The following
table shows the last sale prices of Fulton Financial common stock, Skylands
common stock and the equivalent price per share of Skylands common stock based
on the exchange ratio on February 22, 2000 and _________, 2000.
On February 22, 2000, the last trading day before public announcement
of the merger agreement, the per share closing price for Fulton Financial common
stock was $15.36. Based on such closing price for such date and the conversion
ratio of .819 shares of Fulton Financial common stock for each share of Skylands
common stock, the pro forma value of the shares of Fulton Financial common stock
to be received in exchange for each share of Skylands common stock was $12.58.
On February 22, 2000, the last trading day before public announcement
of the merger agreement, the per share closing price for Skylands common stock
was $10.25.
The foregoing historical and pro forma equivalent per share market
information is summarized in the following table.
Historical Pro Forma
Price Per Share Equivalent
----------------------- Price Per Share
---------------------
- --------------------------------------------------------------------------------
Fulton Financial Common Stock
- --------------------------------------------------------------------------------
Closing Price on February 22, 2000 $15.36
- --------------------------------------------------------------------------------
Skylands Common Stock
- --------------------------------------------------------------------------------
Closing Price on February 22, 2000 10.25 12.58/1/
- --------------------------------------------------------------------------------
1 Based upon the product of the Conversion Ratio (.819) and the closing
price of Fulton Financial Common Stock on February 22, 2000.
The closing price for Fulton Financial common stock on ______________,
2000, was $_______ per share. Based on such closing bid price for such date and
the Skylands conversion ratio of .819 shares of Skylands common stock for each
share of Skylands common stock, the pro forma value of the shares of Fulton
Financial common stock to be received in exchange for each share of Skylands
common stock was $_______.
The market prices of both Fulton Financial and Skylands common stock
will fluctuate prior to the merger. You should obtain current market quotations
for Fulton Financial common stock and Skylands common stock.
COMPARATIVE PER SHARE DATA
Fulton Financial and Skylands have summarized below the per share
information for each company on an historical, pro forma combined and equivalent
basis. You should read this information in conjunction with the
-11-
<PAGE>
historical financial statements and the related notes contained in the annual
and quarterly reports and other documents Fulton Financial and Skylands have
filed with the SEC or attached to this proxy statement/prospectus. See "Where
You Can Find More Information" on page 58. The Fulton Financial pro forma
information gives effect to the merger accounted for as a purchase, assuming
that .819 shares of Fulton Financial common stock are issued for each
outstanding share of Skylands common stock. Skylands equivalent share amounts
are calculated by multiplying the pro forma basic and diluted earnings per
share, historical per share dividend and historical shareholders' equity by the
exchange ratio of .819 shares of Fulton Financial common stock so that the per
share amounts equate to the respective values for one share of Skylands common
stock. You should not rely on the pro forma information as being indicative of
the historical results that Fulton Financial and Skylands would have had if they
had been combined or the future results that Fulton Financial will experience
after the merger.
-12-
<PAGE>
Selected Historical and Pro Forma
Combined Per Share Data (A)
<TABLE>
<CAPTION>
Fulton Financial Quarter Ended March 31, As of or for the Year Ended December 31,
------------------------ ----------------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Historical Per Common Share:
- ---------------------------
Average Shares Outstanding (Basic) 71,648,000 72,628,000 72,422,000 72,415,000 72,167,000
Average Shares Outstanding (Diluted) 71,955,000 73,055,000 72,829,000 73,170,000 73,179,00
Book Value $ 8.55 $ 8.51 $ 8.54 $ 8.37 $ 7.82
Cash Dividends 0.143 0.130 0.558 0.504 0.431
Net Income (Basic) 0.35 0.32 1.34 1.22 1.06
Net Income (Diluted) 0.35 0.32 1.33 1.21 1.04
Fulton Financial, Skylands Combined
- -----------------------------------
Pro Forma Per Common Share:
- ----------------------------
Average Shares Outstanding (Basic) 73,723,000 74,672,000 74,478,000 74,441,000 74,183,000
Average Shares Outstanding (Diluted) 74,047,000 75,173,000 74,941,00 75,299,000 75,237,000
Book Value $ 8.69 $ 8.64 $ 8.67 $ 8.51 $ 7.98
Cash Dividends 0.143 0.130 0.558 0.504 0.431
Net Income (Basic) 0.35 0.32 1.32 1.20 1.03
Net Income (Diluted) 0.35 0.32 1.31 1.19 1.02
</TABLE>
- ---------------------------
(A) The above combined pro forma per share equivalent information is based on
average shares outstanding during the period except for the book value per
share which is based on period end shares outstanding. The number of shares
in each case has been adjusted for stock dividends and stock splits by each
institution through the periods, including the 5% stock dividend declared
by Fulton Financial Corporation on April 18, 2000, payable May 31, 2000 to
shareholders of record on May 8, 2000. The combined pro forma information
is based on the historical information of both Fulton Financial and
Skylands adjusted to reflect this transaction being accounted for on a
purchase basis. This accounting method requires that all assets and
liabilities be recorded based upon their estimated fair value at the
closing date with the excess of the purchase price over the estimated fair
value of the net asset acquired being recorded as goodwill. Goodwill is
amortized over its useful life. The final determination of these values may
differ significantly from the preliminary estimates utilized above.
-13-
<PAGE>
Selected Historical and Pro Forma
Combined Per Share Data (A)
<TABLE>
<CAPTION>
Skylands Quarter Ended March 31, As of or for the Year Ended December 31,
- -------- ----------------------- ----------------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
Historical Per Common Share:
- ---------------------------
<S> <C> <C> <C> <C> <C>
Average Shares Outstanding (Basic) 2,533,000 2,496,000 2,510,000 2,474,000 2,462,000
Average Shares Outstanding (Diluted) 2,615,000 2,585,000 2,579,000 2,599,000 2,513,000
Book Value $ 6.48 $ 5.67 $ 6.26 $ 5.47 $ 4.74
Cash Dividends 0.04 0.02 0.10 0.06 0.05
Net Income (Basic) 0.28 0.21 0.95 0.74 0.58
Net Income (Diluted) 0.28 0.21 0.92 0.71 0.57
Equivalent Pro forma Per Common Share:
- -------------------------------------
Book Value $ 7.12 $ 7.08 $ 7.05 $ 6.99 $ 6.54
Cash Dividends 0.117 0.106 0.457 0.413 0.353
Net Income (Basic) 0.29 0.26 1.08 0.98 0.85
Net Income (Diluted) 0.29 0.26 1.08 0.97 0.83
</TABLE>
- ------------------------
(A) The above combined pro forma per-share equivalent information is based on
average shares outstanding during the period except for the book value per
share which is based on period end shares outstanding. The number of shares
in each case has been adjusted for stock dividends and stock splits by each
institution through the periods, including the 5% stock dividend declared
by Fulton Financial Corporation on April 18, 2000, payable May 31, 2000 to
shareholders of record on May 8, 2000. The equivalent pro forma per common
share information is derived by applying the exchange ratio of .819 shares
of Fulton Financial $2.50 par value common stock for each Skylands $2.50
par value common stock to the Fulton Financial, Skylands combined pro forma
per common share information.
-14-
<PAGE>
SELECTED FINANCIAL DATA
The following tables show certain historical consolidated summary financial
data for both Fulton Financial and Skylands. This information is derived from
the consolidated financial statements of Fulton Financial and Skylands
incorporated by reference in, or included with, this proxy statement/prospectus.
See "Where You Can Find More Information" on page 58.
-15-
<PAGE>
Fulton Financial Corporation
Selected Historical Financial Data
(In Thousands except per share data)
<TABLE>
<CAPTION>
Quarter Ended March 31, As of or for the Year Ended December 31,
----------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
Summary of Operations
- ---------------------
Net interest income $ 61,120 $ 58,626 $ 244,087 $ 231,671 $ 219,095 $ 202,199 $ 186,454
Provision for loan losses 2,025 1,967 8,216 5,582 8,417 5,951 4,357
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision 59,095 56,659 235,871 226,089 210,678 196,248 182,097
for loan losses
Other income 16,652 15,313 62,822 59,948 48,713 41,653 37,673
Other expenses 39,786 38,698 160,988 157,694 149,538 144,174 135,674
Income taxes 10,647 9,747 40,479 39,832 33,448 27,815 23,998
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 25,314 $ 23,527 $ 97,226 $ 88,511 $ 76,405 $ 65,912 $ 60,098
========== ========== ========== ========== ========== ========== ==========
Per Common Share
- ----------------
Net income (basic) $ 0.35 $ 0.32 $ 1.34 $ 1.22 $ 1.06 $ 0.91 $ 0.84
Net income (diluted) 0.35 0.32 1.33 1.21 1.04 0.90 0.83
Dividends 0.143 0.130 0.558 0.504 0.431 0.381 0.322
Average Balances
- ----------------
Total assets $6,080,151 5,786,581 $5,890,619 $5,535,447 $5,138,450 $4,725,999 $4,408,258
Investment securities 1,232,289 1,315,965 1,318,576 1,182,840 1,029,876 1,022,295 1,007,295
Loans and leases, net of unearned income 4,468,516 4,040,547 4,181,654 3,968,971 3,765,384 3,381,599 3,078,437
Deposits 4,552,238 4,482,886 4,529,040 4,478,711 4,234,548 3,934,028 3,706,652
Long-Term debt 340,692 295,900 302,158 162,525 66,139 42,012 49,522
Shareholders' equity 614,421 610,810 615,928 587,552 523,222 475,243 434,057
Ending Balances
- ---------------
Total assets $6,129,914 $5,786,581 $6,070,019 $5,838,663 $5,377,654 $4,936,072 $4,595,925
Long-term debt 323,194 295,826 328,250 296,018 53,045 67,498 56,698
</TABLE>
-16-
<PAGE>
Skylands Financial Corporation
Selected Historical Financial Data
(In Thousands Except For Per Share Data)
<TABLE>
<CAPTION>
Quarter Ended March 31, As of or for the Year Ended December 31,
----------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
- ---------------------
Net interest income $ 2,706 $ 2,145 $ 9,497 $ 7,367 $ 6,038 $ 4,525 $ 2,856
Provision for loan losses 150 112 871 665 632 488 266
-------- -------- -------- -------- -------- -------- -------
Net interest income after provision 2,556 2,033 8,626 6,702 5,406 4,037 2,590
for loan losses
Other income 269 236 1,042 889 673 508 377
Other expenses 1,699 1,401 5,881 4,727 3,838 3,325 2,533
Income taxes 405 337 1,415 1,033 817 470 164
-------- -------- -------- -------- -------- -------- -------
Net income $ 721 $ 531 $ 2,372 $ 1,831 $ 1,424 $ 750 $ 270
======== ======== ======== ======== ======== ======== =======
Per Common Share
Net income (basic) $ 0.28 $ 0.21 $ 0.95 $ 0.74 $ 0.58 $ 0.31 $ 0.14
Net income (diluted) 0.28 0.21 0.92 0.71 0.57 0.30 0.14
Dividends 0.04 0.02 0.10 0.06 0.05 0.00 0.00
Average Balances
- ----------------
Total assets $226,325 $188,171 $204,325 $164,462 $132,886 $109,800 $80,886
Investment securities 57,365 52,700 59,581 51,469 44,785 44,407 40,870
Loans and leases, net of unearned income 154,044 120,133 132,384 103,381 79,525 57,866 35,066
Deposits 203,782 172,336 185,844 150,430 119,103 99,480 73,330
Long-Term debt -- -- -- -- -- -- --
Shareholders' equity 16,071 13,803 14,587 12,515 10,716 9,532 7,030
Ending Balances
- ---------------
Total assets $228,266 $191,352 $219,528 $179,535 $147,088 $119,916 $99,587
Long-term debt -- -- -- -- -- -- --
</TABLE>
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<PAGE>
THE ANNUAL MEETING
Date, Time And Place
Skylands will hold the annual meeting at ___________, New Jersey, at
_____ _.m. local time, on _____, 2000.
Matters To Be Considered At The Annual Meeting
At the annual meeting, holders of Skylands common stock will consider and
vote upon proposals to:
. approve and adopt the merger agreement;
. election of eleven directors to Skylands Board; and
. approve a proposal to adjourn the meeting if more time is needed to
solicit proxies.
A vote for approval of the merger agreement is a vote for approval of the
merger of Skylands into Fulton Financial and for the exchange of Skylands common
stock for Fulton Financial common stock. If the merger is completed, Skylands
common stock will be cancelled and you will receive .819 shares of Fulton
Financial common stock in exchange for each share of Skylands common stock that
you hold. Fulton Financial will pay cash in lieu of issuing any fractional
share interests to you.
Record Date; Stock Entitled To Vote; Quorum
Only holders of record of Skylands common stock on _____, 2000, will
receive notice of, and can vote at, the annual meeting. On ____, 2000,
2,533,889 shares of Skylands common stock were issued and outstanding and held
by approximately 695 holders of record.
A quorum requires the presence, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes which all shareholders of
Skylands are entitled to cast on the record date.
Skylands intends to count the following shares as present at the annual
meeting for the purpose of determining a quorum:
. shares of Skylands common stock present in person at the annual
meeting but not voting;
. shares of Skylands common stock represented by proxies on which the
shareholder has abstained on any matter; and
. shares of Skylands common stock represented by proxies from a broker
with no indication of how the shares are to be voted.
Votes Required
Approval of the merger agreement requires the affirmative vote of a
majority of votes cast at the annual meeting. The eleven individuals receiving
a plurality of votes will be elected as directors of Skylands. Approval of the
adjournment proposal requires the affirmative vote of a majority of the votes
cast at the annual meeting.
You have one vote for each share of Skylands common stock that you hold
of record on each matter to be considered at the annual meeting unless you are
the beneficial owner of 10% or more of Skylands' outstanding common stock. As
of the record date, Skylands is unaware of any person or entity owning 10% or
more of the outstanding shares of Skylands' common stock.
-18-
<PAGE>
The directors and executive officers of Skylands are expected to vote all
shares of Skylands common stock that they own for approval and adoption of the
merger agreement. As of the record date for the annual meeting, directors and
executive officers of Skylands and their affiliates beneficially owned and were
entitled to vote approximately 592,500 shares of Skylands common stock, which
represented approximately 22.4% of the shares of Skylands common stock
outstanding on the record date.
Voting Of Proxies
Skylands will vote shares represented by all properly executed proxies
received in time for the annual meeting in the manner specified on each proxy.
Skylands will vote properly executed proxies that do not contain voting
instructions in favor of the merger agreement, for the nominees for directors
named in this proxy statement/prospectus and in favor of any adjournment
proposal.
If you abstain from voting on any proposal considered at the annual
meeting, we will not count the abstention as a vote "for" or "against" the
proposal for purposes of the annual meeting. Under rules relating to how
brokers vote shares held in brokerage accounts, brokers who hold your shares in
street name cannot give a proxy to vote your shares on the merger agreement or
the adjournment proposal without receiving specific instructions from you. We
will not count these broker non-votes as a vote "for" or "against" the merger
agreement, the nominees for director or the adjournment proposal for purposes of
the annual meeting. As a result:
. because approval of the merger agreement requires the affirmative
vote of a majority of all votes cast at the annual meeting,
abstentions and broker non- votes will not affect the vote on the
merger agreement;
. because the eleven (11) individuals receiving a plurality of votes
will be elected as directors, abstentions and broker non-votes will
not affect the vote on the election of directors.
. because approval of an adjournment proposal requires the affirmative
vote of a majority of all votes cast at the annual meeting,
abstentions and broker non- votes will not affect the vote on any
adjournment proposal.
Revocability Of Proxies
If you grant a proxy, you may revoke your proxy at any time until it is
voted by:
. delivering a notice of revocation or delivering a later dated proxy
to Norman S. Baron, Secretary, Skylands Financial Corporation, 176
Mountain Avenue, Hackettstown, NJ 07840;
. submitting a proxy card with a later date; or
. appearing at the annual meeting and voting in person.
Attendance at the annual meeting will not in and of itself revoke a
proxy.
Solicitation Of Proxies
Skylands will bear the cost of the solicitation of proxies from its
shareholders. Fulton Financial will bear the cost of printing this proxy
statement/prospectus.
Skylands will solicit proxies by mail. In addition, the directors,
officers and employees of Skylands and its subsidiaries may solicit proxies from
shareholders by telephone or telegram or in person. Skylands will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries for forwarding proxy solicitation material to the beneficial owners
of stock held of record by those persons, and Skylands will reimburse them for
reasonable out-of-pocket expenses.
-19-
<PAGE>
You should not send in your stock certificates with your proxy card. As
described below under the caption "The Merger -- Exchange of Skylands Stock
Certificates" on page 34, you will receive materials for exchanging shares of
Skylands common stock shortly after the merger.
THE MERGER
The information contained in this proxy statement/ prospectus regarding
the merger is not intended to contain all of the information in the merger
agreement. It is intended to summarize the most significant aspects of the
merger agreement. We have attached the full merger agreement to this proxy
statement/ prospectus as Exhibit A and we incorporate it in this document by
reference. We urge all shareholders to read the merger agreement carefully.
The merger agreement provides that:
. Skylands will merge into Fulton Financial;
. Skylands Community Bank will continue operations following the
merger as a subsidiary of Fulton Financial; and
. You, as a shareholder of Skylands, will receive .819 shares of
Fulton Financial common stock for each share of Skylands that you
own if the merger is completed.
The Board of Directors of Skylands has unanimously approved and adopted
the merger agreement and believes the merger is in your best interests.
Skylands' Board of Directors unanimously recommends that you vote "FOR" the
merger agreement.
Background Of The Merger
Skylands. Skylands' Board of Directors, over the years, has been
attentive to maximizing value for Skylands' shareholders, and its strategic
positioning as a community bank serving its natural market in northwestern New
Jersey. From time to time it has explored the possibility of growth through
merger; for example, it entered into a merger agreement with Little Falls
Bancorp, Inc. in August, 1998. The merger agreement with Little Falls Bancorp,
Inc. was ultimately terminated.
In connection with its exploration of merger possibilities, the Skylands'
Board met from time to time with representatives of McConnell, Budd & Downes, an
investment banking firm located in Morristown, New Jersey. At one such meeting
on October 4, 1999, MB&D identified Fulton as a possible acquirer of Skylands.
There did not exist any business relationship between Skylands and Fulton at
that time. The Skylands Board of Directors authorized MB&D to contact Fulton
Financial about the possibility of a merger with Skylands, and Fulton Financial
expressed interest in pursuing discussions with Skylands. Initially, Fulton
Financial expressed interest in the possibility of a merger with Skylands in
which each Skylands' shareholder would receive .735 shares (without adjustment
for a 5% stock dividend recently paid by Fulton) of Fulton Financial common
stock for each share of Skylands common stock. Representatives of Fulton
Financial and Skylands met informally from time to time thereafter until
November 17, 1999, at which time the Skylands Board of Directors met with
representatives of MB&D and authorized Skylands' management to pursue
discussions with Fulton leading to an acquisition of Skylands by Fulton.
Representatives of Fulton Financial and Skylands met from time to time
after November 17, 1999 until January 12, 2000, at which time the Skylands Board
of Directors met to consider Fulton Financial's interest in acquiring Skylands
by merger. At that time, Fulton Financial had indicated that its interest in
acquiring Skylands included the following important features:
. Each Skylands' shareholder would receive .7875 shares (prior to
adjustment for a 5% stock dividend recently paid by Fulton) of
Fulton Financial's common stock for each share of Skylands' common
stock.
-20-
<PAGE>
. Each outstanding option for shares of Skylands' common stock would
be converted into options for shares of Fulton Financial common
stock.
. The merger would be accounted for as a purchase.
. Skylands Community Bank would be a separate subsidiary of Fulton
Financial, and its directors would continue in office for at least
three years.
After discussing the foregoing factors, representatives of MB&D presented
a financial analysis of the hypothetical transaction. Their report included an
analysis of Fulton's stock, a calculation of the dilutive effect of the
hypothetical transaction on Fulton Financial's earnings and pro forma "pass
through" values for Fulton Financial after acquiring Skylands. MB&D also
reviewed the financial terms of various comparable recent transactions, and
compared them to the financial terms of the hypothetical transaction between
Skylands and Fulton Financial.
A representative of McCarter & English, LLP then described to the Board
its fiduciary duties under New Jersey corporate law, and emphasized the
importance of keeping confidential the information discussed at this Board
Meeting and refraining from trading in Skylands stock.
According to Skylands' Certificate of Incorporation, the favorable vote
of at least 80 percent of the Skylands directors is required, unless the merger
is approved by the affirmative vote of more than 80 percent of Skylands' stock.
At the January 12, 2000 meeting, less than 80 percent of the Skylands directors
wished to pursue a transaction with Fulton on the terms being discussed.
After the January 12, 2000 meeting, members of Skylands Board of
Directors discussed the proposed transaction informally among themselves, and a
Special Meeting of the Skylands Board was held on January 13, 2000, to consider
the merger again. At the January 13, 2000 meeting, more than 80 percent of the
Skylands directors expressed approval to continue discussions with Fulton
Financial leading toward a possible merger, and authorized management to proceed
with due diligence and the negotiation of definitive agreements for the merger.
As a result, representatives of Skylands, with the assistance of MB&D, continued
merger discussions with Fulton Financial. In those discussions, Fulton
Financial agreed to improve certain features of its merger proposal. Fulton
Financial's counsel prepared drafts of the Merger Agreement and the Warrant
Agreement. Representatives of Fulton Financial performed a "due diligence"
review of Skylands' condition between February 7 and 9, 2000, and
representatives of Skylands and MB&D performed a "due diligence" review of
Fulton Financial on February 9, 2000.
The Skylands Board met again on February 23, 2000 to consider Fulton
Financial's interest in Skylands and the new terms of the proposed transaction.
Some of the new terms were as follows:
. Each Skylands' shareholder would receive .78 shares (adjusted to
.819 shares as a result of a stock dividend paid by Fulton
Financial) of Fulton Financial common stock for each share of
Skylands common stock.
. Each party would have the right to terminate the merger agreement if
the price of Fulton Financial's stock moved out of specified price
ranges prior to the closing.
. Skylands would have the right to terminate the merger if it receives
an offer for a merger or acquisition which is superior to the
proposed transaction with Fulton Financial.
At the meeting, the Skylands Board of Directors reviewed a draft of the
merger agreement and the warrant agreement prepared by counsel to Fulton
Financial. A representative of McCarter & English, LLP again reviewed the
directors' standard of care under New Jersey law and reviewed in detail the
draft merger agreement and warrant agreement prepared by Fulton Financial. The
review included:
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<PAGE>
. The structure of the transaction;
. The exchange of Fulton Financial stock for Skylands stock;
. Covenants of the parties between the date of the Agreement and
closing;
. Conditions to consummation of the transaction;
. The option to be granted to Fulton Financial by Skylands allowing
Fulton Financial to acquire up to 19.9% of Skylands' outstanding stock
under certain conditions; and
. Employment arrangements for Skylands senior management personnel after
completion of the transaction.
The Skylands Board also considered the opinion of MB&D and the financial
analyses of the merger prepared by MB&D, all described under "Opinion of
Independent Financial Advisor", on page 23. At the meeting, the Skylands'
directors unanimously approved the merger, subject to satisfactory completion of
the documentation.
In the course of reaching its decision to approve the agreement, the
Skylands Board of Directors consulted principally with MB&D and its legal
counsel, McCarter & English, LLP. The Skylands Board believes the merger is
fair to, and in the best interests of, Skylands and its shareholders. In
reaching these conclusions, the Skylands Board considered a number of factors,
including the following:
. Skylands' current condition and historical results of operations, and
its prospective results of operation if Skylands were to remain
independent.
. The economic, business and competitive climate for banking and
financial institutions in the western New Jersey area, and the
challenges that Skylands faces as an independent bank in a highly
competitive market.
. The business, operations, earnings and prospects of Fulton Financial,
and Skylands' enhanced ability to offer a broad range of products and
services which the merger would make possible;
. The increased dividend which Skylands' shareholders will receive on
Fulton Financial common stock, if Fulton maintains its current and
past common stock dividend policy;
. The improvement in earnings per share of Fulton Financial stock
compared to earnings per share of Skylands stock;
. The improved liquidity for Skylands shareholders which will result
from the exchange of Fulton Financial stock for Skylands stock;
. Fulton Financial's commitment to keep Skylands Community Bank as a
subsidiary bank in Fulton Financial's multi-bank holding company
system, and to permit Skylands Community Bank directors to continue
their service on the Skylands Community Bank Board, thereby assuring
the preservation of Skylands Community Bank's character as a community
bank and a measure of local control over its operations after the
merger;
. The opinion of MB&D that the exchange ratio to be received in the
merger was fair to Skylands shareholders from a financial point of
view;
. The experience of Fulton Financial's senior management team; and
. The benefits of a tax-free exchange to Skylands shareholders.
-22-
<PAGE>
The list of factors considered by Skylands Board is not exhaustive, but
the foregoing summarizes the important factors considered by the Skylands Board.
Individual directors may have given different weights to these factors in
reaching their decision; however, the Skylands Board did not assign specific
weights or priority to any one factor.
Recommendation Of Skylands' Board Of Directors
The Skylands' Board believes that the merger is in the best interests of
Skylands and its shareholders. Accordingly, the Skylands' board unanimously
recommends that shareholders vote "FOR" approval and adoption of the merger
agreement.
Fulton Financial's Board Of Directors' Reasons For The Merger
The acquisition of Skylands was attractive to Fulton Financial's Board of
Directors because it presented an opportunity to acquire a performing financial
institution in a geographic market which was both a natural extension of Fulton
Financial's existing markets and which fit the profile of Fulton Financial's
desired markets in terms of growth and demographics.
Effect Of The Merger
Upon completion of the merger, Skylands will merge with and into Fulton
Financial, and the separate legal existence of Skylands will cease. As a
consequence of the merger, all property, rights, debts and obligations of
Skylands will automatically transfer to and vest in Fulton Financial, in
accordance with Pennsylvania and New Jersey law. Fulton Financial, as the
surviving corporation, will be governed by the Articles of Incorporation and
Bylaws of Fulton Financial in effect immediately prior to completion of the
merger. The directors and executive officers of Fulton Financial prior to the
merger will continue, in their respective capacities, as the directors and
executive officers of Fulton Financial after the merger.
On the effective day of the merger, each outstanding share of Skylands
common stock will automatically convert into .819 shares of Fulton Financial
common stock. You will receive cash instead of receiving fractional share
interests of Fulton Financial common stock.
Fulton Financial will adjust the number of shares of Fulton Financial
common stock issuable in exchange for shares of Skylands common stock to take
into account any stock splits, stock dividends, reclassifications or other
similar events that occur involving Fulton Financial common stock prior to
closing.
On the effective date of the merger, each outstanding option to purchase
shares of Skylands common stock will automatically convert into an option to
purchase Fulton Financial common stock. The number of shares of Fulton
Financial common stock issuable upon exercise will equal the number of shares of
Skylands common stock subject to the option multiplied by .819, rounded to the
nearest whole share. The exercise price for a whole share of Fulton Financial
common stock will equal the stated exercise price of the option divided by .819.
Shares issuable upon the exercise of such options to acquire Fulton Financial
common stock will remain subject to the terms of the plans and grant agreements
of Skylands under which Skylands issued the options.
Opinion Of Independent Financial Advisor
On February 23, 2000, McConnell, Budd & Downes, Inc. delivered its
initial written opinion to the Board of Directors of Skylands, that as of
February 23, 2000, the exchange ratio was fair, from a financial point of view,
to Skylands shareholders. The basis for the opinion, which is unchanged, has
been updated for inclusion in written form in this proxy statement/prospectus.
MB&D has acted, from time to time, as a financial advisor to Skylands and its
predecessors since December of 1994. MB&D assisted Skylands Community Bank with
respect to a purchase and assumption of deposits transaction in Netcong, New
Jersey in 1994. MB&D also assisted Skylands Community Bank with respect to a
common stock rights offering completed in 1995. MB&D's work specifically with
respect to the pending transaction began during the summer of 1999.
Representatives of MB&D met with the executive management and/or the Board of
Directors of Skylands on nine separate occasions during late 1999 and early 2000
-23-
<PAGE>
in connection with the analysis of Skylands' strategic alternatives and the
negotiation process. MB&D advised Skylands during the evaluation and negotiation
process leading up to the execution of the merger agreement and provided
Skylands with a number of analyses as to a range of financially feasible
exchange ratios. The determination of the applicable exchange ratio was arrived
at in an arms-length negotiation between Skylands and Fulton Financial in a
process in which MB&D advised Skylands and participated directly in the
negotiations. The process by which MB&D reached the opinion involved the
consideration of numerous factors including the following:
. An analysis of the historical and projected future contributions of
recurring earnings by the parties.
. An analysis of the possible future earnings per share results for
the parties on both a combined and a stand-alone basis.
. Anticipated accretive or dilutive effects of the prospective
transaction on earnings per share of Fulton Financial both before
and after reasonable cost savings estimates and related
implementation schedules. Anticipated accretive or dilutive effects
of the prospective transaction on earnings per share of Fulton
Financial both before and after estimated income enhancements and
related implementation schedules and anticipated accretive or
dilutive effects of the prospective transaction on earnings per
share of Fulton Financial before and after a possible buy back of
common stock contemplated by Fulton Financial.
. The probable impact on dividends per share to be received by
Skylands shareholders as a result of the contemplated transaction.
. The composition of loan portfolios and relative asset quality
thereof, as disclosed by the parties.
. The apparent adequacy of reserves for loan and lease losses of the
parties.
. Composition of the deposit bases of each of the parties.
. Analysis of the historical trading range, trading pattern and
relative liquidity of the common shares of each of the parties.
. The accounting equity capitalization, the tangible equity
capitalization and the market capitalization of each of the parties.
. The fact that for a defined period of three years from the effective
date of the merger, Skylands Community Bank will maintain its name
and board of directors with existing compensation arrangements./1/
. There are certain defined conditions (see the agreement and plan of
merger) under which this aspect of the transaction may be changed in
a period of less than three years.
. An analysis of pending or threatened litigation involving either of
the parties.
. Contemplation of other factors, including certain intangible
factors.
MB&D entered into a formal contractual agreement with respect to its
representation of Skylands in this transaction during February of 2000. MB&D
was retained based on its qualifications and experience in the financial
analysis of banking and thrift institutions generally, its knowledge of the New
Jersey, Pennsylvania and Maryland banking markets in particular, as well as its
experience with merger and acquisition transactions involving banking
institutions. As a part of its investment banking business, which is focused
exclusively on financial services industry participants, MB&D is regularly
engaged in the valuation of financial institutions and their securities in
connection
- --------------
/1/ There are certain defined conditions (see the agreement and plan of merger)
under which this aspect of the transaction may be changed in a period of
less than three years.
-24-
<PAGE>
with its equity brokerage business generally and mergers and acquisitions in
particular. Members of the Corporate Finance Advisory Group of MB&D have
extensive experience in advising financial institution clients on mergers and
acquisitions. In the ordinary course of its business as a NASD broker-dealer,
MB&D may, from time to time, purchase securities from or sell securities to
Skylands or Fulton Financial and as a market maker in securities, MB&D may from
time to time have a long or short position in, and buy or sell debt or equity
securities of Skylands or Fulton Financial for its own account or for the
accounts of its customers. In addition, in the ordinary course of business, the
employees of MB&D may have direct or indirect investments in the debt or equity
securities of either or both Skylands or Fulton Financial.
The full text of the opinion, which sets forth assumptions made, matters
considered and limits on the review undertaken is attached as Exhibit C. The
opinion of MB&D is directed only to the exchange ratio at which shares of
Skylands common stock may be exchanged for shares of Fulton Financial common
stock. The opinion does not constitute a recommendation to any holder of
Skylands common stock as to how such holder should vote at the Skylands annual
meeting. The following summary description of the matters that MB&D considered,
limitations on the review undertaken, the analyses performed and the assumptions
on which such analyses are based is more thorough and detailed than the summary
referenced in the opinion. MB&D therefore recommends that the reader carefully
study both this section of this proxy statement/prospectus and the opinion
letter itself. The opinion is necessarily based upon conditions as of the date
of the opinion and upon information made available to MB&D through the date
thereof.
Limitations
A survey, or "market check", of institutions that might have had an
interest in the acquisition of Skylands, was not performed by MB&D in
conjunction with the process followed. As is discussed below, an alternative
methodology was used to consider the likely terms that might have been offered
by other financial institutions. Otherwise, with respect to the process
followed by MB&D, the management and Board of Skylands imposed no limitations on
MB&D with respect to the investigations made, matters considered or procedures
followed in the course of rendering its opinions.
Materials Reviewed and analyses performed by MB&D
In connection with the rendering of its opinion, MB&D reviewed the
following documents and considered the following subjects:
. The merger agreement detailing the pending transaction;
. Fulton Financial Annual Reports to shareholders for 1996, 1997 and
1998 and 1999;
. Fulton Financial Annual Reports on Form 10-K for 1996, 1997 and 1998
and 1999;
. Related financial information for the four calendar years ended
December 31, 1996, 1997, 1998 and 1999 for Fulton Financial;
. Fulton Financial Quarterly Report on Form 10-Q and related unaudited
financial information for the first three quarters of 1999;
. Fulton Financial's press release concerning unaudited results for
the calendar year 1999;
. Fulton Financial's press release concerning unaudited results for
the first quarter of calendar year 2000;
. Fulton Financial's Annual Report on Form 10-K for 1999;
. Skylands Annual Reports to Stockholders for 1996, 1997, 1998 and
1999;
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<PAGE>
. Skylands Annual Reports on Form F-2 or Form 10-KSB, as applicable,
and related financial information for the calendar years ended 1996,
1997, 1998 and 1999;
. Skylands Quarterly Reports on Form 10-QSB and related unaudited
financial information for the first three quarters of 1999;
. Skylands' press release concerning unaudited results for the
calendar year 1999;
. Skylands' press release concerning unaudited results for the first
quarter of calendar year 2000;
. Internal financial information and financial forecasts, relating to
the business, earnings, cash flows, assets, asset quality, reserve
adequacy and prospects of the respective companies furnished to MB&D
by Fulton Financial and Skylands respectively;
. MB&D held discussions with members of the senior management of
Fulton Financial concerning the past and current results of
operations of Fulton Financial, its current financial condition and
management's opinion of its future prospects;
. MB&D also held discussions with members of the senior management of
Skylands concerning the past and current results of operations of
Skylands, its current financial condition and management's opinion
of its future prospects;
. MB&D reviewed the historical record of reported prices, trading
volume and dividend payments for both Fulton Financial and Skylands
common stock;
. Based primarily on anecdotal information, MB&D gave consideration to
the current state of and future prospects for the economy of New
Jersey, Pennsylvania and Maryland generally and the relevant market
areas for Fulton Financial and Skylands in particular;
. MB&D employed specific merger analysis models developed by MB&D to
evaluate potential business combinations of financial institutions
using both historical reported information and projected information
for both Fulton Financial and Skylands and reviewed the results;
. MB&D reviewed the reported financial terms of selected recent
business combinations of financial institutions for purposes of
comparison to the pending transaction;
. A survey, or "market check", of institutions that might have had an
interest in the possible acquisition of Skylands was not completed.
Alternatively, an analysis of the hypothetical acquisition capacity
of a selected group of companies which MB&D believed (with the
concurrence of management of Skylands) would logically have been
interested in a possible acquisition of Skylands, was completed.
This analysis was based solely on publicly available information
concerning such companies and did not involve any actual contact
with such companies. MB&D believes however, that such an analysis is
adequate to establish a reasonable range of expected values that
might have been available to Skylands in an unrestricted negotiation
process, at a point in time. This analysis, which was updated to
reflect changing market conditions, was discussed extensively with
the management and Board of Directors of Skylands.
. MB&D performed such other studies and analyses as MB&D considered
appropriate under the circumstances associated with this particular
transaction.
The opinion of MB&D takes into account its assessment of general
economic, market and financial conditions and its experience in other
transactions involving participants in the financial services industry, as well
as its experience in securities valuation and its knowledge of the banking
industry generally. For purposes of reaching its opinion, MB&D has assumed and
relied upon the accuracy and completeness of the information provided to it or
-26-
<PAGE>
made available by Fulton Financial and Skylands, respectively, and does not
assume any responsibility for the independent verification of such information.
With respect to financial forecasts made available to MB&D, it is assumed by
MB&D that they were prepared on a reasonable basis and reflect the best
currently available estimates and good faith judgments of the management of
Fulton Financial and Skylands, respectively, as to the future performance of
Fulton Financial and Skylands. MB&D has also relied upon assurances of the
management of Fulton Financial and Skylands that they were not aware of any
facts or of the omission of any facts that would make the information or
financial forecasts provided to MB&D incomplete or misleading. In the course of
rendering its opinion, MB&D has not completed any independent valuation or
appraisal of any of the assets or liabilities of either Fulton Financial or
Skylands and has not been provided with such valuations or appraisals from any
other source.
The following is a summary of the material analyses employed by MB&D to
date, in connection with rendering its written opinion. Given that it is a
summary, it does not purport to be a complete and comprehensive description of
all the analyses performed, or an enumeration of every single matter considered
by MB&D in arriving at its opinion. The preparation of a fairness opinion is a
complicated process, involving a determination as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances. Therefore, such an opinion is not readily
susceptible to a summary description. In arriving at its fairness opinion, MB&D
did not attribute any particular weight to any one specific analysis or factor
considered by it and made qualitative as well as quantitative judgments as to
the significance of each analysis and factor. Therefore, MB&D believes that its
analyses must be considered as a whole and feels that attributing undue weight
to any single analysis or factor considered could create a misleading or
incomplete view of the process leading to the formation of its opinion. In its
analyses, MB&D has made certain assumptions with respect to banking industry
performance, general business and economic conditions and other factors, many of
which are beyond the control of management of either Fulton Financial or
Skylands. Estimates, which are referred to in our analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
vary significantly from those set forth. In addition, analyses relating to the
values of businesses do not purport to be appraisals or to reflect the prices at
which businesses might actually be sold. Accordingly, such analyses and
estimates are inherently subject to uncertainty, and MB&D does not assume
responsibility for the accuracy of such analyses or estimates.
Subsequent Event
On April 18, 2000 at its Annual Shareholders meeting, Fulton Financial
Corporation announced a 5% stock dividend and an increase in its periodic cash
dividend rate from $0.15 to $0.16 per share on the post stock dividend shares.
The effect on the pending transaction with Skylands will be to require that the
exchange ratio be adjusted upward to .8190 shares of Fulton common stock in
exchange for each share of Skylands from the .78 shares announced earlier. As a
result of the dividend increase by Fulton Financial, Skylands shareholders will
experience an additional 12% increase in the cash dividend.
Analysis of the Anticipated Merger and the Fixed Exchange Ratio
Table 1, which follows, has not been adjusted for the dividend event
described above since it describes aspects of the pending transaction as of the
announcement date (a date prior to the dividend change).
Table 1
-------
The consideration of .78 shares of Fulton Financial common stock in
exchange for each share of Skylands common stock valued at the last sale price
of Fulton Financial on the day prior to the announcement of the transaction
($16.13) represented the following values and multiples:
Approximate Total Transaction Value2: $31,833,577.04
Deal Price/Skylands's Closing Bid: 12.27x or 122.70%3
--
- ----------
2 Excluding options.
3 Based on the closing bid of Skylands reported on NASDAQ on February 22,
2000, which was $10.25.
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<PAGE>
Deal Price/EPS for the Last 12 Months: 13.24x
Deal Price/Tangible Book as of 12-31-99: 2.25x
Effective Increase or Decrease in Dividends4: 290% increase
--------
Table 2
-------
Table 2 has been adjusted for the dividend action taken by Fulton Financial
on April 18, 2000 and reflects updated market value and other financial
information.
The consideration of the adjusted .8190 shares of Fulton Financial common
stock in exchange for each share of Skylands common stock valued at the last
sale price of Fulton Financial of ($_____) on ________, the day prior to the
mailing of this joint proxy statement/prospectus, represents the following
values and multiples:
Approximate Total Transaction Value5: $
Deal Price/Skylands' Closing Bid on 5----00: 6
Deal Price/Skylands' Closing Bid on 5----00:
Deal Price/EPS for the Last 12 Months: x
Deal Price/Tangible Book as of 03-31-00: x
Effective Increase or Decrease in Dividends: %increase
--------
Pass-Through Value Analysis
Pass-through value analysis employs a comparison of anticipated pro forma
values to stand-alone values as of a given point in time. Pass-through value
analysis with respect to pro forma earnings per exchange unit, pro forma
tangible book value per exchange unit and pro forma dividends to be received per
exchange unit is not affected by movements in the market value of the acquirer's
common stock in fixed exchange ratio transactions. The receipt of .819 shares
of Fulton Financial common stock (the exchange unit) in exchange for each share
of Skylands common stock involves a transfer of value in market as well as other
significant terms. Conventional financial analysis places great weight on
transaction multiples, such as transaction value divided by the acquired
entity's market price, transaction value price divided by the trailing 12 months
earnings of the acquired entity and transaction value divided by the acquired
entity's book value. While these comparisons are of great interest to
investors, the pass-through of value in terms of earnings, book value and
dividends that an acquired entity's shareholders receive as a result of an
exchange of stock with another financial institution should also be given due
weight. Table 3 illustrates the pass-through values based on these measures
that exchanging one share of Skylands for .819 shares of Fulton Financial
implies:
Table 3
-------
Pass-Through Value Analysis
---------------------------
<TABLE>
<CAPTION>
As of Announcement Date
- ----------------------------------------------------------------------------------------------------------------------
Percentage Percentage
Current Position Proposed Change Change
Item Position7 (Diluted) (Undiluted)8
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Holdings 1 share of .819 shares of NA NA
</TABLE>
- ----------
4 Assumes a continuation of quarterly dividend declarations by Fulton
Financial.
5 Excluding options.
6 Based on the closing bid of Skylands reported on NASDAQ on _____________,
which was $_________.
7 Proposed position values are before cost savings, income enhancements and
the effect of buyback assumptions.
8 The undiluted column reflects an assumption that cost savings and income
improvements exactly sufficient to render the proposed transaction earnings
neutral to Fulton Financial can be achieved.
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<PAGE>
<TABLE>
<CAPTION>
Skylands Fulton Financial
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Market value $10.25 $12.58 +22.70% +22.70%
- ----------------------------------------------------------------------------------------------------------------------
Earnings power $ 1.12/9/ $ 1.18/10/ +5.12% +6.54%
- ----------------------------------------------------------------------------------------------------------------------
Tangible book value $ 5.58 $ 6.72 +20.32% +20.32%
- ----------------------------------------------------------------------------------------------------------------------
Dividend income $ 0.12 $ 0.47 +289.96% +289.96%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 4
-------
<TABLE>
<CAPTION>
As of Adjusted to
reflect Fulton's
dividend news.
- ----------------------------------------------------------------------------------------------------------------------
Percentage Percentage
Current Position Proposed Change Change
Item Position11 (Diluted) (Undiluted)
- ----------------------------------------------------------------------------------------------------------------------
Holdings 1 share of .8190 shares of NA NA
Skylands Fulton Financial
- ----------------------------------------------------------------------------------------------------------------------
Market value $ $ +% +%
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings power $ 1.12/12/ $ /13/ +% +%
- ----------------------------------------------------------------------------------------------------------------------
Tangible book value $ ____ $ ____ +_____% +_____%
- ----------------------------------------------------------------------------------------------------------------------
Dividend income $ 0.12 $0.5242 +336.8% +336.8%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
. While the market value of the consideration to be received at a point in
time is an important factor, of great significance to longer term value is
the expected impact on the earnings power commanded by the .819 shares of
Fulton Financial common stock to be received versus continuing to hold one
share of Skylands. MB&D believes that the prospective increase in such
earnings power of 5.12% (6.54% on an undiluted basis) as a result of the
transaction is significant. The significance of an increase in earnings
commanded by the exchange unit received is, that at any given price
earnings ratio at which Fulton Financial trades in the future, the market
value of such an exchange unit will exceed the market value of a share of
Skylands trading at the same price earnings ratio.
. Similarly a prospective _______% increase in tangible book value per share
is significant and provides support for the market value of the exchange
unit received.
. Finally MB&D believes that a prospective 336.8% increase in cash dividends
is very meaningful in terms of cash flow impact on the shareholders of
Skylands.
Specific Acquisition Analysis
- ------------------------------
9 Based on the business plan of Skylands for Calendar Year 2000. This is an
estimate.
10 Based on the consensus analyst estimate for Fulton Financial as of
February, 2000 for Calendar Year 2000 as reported on Bloomberg.
11 Proposed position values are before cost savings, income enhancements, and
buyback assumptions any or all of which will have an accretive impact on
earnings to the extent they are realized.
12 Based on the business plan of Skylands for Calendar Year 2000. This is an
estimate.
13 Based on the consensus analyst estimate for Fulton Financial as of
_______________, 2000 for Calendar Year 2000 as reported on Bloomberg.
-29-
<PAGE>
MB&D employs a proprietary analytical model to examine transactions
involving banking companies. The model uses the following information:
. forecast earnings data;
. selected current period balance sheet and income statement data;
. current market and trading information;
. assumptions as to interest rates for borrowed funds;
. the opportunity cost of funds;
. discount rates;
. dividend streams;
. the planned accounting convention for the transaction;
. effective tax rates and transaction structures.
The model inquires into the likely economic feasibility of a given
transaction at a given price level or specified exchange rate while employing a
specified transaction structure and accounting convention. The model also
permits evaluation of various levels of potential non-interest expense savings,
which might be achieved along with various potential implementation timetables
for such savings, as well as the possibility of income enhancement opportunities
and their associated implementation timetables, which may arise in a given
transaction.
Utilizing this model, MB&D prepared pro forma analyses of the financial
impact of the merger to the Skylands shareholders. MB&D compared estimated
earnings per share of Skylands on a stand-alone basis for calendar year 2000 and
2001 to the estimated earnings per share of the common stock of the combined
company on a pro forma basis for the same calendar years. MB&D's analysis
suggests that the merger will be slightly dilutive to shareholders of Fulton
Financial on an earnings per share basis in calendar year 2000, but should
become accretive to Fulton Financial shareholders (who will then include former
Skylands shareholders) at some point during calendar year 2001. Because the
estimation of incremental amounts of recurring cost savings and the exact timing
of their realization is not feasible for outside observers, MB&D does not
attempt to forecast the future quarter in which a given pending transaction will
become either earnings neutral or accretive. These expected results are based
on assumptions concerning earnings, estimated achievable cost savings, the
average per share cost of Fulton Financial's planned future common stock buy
back and other factors, all of which are subject to error.
Analysis of Other Comparable Transactions
MB&D is reluctant to place excessive emphasis on the analysis of comparable
transactions ("Comparable Analysis") as a valuation methodology due to what it
considers to be inherent limitations of the application of the results to
specific cases. MB&D believes that such analysis fails to adequately take into
consideration such factors as:
. Material differences in the underlying capitalization of the
comparable institutions which are being acquired;
. Differences in the historic earnings (or loss) patterns recorded by
the compared institutions which can depict a very different trend than
might be implied by examining recent financial results only;
. Failure to exclude non-recurring profit or loss items from the last
twelve months' earnings streams of target companies which can distort
apparent earnings multiples;
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<PAGE>
. Material differences in the form or forms of consideration used to
complete a given transaction as contrasted to the transaction to which
it is being compared;
. Differences between the planned method of accounting for the completed
transaction as contrasted to the transaction to which it is being
compared;
. Factors such as the relative population, business and economic
demographics of the acquired entity's markets as compared or
contrasted to such factors for the markets in which comparable
companies are doing business;
. Differences between the abilities of the acquirer in a given
transaction to achieve cost savings based on such factors as branch
overlap or market proximity which factors may or may not be present,
or may be present to a different degree, in the transaction to which
it is being compared;
. Comparables analysis usually cites transaction premiums as of the date
of announcement only and fails to adjust such premiums for subsequent
----
changes in the trading values of the securities involved. In MB&D's
opinion, this failure to make adjustments can render the comparisons
virtually meaningless, particularly in cases where there has been a
material change in the equity prices of financial institutions
subsequent to such announcement date.
. Comparables analysis also generally fails to incorporate the projected
impact of deposit divestitures that may be required by regulatory
authorities in a given transaction and which may not be required at
all in a so-called comparable transaction.
For the nine reasons cited, MB&D believes that comparable analysis has
serious inherent limitations and should not be relied upon to any material
extent by members of management, the Board of Directors or the shareholders in
considering the presumed merits of a given transaction. MB&D believes this is
the case regardless of whether or not such an analysis seems to support a given
transaction or fails to support a given transaction.
In this particular case the structure being employed is a 100% stock for
stock exchange, accounted for as a purchase. This has historically been an
--------
uncommon pairing of form of consideration and selection of accounting
convention. Consequently, comparability with transactions announced in 1999
(the vast majority of which were accounted for as poolings of interest) is
rendered more questionable than usual. With these significant reservations in
mind, we nonetheless examined statistics associated with 6 transactions (not
including the subject transaction) involving commercial banks that utilized
similar deal structures and accounting conventions to Skylands' and Fulton
Financial's. The following criteria were used to create the sample:
. The acquired institutions are all commercial banks.
. The acquiring institutions were either banks or thrifts.
. The transactions were announced between July 17, 1998 to October 4,
1999.
. Announced deal values were greater than $20 million and less than $305
million.
. All the transactions were 100% common stock transactions being
accounted for as purchase transactions and thus are "comparable" both
in terms of form of consideration used and selection of accounting
convention.
-31-
<PAGE>
The transactions used for comparison are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Acquiror Target Entity Announcement Date
------- ------------- -----------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Summit Bancorp NMBT Corp. 10/04/99
- --------------------------------------------------------------------------------------------------------------------
Summit Bancorp Prime Bancorp 02/18/99
- --------------------------------------------------------------------------------------------------------------------
Webster Financial Corp. Maritime Bank & Trust 11/04/98
- --------------------------------------------------------------------------------------------------------------------
Summit Bancorp New Canaan Bank & Trust Co. 08/25/98
- --------------------------------------------------------------------------------------------------------------------
Patriot Bank Corp. First Lehigh Corp. 07/28/98
- --------------------------------------------------------------------------------------------------------------------
Richmond County Financial Corp. Ironbound Bancorp 07/17/98
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 5 following compares the mean and median values for price to tangible
book value and price to trailing 12 months earnings arising from the list of 6
transactions with the "comparable" statistics calculated for Skylands/Fulton
Financial. Table 6, adjusts acquirer stock prices as of February 22, 2000 and
recalculates these values.
Table 5
-------
"Comparable" Statistics as of the Announcement Date
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Announced Transaction Announced Transaction Price/
Price/Tangible Book Value Trailing 12 Months Earnings
------------------------- ---------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Skylands/Fulton Financial 2.25X 13.24X
- -------------------------------------------------------------------------------------------------------------------
Mean of comparison group 2.55X 20.60X
- -------------------------------------------------------------------------------------------------------------------
Median of comparison group 2.57X 22.29X
- -------------------------------------------------------------------------------------------------------------------
Variance with Mean -.30X -7.36X
- -------------------------------------------------------------------------------------------------------------------
Percentage Variance with Mean -11.90% -35.72%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 6
-------
"Comparable " Statistics Adjusted for changes in Acquirer Market Values as of
May ___, 2000.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Adjusted Transaction Price/Tangible Adjusted Transaction Price/Trailing
Book Value 12 Months Earnings
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Skylands/Fulton Financial X X
- ---------------------------------------------------------------------------------------------------------------------
Mean of comparison group X X
- ---------------------------------------------------------------------------------------------------------------------
Median of comparison group X X
- ---------------------------------------------------------------------------------------------------------------------
Variance with Mean X X
- ---------------------------------------------------------------------------------------------------------------------
Percentage Variance with Mean % %
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
-32-
<PAGE>
For the multiple reasons cited, MB&D is reluctant to place excessive weight
on conclusions reached employing "Comparable Analysis". The subject
transaction, when comparables are adjusted for changes in the market values of
the acquirers' stock prices from deal announcement dates to May , 2000, is at
a multiple of book value which the mean of the comparison group
by % and is at a multiple of trailing 12 month earnings which is
% the mean of the comparables group.
While MB&D is willing to provide selected data with respect to comparable
transactions for the interest and possible benefit of the reader, we do not
place much weight on consideration of such factors for the reasons discussed
above. MB&D recommends that more weight be given to all of the other factors
considered regardless of whether or not comparable analysis tends to suggest
that a given transaction is favorable or not.
Contribution Analysis
Based on unaudited reported financial data for Fulton Financial and
Skylands as of March 31, 2000, the relative contributions of the parties to the
pro forma Skylands on a pooling basis14 would have been as follows, had the
contemplated transaction been closed as of such date:
Pro Forma Contribution Table
at March 31, 2000 (Pooling Basis)
---------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Item Fulton Financial Skylands
---------------- --------
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Proposed Ownership
- -----------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------
Loans
- -----------------------------------------------------------------------------------------------
Deposits
- -----------------------------------------------------------------------------------------------
Equity
- -----------------------------------------------------------------------------------------------
Tangible Equity
- -----------------------------------------------------------------------------------------------
Estimated Net Income of Combined Company
for Fiscal Year 2000.
- -----------------------------------------------------------------------------------------------
</TABLE>
A reflection of the prospective implicit premium being paid to Skylands
shareholders in this transaction can be found by noting that former shareholders
of Skylands will notionally own ____% of the pro forma outstanding shares of
Fulton Financial while the projected earnings contribution to the combined
entity for the year 2000, will be ____%. Given that the transaction will be
accounted for as a purchase, the actual implicit premium in terms of relative
earnings contribution is greater than this table would suggest. MB&D has not
attempted to create a contribution table based on purchase accounting
adjustments because the information necessary to estimate such adjustments is
not currently available.
- ---------------------
14 The intended accounting convention for this transaction is purchase
accounting notwithstanding the fact that it will be a stock for stock
exchange.
-33-
<PAGE>
Reiteration of Opinion
Based on the foregoing analyses, and the information made available to MB&D
through May _____, 2000, the date of its opinion letter and a date closely
proximate to the date of this proxy statement/ prospectus, MB&D believes that
the exchange ratio is fair, from a financial point of view, to Skylands
shareholders.
Compensation of MB&D
Pursuant to a letter agreement with Skylands dated February 23, 2000, MB&D
will receive a fee that is currently estimated15 to be approximately
$____________. This estimated fee is based on .90% (ninety basis points) of the
expected market value of the shares to be issued to the shareholders of Skylands
and is based on a value for Fulton Financial common stock of $__________ as of
__________ less the $160,000 in fees already paid to MB&D. The fee will be
reduced to the extent that the market value of Fulton Financial common stock
declines between the announcement date and the effective date of the merger and
would increase to the extent that the market value of Fulton Financial common
stock rises between the announcement date and the effective date of the merger.
The fee, all of which is contingent on specific defined events, will be divided
into several payments, which correspond with the successful completion of such
specific events. MB&D was paid $60,000.00 after the execution of the merger
agreement and will be paid an additional $100,000.00 upon issuance of its
opinion that will be included as an exhibit to this proxy statement/prospectus.
Payment of the balance of the fee will be conditioned on closing of the
transaction and the issuance of our updated opinion as of a date within five
days of the closing date and will be based on a valuation of the shares issued
to Skylands shareholders as of point in time close to the effective date.
The fee payable to MB&D represents compensation for services rendered in
connection with the analysis of the transaction, participation in the
negotiations, participation in the drafting of documentation, and for the
rendering of its opinions. In addition, Skylands has agreed to reimburse MB&D
for its reasonable out-of-pocket expenses incurred in connection with the
transaction. Skylands also has agreed to indemnify MB&D and its directors,
officers and employees against certain losses, claims, damages and liabilities
relating to or arising out of its engagement, including liabilities under the
federal securities laws.
Effective Date Of The Merger
The effective date of the merger will occur within 30 days following the
receipt of all regulatory and shareholder approval. Fulton Financial and
Skylands may also mutually agree on a different date. Fulton Financial and
Skylands presently expect that the effective date of the merger will occur in
the third quarter of 2000.
On or prior to the effective date of the merger, Fulton Financial and
Skylands will file articles of merger and a certificate of merger with the
Pennsylvania Department of State and the Office of the Treasurer of the State of
New Jersey, respectively, and each such document will set forth the effective
date of the merger. Either Fulton Financial or Skylands can terminate the
merger agreement if, among other reasons, the merger does not occur on or before
December 31, 2000, and the terminating party has not breached or failed to
perform any of its obligations under the merger agreement. See "-- Termination;
Effect of Termination" on page 38.
Exchange Of Skylands Stock Certificates
No later than five business days after the effective date of the merger,
Fulton Financial will send a transmittal form to each record owner of Skylands
common stock. The transmittal form will contain instructions on how to
surrender certificates representing Skylands common stock for certificates
representing Fulton Financial common stock.
You should not forward Skylands stock certificates until you have received
transmittal forms from Fulton Financial. You should not return stock
certificates with the enclosed proxy card.
- ---------------------------
15 This estimate is based on an exchange ratio of .819 and a market value of
Fulton common stock of $____ on May __, 2000.
-34-
<PAGE>
Until you exchange your certificates representing Skylands common stock,
you will not receive the certificates representing Fulton Financial common stock
into which your Skylands shares have converted or any dividends on the Fulton
Financial shares. When you surrender your Skylands certificates, you will
receive any unpaid dividends without interest. For all other purposes, however,
each certificate which represents shares of Skylands common stock outstanding at
the effective date of the merger will evidence ownership of the shares of Fulton
Financial common stock into which those shares converted as a result of the
merger. Neither Fulton Financial nor Skylands will have liability for any
amount paid in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Conditions To The Merger
The obligations of Fulton Financial and Skylands to complete the merger are
subject to various conditions, which include, among other customary provisions
for transactions of this type, the following:
. approval of the merger agreement by Skylands' shareholders;
. receipt of all required regulatory approvals, including the expiration
or termination of any notice and waiting periods;
. the absence of any action, suit or preceding, pending or threatened,
which seeks to modify, enjoin or prohibit or otherwise adversely and
materially affect the transaction contemplated by the merger
agreement;
. delivery of a tax opinion to each of Fulton Financial and Skylands;
. the absence of any material and adverse change in the condition,
assets, liabilities, business or operations or future prospects of the
other;
. the accuracy in all material respects as of the date of the merger
agreement and as of the effective date of the merger of the
representations and warranties of the other party, except as to any
representation or warranty which specifically relates to an earlier
date and except as otherwise contemplated by the merger agreement;
. the other party's material performance of all its covenants and
obligations; and
. other conditions customary for similar transactions, such as the
receipt of officer certificates and legal opinions.
Except for the requirements of shareholder approval, regulatory approvals
and the absence of any legal action preventing the merger, each of the
conditions described above may be waived in the manner and to the extent
described in "-- Amendment; Waivers" on page 38. As of the date of this proxy
statement/prospectus, Fulton Financial's counsel has delivered the required tax
opinion.
Representations and Warranties
The merger agreement contains customary representations and warranties
relating to:
. the corporate organizations of Fulton Financial, Skylands and Skylands
Community Bank and their respective subsidiaries;
. the capital structures of Fulton Financial and Skylands;
. the approval and enforceability of the merger agreement;
-35-
<PAGE>
. the consistency of financial statements with generally accepted
accounting principles;
. the filing of tax returns and payment of taxes;
. the absence of material adverse changes, since September 30, 1999, in
the condition, assets, liabilities, business or operations of either
Fulton Financial or Skylands, on a consolidated basis;
. the absence of undisclosed material pending or threatened litigation;
. compliance with applicable laws and regulations;
. retirement and other employee plans and matters relating to the
Employee Retirement Income Security Act of 1974;
. the quality of title to assets and properties;
. the maintenance of adequate insurance;
. the performance of material contracts
. the absence of undisclosed brokers' or finders' fees;
. the absence of material environmental violations, actions or
liabilities;
. the consistency of the allowance for loan losses with generally
accepted accounting principles and all applicable regulatory criteria;
. the accuracy of information supplied by Fulton Financial and Skylands
in connection with the Registration Statement filed by Fulton
Financial with the SEC, this proxy statement/prospectus and all
applications filed with regulatory authorities for approval of the
merger; and
. documents filed by Fulton Financial and Skylands with the SEC and the
accuracy of information contained therein.
The merger agreement also contains other representations and warranties by
Skylands relating to:
. transactions between Skylands and certain related parties;
. the filing of all regulatory reports;
. the lack of any regulatory agency proceeding or investigation into the
business or operations of Skylands or any of its subsidiaries; and
. the receipt by the Skylands Board of Directors of a written fairness
opinion.
Business Pending The Merger
Under the merger agreement, Skylands and its subsidiaries agreed to:
. use all reasonable efforts to carry on their respective business in
the ordinary course;
. use all reasonable efforts to preserve their respective business
organizations, to retain the services of their present officers and
employees and to their relationships with customers, suppliers and
others with whom they have business dealings;
-36-
<PAGE>
. maintain all of their structures, equipment and other property in good
repair;
. use all reasonable efforts to preserve or collect all material claims
and causes of action;
. materially perform their obligations under all material contracts;
. maintain their books of account and other records in the ordinary
course of business;
. comply in all material respects with all regulations and laws that
apply;
. not amend their Charter or bylaws;
. not enter into any material contract or incur any material liability
or obligation except in the ordinary course of business;
. not make any material acquisition or disposition of properties or
assets that would exceed $75,000, except for the addition of a new
branch of Skylands Community Bank in Roxbury, New Jersey;
. declare, set aside or pay any dividend or other distribution on its
capital stock, except as otherwise specifically set forth in the
merger agreement (see "Dividends" on page 37);
. not authorize, purchase, redeem, issue or sell any shares of Skylands
common stock or any other equity or debt securities, with the
exception of shares purchased in the open market for distribution
under Skylands' dividend reinvestment plan or the issuance of shares
upon the exercise of outstanding Skylands' options;
. not increase the rate of compensation of, pay a bonus or severance
compensation to, or create or amend employment agreements for any
officer, director, employee or consultant, except as otherwise
required or permitted by the merger agreement, except that they may
grant any pay routine periodic salary increases in accordance with
past practices;
. engage in any merger, acquisition or similar transaction;
. take any action which would result in any of the representations and
warranties becoming untrue;
. implement any new employee benefit or welfare plan, or amend any plan;
or
. enter into, renew, modify or compromise any transaction with any
affiliate of Skylands, unless permitted by the merger agreement.
Dividends
The merger agreement permits Skylands to pay a regular quarterly cash
dividend not to exceed $.03 per share of Skylands common stock outstanding (and
up to $.04 per share if Skylands' results of operations are consistent with the
budget provided to Fulton Financial prior to the date of the merger agreement).
Subject to applicable regulatory restrictions, if any, Skylands Community Bank
may pay cash dividends sufficient to permit payment of the dividends by
Skylands. Neither Skylands nor Skylands Community Bank may pay any other
dividend without the prior written consent of Fulton Financial.
No Solicitation Of Transactions
The merger agreement prohibits Skylands or any of its affiliates or
representatives from:
-37-
<PAGE>
. responding to, soliciting, initiating or encouraging any inquiries
relating to an acquisition of Skylands or its subsidiaries by a party
other than Fulton Financial, or engaging in negotiations with respect
to such a transaction;
. withdrawing approval or recommendation of the merger agreement or the
merger except under limited circumstances concerning a third party's
proposal to acquire Skylands or its subsidiaries;
. approve or recommend a third party's proposal to acquire Skylands or
its subsidiaries; or
. cause Skylands to enter into any kind of agreement with a third party
relating to the third party's proposal to acquire Skylands or its
subsidiaries unless the Skylands Board of Directors determines in good
faith and with the written advice of outside counsel that failure to
do so would be reasonably likely to constitute a breach of its
fiduciary duties and the applicable proposal is superior to Fulton
Financial's acquisition terms.
However, if at any time the Board of Directors of Skylands determines in
good faith, based on the written advice of outside counsel, that failure to
consider a third party's proposal would be reasonably likely to constitute a
breach of its fiduciary duties, Skylands, in response to a written acquisition
proposal that was unsolicited and that is reasonably likely to lead to a better
proposal, may:
. give the third party non-public information relating to Skylands or
its subsidiaries pursuant to a customary confidentiality agreement;
and
. participate in negotiations regarding such proposal. Skylands agreed
to notify Fulton Financial if it receives any inquiries or proposals
relating to an acquisition by a party other than Fulton Financial.
Amendment; Waivers
Subject to any applicable legal restrictions, at any time prior to
completion of the merger, Fulton Financial and Skylands may:
. amend the merger agreement, except that any amendment relating to the
consideration to be received by the Skylands shareholders in exchange
for their shares must be approved by the Skylands shareholders (unless
Skylands' Board of Directors elects to decrease the exchange ratio in
the event the market price of Fulton Financial common stock just
before the merger is greater than $19.24);
. extend the time for the performance of any of the obligations or other
acts of Fulton Financial and Skylands required in the merger
agreement; or
. waive any term or condition in the merger agreement to the extent
permitted by law.
Termination; Effect Of Termination
Fulton Financial and Skylands may terminate the merger agreement at any
time prior to completion of the merger by mutual written consent.
Either Fulton Financial or Skylands may terminate the merger agreement at
any time prior to completion of the merger, if any condition precedent to its
obligations under the merger agreement remains unsatisfied as of December 31,
2000 through no fault of its own. In addition, either party may terminate the
merger agreement if there has been a material breach by the other party of a
representation in the merger agreement and such breach has not been cured within
thirty days after written notice of such breach has been given.
-38-
<PAGE>
Fulton Financial alone may terminate the merger agreement at any time prior
to completion of the merger if the Board of Directors of Skylands, acting in
good faith and consistent with its fiduciary duties, takes certain actions in
connection with an acquisition of Skylands by a party other than Fulton
Financial, which it believes is more favorable to Skylands' shareholders.
Fulton Financial may terminate the merger agreement if the price of Fulton
Financial common stock just before the merger is greater than $19.24. However,
Skylands may cause Fulton Financial to amend the merger agreement to decrease
the exchange ratio, eliminating Fulton Financial's right to terminate.
Specifically, the current conversion ratio of .819 would be multiplied by the
ceiling price ($19.24) and divided by the actual closing price. The product of
this calculation equals the new, reduced exchange ratio.
Similarly, Skylands may terminate if the price of Fulton Financial common
stock just before the merger is less than $13.09. Fulton Financial may cause
the merger agreement to be amended to increase the exchange ratio, eliminating
Skylands' right to terminate under this provision. Specifically, the current
exchange ratio of .819 would be multiplied by the floor price ($13.09) and
divided by the actual closing price. The product of this calculation equals the
new, increased exchange ratio.
In the event that either Fulton Financial or Skylands terminates the merger
agreement, neither Fulton Financial nor Skylands will have any continuing
liability or obligation other than the obligation dealing with confidentiality
and any liabilities resulting from a breach by the other of a material term or
condition of the merger agreement.
Management And Operations After The Merger
The Board of Directors and executive officers of Fulton Financial and its
subsidiaries will not change as a result of the merger.
On the effective date of the merger and for a period of three years
thereafter, Fulton Financial has agreed to maintain Skylands Community Bank as a
subsidiary under the same name and to allow the current directors of Skylands
Community Bank to continue to serve. Fulton Financial may shorten the three
year period due to regulatory considerations, safe banking practices, exercise
of the Fulton's directors' fiduciary duties or as a result of Fulton Financial's
acquisition of a larger institution in Warren, Sussex or Morris Counties or in a
county contiguous to those counties.
Employee Benefits And Severance Benefits
Employee Benefits
-----------------
For a period of three years from the effective date of the merger,
Skylands' subsidiaries will continue to provide its employees with benefits that
are substantially equivalent, in the aggregate, to those currently received by
its employees. Only Skylands' employees at the effective time of the merger are
entitled to these benefits.
Fulton Financial agreed that, following the merger, it will:
. use its best efforts to retain each full-time Skylands' employee in
his or her current position or a similar position;
. continue to pay such employees compensation that, overall, is
equivalent to what they received before the merger;
. employ Skylands' employees (who did not have an employment contract
with Skylands) on at "at-will" basis; and
. employ Skylands' employees who had contracts with Skylands according
to the terms of their contracts.
-39-
<PAGE>
Severance Benefits
------------------
Fulton Financial will provide severance pay to any employee of Skylands as
of the effective date of the merger whose employment is terminated other than
for unsatisfactory performance as follows:
. if employment is terminated on or before the one year anniversary of
the merger's effective date, an employee will receive one week's
salary plus an additional week's salary for each year of service with
Skylands.
. if employment is terminated thereafter the employee will receive
severance benefits in accordance with the then existing severance
policy of Skylands Community Bank.
Accounting Treatment
Fulton Financial will use the purchase method of accounting to account for
the merger. In general, the purchase method of accounting accounts for a
business combination as the acquisition of one company by another. Purchase
accounting requires Fulton Financial to allocate the purchase price and costs of
the acquisition to all of Skylands' assets and liabilities, based on their
estimated fair value at the acquisition date. If the purchase price exceeds the
estimated fair value of Skylands' net assets, Fulton Financial must record the
excess as goodwill and then amortize it as an expense over its estimated life.
Skylands' earnings or losses will be included in Fulton Financial's financial
statements only prospectively from the date of the merger.
Material Federal Income Tax Consequences
To complete the merger, Fulton Financial and Skylands must receive an
opinion of Barley, Snyder, Senft & Cohen, LLC, counsel to Fulton Financial, that
the merger will qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, and that Fulton Financial and Skylands will each
be a party to the reorganization within the meaning of Section 368(b) of the
Code.
In the opinion of Barley, Snyder, Senft & Cohen, LLC, the material federal
income tax consequences of the merger will be as follows:
. Fulton Financial and Skylands will not recognize gain or loss in the
merger;
. Skylands' shareholders will not recognize any gain or loss upon
receipt of Fulton Financial common stock in exchange for Skylands
common stock, except shareholders who receive cash proceeds for
fractional interests will recognize gain or loss equal to the
difference between such proceeds and the tax basis allocated to their
fractional share interests, and such gain or loss will constitute
capital gain or loss if the shareholders held their Skylands common
stock as a capital asset at the effective date of the merger;
. the tax basis of shares of Fulton Financial common stock (including
fractional share interests) Skylands' shareholders receive in the
merger will be the same as the tax basis of their shares of Skylands
common stock; and
. the holding period of the Fulton Financial common stock Skylands'
shareholders receive in the merger will include the holding period of
their shares of Skylands common stock, provided that they hold their
Skylands common stock as a capital asset at the time of the merger.
This is not a complete description of all the federal income tax
consequences of the merger and, in particular, does not address tax
considerations that may affect the treatment of shareholders who acquired their
Skylands common stock pursuant to the exercise of employee stock options or
otherwise as compensation, or shareholders which are exempt organizations or who
are not citizens or residents of the united states. Each shareholder's
individual circumstances may affect the tax consequences of the merger to such
shareholder. In addition, no information is provided herein with respect to the
tax consequences of the merger under applicable
-40-
<PAGE>
state, local, or foreign laws. Accordingly, you are advised to consult a tax
advisor as to the specific tax consequences of the merger to you.
Expenses
Fulton Financial and Skylands will each pay all their respective costs and
expenses, including fees and expenses of financial consultants, accountants and
legal counsel, except that Fulton Financial will bear the cost of printing and
mailing this proxy statement/prospectus.
Resale Of Fulton Financial Common Stock
The Fulton Financial common stock issued in the merger will be freely
transferable under the Securities Act of 1933 except for shares issued to any
Skylands shareholder who is an "affiliate" for purposes of SEC Rule 145. Each
director and executive officer of Skylands will enter into an agreement with
Fulton Financial providing that, as an affiliate, he or she will not transfer
any Fulton Financial common stock received in the merger except in compliance
with the securities laws. This proxy statement/prospectus does not cover
resales of Fulton Financial common stock received by any affiliate of Skylands
or Fulton Financial.
No Dissenters' Rights Of Appraisal
Holders of shares of Skylands common stock will not be entitled to
dissenters' rights of appraisal under New Jersey corporate law in connection
with the matters to be acted on at the annual meeting.
Dividend Reinvestment Plan
Fulton Financial currently maintains a dividend reinvestment plan. This
plan provides shareholders of Fulton Financial with a simple and convenient
method of investing cash dividends, as well as voluntary cash payments, in
additional shares of Fulton Financial common stock without payment of any
brokerage commission or service charge. Fulton Financial expects to continue to
offer this plan after the effective date of the merger, and shareholders of
Skylands who become shareholders of Fulton Financial will be eligible to
participate in the plan.
Financial Interests Of Directors And Officers
Certain members of management of Skylands and Skylands Community Bank, and
their Boards of Directors, may have interests in the merger in addition to their
interests as shareholders of Skylands. The Skylands Board of Directors was
aware of these factors and considered them, among other matters, in approving
the merger agreement.
Stock Options
-------------
As of the record date, the directors and executive officers of Skylands
beneficially own approximately 592,500 shares of Skylands common stock, and hold
options to purchase approximately 120,700 shares of Skylands common stock. On
the effective date of the merger, each option will convert into an option to
acquire Fulton Financial common stock. The number of shares of Fulton Financial
common stock issuable upon the exercise of the converted option will equal the
number of shares of Skylands common stock covered by the option multiplied by
.819, and the exercise price for a whole share of Fulton Financial common stock
will be the stated exercise price of the option divided by .819. Shares
issuable upon the exercise of options to acquire Fulton Financial common stock
will be issuable in accordance with the terms of the respective plans and grant
agreements of Skylands under which Skylands issued the options.
Directors And Officers Insurance
--------------------------------
Fulton Financial has agreed to provide Skylands' existing directors and
officers with coverage under a "tail" liability insurance policy for a period of
three years after the effective date, subject to certain maximum cost limits.
-41-
<PAGE>
Employment And Other Agreements
-------------------------------
Mr. Michael Halpin, President and Chief Executive Officer, Mr. Dan E.
Marcmann, Senior Vice President and Treasurer, Mr. Bruce L. Schott, Senior Vice
President and Senior Loan Officer, and Mr. Edward Poolas, Senior Vice President
and Credit Administrator, each either amended an existing employment agreement,
or entered into a new employment agreement, with Skylands Community Bank as of
February 23, 2000.
Mr. Halpin's agreement provides that he will be employed for a renewable
three year term, and Messrs. Marcmann, Schott and Poolas are each employed for
renewable one year terms. Each of the agreements provides that if an executive
is terminated, or if there is a constructive termination of such executive (such
as a material reduction in duties and responsibilities without cause, a
relocation of the executive's principal place of employment greater than 20
miles from his present location, or a reduction in base compensation to less
than current salary without cause), severance payments for that executive will
be due in such event.
In such event, Mr. Halpin would receive a severance payment of 2.99 times
his annual salary in effect at the time of his termination, and each of Messrs.
Marcmann, Schott and Poolas would receive a severance payment of one year's
salary as in effect at the time of his termination.
Warrant Agreement and Warrant
General
-------
In connection with the merger agreement, Skylands executed a warrant
agreement dated February 24, 2000 which permits Fulton Financial to purchase
Skylands common stock under certain circumstances.
Under the warrant agreement, Fulton Financial received a warrant to
purchase up to 625,000 shares of Skylands common stock. This number represents
approximately 19.9% of the issued and outstanding shares of Skylands common
stock on February 24, 2000 taking into consideration the shares issuable under
the warrant. The exercise price per share to purchase Skylands common stock
under the warrant is $10.25, subject to adjustment. The warrant is only
exercisable upon one of the specified events that trigger exercise of the
warrant. These triggering events are described below. None of the triggering
events have occurred to the best of Fulton Financial's or Skylands' knowledge as
of the date of this proxy statement/prospectus.
Effect of Warrant Agreement
---------------------------
The warrant agreement, together with Skylands' agreement to not solicit
other transactions relating to the acquisition of Skylands by a third party, may
have the effect of discouraging other persons from making a proposal to acquire
Skylands.
Certain attempts to acquire Skylands or an interest in Skylands would cause
the warrant to become exercisable as described above. Fulton Financial's
exercise of the warrant would significantly increase a potential acquirer's cost
of acquiring Skylands compared to the cost that would be incurred without the
warrant agreement.
Terms of Warrant Agreement
--------------------------
The following is a brief summary of the material provisions of the warrant
agreement. A complete copy of the warrant agreement and warrant is included as
Exhibit B to this proxy statement/prospectus. Fulton Financial and Skylands
urge you to read it carefully.
The warrant is exercisable only upon the occurrence of one of the following
events:
. if Skylands breaches any covenant in the merger agreement which would
permit Fulton Financial to terminate the merger agreement as provided
therein and which occurs following a third party's proposal to merge
with or acquire all or substantially all of the assets of Skylands or
one of its subsidiaries, or to acquire 25% or more of the voting power
of Skylands or one of its subsidiaries;
-42-
<PAGE>
. if Skylands' shareholders fail to approve the merger and, at the time
of the shareholders' meeting, a third party proposal to merge with or
acquire Skylands has been announced;
. if a person other than Fulton Financial acquires 25% or more of
Skylands common stock;
. if a person or group, other than Fulton Financial, enters into an
agreement or letter of intent with Skylands to merge or consolidate
with Skylands, to acquire all or substantially all of the assets or
liabilities of Skylands or one of its subsidiaries, or to acquire
beneficial ownership of 25% or more of the voting power of Skylands or
one of its subsidiaries;
. if a person or group, other than Fulton Financial, commences a tender
offer or exchange offer and within six months consummates a merger
with or acquisition of Skylands or one of its subsidiaries; or
. Fulton Financial terminates the merger agreement because Skylands'
board takes certain actions inconsistent with Fulton's acquisition of
Skylands.
If the warrant becomes exercisable, Fulton Financial may exercise the
warrant by presenting the warrant to Skylands along with:
. a written notice of exercise; and
. payment to Skylands of the exercise price for the number of shares
specified in the notice of exercise; and
. a certificate specifying the events which have occurred which cause
the warrant to be exercisable.
The warrant terminates on the earlier of:
. the effective date of the merger; or
. termination of the merger agreement in accordance with its terms
(other than a termination by Fulton Financial caused by Skylands'
board taking action), except that if one of the events described above
which causes the warrant to be exercisable occurs prior to termination
of the merger agreement, the warrant shall not terminate until twelve
months thereafter; or
. if the warrant has not previously been exercised within twelve months
after the occurrence of one of the events described above which causes
the warrant to be exercisable.
In the event of any change in Skylands common stock by reason of stock
dividends, split-ups, recapitalizations, combinations, conversions, divisions,
exchanges of shares or the like, the number and kind of shares issuable under
the warrant are adjusted appropriately.
Under the warrant agreement, Fulton Financial has the right to require
Skylands to repurchase the warrant or, in the event the warrant has been
exercised in whole or in part, redeem the shares obtained upon such exercise.
In the case of a repurchase of shares obtained upon exercise of the warrant, the
redemption price per share is to be equal to the highest of: (i) 110% of the
exercise price, (ii) the highest price paid or agreed to be paid for any share
of common stock by an acquiring person (defined as any person who or which is
the beneficial owner of 25% or more of the Skylands common stock) during the one
year period immediately preceding the date of redemption, and (iii) in the event
of a sale of all or substantially all of Skylands' assets: (x) the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Skylands as determined by a recognized investment banking
firm selected by Fulton Financial, divided by (y) the number of shares of
Skylands common stock then outstanding. If the price paid consists in whole or
in part of securities or assets other than cash, the value of such securities or
assets shall be their then current market value as determined by a recognized
investment banking firm selected by Fulton Financial.
-43-
<PAGE>
In the case of a repurchase of the warrant, the redemption price is to be
equal to the product obtained by multiplying: (i) the number of shares of
Skylands common stock represented by the portion of the warrant that Fulton
Financial is requiring Skylands to repurchase, times (ii) the excess of the
redemption price over the exercise price.
Skylands granted Fulton Financial the right to request registration under
the Securities Act of 1933 for the shares of Skylands common stock which are
issuable upon exercise of the warrant.
INFORMATION ABOUT FULTON FINANCIAL
General
Financial and other information relating to Fulton Financial, including
information relating to Fulton Financial's directors and executive officers, is
incorporated herein by reference. See "WHERE YOU CAN FIND MORE INFORMATION" on
page 58.
Fulton Financial declared a 5% stock dividend payable on May 31, 2000 to
shareholders of record on May 8, 2000. All amounts relating to Fulton
Financial's common stock in this proxy statement/prospectus have been restated
to reflect this stock dividend.
Market Price Of And Dividends On Fulton Financial Common Stock And Related
Shareholder Matters
The Fulton Financial common stock trades on the NASDAQ National Market
under the symbol "FULT". As of December 31, 1999, Fulton Financial had 15,696
shareholders of record. The table below shows for the periods indicated the
amount of dividends paid per share and the quarterly ranges of high and low
sales prices for Fulton Financial common stock as reported by the NASDAQ
National Market. Stock price information does not necessarily reflect mark-ups,
mark-downs or commissions. Per share amounts have been retroactively adjusted
to reflect the effect of stock dividends declared.
<TABLE>
<CAPTION>
Price Range Per-Share Per-Share
High Low Dividend
--------------------- --------
<S> <C> <C> <C>
2000
- --------------------------------------------------------------------------------------------------
First Quarter $20.06 $15.18 $0.143
Second Quarter (through _______________, 2000)
1999
- --------------------------------------------------------------------------------------------------
First Quarter 19.91 17.32 $0.130
Second Quarter 20.60 18.45 0.143
Third Quarter 20.06 17.86 0.143
Fourth Quarter 19.58 16.37 0.143
1998
- --------------------------------------------------------------------------------------------------
First Quarter 22.95 20.61 $0.119
Second Quarter 26.03 20.61 0.125
Third Quarter 22.84 16.99 0.130
Fourth Quarter 19.91 15.58 0.130
</TABLE>
On February 22, 2000, the last business day preceding public announcement
of the merger, the last sale price for Fulton Financial common stock was $15.36
per share. On ____________, 2000, the last sale price for the Fulton Financial
common stock was $______ per share. The average weekly trading volume for
Fulton Financial common stock during the quarter ended March 31, 2000 was
473,000 shares.
For certain limitations on the ability of Fulton Financial's subsidiaries
to pay dividends to Fulton Financial, see Fulton Financial's Annual Report on
Form 10-K for the year ended December 31, 1999, which is incorporated herein by
reference. See "WHERE YOU CAN FIND MORE INFORMATION" on page 58.
-44-
<PAGE>
Indemnification
The Bylaws of Fulton Financial provide for indemnification of its
directors, officers, employees and agents to the fullest extent permitted under
the laws of the Commonwealth of Pennsylvania, provided that the person seeking
indemnification acted in good faith, in a manner he or she reasonably believed
to be in the best interests of Fulton Financial, and without willful misconduct
or recklessness. Fulton Financial has purchased insurance to indemnify its
directors, officers, employees and agents under certain circumstances.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Fulton
Financial pursuant to the foregoing provisions of Fulton Financial's Bylaws,
Fulton Financial has been informed that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is therefore unenforceable.
INFORMATION ABOUT SKYLANDS
General
Skylands is a New Jersey corporation organized in February, 1999 at the
direction of the Board of Directors of Skylands Community Bank for the purpose
of acquiring all the capital stock of Skylands Community Bank and thereby
becoming a bank holding company. The only significant asset of Skylands
Financial is its investment in Skylands Community Bank. Skylands' main office is
located at 176 Mountain Avenue, Hackettstown, New Jersey 07840.
Skylands Community Bank is a commercial bank formed under the laws of New
Jersey on May 17,1989. The bank commenced operations on October 9, 1990.
Skylands Community Bank operates from its main office at 176 Mountain Avenue,
Hackettstown, New Jersey and eight branch offices located in Warren, Sussex and
Morris Counties, New Jersey. The bank engages in the general business of
commercial banking and offers traditional deposit services such as checking,
savings and certificates of deposit. For its commercial customers, the bank
offers loans for equipment, working capital needs and commercial real estate as
well as New Jersey Economic Development Authority and Small Business
Administration loans. The bank also bids for tax anticipation notes and bond
anticipation notes. In consumer lending, the bank offers personal, automobile,
credit card, home equity and home improvement loans and makes one-to-four family
residential real estate loans available for its customers.
As of December 31, 1999, Skylands' common stock was held by approximately
695 holders of record.
Competition
Skylands Community Bank believes it offers competitive rates for its
deposit and loan services, thereby enabling consumers and business entities in
its service areas to avail themselves of the bank's credit and non-credit
services. The bank structures its specific services and charges in a manner
designed to attract the business of small and medium-sized businesses and the
professional community, as well as that of individuals, in the Sussex County,
Warren County and Morris County, New Jersey area. As a general rule, specific
banking services are offered only on a basis believed to be profitable. Such
services are charged for fully unless other aspects of the account relationship
provide sufficient earnings to offset the cost of the services provided.
Skylands Community Bank believes it offers competitive rates for its services,
thereby enabling consumers and business entities in its service area to avail
themselves of the bank's credit and non-credit services. The bank is fully
computerized and uses the data processing services of The National Bank of
Sussex County. All bank departments are automated, and Skylands Community Bank
believes that the data processing services available to bank customers compare
favorably with those of competing financial institutions. Skylands Community
Bank is also a member of the MAC Money Access Service, a regional automated
teller network system.
Skylands Community Bank competes with commercial banks, savings banks and
savings and loan associations, some of which have assets, capital and lending
limits (ceilings on the amount of credit a bank may provide a single customer
that are linked to the institution's capital) greater than it. There are
approximately eleven such institutions in it's services area. Skylands
Community Bank competes both in attracting deposits and
-45-
<PAGE>
borrowers with these institutions, as well as with regional and national
insurance companies and non- bank banks, with regulated small loan companies and
local credit unions, and with regional and national issuers of money market
funds. In addition to having established deposit bases and loan portfolios, some
of these institutions, particularly the large regional commercial and savings
banks, have the ability to finance extensive advertising campaigns and to
allocate considerable resources to locations and products perceived as
profitable. Significantly, these institutions have larger lending limits and, in
certain cases, lower funding costs (the price a bank must pay for deposits and
other borrowed monies used to make loans to customers). Many of these
institutions also offer certain services, such as trust services, which are not
currently offered by Skylands Community Bank. Skylands Community Bank has sought
to offer an alternative, community-oriented style of banking in an area which at
present is mainly dominated by these larger, statewide institutions. Skylands
Community Bank has sought to be a positive force by assisting in the development
of the residential sector, by serving the needs of small and medium-sized
businesses and the local professional community, and by meeting the requirements
of individuals residing, working and shopping in the bank's service areas by
extending consumer loans and by offering depository services. Skylands Community
Bank believes that the following attributes of the bank have made the bank
attractive to local business people and residents:
. Competitively priced services;
. Direct and easy access to management by members of the community,
whether during or after business hours;
. Local conditions and needs are taken into account when reviewing loan
applications and making other business decisions affecting members of
the community;
. Responsiveness of personnel for requests for information and services
by depositors and others;
. Depositors' funds are invested in the community; and
. Positive involvement of the bank in the community affairs of Sussex,
Warren and Morris Counties.
Employees
As of March 9, 2000, Skylands Community Bank had 60 full time employees and
12 part time employees. Skylands Community Bank's employees are not members of
any collective bargaining group.
Market Price Of And Dividends On Skylands Common Stock And Related Shareholder
Matters
The Skylands common stock trades on the NASDAQ Small Cap Market under the
symbol "SKCB". As of May 10, 2000, there were approximately 695 shareholders of
record. The table below sets forth for the periods indicated the amount of
dividends declared per share and the quarterly ranges of high and low bid quotes
as reported on the NASDAQ Small Cap Market for the periods indicated. Such
prices do not necessarily reflect mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
Price Range Per-Share Per-Share
High Low Dividend
--------------------- --------
<S> <C> <C> <C>
2000
- --------------------------------------------------------------------------------------------------
First Quarter 14.38 9.63 .04
Second quarter (through _______, 2000)
1999
- --------------------------------------------------------------------------------------------------
First Quarter 12.75 10.50 .03
Second Quarter 13.63 11.63 .03
Third Quarter 12.25 9.75 .02
Fourth Quarter 12.63 9.63 .02
</TABLE>
-46-
<PAGE>
<TABLE>
<S> <C> <C> <C>
1998
- -----------------------------------------------------------------------------------------------
First Quarter 14.29 12.38
Second Quarter 16.08 12.68 .03
Third Quarter 16.90 11.55
Fourth Quarter 12.98 10.71 .03
</TABLE>
On February 22, 2000, the last business day preceding public announcement
of the merger, the last sale price for Skylands common stock was $10.25 per
share. On ____________, 2000, the last sale price for Skylands common stock was
$_______ per share. The average weekly trading volume for the Skylands common
stock during the quarter ended March 31, 2000 was approximately 37.322 shares.
The merger agreement permits Skylands to pay a regular quarterly cash
dividend not to exceed $.03 per share of Skylands common stock outstanding (and
up to $.04 per share if Skylands' results of operations are consistent with the
budget provided to Fulton Financial prior to the date of the merger agreement).
Skylands' ability to continue to pay dividends may be dependent upon its
receipt of dividends from Skylands Community Bank. See Skylands' Annual Report
to Shareholders for the fiscal year ended December 31, 1999, which accompanies
this proxy statement/prospectus. See "WHERE YOU CAN FIND MORE INFORMATION" on
page __.
Information Regarding Nominees For Directors of Skylands
Skylands' bylaws currently authorize eleven directors. There are eleven
directors to be elected, three of whom will serve until the annual meeting of
Skylands to be held in 2001 (these directors are marked in the table below by an
"*"), four of whom will serve until the annual meeting of Skylands to be held in
2002 (these directors are marked in the table below by an ("**"), and four of
whom will serve until the annual meeting of Skylands to be held in 2003 (these
directors are marked in the table below by an "***"). Each nominee named below
is presently a director of Skylands. Each nominee has been a director of the
Skylands Community Bank since its inception, except for Michael Halpin, who
became a director in 1995 and Norman Worth, who became a director in 1997.
Unless authority to so vote is withheld, it is intended that the proxies
solicited by the Board of Directors from the shareholders will be voted in favor
of electing the nominees listed below:
<TABLE>
<CAPTION>
Positions and Offices Principal Occupations
Name Age Held with Skylands For Past Five Years
---- --- ------------------ -------------------
<S> <C> <C> <C>
Norman S. Baron** 54 Director and Secretary President and Chief Executive Officer
Baron's Hallmark Shops.
James L. Cochran** 70 Director Owner and President of Cochran Funeral
Home, Inc. (retired).
Daniel M. DiCarlo, Jr.* 61 Director President and Chief Executive Officer of
Area Lighting Research, Inc.; President and
Chief Executive Officer of East Rock
Manufacturing & Technology, Inc. and Bolt
Electric Inc.; Partner in Asbury Leasing
Co. and NUJA Realty Co.; Secretary and
Treasurer of WOJO Inc.
</TABLE>
-47-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Michael Halpin*** 57 Director, President and Currently President and Chief
Chief Executive Officer Executive Officer of Skylands Community
Bank; August 1990 to May 1995, President and
Chief Executive Officer of Lakeland Savings
Bank and Lakeland First Financial Group,
Inc.
Ralph C. Knechel** 73 Director President of Knechel Ford (retired).
J. William Noeltner*** 63 Director and Vice Chairman Chairman of Insurance & Risk Managers, Inc.
(division of Traber and Vreeland, Inc.);
President, Skylands Investment Corp.
Denis H. O'Rourke*** 59 Director and Chairman President of Skylands Development Group,
Inc.
Paul J. Pinizzotto** 52 Director Senior Vice President of The Vizzoni Group
(real estate development).
Dominick V. Romano*** 65 Director Vice President and Chief Executive Officer
of RoNetco Supermarkets, Inc.; Chairman of
Readington Farms Inc.; Director of Wakefern
Food Corporation; Partner in P&D Realty and
PECD Realty.
Mark F. Strauss* 48 Director Corporate Counsel for Applied Wastewater
Technology, Inc.; General Counsel to VBCC,
Inc. (formerly Vizzoni Bros. Construction
Co.); Of Counsel to Mauro, Savo, Camerino &
Grant (law firm).
Norman Worth* 48 Director Partner, Vice President and General Manager
of Radio New Jersey (parent company of
WRNJ); Partner in Tri-Caps
(telecommunications).
</TABLE>
Certain Legal Proceedings
None of the directors of Skylands has been involved in a legal
proceeding or event during the last five years which the federal securities laws
require to be disclosed.
Family Relationships
Skylands is not aware of any family relationships among the directors and
officers of Skylands.
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<PAGE>
Other Directorships
None of the directors of Skylands is a director (or has been nominated
to become a director) of any company with a class of securities registered under
Section 12 of the Securities Exchange Act of 1934 or subject to the requirements
of Section 15(d) of such Act or any company registered as an investment company
under the Investment Company Act of 1940, other than Skylands.
Reports of Beneficial Ownership
The federal securities laws require Skylands' directors and officers
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of any equity securities of Skylands. To
Skylands' knowledge, all the other directors and officers of the bank filed the
required reports on a timely basis.
Security Ownership Of Certain Beneficial Owners And Management of Skylands
The following table sets forth, as of January 1, 2000, information
with respect to Skylands' common stock ownership of each person known by
Skylands to own beneficially more than 5% of the shares of Skylands' common
stock, and the beneficial ownership of all directors individually and all
officers and directors as a group:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Name # Shares of # Shares of # Options Total % of Total
Common Stock Common Stock Exercisable Common Stock
Owned Directly Owned Within 60 Days Outstanding
Indirectly (see of January 1, (2,533,889
notes below) 2000 shares)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Norman S. 13,719 51,791 3,366 68,876 2.59
Baron (1)
- ----------------------------------------------------------------------------------------------------------------------------------
James L. 7,842 15,941 5,103 28,886 0.94
Cochran (2)
- ----------------------------------------------------------------------------------------------------------------------------------
Daniel M. 14,952 770 3,366 19,088 0.62
DiCarlo, Jr. (3)
- ----------------------------------------------------------------------------------------------------------------------------------
Michael Halpin 32,530 -0- 59,910 92,440 1.28
- ----------------------------------------------------------------------------------------------------------------------------------
Ralph C. 17,983 15,648 5,103 38,734 1.33
Knechel (4)
- ----------------------------------------------------------------------------------------------------------------------------------
J. William 44,495 34,500 5,103 84,098 3.12
Noeltner (5)
- ----------------------------------------------------------------------------------------------------------------------------------
Denis H. 225 32,155 4,524 36,904 1.28
O'Rourke (6)
- ----------------------------------------------------------------------------------------------------------------------------------
Paul J. 2,262 36,198 3,366 41,826 1.52
Pinizzotto (7)
- ----------------------------------------------------------------------------------------------------------------------------------
Dominick V. 5,865 224,210 3,366 233,441 9.08
Romano (8)
- ----------------------------------------------------------------------------------------------------------------------------------
Mark F. Strauss 5,458 600 4,524 10,582 0.24
(9)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Norman Worth 5,050 -0- 3,366 8,416 0.20
- ----------------------------------------------------------------------------------------------------------------------------------
Principal 2,260 3,189 19,639 25,088 0.22
officers
- ----------------------------------------------------------------------------------------------------------------------------------
Directors and 152,641 415,002 120,736 688,379 22.40
principal
officers as a
group (13
persons)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
(1)Norman S. Baron Of the 51,791 shares, 25,584 are jointly held with his wife, 259 are held solely by his wife, 21,030
are held by Trust Company of America MMP, 4,020 are held by Trust Company of America Profit Sharing
Plan and 898 are held by a daughter in a trust for which Mr. Baron's wife is the trustee (and to which
Mr. Baron disclaims beneficial ownership).
- -----------------------------------------------------------------------------------------------------------------------------------
(2)James L. Cochran The 15,941 shares represent shares held jointly with Mr. Cochran's wife.
- -----------------------------------------------------------------------------------------------------------------------------------
(3)Daniel M. DiCarlo, Jr. The 770 shares represent shares held by Mr. DiCarlo's immediate family.
- -----------------------------------------------------------------------------------------------------------------------------------
(4)Ralph Knechel The 15,648 shares represent 10,398 shares owned by Mr. Knechel's wife (and to which he disclaims
beneficial ownership) and 5,250 shares held in an IRA.
- -----------------------------------------------------------------------------------------------------------------------------------
(5)J. William Noeltner The 34,500 shares represent shares held in an IRA and held by Skylands Investment Corp., an entity
unrelated to the Company of which Mr. Noeltner is the sole owner.
- -----------------------------------------------------------------------------------------------------------------------------------
(6)Denis H. O'Rourke The 32,155 shares represent shares owned by Mr. O'Rourke's wife (and to which Mr. O'Rourke disclaims
beneficial ownership).
- -----------------------------------------------------------------------------------------------------------------------------------
(7)Paul J. Pinizzotto The 36,198 shares represent 35,403 shares owned by P. Pinizzotto Investment, L.P. (an entity in which
Mr. Pinizzotto owns a 99.5% interest), and 795 shares held in an IRA.
- -----------------------------------------------------------------------------------------------------------------------------------
(8)Dominick V. Romano The 224,210 shares represent 155,053 shares owned by RoNetco Supermarkets, Inc., of which Mr. Romano is
one of the owners, 48,242 shares held jointly with Mr. Romano's wife, and 20,915 shares held by other
members of Mr. Romano's family (and to which Mr. Romano disclaims beneficial ownership).
- -----------------------------------------------------------------------------------------------------------------------------------
(9)Mark F. Strauss The 600 shares represents shares owned by Mr. Strauss' father.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Compensation Of Directors And Principal Officers
The following table sets forth the compensation paid during the last three
fiscal years to Skylands Community Bank's chief executive officer and to each of
Skylands Community Bank's four highest paid executive officers earning over
$100,000 during fiscal year 1999. The following table does not include
directors' fees.
-50-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Name and Annual Securities
Principal Compensation Underlying All Other
Position Year Salary($) Bonus($) Options(#) Compensation($)
- -------- ---- --------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Michael Halpin, President 1999 $189,045 $30,000 0 $8,070(1)
and Chief Executive 1998 $176,628 $30,000 0 $8,013(1)
Officer 1997 $176,631 $30,000 114,056 $7,180(1)
Dan Marcmann, Senior VP 1999 $ 89,786 $14,000 0 $1,346(2)
and Treasurer 1998 $ 87,171 $14,000 0 $1,296(2)
Bruce Schott, Senior VP 1999 $ 89,094 $14,000 0 $1,837(3)
1998 $ 86,355 $14,000 0 $1,727(3)
</TABLE>
- ----------
(1) Represents $1,617, $1,560 and $1,527 received in 1999, 1998 and 1997,
respectively, pursuant to Skylands Community Bank's matched savings plan,
matching contributions to the 401(k) plan of $5,600, $5,600 and $4,800 in
each of 1999, 1998 and 1997, respectively, and $853, $853 and $853 in
insurance premiums paid in 1999, 1998 and 1997, respectively, by Skylands
Community Bank with respect to term life insurance maintained for the
benefit of Mr. Halpin.
(2) Represents $892 and $866 received in 1999 and 1998, respectively, pursuant
to Skylands Community Bank's matched savings plan, and $454 and $430 in
insurance premiums paid in 1999 and 1998, respectively, by Skylands
Community Bank with respect to term life insurance maintained for the
benefit of Mr. Marcmann.
(3) Represents $892 and $866 received in 1999 and 1998, respectively, pursuant
to Skylands Community Bank's matched savings plan, and $945 and $861 in
insurance premiums paid in 1999 and 1998, respectively, by Skylands
Community Bank with respect to term life insurance maintained for the
benefit of Mr. Marcmann.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
The following table sets forth for the named executive officers of
Skylands, the number of unexercised options held at December 31, 1999 and the
potential value thereof based on the closing per share sales price of the
Skylands' common stock of $11.00 on December 31, 1999.
-51-
<PAGE>
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money Options
Options Options
at FY-End (#) at FY-End ($)(1)
Shares Acquired Value Exercisable(E)/ Exercisable(E)/
Name on Exercise (#) Realized ($) Unexercisable(U) Unexercisable(U)
---- --------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Michael Halpin, President and 20,000 106,660 59,910 (E) $196,823 (E)
Chief Executive Officer 80,328 (U) $240,350 (U)
Dan E. Marcmann 19,639 (E) $ 73,384 (E)
Treasurer 8,847 (U) $ 7,479 (U)
Bruce L. Schott 19,639 (E) $ 73,384 (E)
Senior Vice President 8,847 (U) $ 7,479 (U)
</TABLE>
- ------------------------
(1) Value based on actual closing per share sales price of Skylands' common
stock of $11.00 on December 31, 1999.
Transactions with Certain Related Persons
Skylands Community Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with its directors and officers
(and to entities associated with such persons). Management believes that these
transactions were on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the same time for comparable
transactions with other persons of similar creditworthiness, and did not involve
more than a normal risk of collectibility or present other unfavorable features.
Meetings of Skylands' Board of Directors and Committees'
The Board of Directors of Skylands held 12 regular meetings during fiscal
year 1999. Directors (other than the Chairman of the Board) received an annual
retainer of $2,500, and a fee of $500 for each meeting of the Board of Directors
they attend, and a fee of $300 for each meeting they attend of any committee of
the Board of Directors on which they serve. In 1999, the Chairman of the Board,
Denis H. O'Rourke, received an annual retainer of $40,000 in lieu of directors'
fees. In 2000, the Chairman of the Board will receive an annual retainer of
$40,000 in lieu of directors' fees.
The Board of Directors has established from among its members an Executive
Committee, an Audit Committee, and a Compensation and Benefits Committee. The
Audit Committee arranges for Skylands' directors examinations through its
independent certified public accountant, reviews and evaluates the
recommendations of the directors examinations, receives all reports of
examination of Skylands and Skylands Community Bank by regulatory agencies,
analyzes such reports, and reports to Skylands' Board the results of its
analysis of the regulatory reports. The members of the Audit Committee are
Dominick V. Romano (Chairman), Denis H. O'Rourke, Mark F. Strauss and Norman
Worth. During 1999, the Audit Committee held 4 meetings.
The Compensation and Benefits Committee reviews and recommends to the Board
of Directors the level of compensation of the officers of Skylands, as well as
employee benefits. The members of the Compensation and Benefits Committee are
Daniel M. DiCarlo, Jr. (Chairman), Michael Halpin, Denis H. O'Rourke, J. William
Noeltner and Dominick V. Romano. The Compensation and Benefits Committee met 2
times in 1999.
No member of the Board of Directors attended fewer than 75% of all meetings
of the Board and committees on which he served.
-52-
<PAGE>
DESCRIPTION OF FULTON FINANCIAL COMMON STOCK
General
The authorized capital of Fulton Financial consists exclusively of 400
million shares of common stock, par value $2.50 per share, and 10 million shares
of preferred stock, without par value. As of December 31, 1999, there were
issued and outstanding 71,924,446 shares of Fulton Financial common stock, which
shares were held by 15,696 owners of record, and there were 1,551,809 shares
issuable upon the exercise of options. No shares of preferred stock have been
issued by Fulton Financial. Fulton Financial's common stock is listed for
quotation on the NASDAQ National Market System under the symbol "FULT". The
holders of Fulton Financial common stock are entitled to one vote per share on
all matters submitted to a vote of the shareholders and may not cumulate their
votes for the election of directors. Each share of Fulton Financial common
stock is entitled to participate on an equal pro rata basis in dividends and
other distributions. The holders of Fulton Financial common stock do not have
preemptive rights to subscribe for additional shares that may be issued by
Fulton Financial, and no share is entitled in any manner to any preference over
any other share. Fulton Bank serves as the transfer agent for Fulton Financial.
The holders of Fulton Financial common stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available. Fulton Financial has in the past paid quarterly cash
dividends to its shareholders on or about the 15th day of January, April, July
and October of each year. The ability of Fulton Financial to pay dividends to
its shareholders is dependent primarily upon the earnings and financial
condition of Fulton Financial's subsidiary banks. Funds for the payment of
dividends on Fulton Financial common stock are expected for the foreseeable
future to be obtained primarily from dividends paid to Fulton Financial by its
bank subsidiaries, which dividends are subject to certain statutory limitations.
Under applicable state and federal laws, the dividends that may be paid
by the bank subsidiaries of Fulton Financial without prior regulatory approval
are subject to certain prescribed limitations. As state banks chartered under
the Pennsylvania Banking Code of 1965, as amended, Fulton Bank, Lebanon Valley
Farmers Bank, Lafayette Ambassador Bank and Great Valley Savings Bank may pay
dividends only out of accumulated net earnings and may not declare or pay any
dividend requiring a reduction of the statutorily required surplus of the
institution. In the case of national banks such as Swineford National Bank, FNB
Bank, National Association, Delaware National Bank, The Woodstown National Bank
and Trust Company and Fulton Financial Advisors, N.A., the approval of the
Office of the Comptroller of the Currency is required under federal law if the
total of all dividends declared during any calendar year would exceed the net
profits (as defined) of the bank for the year, combined with its retained net
profits (as defined) for the two preceding calendar years. As commercial banks
organized under the laws of the State of Maryland, Hagerstown Trust Company and
The Peoples Bank of Elkton may only declare a cash dividend from their undivided
profits or (with the prior approval of the Maryland Bank Commissioner) from its
surplus in excess of 100% of its required capital stock, in each case after
providing for due or accrued expenses, losses, interest and taxes. In addition,
if Hagerstown's or Peoples' surplus becomes less that 100% of its required
capital stock, Hagerstown or Peoples may not declare or pay any cash dividends
that exceed 90% of its net earnings until its surplus becomes 100% of its
required capital stock. As a New Jersey bank, The Bank of Gloucester may not
declare or pay any dividends which would impair its capital stock or reduce its
surplus to a level of less than 50% of its capital stock or if the surplus is
currently less than 50% of the capital stock, the payment of such dividends
would not reduce the surplus of the bank. In addition to the foregoing
statutory restrictions on dividends, state banking regulations (with respect to
state-chartered banks), the FDIC (with respect to state-chartered banks that are
not members of the Federal Reserve System, such as Fulton Bank, Lafayette
Ambassador Bank, Great Valley Savings Bank, Hagerstown Trust Company, The Bank
of Gloucester County and the Peoples Bank of Elkton), the FRB (with respect to
state-chartered banks that are members of the Federal Reserve System, such as
Lebanon Valley Farmers Bank and Lafayette Ambassador Bank), and the OCC (with
respect to national banks such as Swineford National Bank, FNB Bank, National
Association, Delaware National Bank, The Woodstown National Bank and Trust
Company and Fulton Financial Advisors, N.A.), also have adopted minimum capital
standards and have broad authority to prohibit a bank from engaging in unsafe or
unsound banking practices. The payment of a dividend by a bank could, depending
upon the financial condition of the bank involved and other factors, be deemed
to impair its capital or to be as such an unsafe or unsound practice.
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<PAGE>
Dividend Reinvestment Plan
The holders of Fulton Financial common stock may elect to participate in
the Fulton Financial Corporation Dividend Reinvestment Plan, which is a plan
administered by Fulton Bank as the plan agent. Under the dividend reinvestment
plan, dividends payable to participating shareholders are paid to the plan agent
and are used to purchase, on behalf of the participating shareholders,
additional shares of Fulton Financial common stock. Participating shareholders
may make additional voluntary cash payments, which are also used by the plan
agent to purchase, on behalf of such shareholders, additional shares of Fulton
Financial common stock. Shares of Fulton Financial common stock held for the
account of participating shareholders are voted by the plan agent in accordance
with the instructions of each participating shareholder as set forth in his or
her proxy.
Securities Laws
Fulton Financial, as a business corporation, is subject to the
registration and prospectus delivery requirements of the Securities Act of 1933
and is also subject to similar requirements under state securities laws. Fulton
Financial common stock is registered with the Securities and Exchange Commission
under Section 12(g) of the Securities Exchange Act of 1934, and Fulton Financial
is subject to the periodic reporting, proxy solicitation and insider trading
requirements of the 1934 Act. The executive officers, directors and ten percent
shareholders of Fulton Financial are subject to certain restrictions affecting
their right to buy and sell shares of Fulton Financial common stock owned
beneficially by them. Specifically, each such person is subject to the
beneficial ownership reporting requirements and to the short-swing profit
recapture provisions of Section 16 of the 1934 Act and may sell shares of Fulton
Financial common stock only: (i) in compliance with the provisions of SEC Rule
144, (ii) in compliance with the provisions of another applicable exemption from
the registration requirements of the 1933 Act, or (iii) pursuant to an effective
registration statement filed with the SEC under the 1933 Act.
Repurchase Program
On December 31, 1999, Fulton Financial's Board of Directors approved an
open market repurchase program for Fulton Financial's common stock for up to
1,050,000 shares. On January 18, 2000, the Board approved a second open market
repurchase program of up to 2,100,000 shares in anticipation of the Skylands
transaction. The second plan was adopted as a means to minimize any increase in
the number of outstanding shares of Fulton Financial as a result of the merger.
The shares of Fulton Financial common stock issuable in the merger will be
shares purchased under the plans adopted on December 21, 1999 and January 18,
2000 and, if, more shares are required, treasury shares repurchased under prior
repurchase programs and authorized but unissued shares. Fulton Financial's
repurchase programs are conducted in accordance with the safe harbor provisions
of Rule 10b-18 under the Securities Exchange Act of 1934 and will be suspended
during the periods required under the SEC's Regulation M.
Antitakeover Provisions
The Articles of Incorporation and Bylaws of Fulton Financial include
certain provisions which may be considered to be "antitakeover" in nature,
because they may have the effect of discouraging or making more difficult the
acquisition of control over Fulton Financial by means of a hostile tender offer,
exchange offer, proxy contest or similar transaction. These provisions are
intended to protect the shareholders of Fulton Financial (including the present
shareholders of Skylands, who will become shareholders of Fulton Financial
following the merger) by providing a measure of assurance that Fulton
Financial's shareholders will be treated fairly in the event of an unsolicited
takeover bid and by preventing a successful takeover bidder from exercising its
voting control to the detriment of the other shareholders. However, the
antitakeover provisions set forth in the Articles of Incorporation and Bylaws of
Fulton Financial, taken as a whole, may discourage a hostile tender offer,
exchange offer, proxy solicitation or similar transaction relating to Fulton
Financial common stock. To the extent that these provisions actually discourage
such a transaction, holders of Fulton Financial common stock may not have an
opportunity to dispose of part or all of their stock at a higher price than that
prevailing in the market. In addition, these provisions make it more difficult
to remove, and thereby may serve to entrench, incumbent directors and officers
of Fulton Financial, even if their removal would be regarded by some
shareholders as desirable.
-54-
<PAGE>
The provisions in the Articles of Incorporation of Fulton Financial which
may be considered to be "antitakeover" in nature include the following:
. a provision that provides for substantial amounts of authorized
but unissued capital stock, including a class of preferred stock
whose rights and privileges may be determined prior to issuance by
Fulton Financial's Board of Directors;
. a provision that does not permit shareholders to cumulate their
votes for the election of directors;
. a provision that requires a greater than majority shareholder vote
in order to approve certain business combinations and other
extraordinary corporate transactions;
. a provision that establishes criteria to be applied by the Board
of Directors in evaluating an acquisition proposal;
. a provision that requires a greater than majority shareholder vote
in order for the shareholders to remove a director from office
without cause;
. a provision that prohibits the taking of any action by the
shareholders without a meeting and eliminates the right of
shareholders to call a special meeting;
. a provision that limits the right of the shareholders to amend the
Bylaws; and
. a provision that requires, under certain circumstances, a greater
than majority shareholder vote in order to amend the Articles of
Incorporation.
The provisions of the Bylaws of Fulton Financial which may be considered
to be "antitakeover" in nature include the following:
. a provision that limits the permissible number of directors;
. a provision that establishes a Board of Directors divided into
three classes, with members of each class elected for a three-year
term that is staggered with the terms of the members of the other
two classes; and
. a provision that requires advance written notice as a precondition
to the nomination of any person for election to the Board of
Directors, other than in the case of nominations made by existing
management.
As a Pennsylvania business corporation and a corporation registered under
the Securities Exchange Act of 1934, Fulton Financial is subject to, and may
take advantage of the protections of, the antitakeover provisions of the
Pennsylvania Business Corporation Law of 1988, as amended. These antitakeover
provisions, which are designed to discourage the acquisition of control over a
targeted Pennsylvania business corporation, include:
. a provision whereby the directors of the corporation, in
determining what is in the best interests of the corporation, may
consider factors other than the economic interests of the
shareholders, such as the effect of any action upon other
constituencies, including employees, suppliers, customers,
creditors and the community in which the corporation is located;
. a provision that permits shareholders to demand that a controlling
person pay to them the fair value of their shares in cash upon a
change in control;
. a provision that restricts certain business combinations unless
there is prior approval by the directors or a supermajority of the
shareholders;
-55-
<PAGE>
. a provision permitting a corporation to adopt a shareholders
rights plan;
. a provision denying the right to vote to a person who acquires a
specified percentage of stock ownership unless those voting rights
are restored by a vote of disinterested shareholders; and
. a provision requiring a person who acquires "control shares",
which are described in the previous sentence, to disgorge to the
corporation all profits from the sale of equity securities within
eighteen months thereafter.
Corporations may elect to "opt out" of any or all of these antitakeover
provisions of the Pennsylvania corporate law. Fulton Financial has not elected
to opt out of any of the protections provided by the antitakeover statutes.
On April 27, 1999, Fulton Financial extended the term of its Shareholder
Rights Plan, originally adopted in June of 1989, by ten years. The plan is
intended to discourage unfair or financially inadequate takeover proposals and
abusive takeover practices and to encourage third parties who may in the future
be interested in acquiring Fulton Financial to negotiate with Fulton Financial's
Board of Directors. The plan may have the effect of discouraging or making more
difficult the acquisition of Fulton Financial by means of a hostile tender
offer, exchange offer or similar transaction. The plan is similar to
shareholder rights plans which have been adopted by many other bank holding
companies and business corporations and contains "flip-in" rights (allowing non-
acquiring holders to purchase Fulton Financial's common stock equal to two times
the right's exercise price) and "flip-over" rights (allowing rights holders to
acquire shares of the acquirer's stock at a substantial discount provisions)
which are typically included in plans of this kind. Each share of Fulton
Financial common stock, including all shares that will be issued to Skylands'
shareholders in the Merger, will also represent one right pursuant to the terms
of the plan, which right will initially, and until it becomes exercisable, trade
with and be represented by the Fulton Financial common stock certificates to be
received by the shareholders of Skylands.
The management of Fulton Financial does not presently contemplate
recommending to the shareholders the adoption of any additional antitakeover
provisions.
COMPARISON OF SHAREHOLDER RIGHTS
If Fulton Financial and Skylands complete the merger, shareholders of
Skylands automatically will become shareholders of Fulton Financial, and their
rights as shareholders will be determined by the Pennsylvania Business
Corporation Law of 1988, and by Fulton Financial's Articles of Incorporation and
Bylaws. The following is a summary of material differences between the rights
of holders of Fulton Financial common stock and the rights of holders of
Skylands common stock. These differences arise from various provisions of the
Pennsylvania Business Corporation Law of 1988, and the New Jersey General
Corporation Law, the Articles of Incorporation, Bylaws and Shareholder Rights
Plan of Fulton Financial and the Certificate of Incorporation and Bylaws of
Skylands.
The most significant differences are:
. Fulton Financial has adopted a Shareholder Rights Plan, which
provides Fulton Financial's shareholders with certain
stock-related rights in the event of a hostile takeover but may
have the effect of discouraging such a takeover, while Skylands
has not adopted any such plan;
. Fulton Financial Common Stock is registered under the 1934 Act and
traded on the NASDAQ National Market, while Skylands Common Stock
is traded on the NASDAQ Small Cap Market.
The material differences between Skylands common stock and Fulton
Financial common stock and the rights of their respective holders are summarized
in the following table:
-56-
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
SKYLANDS FULTON FINANCIAL
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Title Common Stock, Par Value $2.50 per share Common Stock, $2.50 par value
per share
- -----------------------------------------------------------------------------------------------------------------
Shares Authorized 10,000,000 400,000,000
- -----------------------------------------------------------------------------------------------------------------
Shares Issued & Outstanding 2,533,889 as of 03/31/00 71,335,092 as of 03/31/00
- -----------------------------------------------------------------------------------------------------------------
Preemptive Rights No No
- -----------------------------------------------------------------------------------------------------------------
Classification of Board of Directors Board of Directors divided into three Board of Directors divided
classes with three year terms; into three classes with three
one-third of directors elected each year terms; one-third of
year. directors elected each year.
- -----------------------------------------------------------------------------------------------------------------
Voting: Election of Directors Non-cumulative Non-cumulative
- -----------------------------------------------------------------------------------------------------------------
Voting: Other Matters One vote for each share owned of One vote for each share owned
record. However, no owner of record of of record.
stock beneficially owned by a person
who beneficially owns 10% or more of
the voting stock may vote those shares
that exceed the 10% limit.
- -----------------------------------------------------------------------------------------------------------------
Shareholder Rights Plan No Yes
- -----------------------------------------------------------------------------------------------------------------
Dissenters' Rights Not generally available except by Not generally available,
resolution of the Board of Directors except by resolution of the
Board of Directors
- -----------------------------------------------------------------------------------------------------------------
Dividend Reinvestment Plan Yes Yes
- -----------------------------------------------------------------------------------------------------------------
Market Listed for quotation on NASDAQ Small Listed for quotation on NASDAQ
Cap Market National Market
- -----------------------------------------------------------------------------------------------------------------
Registered under 1934 Act Yes Yes
- -----------------------------------------------------------------------------------------------------------------
Limitation of Liability of Directors Yes Yes
for Monetary Damages
- -----------------------------------------------------------------------------------------------------------------
Indemnification of Directors, Yes Yes
Officers and Employees
- -----------------------------------------------------------------------------------------------------------------
Authorized Class of Preferred Stock Yes. 1,000,000 shares, par value Yes. 10,000,000 shares,
$10.00 per share which can be issued without par value which can be
under terms and conditions to be issued under terms and
determined by the Board of Directors. conditions to be determined by
the Board of Directors
- -----------------------------------------------------------------------------------------------------------------
Control Share Statute Yes Yes
- -----------------------------------------------------------------------------------------------------------------
Business Combination Statute Yes Yes
- -----------------------------------------------------------------------------------------------------------------
Right of Shareholders to call a No No
Special Meeting
- -----------------------------------------------------------------------------------------------------------------
Shareholder Inspection Rights General General
- -----------------------------------------------------------------------------------------------------------------
Right of Shareholders to act by Yes No
Written Consent
=================================================================================================================
</TABLE>
ADJOURNMENT
In the event that Skylands does not have sufficient votes for a quorum or
to approve the merger agreement at the annual meeting, Skylands intends to
adjourn the meeting to permit further solicitation of proxies. The Board of
Directors of Skylands recommends that shareholders vote their proxies in favor
of the adjournment proposal so that their proxies may be used to vote for an
adjournment if necessary. The proxyholders will vote properly
-57-
<PAGE>
executed proxies in favor of the adjournment proposal unless the proxies
indicate otherwise. If Skylands adjourns the annual meeting, Skylands will not
give notice of the time and place of the adjourned meeting other than by an
announcement of such time and place at the annual meeting.
AUDITORS
Skylands' independent public accountants for 1999 are Arthur Andersen LLP
which has served as Skylands Community Bank's independent auditors since its
inception. Representatives of Arthur Andersen LLP are expected to attend the
annual meeting and will have an opportunity to make a statement if so desired.
Such representatives are expected to be available to respond to appropriate
questions from shareholders at the annual meeting.
EXPERTS
The consolidated financial statements of Fulton Financial, at December
31, 1999 and 1998 and for each of the three years in the period ended December
31, 1999, included in Fulton Financial's Annual Report on Form 10-KSB for the
year ended December 31, 1999 have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts giving said reports.
The consolidated financial statements of Skylands Financial Corporation
as of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, included in Skylands' Annual Report on Form 10-K for
the year ended December 31, 1999, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
LEGAL MATTERS
Barley, Snyder, Senft & Cohen, LLC will pass on the validity of the
Fulton Financial common stock issued in the merger, and certain federal income
tax consequences of the merger.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Board of Directors
of Skylands knows of no matters which will be presented for consideration at the
annual meeting other than matters described in this proxy statement/prospectus.
However, if any other matters shall come before the annual meeting or any
adjournments, the forms of proxy will confer discretionary authority to the
individuals named as proxies to vote the shares represented by the proxy on any
such matters.
SHAREHOLDER PROPOSALS
In the event the merger is not completed, Skylands' 2001 annual meeting
of shareholders will be held on April 20, 2001. Any shareholder who desires to
submit a proposal to be considered for inclusion in Skylands' proxy materials
relating to its 2001 annual meeting of shareholders must submit such proposal in
writing, addressed to Skylands Financial Corporation at 176 Mountain Avenue,
Hackettstown, New Jersey 07840 (Attn: Secretary), on or before December 1, 2000.
WHERE YOU CAN FIND MORE INFORMATION
Fulton Financial and Skylands are subject to the informational
requirements of the Securities Exchange Act of 1934, and file reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, proxy statements and other information that
Fulton Financial and/or Skylands files at the Securities and Exchange
Commission's public reference rooms at:
-58-
<PAGE>
. 450 Fifth Street, N.W., Washington, D.C. 20549
. 7 World Trade Center, Suite 1300, New York, New York 10048
. Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661
You may call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. Fulton Financial's and
Skylands' Securities and Exchange Commission filings are also available on the
Securities and Exchange Commission's Internet site at http://www.sec.gov.
Fulton Financial common stock (symbol: FULT) is traded on the NASDAQ National
Market. Skylands common stock (symbol: SKCB) is traded on the NASDAQ Small Cap
Market. Therefore, you can also inspect reports, proxy statements and other
information concerning Fulton Financial and Skylands at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
Fulton Financial filed a Registration Statement on Form S-4 (No. 333-
____) to register with the Securities and Exchange Commission the Fulton
Financial common stock issuable to Skylands shareholders in the merger. This
proxy statement/prospectus is a part of that Registration Statement and
constitutes a prospectus of Fulton Financial in addition to being a proxy
statement of Skylands for the annual meeting. As allowed by Securities and
Exchange Commission rules, this proxy statement/prospectus does not contain all
the information you can find in the Registration Statement or the exhibits to
the Registration Statement.
Some of the information that you may want to consider in deciding how to
vote with respect to the merger is not physically included in this proxy
statement/prospectus, but rather is "incorporated by reference" to documents
that have been filed by Fulton Financial and Skylands with the Securities and
Exchange Commission. The information that is incorporated by reference consists
of:
Documents filed by Fulton Financial (SEC File No. 0-10587):
. Quarterly Report on Form 10-Q, filed May 12, 2000, for the quarter
ended March 31, 2000.
. Annual Report on Form 10-K filed March 27, 2000, for the year
ended December 31, 1999.
. Current Report on Form 8-K filed March 7, 2000.
Documents filed by Skylands (SEC File No. 0-26069):
. Quarterly Report on Form 10-QSB filed May 11, 2000 for the quarter
ended March 31, 2000.
. Annual Report on Form 10-KSB filed March 30, 2000, for the year
ended December 31, 1999.
. Current Report on Form 8-K filed March 6, 2000
All documents filed by Fulton Financial and Skylands pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
after the date of this proxy statement/prospectus and prior to the annual
meeting also are incorporated by reference into this proxy statement/prospectus
and will be deemed to be a part hereof from the date of filing of such
documents.
Any statement contained in a document that is incorporated by reference
will be deemed to be modified or superseded for all purposes to the extent that
a statement contained herein (or in any other document that is subsequently
filed with the Securities and Exchange Commission and incorporated by reference)
modifies or is contrary to that previous statement.
We may have sent you some of the documents incorporated by reference, but
you can obtain any of them through us or the Securities and Exchange Commission.
Documents incorporated by reference are available from Fulton Financial and/or
Skylands without charge, excluding all exhibits unless we have specifically
incorporated by
-59-
<PAGE>
reference an exhibit in this proxy statement/prospectus. Skylands shareholders
may obtain documents incorporated by reference in this proxy
statement/prospectus, with respect to Fulton Financial, by requesting them in
writing or by telephone from: Fulton Financial Corporation, One Penn Square,
Lancaster, PA 17604, Attention: William R. Colmery (telephone number (717) 291-
2411), and with respect to Skylands, by requesting them in writing or by
telephone from: Skylands Financial Corporation, 176 Mountain Avenue,
Hackettstown, New Jersey 07840, Attention: Norman S. Baron (telephone number
(908) 850-9010). In order to ensure timely delivery of such documents, any
request should be made by ________, 2000.
All information contained or incorporated by reference in this proxy
statement/prospectus relating to Fulton Financial and its subsidiaries has been
supplied by Fulton Financial. All information contained or incorporated by
reference in this proxy statement/prospectus relating to Skylands and its
subsidiaries has been supplied by Skylands. In addition, a copy of Skylands
Annual Report to Shareholders for the year ended December 31, 1999 has been
mailed to Skylands shareholders with this proxy/statement prospectus.
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
A-1
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SKYLANDS FINANCIAL CORPORATION
AND
FULTON FINANCIAL CORPORATION
A-2
<PAGE>
TABLE OF CONTENTS
ARTICLE I. THE MERGER..................................................... 9
Section 1.1. Merger.................................................. 10
Section 1.2. Name.................................................... 10
Section 1.3. Articles of Incorporation............................... 10
Section 1.4. Bylaws.................................................. 10
Section 1.5. Directors and Officers.................................. 10
ARTICLE II CONVERSION OF SHARES AND EXCHANGE OF STOCK CERTIFICATES......... 10
Section 2.1. Conversion of Shares.................................... 10
(a) General................................................. 10
(b) Antidilution Provision.................................. 11
(c) No Fractional Shares.................................... 11
(d) Closing Market Price.................................... 11
Section 2.2. Exchange of Stock Certificates.......................... 12
(a) Exchange Agent.......................................... 12
(b) Surrender of Certificates............................... 12
(c) Dividend Withholding.................................... 12
(d) Failure to Surrender Certificates....................... 12
(e) Expenses................................................ 13
Section 2.3. Treatment of Outstanding SFC Options.................... 13
Section 2.4. Reservation of Shares................................... 14
Section 2.5. Taking Necessary Action................................. 14
Section 2.6. Press Releases.......................................... 14
Section 2.7. FFC Common Stock........................................ 14
Section 2.8. No Right of Dissent..................................... 15
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SFC........................ 15
Section 3.1. Authority............................................... 15
Section 3.2. Organization and Standing............................... 15
Section 3.3. Subsidiaries............................................ 16
Section 3.4. Capitalization.......................................... 16
Section 3.5. Charter, Bylaws and Minute Books........................ 16
Section 3.6. Financial Statements.................................... 16
Section 3.7. Absence of Undisclosed Liabilities...................... 17
Section 3.8. Absence of Changes...................................... 17
Section 3.9. Dividends, Distributions and Stock Purchases............ 17
Section 3.10. Taxes................................................... 17
Section 3.11. Title to and Condition of Assets........................ 18
Section 3.12. Contracts............................................... 18
Section 3.13. Litigation and Governmental Directives.................. 20
Section 3.14. Compliance with Laws; Governmental Authorizations....... 20
Section 3.15. Insurance............................................... 21
Section 3.16. Financial Institutions Bonds............................ 21
Section 3.17. Labor Relations and Employment Agreements............... 21
Section 3.18. Employee Benefit Plans.................................. 22
Section 3.19. Related Party Transactions.............................. 22
Section 3.20. No Finder............................................... 22
A-3
<PAGE>
Section 3.21. Complete and Accurate Disclosure........................ 23
Section 3.22. Environmental Matters................................... 23
Section 3.23. Proxy Statement/Prospectus.............................. 23
Section 3.24. SEC Filings............................................. 24
Section 3.25. Reports................................................. 24
Section 3.26. Loan Portfolio of SCB................................... 24
Section 3.27. Investment Portfolio.................................... 25
Section 3.28. Regulatory Examinations................................. 25
Section 3.29. Beneficial Ownership of FFC Common Stock................ 25
Section 3.30. Fairness Opinion........................................ 25
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF FFC......................... 25
Section 4.1. Authority............................................... 26
Section 4.2. Organization and Standing............................... 26
Section 4.3. Capitalization.......................................... 26
Section 4.4. Articles of Incorporation and Bylaws.................... 26
Section 4.5. Subsidiaries............................................ 26
Section 4.6. Financial Statements.................................... 27
Section 4.7. Absence of Undisclosed Liabilities...................... 27
Section 4.8. Absence of Changes...................................... 27
Section 4.9. Litigation and Governmental Directives.................. 27
Section 4.10. Compliance with Laws; Governmental Authorizations....... 28
Section 4.11. Complete and Accurate Disclosure........................ 28
Section 4.12. Labor Relations......................................... 29
Section 4.13. Employee Benefits Plans................................. 29
Section 4.14. Environmental Matters................................... 29
Section 4.15. SEC Filings............................................. 29
Section 4.16. Proxy Statement/Prospectus.............................. 30
Section 4.17. Regulatory Approvals.................................... 30
Section 4.18. No Finder............................................... 30
Section 4.19. Taxes................................................... 30
Section 4.20. Title to and Condition of Assets........................ 30
Section 4.21. Contracts............................................... 31
Section 4.22. Insurance............................................... 31
Section 4.23. Reports................................................. 31
ARTICLE V. COVENANTS OF SFC............................................... 31
Section 5.1. Conduct of Business..................................... 32
Section 5.2. Best Efforts............................................ 33
Section 5.3. Access to Properties and Records........................ 34
Section 5.4. Subsequent Financial Statements......................... 34
Section 5.5. Update Schedules........................................ 34
Section 5.6. Notice.................................................. 34
Section 5.7. No Solicitation......................................... 35
Section 5.8. Affiliate Letters....................................... 36
Section 5.9. No Purchases or Sales of FFC Common Stock
During Price Determination Period....................... 37
Section 5.10. Dividends............................................... 37
A-4
<PAGE>
ARTICLE VI. COVENANTS OF FFC.............................................. 37
Section 6.1. Best Efforts............................................ 37
(a) Applications for Regulatory Approval.................... 37
(b) Registration Statement.................................. 38
(c) State Securities Laws................................... 38
(d) Stock Listing........................................... 38
(e) Adopt Amendments........................................ 38
Section 6.2. Access to Properties and Records........................ 38
Section 6.3. Subsequent Financial Statements......................... 38
Section 6.4. Update Schedules........................................ 39
Section 6.5. Notice.................................................. 39
Section 6.6. Employment Arrangements................................. 39
Section 6.7. No Purchase or Sales of FFC Common Stock During
Price Determination Period.............................. 40
Section 6.8 Continuation of SCB's Structure, Name and Directors..... 40
Section 6.9 Insurance............................................... 41
ARTICLE VII. CONDITIONS PRECEDENT......................................... 42
Section 7.1. Common Conditions....................................... 42
(a) Shareholder Approval.................................... 42
(b) Regulatory Approvals.................................... 42
(c) Stock Listing........................................... 42
(d) Tax Opinion............................................. 42
(e) Registration Statement.................................. 43
(f) No Suits................................................ 33
(g) Interim Condition....................................... 44
Section 7.2. Conditions Precedent to Obligations of FFC.............. 44
(a) Accuracy of Representations and Warranties.............. 44
(b) Covenants Performed..................................... 44
(c) Opinion of Counsel for SFC.............................. 44
(d) Affiliate Agreements.................................... 44
(e) SFC Options............................................. 44
(f) No Material Adverse Change.............................. 45
(g) Accountants' Letter..................................... 45
(g) Accountants' Letter..................................... 46
(h) Federal and State Securities and Antitrust Laws......... 46
(i) Environmental Matters................................... 46
(j) Closing Documents....................................... 46
Section 7.3. Conditions Precedent to the Obligations of SFC.......... 47
(a) Accuracy of Representations and Warranties.............. 47
(b) Covenants Performed..................................... 47
(c) Opinion of Counsel for FFC.............................. 47
(d) FFC Options............................................. 47
(e) No Material Adverse Change.............................. 47
(e) Fairness Opinion........................................ 48
(f) Closing Documents....................................... 48
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER........................... 48
Section 8.1. Termination............................................. 48
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<PAGE>
(a) Mutual Consent.......................................... 48
(b) Unilateral Action by FFC................................ 48
(c) Unilateral Action By SFC................................ 49
(d) Market Price of FFC Common Stock........................ 49
Section 8.2. Effect of Termination................................... 49
(a) Effect.................................................. 50
(b) Limited Liability....................................... 50
(c) Confidentiality......................................... 50
Section 8.3. Amendment............................................... 50
Section 8.4. Waiver.................................................. 50
ARTICLE IX. CLOSING AND EFFECTIVE TIME.................................... 50
Section 9.1. Closing................................................. 50
Section 9.2. Effective Time.......................................... 51
ARTICLE X. NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................. 51
Section 10.1. No Survival............................................. 51
ARTICLE XI. GENERAL PROVISIONS............................................ 51
Section 11.1. Expenses................................................ 51
Section 11.2. Other Mergers and Acquisitions.......................... 51
Section 11.3. Notices................................................. 52
Section 11.4. Counterparts............................................ 54
Section 11.5. Governing Law........................................... 54
Section 11.6. Parties in Interest..................................... 54
Section 11.7. Entire Agreement........................................ 54
A-6
<PAGE>
INDEX OF SCHEDULES
Schedule 2.3 SFC Options
- ------------
Schedule 3.7 Undisclosed Liabilities
- ------------
Schedule 3.8 Changes
- ------------
Schedule 3.9 Dividends, Distributions and Stock Purchases
- ------------
Schedule 3.10 Taxes
- -------------
Schedule 3.11 Title to and Condition of Assets
- -------------
Schedule 3.12 Contracts
- -------------
Schedule 3.13 Litigations and Governmental Directives
- -------------
Schedule 3.14 Compliance with Laws; Governmental Authorizations
- -------------
Schedule 3.15 Insurance
- -------------
Schedule 3.16 Financial Institutions Bonds
- -------------
Schedule 3.17 Labor Relations and Employment Agreements
- -------------
Schedule 3.18 Employee Benefit Plans
- -------------
Schedule 3.19 Related Party Transactions
- -------------
Schedule 3.20 Finders
- -------------
Schedule 3.22 Environmental Matters
- -------------
Schedule 3.26 Loan Portfolio
- -------------
Schedule 3.27 Investment Portfolio
- -------------
Schedule 4.5 Subsidiaries
- ------------
Schedule 4.7 Undisclosed Liabilities
- ------------
Schedule 4.9 Litigation and Governmental Directives
- ------------
Schedule 4.10 Compliance with Laws; Governmental Authorizations
- -------------
Schedule 4.14 Environmental Matters
- -------------
Schedule 6.8 SCB Director Fees and Benefits
- ------------
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<PAGE>
INDEX OF EXHIBITS
Exhibit A Form of Warrant Agreement
- ---------
Exhibit B Form of Warrant
- ---------
Exhibit C Form of Amendments to Employment Agreements
- ---------
Exhibit D Form of Employment Agreements
- ---------
Exhibit E Form of Opinion of SFC's Counsel
- ---------
Exhibit F Form of Opinion of FFC's Counsel
- ---------
A-8
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER made as of the 23rd day of February, 2000 and
amended and restated as of May 1, 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").
In connection with the execution of the 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.
FFC and SFC wish to amend and restate the Agreement and Plan of Merger
dated as of the 23rd of February, 2000 (the "Original Agreement") to reflect a
five percent (5%) stock dividend declared by FFC on April 18, 2000, payable on
May 31, 2000 to FFC shareholders of record on May 8, 2000 (the "FFC April Stock
Dividend") and the satisfaction of the "Interim Condition" set forth in the
Original Agreement.
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
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<PAGE>
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.
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, .819 (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,
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<PAGE>
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 (other than with respect to FFC April Stock Dividend):
(i) issue a dividend in shares of FFC Common Stock, (ii) combine the outstanding
shares of FFC Common Stock into a smaller number of shares, or (iii) subdivide
the outstanding shares of FFC Common Stock into a greater number of shares, then
the Conversion Ratio shall be proportionately adjusted (calculated to four
decimal places), so that each 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 .819 shares to .8600 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
A-11
<PAGE>
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; 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 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
A-12
<PAGE>
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").
(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
A-13
<PAGE>
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 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.
A-14
<PAGE>
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 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.
A-15
<PAGE>
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 . As of February 23, 2000,
there were 2,550,994 shares of SFC Common Stock validly issued, outstanding,
fully paid and non-assessable, and no shares were held as treasury shares. There
are no shares of preferred stock issued. In addition, as of February 23, 2000,
308,084 shares of SFC Common Stock were 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".
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
A-16
<PAGE>
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.
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
-------------
A-17
<PAGE>
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 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
A-18
<PAGE>
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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<PAGE>
(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,
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<PAGE>
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
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 and agreement referred to below, an "Employment Obligation") with
any director, officer, employee, agent or consultant; provided, however, that,
as of the date of this Agreement (and effective as of the Effective Time), (i)
each of Michael Halpin, Dan E. Marcmann and Bruce L. Schott has executed an
amendment to his existing employment agreement with SFC and/or the SFC
Subsidiaries in the form of Exhibit C attached hereto, and (ii) Edward Poolas
---------
has entered into an employment agreement in the form of Exhibit D attached
hereto. 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.
A-21
<PAGE>
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 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.
A-22
<PAGE>
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 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
A-23
<PAGE>
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
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."
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<PAGE>
(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 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:
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<PAGE>
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 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)
A-26
<PAGE>
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 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,
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<PAGE>
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 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.
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<PAGE>
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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<PAGE>
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
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<PAGE>
good faith by appropriate proceedings; and (iii) represent such imperfections of
title, liens, encumbrances, zoning requirements and easements, if any, as are
not substantial in character, amount or extent and do not materially detract
from the value, or interfere with the present or proposed use, of the properties
and assets subject thereto.
Section 4.21. Contracts. 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:
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<PAGE>
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
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
A-32
<PAGE>
enter into or amend any Employment Obligation (as defined in Section 3.17
herein) with 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 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
A-33
<PAGE>
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. 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
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.
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<PAGE>
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.
(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.
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<PAGE>
(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 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.
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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).
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
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<PAGE>
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.
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
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<PAGE>
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 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 Effective 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
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<PAGE>
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 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
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<PAGE>
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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<PAGE>
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;
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<PAGE>
(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;
(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.
A-43
<PAGE>
(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.
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 E hereto. In rendering any such opinion,
such counsel may require and, to the extent they deem necessary or appropriate
may rely upon, opinions of other counsel and upon representations made in
certificates of officers of 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.
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<PAGE>
(f) No Material Adverse Change: FFC (together with its
--------------------------
accountants, if the advice of such accountants is deemed necessary or desirable
by FFC) shall have established to its reasonable satisfaction that, since the
date of this Agreement, there shall not have been any material and adverse
change in the condition (financial or otherwise), assets, liabilities, business
or operations or future prospects of 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
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<PAGE>
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 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 Federal and State 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
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<PAGE>
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:
(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 F hereto. In rendering any
---------
such opinion, such counsel may require and, to the extent they deem necessary or
appropriate may rely upon, opinions of other counsel and upon representations
made in certificates of officers of 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
A-47
<PAGE>
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.
(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
A-48
<PAGE>
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; or
(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.
(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.
(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
$13.09, 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 $13.09, FFC would have the option to increase the Conversion
Ratio to .8934 (.819 x 13.09/12.00) in lieu of terminating this Agreement.
(ii) FFC shall have the right to terminate this Agreement
if the Closing Market Price is greater than $19.24, 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 $19.24, SFC would have the
option to decrease the Conversion Ratio to .7163 (.819 x $19.24/22.00) in lieu
of terminating this Agreement.
(iii) For purposes of this Section 8.1(d), "Starting Price"
shall mean $15.39, 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-49
<PAGE>
(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.
(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
A-50
<PAGE>
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.
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
A-51
<PAGE>
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-52
<PAGE>
(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
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
A-53
<PAGE>
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.
A-54
<PAGE>
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: /s/ Rufus A.Fulton, Jr.
-----------------------
Rufus A. Fulton, Jr., President
and Chief Executive Officer
Attest: /s/ William R. Colmery
----------------------
William R. Colmery, Secretary
SKYLANDS FINANCIAL CORPORATION
By: /s/ Michael Halpin
------------------
Michael Halpin, President and
Chief Executive Officer
By: /s/ Dennis H O'Rourke
----------------------
A-55
<PAGE>
Dennis H. O'Rourke, Chairman
Attest: /s/ Norman S. Baron
-------------------
Norman S. Baron, Secretary
A-56
<PAGE>
EXHIBIT B
WARRANT AGREEMENT AND WARRANT
B-1
<PAGE>
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").
WITNESSETH:
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.
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)
B-2
<PAGE>
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% 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;
B-3
<PAGE>
(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 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, 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
B-4
<PAGE>
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.
(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-5
<PAGE>
(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 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;
B-6
<PAGE>
(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 herein-
after 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.
B-7
<PAGE>
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
B-8
<PAGE>
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 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. (S)18a and the regulations
promulgated thereunder and (B) in the event that, under Section 3 of the Bank
Holding Company Act of 1956, as amended (12 U.S.C. (S)1842(a)(3)), or the Change
in Bank Control Act of 1978, as amended (12 U.S.C. (S)1817(j)), prior approval
of the Board of Governors of the Federal Reserve
B-9
<PAGE>
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.
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.
B-10
<PAGE>
(5) Adjustment to Exercise Price. Whenever the number of shares
----------------------------
of Common Stock issuable upon exercise of this Warrant is adjusted as provided
in this Paragraph 6(A), the Exercise Price shall be adjusted by a fraction in
which the numerator is equal to the number of shares of Common Stock issuable
prior to the adjustment and the denominator is equal to the number of shares of
Common Stock issuable after the adjustment.
(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.
(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-11
<PAGE>
(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.
B-12
<PAGE>
Dated: February 24, 2000
SKYLANDS FINANCIAL CORPORATION
By:
-------------------------------------
Michael Halpin, President and Chief
Executive Officer
Attest:
-------------------------------------
Norman S. Baron, Secretary
B-13
<PAGE>
EXHIBIT C
OPINION OF McCONNELL, BUDD & DOWNES
C-1
<PAGE>
May__, 2000
The Board of Directors
Skylands Financial Corporation
176 Mountain Avenue
Hackettstown, NJ 07840
The Board of Directors:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of' Skylands Financial Corporation ("Skylands") of the
exchange ratio governing the exchange of shares of common stock of Skylands for
shares of common stock of Fulton Financial Corporation ("Fulton") in connection
with the proposed acquisition of Skylands by Fulton. The transaction will be
completed pursuant to an Agreement and Plan of Merger (the "Merger Agreement'')
dated February 23, 2000, as amended and restated as of May 1, 2000, by and
between Skylands and Fulton, as amended and restated. Pursuant to the Merger
Agreement, Skylands will merge (the "Merger") with and into Fulton and Fulton
will be the surviving Bank Holding Company.
As is more specifically set forth in the Merger Agreement, upon consummation
of the Merger, each outstanding share of the common stock of Skylands, except
for shares held by Skylands and its subsidiaries or by Fulton and its
subsidiaries (in both cases, other than shares held in a fiduciary capacity or
as the result of debts previously contracted), will be converted into .8190
shares of Fulton, subject to adjustment as provided in the Merger Agreement.
The exchange ratio referenced is a fixed exchange ratio and consequently the
market value of the consideration to be received by the shareholders of Skylands
will fluctuate reflecting changes in the trading value of Fulton. The Merger
Agreement, as amended and restated, may be terminated under certain conditions
prior to the effective time by the board of directors of either party based on
defined criteria including in the case of the board of directors of Skylands a
defined decline in the price of a share of Fulton common stock to a level below
$13.09 and in the case of the directors of Fulton, a defined increase in the
price of Fulton common stock to a level above $19.24. Fulfillment of the
defined criteria in either case creates a right to terminate but not an
obligation. Provision has also been made granting Fulton a right to amend the
exchange ratio in the event a termination takes place. As of the date of this
opinion letter, Fulton common stock is trading above $19.24 which would create a
right, but not an obligation, to terminate the transaction, for Fulton if the
transaction were scheduled to close as of this time. For purposes of our
---------------------
opinion, MB&D has not assumed any upward or downward adjustment in the exchange
- -------------------------------------------------------------------------------
ratio as the result of the exercise of termination rights by either party to
- ----------------------------------------------------------------------------
this transaction.
- -----------------
C-2
<PAGE>
McConnell, Budd & Downes, Inc., as part of its investment banking business,
is regularly engaged in the valuation of bank holding companies and banks,
thrift holding companies and thrifts and their securities in connection with
mergers and acquisitions, negotiated underwritings, private placements,
competitive bidding processes, market making as a NASD market maker, secondary
distributions of listed securities and valuations for corporate, estate and
other purposes. Our experience and familiarity with Skylands includes having
worked from time to time as a financial advisor to Skylands on specific projects
on a contractual basis and specifically includes our participation in the
process and negotiations leading up to the proposed Merger with Fulton. In the
course of our role as financial advisor to Skylands in connection with the
Merger, we have received fees for our services and will receive additional fees
contingent on the occurrence of certain defined events, including the
consummation of the Merger.
In arriving at our opinion, we have reviewed the Merger Agreement, as
amended and restated, and the Proxy Statement/Prospectus in substantially the
form to be mailed to Skylands shareholders. We have also reviewed publicly
available business, financial and shareholder information relating to Skylands
and its subsidiaries and publicly available business, financial and shareholder
information relating to Fulton and its subsidiaries. In addition, we have
reviewed certain other information, including internal reports and documents of
Skylands and Fulton relating to the business, earnings, cash flows assets and
prospects of the respective companies as well as certain management prepared
financial information provided to us by Skylands and Fulton. We have also met
with and had discussions with members of the senior management of Skylands and
Fulton to discuss their past and current business operations, current financial
condition and future prospects. In connection with the foregoing, we have
reviewed the annual reports to shareholders of Fulton for the calendar years
ended December 31, 1996, 1997, 1998 and 1999. We have similarly reviewed the
annual reports of Skylands for the calendar years ended December 31, 1996, 1997,
1998 and 1999. We have also reviewed annual reports for 1999 on Form 10-K or
equivalent for both Fulton and Skylands. In addition we have reviewed the
quarterly reports on Form 10-Q and equivalents for the first three calendar
quarters of 1999 for both Fulton and Skylands and the quarterly report for the
quarter ended March 31, 2000 for Fulton as well as the press release concerning
financial results for the first calendar quarter of 2000 for Skylands. We have
reviewed and studied the historical stock prices, trading volumes and apparent
liquidity of the common stock of Skylands and Fulton as well as the terms and
conditions of 6 recent transactions, selected from a larger universe of
transactions which can be compared to the proposed acquisition of Skylands by
Fulton. We also considered, based primarily on anecdotal information, the
current state of and future prospects for the economies of Pennsylvania, New
Jersey, Maryland and Delaware generally and the relevant market areas for Fulton
and Skylands in particular. We have also conducted such other studies, analyses
and investigations as we deemed appropriate under the circumstances surrounding
this proposed Merger. We direct the reader's attention to the section on page
__ titled Opinion of Financial Advisor to Skylands for a more complete
----------------------------------------
discussion of the materials we reviewed and the analyses, which we completed.
C-3
<PAGE>
In the course of our review and analysis we considered, among other things,
such topics as the historical and projected future contributions to recurring
earnings by the respective parties, the anticipated future earnings per share
results that might be available to the respective parties on both a combined and
a stand-alone basis, the potential to realize significant one time and recurring
operating expense reductions. We also considered the relative capitalization,
capital adequacy, profitability, availability of non-interest income, relative
asset quality, adequacy of the reserve for loan losses, the composition of the
loan portfolio and the status of any pending litigation with respect to each of
Skylands and Fulton. We also considered management's estimates of cost savings
and revenue enhancements which might result from a consolidation of Skylands and
Fulton. In the conduct of our review and analysis we have relied upon and
assumed, without independent verification, the accuracy and completeness of the
financial information provided to us by Skylands and Fulton and or otherwise
publicly obtainable. In reaching our opinion we have not assumed any
responsibility for the independent verification of such information or any
independent valuation or appraisal of any of the assets or the liabilities of
either Skylands or Fulton nor have we obtained from any other source, any
current appraisals of the assets or liabilities of either Skylands or Fulton.
We have also relied on the management of Skylands as to the reasonableness of
various financial and operating forecasts and of the assumptions on which they
are based, which were provided to us for use in our analyses.
In the course of rendering this opinion, which is being rendered prior to
the receipt of certain required regulatory approvals necessary before
consummation of the Merger, we assume that no conditions will be imposed by any
regulatory agency in connection with its approval of the Merger that will have a
material adverse effect on the results of operations, the financial condition or
the prospects of Fulton following consummation of the Merger.
Based upon and subject to the foregoing, it is our opinion, that as of the
date of this letter, the fixed exchange ratio of .8190 shares of Fulton common
-----
stock in exchange for each outstanding share of Skylands common stock is fair to
the shareholders of Skylands from a financial point of view.
Very truly yours,
McConnell, Budd & Downes, Inc.
By_________________________
David A. Budd
Managing Director
C-4
<PAGE>
Part II Information Not Required In Prospectus
Item 20. Indemnification of Directors and Officers.
Pennsylvania law provides that a Pennsylvania corporation may
indemnify directors, officers, employees and agents of the corporation against
liabilities they may incur in such capacities for any action taken or any
failure to act, whether or not the corporation would have the power to indemnify
the person under any provision of law, unless such action or failure to act is
determined by a court to have constituted recklessness or willful misconduct.
Pennsylvania law also permits the adoption of a bylaw amendment, approved by
shareholders, providing for the elimination of a director's liability for
monetary damages for any action taken or any failure to take any action unless
(1) the director has breached or failed to perform the duties of his office and
(2) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness.
The bylaws of Fulton Financial provide for (1) indemnification of
directors, officers, employees and agents of the registrant and its subsidiaries
and (2) the elimination of a director's liability for monetary damages, to the
fullest extent permitted by Pennsylvania law.
Directors and officers are also insured against certain liabilities
for their actions, as such, by an insurance policy obtained by Fulton Financial.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
No. Title Page
----- -------------------------------------------------------------------------------- ----
<C> <S> <C>
2 Agreement and Plan of Merger dated February 23, 2000, as amended and restated A-1
as of May 1, 2000, between Fulton Financial Corporation and Skylands Financial
Corporation - furnished as Exhibit A to the proxy statement/prospectus which is
included in Part I of the Registration Statement
3 Articles of Incorporation, as amended and restated, and Bylaws of Fulton
Financial Corporation, as amended - Incorporated by reference from Exhibit 3 of
the Fulton Financial Corporation Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999.
4 Rights Agreement dated April 27, 1999 between Fulton Financial Corporation and
Fulton Bank, incorporated by reference to Fulton Financial Corporation's Form
8-K, Exhibit 4, filed May 6, 1999
5.1 Opinion of Barley, Snyder, Senft & Cohen, LLC regarding legality
8 Opinion of Barley, Snyder, Senft & Cohen, LLC regarding tax matters
13 Annual Report on Form 10-K for Fulton Financial Corporation for the year ending
December 31, 1999, incorporated by reference in the proxy statement/prospectus
which is included in Part I of this Registration Statement
21 Subsidiaries of Registrant, incorporated by reference to Fulton Financial
Corporation's Annual Report on Form 10-K for the year ended December 31, 1999.
</TABLE>
-II-1-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
23.1 Consent of Barley, Snyder, Senft & Cohen, LLC, included as part of Exhibit 5.1
and Exhibit 8
23.2 Consent of McConnell, Budd & Downes
23.3 Consent of Arthur Andersen LLP - Lancaster, PA
23.4 Consent of Arthur Andersen LLP - Roseland, NJ
24 Power of Attorney (included in the signature page)
99.1 Form of Proxy
99.2 Letter to shareholders of Skylands Financial Corporation
99.3 Notice of Annual Meeting of Shareholders of Skylands Financial Corporation
</TABLE>
(b) Financial Statement Schedules.[None required.]
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any fact or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
-II-2-
<PAGE>
(c) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the bylaws of the registrant, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
-II-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Lancaster,
Commonwealth of Pennsylvania, on March 21, 2000.
FULTON FINANCIAL CORPORATION
By: /s/ Rufus A. Fulton, Jr.
------------------------
March 21, 2000
- -------------- Rufus A. Fulton, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated. KNOWN ALL MEN BY THESE PRESENTS, that
each person whose signature appears below constitutes and appoints William R.
Colmery and Charles J. Nugent and each of them, his true and lawful attorney-in-
fact, as agent with full power of substitution and resubstitution for him and in
his name, place and stead, in any and all capacity, to sign any or all
amendments to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as they might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE CAPACITY DATE
/s/ Jeffrey A. Albertson
- ----------------------------------
Jeffrey A. Albertson Director March 21, 2000
/s/ Harold D. Chubb
- ----------------------------------
Harold D. Chubb Director March 21, 2000
/s/ William H. Clark, Jr.
- ----------------------------------
William H. Clark, Jr. Director March 21, 2000
Chairman of the Board,
President and Chief
Executive Officer, and
/s/ Rufus A. Fulton, Jr. Director (Principal
- ---------------------------------- Executive Officer) March 21, 2000
Rufus A. Fulton, Jr.
/s/ Eugene H. Gardner
- ----------------------------------
Eugene H. Gardner Director March 21, 2000
/s/ Clyde W. Horst
- ---------------------------------- Director March 21, 2000
Clyde W. Horst
/s/ James R. Argires, M.D.
- ---------------------------------- Director March 21, 2000
James R. Argires, M.D.
<PAGE>
/s/ Frederick B. Fichthorn
- ----------------------------------
Frederick B. Fichthorn Director March 21, 2000
/s/ Charles V. Henry, III
- ----------------------------------
Charles V. Henry, III Director March 21, 2000
/s/ Joseph J. Mowad, M.D.
- ----------------------------------
Joseph J. Mowad, M.D. Director March 21, 2000
/s/ James K. Sperry
- ----------------------------------
James K. Sperry Director March 21, 2000
/s/ Martin D. Cohen
- ---------------------------------- Director March 21, 2000
Martin D. Cohen
/s/ Kenneth G. Stoudt
- ----------------------------------
Kenneth G. Stoudt Director March 21, 2000
/s/ Patrick J. Freer
- ----------------------------------
Patrick J. Freer Director March 21, 2000
/s/ Robert D. Garner
- ----------------------------------
Robert D. Garner Director March 21, 2000
/s/ Carolyn R. Holleran
- ----------------------------------
Carolyn R. Holleran Director March 21, 2000
/s/ Samuel H. Jones, Jr.
- ----------------------------------
Samuel H. Jones, Jr. Director March 21, 2000
/s/ Donald W. Lesher, Jr.
- ---------------------------------- Director March 21, 2000
Donald W. Lesher, Jr.
/s/ Mary Ann Russell
- ----------------------------------
Mary Ann Russell Director March 21, 2000
/s/ William E. Rusling
- ----------------------------------
William E. Rusling Director March 21, 2000
<PAGE>
/s/ Daniel M. Heisey
- ----------------------------------
Daniel M. Heisey Director March 21, 2000
/s/ Beth Ann L. Chivinski Senior Vice President and
- ---------------------------------- Controller (Principal March 21, 2000
Beth Ann L. Chivinski Accounting Officer)
/s/ Charles J. Nugent Executive Vice President
- ---------------------------------- and Chief Financial March 21, 2000
Charles J. Nugent Officer (Principal
Financial Officer)
<PAGE>
Index of Exhibits
<TABLE>
<CAPTION>
No. Title Page
- --- ----- ----
<C> <S> <C>
2 Agreement and Plan of Merger dated February 23, 2000, as amended and restated A-1
as of May 1, 2000, between Fulton Financial Corporation and Skylands Financial
Corporation - furnished as Exhibit A to the proxy statement/prospectus which is
included in Part I of the Registration Statement
3 Articles of Incorporation, as amended and restated, and Bylaws of Fulton
Financial Corporation, as amended - Incorporated by reference from Exhibit 3 of
the Fulton Financial Corporation Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999.
4 Rights Agreement dated April 27, 1999 between Fulton Financial Corporation and
Fulton Bank, incorporated by reference to Fulton Financial Corporation's Form
8-K, Exhibit 4, filed May 6, 1999
5.1 Opinion of Barley, Snyder, Senft & Cohen, LLC regarding legality
8 Opinion of Barley, Snyder, Senft & Cohen, LLC regarding tax matters
13 Annual Report on Form 10-K for Fulton Financial Corporation for the year ending
December 31, 1999, incorporated by reference in the proxy statement/prospectus
which is included in Part I of this Registration Statement
21 Subsidiaries of Registrant, incorporated by reference to Fulton Financial
Corporation's Annual Report on Form 10-K for the year ended December 31, 1999.
23.1 Consent of Barley, Snyder, Senft & Cohen, LLC, included as part of Exhibit 5.1
and Exhibit 8
23.2 Consent of McConnell, Budd & Downes
23.3 Consent of Arthur Andersen LLP - Lancaster, PA
23.4 Consent of Arthur Andersen LLP - Roseland, NJ
24 Power of Attorney (included in the signature page)
99.1 Form of Proxy
99.2 Letter to shareholders of Skylands Financial Corporation
99.3 Notice of Annual Meeting of Shareholder of Skylands Financial Corporation
</TABLE>
<PAGE>
Exhibit 5.1
Paul G. Mattaini
Direct Dial Number: (717) 399-1519
E-mail: [email protected]
May 22, 2000
Fulton Financial Corporation Skylands Financial Corporation
One Penn Square 176 Mountain Avenue
Lancaster, PA 17604 Hackettstown, NJ 07840
Re: Merger of Fulton Financial Corporation and Skylands Financial
Corporation
Dear Ladies and Gentlemen:
We have acted as counsel to Fulton Financial Corporation ("FFC") in
connection with the registration under the Securities Act of 1933, as amended,
by means of a registration statement on Form S-4 (the "Registration Statement"),
of 2,325,206 shares of the $2.50 par value common stock of FFC, which is the
maximum number of shares to be issued pursuant to the terms of the Agreement and
Plan of Merger, dated as of February 22, 2000, and amended and restated as of
May 1, 2000 (the "Merger Agreement"), entered into between FFC and Skylands
Financial Corporation ("SFC"). The following transactions will occur upon
consummation of the Merger Agreement: (i) SFC will be merged with and into FFC,
(ii) FFC will survive the Merger, (iii) SFC's wholly owned subsidiary, Skylands
Community Bank ("SCB"), will become the wholly-owned subsidiary of FFC and (iv)
each share of the 2.50 par value common stock of SFC (the "SFC Common Stock")
will be converted into .819 shares of the $2.50 par value common stock of FFC
(the "FFC Common Stock").
This Opinion Letter is provided pursuant to the requirements of Item
601(b)(5)(i) of Regulation S-K of the Securities and Exchange Commission for
inclusion as an exhibit to the Registration Statement. This Opinion Letter is
governed by, and shall be interpreted in accordance with, the Legal Opinion
Accord (the "Accord") of the American Bar Association's Section of Business Law
(1991), as supplemented or modified by the Pennsylvania Third-Party Legal
Opinion Supplement (the "Pennsylvania Supplement") of the Pennsylvania Bar
Association's Section of Corporation, Banking and Business Law (1992). As a
consequence, this Opinion Letter is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord and the Pennsylvania Supplement, and
this Opinion Letter shall be read in conjunction therewith. The Law covered by
the opinions expressed herein is limited to the federal law of the United States
of America and the law of the Commonwealth of Pennsylvania. Except as otherwise
indicated herein, capitalized terms used in this Opinion Letter are defined and
set forth in the Merger Agreement, the Accord or the Pennsylvania Supplement.
Our opinions herein are subject to the following conditions and assumptions, in
addition to those set forth in the Accord and the Pennsylvania Supplement:
(1) All of the shares of SFC Common Stock that are issued and outstanding
at the time of the Merger will be duly authorized, validly issued, fully paid
and nonassessable;
(2) All conditions precedent to the obligations of SFC as set forth in the
Merger Agreement will have been satisfied at the time of the Merger;
(3) All covenants required to be performed by FFC, SFC and SCB on or
before the date of consummation of the Merger, as set forth in the Merger
Agreement, will have been performed by them as of such date; and
<PAGE>
(4) The shares of FFC Common Stock will be issued, and the Merger will be
consummated, in strict accordance with the terms of the Merger Agreement and the
statutory laws of the United States of America and the Commonwealth of
Pennsylvania.
Based upon and subject to the foregoing, we are of the opinion that the
shares of FFC Common Stock to be issued in connection with the Merger have been
duly authorized and, when issued as provided in the Merger Agreement, will be
legally issued, fully paid and nonassessable.
We hereby consent to the use of this Opinion in the Registration Statement
on Form S-4 of FFC, and we further consent to the reference to our name in the
proxy statement/prospectus included as part of the Registration Statement, under
the captions "Material Federal Income Tax Consequences" and "Legal Matters".
Very truly yours,
Paul G. Mattaini
<PAGE>
Exhibit 8
May 24, 2000
Skylands Financial Corporation Fulton Financial Corporation
24-26 Crossroads Center, Route 517 One Penn Square
Hackettstown, NJ 07840 Lancaster, PA 17604
Re: Merger of Skylands Financial Corporation
with and into Fulton Financial Corporation
Gentlemen:
We have acted as counsel to Fulton Financial Corporation ("FFC") in
connection with the Agreement and Plan of Merger dated February 23, 2000, as
amended and restated as of May 1, 2000 (the "Merger Agreement") between FFC and
Skylands Financial Corporation ("SFC").
The following transactions will occur pursuant to the Merger
Agreement:
(i.) SFC will be merged with and into FFC, with FFC surviving the
merger (the "Merger");
(ii.) Each issued and outstanding share of the common stock of
SFC, par value $2.50 per share ("SFC Common Stock"), will be
converted into .819 shares of the common stock of FFC, par
value $2.50 per share (the "FFC Common Stock").
You have requested our opinion as to certain federal income tax
consequences of the transactions contemplated by the Merger Agreement, and this
opinion is rendered pursuant to the provisions of Section 7.1(d) of Article VII
of the Merger Agreement.
This Opinion Letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the American Bar Association's
Section of Business Law (1991), as supplemented or modified by the Pennsylvania
Third-Party Legal Opinion Supplement (the "Pennsylvania Supplement") of the
Pennsylvania Bar Association's Section of Corporation, Banking and Business Law
(1992). As a consequence, this Opinion Letter is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord and the
Pennsylvania Supplement, and this Opinion Letter shall be read in conjunction
therewith. The law covered by the opinions expressed herein is limited to the
federal law of the United States of America.
Except as otherwise indicated herein, capitalized terms used in this
Opinion Letter are defined and set forth in the Merger Agreement, the Accord or
the Pennsylvania Supplement. Our opinions herein are subject to the following
conditions and assumptions, in addition to those set forth in the Accord and the
Pennsylvania Supplement:
<PAGE>
(A) All of the shares of SFC Common Stock that are issued and outstanding
at the time of the Merger will be duly authorized, validly issued,
fully paid and nonassessable.
(B) All conditions precedent to the obligations of FFC and SFC as set
forth in the Merger Agreement will have been satisfied at the time of
the Merger.
(C) All covenants required to be performed by FFC and SFC on or before the
date of consummation of the Merger, as set forth in the Merger
Agreement, will have been performed by them as of such date.
(D) The transaction contemplated by the Merger Agreement, including
without limitation the Merger and the issuance of shares of FFC Common
Stock to the stockholders of SFC, will be accomplished in strict
accordance with the terms of the Merger Agreement.
(E) The fair market value of the FFC Common Stock and the other
consideration received by each SFC shareholder will be approximately
equal to the fair market value of the SFC Common Stock surrendered in
the exchange.
(F) Upon consummation of the Merger, the former stockholders of SFC will
own, in the aggregate, FFC Common Stock equal in value to at least 50
percent of the value of all of the formerly outstanding SFC Common
Stock as of the date of the Merger.
(G) There is no plan or intention on the part of the shareholders of SFC
who own, individually or collectively, five percent or more of the SFC
Common Stock, to sell or otherwise transfer to FFC or any person
related to FFC (within the meaning of Reg. Sec. 1.368-1-1(e)(3) a
number of shares of FFC Common Stock to be received pursuant to the
Merger Agreement that would reduce the ownership of FFC Common Stock
by former stockholders of SFC to a number of shares of the FFC Common
Stock having, in the aggregate, a value of less than 50 percent of the
value of all SFC Common Stock outstanding immediately prior to the
Merger. For purposes of this assumption, shares of SFC Common Stock
exchanged for cash or other property, surrendered by dissenters, or
exchanged for cash in lieu of fractional shares of FFC Common Stock
will be treated as outstanding SFC Common Stock on the date of the
transaction. Moreover, shares of FFC Common Stock and shares of SFC
Common Stock sold, redeemed, or disposed of prior or subsequent to the
transaction will be considered in making this assumption.
(H) There is no plan or intention on the part of FFC to reacquire any of
the shares of FFC Common Stock issued pursuant to the provisions of
the Merger Agreement, whether under FFC's announced stock repurchase
programs or otherwise.
(I) There is no plan or intention on the part of FFC to sell or otherwise
dispose of any of the assets of SFC acquired in the Merger, except for
the dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Internal Revenue Code of
1986, as amended (the "Code").
(J) The liabilities of SFC assumed by FFC and the liabilities to which the
assets of SFC are subject were incurred by SFC in the ordinary course
of SFC business.
(K) Following the Merger, FFC will continue the historic business of SFC
or will use a significant portion of SFC's historic business assets in
a business.
(L) FFC, SFC and stockholders of SFC will pay their respective expenses,
if any, incurred in connection with the Merger.
(M) There is no intercorporate indebtedness existing between FFC and SFC
that was issued or acquired or that will be settled at a discount.
<PAGE>
(N) No two parties to the Merger are investment companies as defined in
Section 368(a)(2)(F) of the Code.
(O) SFC is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
(P) The fair market value of the assets of SFC transferred to FFC will
equal or exceed the sum of the liabilities assumed by FFC plus the
amount of liabilities, if any, to which the transferred assets are
subject.
Based upon and subject to the foregoing, we are of the opinion 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 SFC,or FFC 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.
(4) The holding period of the assets of SFC in the hands of FFC following
the Merger will include the period during which such assets were held
by SFC prior the Merger.
(5) No gain or loss will be recognized by the SFC shareholders on the
exchange of shares of SFC Common Stock solely for shares of FFC Common
Stock, except for that income, gain or loss which is recognized due to
the receipt of cash which is received in lieu of the issuance of
fractional shares of FFC Common Stock. The receipt of cash by SFC
shareholders will have the effect of treating the shareholders as
having received solely shares of FFC Common Stock in the
reorganization exchange and then having received a cash payment from
FFC in a hypothetical redemption of that number of shares of FFC
Common Stock equal in value to such cash payment. The SFC shareholder
who receives cash will therefore recognize capital gain or loss on the
constructive redemption of such shares in an amount equal to the
difference between the cash received and the adjusted basis in such
shares.
(6) The basis of the shares of FFC Common Stock received by SFC
shareholders will be the same as the basis of the shares of SFC Common
Stock exchanged therefor (decreased by any amount allocable to
fractional share interests for which cash is received).
(7) The holding period of the shares of FFC Common Stock received by the
shareholders of SFC will include the period during which SFC
shareholders 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.
Very truly yours,
Barley, Snyder, Senft & Cohen, LLC
By: /s/ Barley, Snyder, Senft & Cohen, LLC
----------------------------------------
<PAGE>
Exhibit 23.2
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion of the Opinion of McConnell, Budd &
Downes, Inc. as Exhibit C to the Form S-4 Registration Statement of Fulton
Financial Corporation and Skylands Financial Corporation to be filed with the
Securities and Exchange Commission in connection with the proposed merger of
Skylands with and into Fulton and to the references to the work completed by our
firm as financial advisor to Skylands in the text of the related Proxy
Statement/Prospectus. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "expert" as used in the Securities Act of 1933 as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ McConnell, Budd & Downes, Inc.
May 18, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 21, 2000,
included in Fulton Financial Corporation's Form 10-K for the year ended December
31, 1999 and to all references to our firm included in this registration
statement.
/s/ Arthur Andersen LLP
Lancaster, Pennsylvania
May 22, 2000
<PAGE>
Exhibit 23.4
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated
January 12, 2000 (except with respect to the matter discussed in Note 20, as to
which the date is February 23, 2000) included in Skylands Financial
Corporation's Form 10-KSB for the year ended December 31, 1999 and to all
references to our Firm included in this registration statement on Form S-4.
/s/ Arthur Andersen LLP
Roseland, New Jersey
May 19, 2000
<PAGE>
Exhibit 99.1
SKYLANDS FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy for Annual Meeting of Stockholders, _______, 2000
The undersigned hereby appoints Michael Halpin and Denis H. O'Rourke, and
each of them, as proxies, with full power of substitution, to vote the shares of
Common Stock of the Corporation which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of Skylands Financial Corporation, to be held on
_____________ at ___ _.m., New York City time, at ___________________________,
New Jersey, and at any adjournments thereof.
(1) Election of the directors marked by a "*" to serve for the ensuing year and
until their successors are elected and qualified, the directors marked by a
"**" to serve until the annual meeting to be held in 2002 and until their
successors are elected and qualified, and the directors marked by a "***"
to serve until the annual meeting to be held in 2003 and until their
successors are elected and qualified.
Nominees: Norman S. Baron**, James L. Cochran**, Daniel M. DiCarlo, Jr.*,
Michael Halpin***, Ralph C. Knechel**, J. William Noeltner***, Denis H.
O'Rourke***, Paul J. Pinizzotto**, Dominick V. Romano***, Mark F. Strauss*,
Norman Worth*.
( ) VOTE FOR all nominees listed above, except authority to vote withheld
for the following nominees (to withhold authority to vote for any of
the above nominees, print the name of the nominee(s) on the lines
below).
_________________________________________________________________
_________________________________________________________________
( ) AUTHORITY TO VOTE WITHHELD for all nominees.
(2) Proposal to approve and adopt the Agreement and Plan of Merger dated
February 23, 2000, as amended and restated as of May 1, 2000, between
Fulton Financial Corporation and Skylands Financial Corporation, which
provides, among other things, for the merger of Skylands with and into
Fulton Financial and the conversion of each share of common stock of
Skylands outstanding immediately prior to the merger into .819 shares of
Fulton Financial common stock, plus cash in lieu of any fractional share
interest.
( ) VOTE FOR proposal to approve and adopt the Agreement and Plan of
Merger.
( ) VOTE AGAINST proposal to approve and adopt the Agreement and Plan of
Merger.
( ) ABSTAIN.
<PAGE>
(3) Proposal to adjourn the annual meeting, if necessary, to permit further
solicitation of proxies in the event there are not sufficient votes at the
time of the annual meeting to approve and adopt the Agreement and Plan of
Merger.
( ) VOTE FOR proposal to approve and adopt the Agreement and Plan of
Merger.
( ) VOTE AGAINST proposal to approve and adopt the Agreement and Plan of
Merger.
( ) ABSTAIN.
(4) In the discretion of such proxies, upon all other matters which may
properly come before the annual meeting, or any adjournments thereof.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INTENT OF THE PROXIES AS SET FORTH IN THE PROXY STATEMENT UNLESS DIRECTIONS TO
THE CONTRARY ARE INDICATED ON THE REVERSE SIDE HEREOF.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the proxy statement/prospectus furnished herewith, each
dated ________, 2000.
----------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
----------------------------------------------------------------
Dated: ___________________, 2000
________________________________
________________________________
Please sign proxy as your name
appears hereon
<PAGE>
Exhibit 99.2
[SKYLANDS FINANCIAL CORPORATION LETTERHEAD]
________________________, 2000
Dear Shareholder:
You are cordially invited to the annual meeting of shareholders of Skylands
Financial Corporation to be held on ____________________________, 2000, at
______________ ___.m., at ______________________.
The Board of Directors of Skylands Financial Corporation and Fulton
Financial Corporation have approved an agreement and plan of merger providing
for the acquisition of Skylands by Fulton Financial through a merger. In the
merger, Skylands shareholders will receive .819 shares of Fulton Financial
common stock for each share of Skylands common stock that they hold. Skylands
shareholders generally will not recognize federal income tax gain or loss for
the Fulton Financial common stock that they receive. The attached proxy
statement/prospectus provides you with detailed information about the proposed
merger. I encourage Skylands shareholders to read this entire document
carefully.
At the annual meeting, shareholders of Skylands will be asked to vote on a
proposal to approve the merger agreement and to elect eleven directors to
Skylands' Board of Directors. The merger cannot be completed unless the holders
of a majority of the votes cast at the annual meeting to approve the merger
agreement. Thus, your vote is very important. Skylands' Board of Directors
strongly supports this combination of Skylands and Fulton Financial and
enthusiastically recommends that you vote in favor of the merger. Whether or
not you plan to attend the meeting, please take the time to vote by completing
and mailing the enclosed proxy card to Skylands. If you sign, date and mail
your proxy card without indicating how you wish to vote, your proxy will be
counted as a vote in favor of the nominees for director and the merger
agreement.
Sincerely,
Michael Halpin, President
<PAGE>
Exhibit 99.3
SKYLANDS FINANCIAL CORPORATION
176 Mountain Avenue
Hackettstown, NJ 07840
..........................
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON ________, 2000
WE HEREBY GIVE YOU NOTICE that Skylands Financial Corporation will hold an
annual meeting of shareholders on _________, ___________, 2000, at _______ _.m.,
local time, at ______________, New Jersey, to consider and vote upon the
following matters, all as more fully described in the accompanying proxy
statement/prospectus:
1. To elect eleven directors to the Board of Directors of Skylands;
2. The approval and adoption of the Agreement and Plan of Merger
dated February 23, 2000, as amended and restated as of May 1, 2000, between
Fulton Financial Corporation and Skylands, which provides, among other
things, for the merger of Skylands with and into Fulton Financial and the
conversion of each share of common stock of Skylands outstanding
immediately prior to the merger into .819 shares of Fulton Financial common
stock, plus cash in lieu of any fractional share interest;
3. The adjournment of the annual meeting, if necessary, to permit
further solicitation of proxies in the event there are not sufficient votes
at the time of the annual meeting to approve the merger agreement; and
4. The transaction of such other business as may properly be brought
before the annual meeting.
The Board of Directors of Skylands recommends a vote "FOR" each proposal
and the nominees for election to the Board of Directors.
The Board of Directors of Skylands has fixed the close of business on
_______, 2000, as the record date for determining shareholders entitled to
notice of, and to vote at, the annual meeting. A list of shareholders entitled
to vote at the annual meeting will be available for inspection at Skylands' main
office for a period of ten days prior to the annual meeting and also will be
available for inspection at the annual meeting.
Your vote is important regardless of the number of shares you own. Whether
or not you plan to attend the annual meeting, the Board of Directors of Skylands
urges you to complete, sign, date and return the enclosed proxy card as soon as
possible in the enclosed postage-paid envelope. This will not prevent you from
voting in person at the annual meeting but will assure that your vote is counted
if you are unable to attend. If you are a shareholder whose shares are not
registered in your own name, you will need additional documentation from your
record holder in order to vote personally at the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Norman S. Baron, Secretary
