AGREEMENT AND PLAN OF MERGER BY AND BETWEEN DNB FINANCIAL CORPORATION AND EAST RIVER BANK

 

Exhibit 2.1

 

 

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

DNB FINANCIAL CORPORATION

AND

EAST RIVER BANK

 

 

 

 

 

ARTICLE I  CERTAIN DEFINITIONS			2
	1.1.	Certain Definitions	2
ARTICLE II  THE MERGER			11
	2.1.	Merger	11
	2.2.	Effective Time	11
	2.3.	Articles of Association and Bylaws	12
	2.4.	Directors and Officers of DNB and the Surviving Institution	12
	2.5.	Effects of the Merger	12
	2.6.	Tax Consequences	12
	2.7.	Possible Alternative Structures	12
	2.8.	Absence of Control	13
ARTICLE III  CONVERSION OF SHARES			13
	3.1.	Conversion of ▇▇▇ Common Stock; Merger Consideration	13
	3.2.	Election Procedures	15
	3.3.	Procedures for Exchange of ▇▇▇ Common Stock	17
ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF ▇▇▇			20
	4.1.	Organization	20
	4.2.	Capitalization	21
	4.3.	Authority; No Violation	21
	4.4.	Consents	22
	4.5.	Reports, Regulatory Matters, Financial Statements	23
	4.6.	Taxes	24
	4.7.	No Material Adverse Effect	26
	4.8.	Material Contracts; Leases; Defaults	27
	4.9.	Ownership of Property; Insurance Coverage	29
	4.10.	Legal Proceedings	30
	4.11.	Compliance With Applicable Law	30
	4.12.	Employee Benefit Plans	31
	4.13.	Brokers, Finders and Financial Advisors	34
	4.14.	Environmental Matters	34

	4.15.	Loan Portfolio	35
	4.16.	Documents	36
	4.17.	Related Party Transactions	36
	4.18.	Deposits	37
	4.19.	Required Vote	37
	4.20.	Registration Obligations	37
	4.21.	Risk Management Instruments	37
	4.22.	Fairness Opinion	37
	4.23.	Trust Accounts	38
	4.24.	Intellectual Property	38
	4.25.	Labor Matters	38
	4.26.	▇▇▇ Information Supplied	39
	4.27.	Investment Securities and Commodities	39
ARTICLE V  REPRESENTATIONS AND WARRANTIES OF DNB			39
	5.1.	Organization	40
	5.2.	Capitalization	40
	5.3.	Authority; No Violation	41
	5.4.	Consents	42
	5.5.	Financial Statements	43
	5.6.	Taxes	44
	5.7.	No Material Adverse Effect	45
	5.8.	Ownership of Property; Insurance Coverage	45
	5.9.	Legal Proceedings	46
	5.10.	Compliance With Applicable Law	46
	5.11.	Employee Benefit Plans	48
	5.12.	Environmental Matters	50
	5.13.	Securities Documents	51
	5.14.	Brokers, Finders and Financial Advisors	51
	5.15.	DNB Common Stock	51
	5.16.	DNB Information Supplied	51
	5.17.	Loan Portfolio	52
	5.18.	Investment Securities and Commodities	52

	5.19.	Related Party Transactions	52
	5.20.	Fairness Opinion	53
	5.21.	Intellectual Property	53
ARTICLE VI  COVENANTS OF ▇▇▇			54
	6.1.	Conduct of Business	54
	6.2.	Current Information and Cooperation	58
	6.3.	Access to Properties and Records	60
	6.4.	Financial and Other Statements	60
	6.5.	Maintenance of Insurance	61
	6.6.	Disclosure Supplements	61
	6.7.	Consents and Approvals of Third Parties	62
	6.8.	Reasonable Best Efforts	62
	6.9.	Failure to Fulfill Conditions	62
	6.10.	No Solicitation	62
	6.11.	Reserves and Merger-Related Costs	65
	6.12.	▇▇▇ Board of Directors and Committee Meetings	65
ARTICLE VII  COVENANTS OF DNB			66
	7.1.	Conduct of Business	66
	7.2.	Current Information	66
	7.3.	Financial and Other Statements	66
	7.4.	Disclosure Supplements	67
	7.5.	Consents and Approvals of Third Parties	67
	7.6.	Reasonable Best Efforts	67
	7.7.	Failure to Fulfill Conditions	67
	7.8.	Employee Benefits	67
	7.9.	Directors and Officers Indemnification and Insurance	69
	7.10.	Stock Listing	71
	7.11.	Stock and Cash Reserve	71
	7.12.	DNB/DNB Bank Board of Directors	71
ARTICLE VIII  REGULATORY AND OTHER MATTERS			72
	8.1.	Shareholder Meetings	72
	8.2.	Proxy Statement-Prospectus	72

	8.3.	Regulatory Approvals	73
ARTICLE IX  CLOSING CONDITIONS			74
	9.1.	Conditions to Each Party's Obligations under this Agreement	74
	9.2.	Conditions to the Obligations of DNB under this Agreement	75
	9.3.	Conditions to the Obligations of ▇▇▇ under this Agreement	76
ARTICLE X  THE CLOSING			77
	10.1.	Time and Place	77
	10.2.	Deliveries at the Pre-Closing and the Closing	77
ARTICLE XI  TERMINATION, AMENDMENT AND WAIVER			77
	11.1.	Termination	77
	11.2.	Effect of Termination	80
	11.3.	Amendment, Extension and Waiver	82
ARTICLE XII  MISCELLANEOUS			82
	12.1.	Confidentiality	82
	12.2.	Public Announcements	82
	12.3.	Survival	82
	12.4.	Notices	83
	12.5.	Parties in Interest	83
	12.6.	Complete Agreement	84
	12.7.	Counterparts	84
	12.8.	Severability	84
	12.9.	Governing Law	84
	12.10.	Interpretation	84
	12.11.	Specific Performance; Jurisdiction	85

 

 

 

This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of April 4, 2016, by and between DNB Financial Corporation, a Pennsylvania corporation ("DNB"), and East River Bank, a Pennsylvania chartered savings bank ("▇▇▇").

WHEREAS, the Board of Directors of each of DNB and ▇▇▇ (a) has determined that this Agreement and the business combination and related transactions contemplated hereby are in the best interests of their respective companies, (b) has determined that this Agreement and the transactions contemplated hereby are consistent with and in furtherance of their respective business strategies, and (c) has adopted a resolution approving this Agreement and declaring its advisability; and

WHEREAS, in accordance with the terms of this Agreement, ▇▇▇ will merge with and into DNB First, N.A., a national bank and wholly owned subsidiary of DNB ("DNB Bank")(the "Merger") pursuant to the terms of the Agreement and Plan of Merger substantially in the form attached hereto as Exhibit A; and

WHEREAS, as a condition to the willingness of DNB to enter into this Agreement, each of the directors and executive officers of ▇▇▇ has entered into a Voting Agreement, substantially in the form of Exhibit B hereto, dated as of the date hereof, with DNB (the "▇▇▇ Voting Agreements"), pursuant to which each such director has agreed, among other things, to vote all shares of common stock of ▇▇▇ owned by such person in favor of the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in the ▇▇▇ Voting Agreements; and

WHEREAS, the parties intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement be and is hereby adopted as a "plan of reorganization" within the meaning of Sections 354 and 361 of the Code; and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the business transactions described in this Agreement and to prescribe certain conditions thereto.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound, the parties hereto agree as follows:

 

 

 

ARTICLE I
CERTAIN DEFINITIONS

As used in this Agreement, the following terms have the following meanings (unless the context otherwise requires, references to Articles and Sections refer to Articles and Sections of this Agreement).

"ACA" shall have the meaning set forth in Section 4.12.2.

"ACBB" shall mean Atlantic Community Bankers Bank.

"Acquisition Proposal" shall have the meaning set forth in Section 6.10.1.

"Acquisition Transaction" shall have the meaning set forth in Section 6.10.1.

"Adjusted DNB Ratio" shall have the meaning set forth in Section 11.1.7.

"Adjusted Per Share Stock Consideration" shall have the meaning set forth in Section 11.1.7.

"Administrative Delinquencies" shall mean loans (a) that are current (less than 30 days delinquent), but have reached a maturity date and have not yet been extended, and (b) that are more than 30 days delinquent as a result of (i) a delay in billing by ▇▇▇, (ii) a delay in posting payments by ▇▇▇, or (iii) weather, hostilities, or other events not in the borrower's control that delay the delivery of payments generally to ▇▇▇.

"Affiliate" shall mean any Person who directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person and, without limiting the generality of the foregoing, includes any executive officer or director of such Person and any Affiliate of such executive officer or director.

"Agreement" shall mean this agreement, together with any amendment hereto.

"Applications" shall mean the applications for regulatory approval that are required by the transactions contemplated hereby.

"Average Closing Price" shall have the meaning set forth in Section 11.1.7.

"Bank Regulator" shall mean any federal or state banking regulator, including but not limited to the OCC, the FRB, the FDIC and the Pennsylvania Department, which regulates DNB Bank or ▇▇▇, or any of their respective holding companies or subsidiaries, as the case may be.

"Business Day" shall mean any day other than (a) a Saturday or Sunday, or (b) a day on which banking and savings and loan institutions in the Commonwealth of Pennsylvania are authorized or obligated by law or executive order to be closed.

"Cash Election" shall have the meaning set forth in Section 3.1.4.

 

 

 

 

"Cash Election Shares" shall have the meaning set forth in Section 3.1.4.

"Cash-Out Consideration" shall have the meaning set forth in Section 3.3.9.

"Certificates" shall mean certificates evidencing shares of ▇▇▇ Common Stock.

"Claim" shall have the meaning set forth in Section 7.9.1.

"Closing" shall have the meaning set forth in Section 2.2.

"Closing Date" shall have the meaning set forth in Section 2.2.

"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

"Code" shall have the meaning assigned in the recitals of this Agreement.

"Confidentiality Agreements" shall have the meaning set forth in Section 12.1.

"Continuing Employees" shall have the meaning set forth in Section 7.8.1.

"Determination Date" shall have the meaning set forth in Section 11.1.7.

"Dissenting Shareholder" shall have the meaning set forth in Section 3.3.10.

"Dissenting Shares" shall have the meaning set forth in Section 3.3.10.

"DNB" shall mean DNB Financial Corporation, a Pennsylvania corporation, with its principal executive offices located at ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.

"DNB Audit Committee" shall have the meaning set forth in Section 5.5.3.

"DNB Bank" shall mean DNB First, N.A., a national bank, with its principal offices located at ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, which is a wholly owned subsidiary of DNB.

"DNB Common Stock" shall mean the common stock, par value $1.00 per share, of DNB.

"DNB Compensation and Benefit Plans" shall mean all existing bonus, incentive, deferred compensation, supplemental executive retirement plans, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, stock appreciation, phantom stock, severance, welfare benefit plans (including paid time off policies and other benefit policies and procedures), fringe benefit plans, employment, consulting, settlement and change in control agreements and all other benefit practices, policies and arrangements maintained by DNB or any DNB Subsidiary in which any employee or former employee, consultant or former consultant or director or former director of DNB or any DNB Subsidiary participates or to which any such employee, consultant or director is a party or is otherwise entitled to receive benefits.

 

 

 

 

"DNB Disclosure Schedule" shall mean a written disclosure schedule delivered by DNB to ▇▇▇ specifically referring to the appropriate section of this Agreement.

"DNB ERISA Affiliate" shall have the meaning set forth in Section 5.11.3.

"DNB Financial Statements" shall mean the (a) the audited consolidated statements of condition (including related notes and schedules) of DNB and subsidiaries as of December 31, 2015 and 2014 and the consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows (including related notes and schedules, if any) of DNB and subsidiaries for each of the two years ended December 31, 2015 and 2014, as set forth in DNB's annual report for the year ended December 31, 2015, and (b) the unaudited interim consolidated financial statements of DNB and subsidiaries as of the end of each calendar quarter following December 31, 2015, and for the periods then ended, as filed by DNB in its Securities Documents.

"DNB MAE Rep" shall mean each of the representations and warranties set forth in the following sections and subsections:  5.1.1 (other than the first sentence thereof), 5.1.2 (other than the first sentence thereof), 5.2.3, 5.2.4, 5.3.2 (beginning at clause (c)(ii) thereof), 5.4, 5.6, 5.7, 5.8, 5.9, 5.10.1 (other than the first sentence thereof), 5.10.2, 5.10.4, 5.11, 5.12, 5.13, 5.14, 5.15, 5.16, 5.17, 5.18, 5.20 and 5.21.

"DNB Payment" shall have the meaning set forth in Section 11.2.2.

"DNB Pension Plan" shall have the meaning set forth in Section 5.11.3.

"DNB Ratio" shall have the meaning set forth in Section 11.1.7.

"DNB Recommendation" shall have the meaning set forth in Section 8.1.2.

"DNB Regulatory Agreement" shall have the meaning set forth in Section 5.10.3.

"DNB Shareholders Meeting" shall have the meaning set forth in Section 8.1.2.

"DNB Stock Benefit Plans" shall mean the (i) Deferred Compensation Plan for Directors of DNB Financial Corporation, effective as of October 1, 2006, (ii) DNB Financial Corporation Deferred Compensation Plan, effective as of October 1, 2006, (iii) DNB Financial Corporation Incentive Equity and Deferred Compensation Plan, as amended and restated effective as of May 5, 2009, and (iv) 1995 Stock Option Plan of DNB Financial Corporation, as amended and restated effective as of April 25, 2012.

"DNB Subsidiary" shall mean a Subsidiary of DNB.

"Effective Time" shall mean the date and time specified pursuant to Section 2.2 hereof as the effective time of the Merger.

"Election Deadline" shall have the meaning set forth in Section 3.2.3.

"Election Form" shall have the meaning set forth in Section 3.2.2.

 

 

 

 

"Employment Agreements" shall mean the employment agreements referred to in Section 7.8.6.

"Environmental Laws" shall mean any applicable federal, state or local law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any governmental entity relating to (1) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (2) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Materials of Environmental Concern.  The term Environmental Laws includes without limitation (a) the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601, et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901, et seq.; the Clean Air Act, as amended, 42 U.S.C. § 7401, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1251, et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. § 2601, et seq.; the Emergency Planning and Community Right to ▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. § ▇▇▇▇▇, et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300f, et seq.; and all comparable state and local laws, and (b) any common law (including without limitation common law that may impose strict liability) that may impose liability or obligations for injuries or damages due to the presence of or exposure to any Materials of Environmental Concern.

"▇▇▇" shall mean East River Bank, a Pennsylvania chartered savings bank, with its principal offices located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.

"▇▇▇ Common Stock" shall mean the common stock, $0.10 par value per share, of ▇▇▇.

"▇▇▇ Delinquencies" shall mean (a) all loans with principal and/or interest that are more than 30 days contractually past due and still accruing, (b) all loans that are on non-accrual or non-performing status, (c) OREO, (d) the aggregate amount, if any, of net loan charge-offs by ▇▇▇ between December 31, 2015 and the month-end immediately preceding the Closing Date, and (e) Troubled Debt Restructurings not otherwise included in clauses (a), (c) or (d) of this definition; provided, however, that ▇▇▇ Delinquencies shall not include any loans which are Administrative Delinquencies.  For purposes of clauses (a), (b) and (e) of this definition, the aggregate amount of the loan balances included therein shall be net of any charge-offs.

"▇▇▇ Disclosure Schedule" shall mean a written disclosure schedule delivered by ▇▇▇ to DNB specifically referring to the appropriate section of this Agreement.

"▇▇▇ Directors" has the meaning set forth in Section 7.12.

"▇▇▇ ERISA Affiliate" shall have the meaning set forth in Section 4.12.3.

"▇▇▇ Financial Statements" shall mean (a) the audited consolidated balance sheets (including related notes and schedules, if any) of ▇▇▇ and Subsidiaries as of December 31, 2015 and 2014 and the consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows (including related notes and schedules, if any) of ▇▇▇ and subsidiaries for each of the two years ended December 31, 2015 and 2014, and (b) the unaudited interim consolidated financial statements of ▇▇▇ and Subsidiaries as of the end of each calendar quarter following December 31, 2015 and for the periods then ended.

 

 

 

 

"▇▇▇ ▇▇▇ Rep" shall mean each of the representations and warranties set forth in the following sections and subsections:  4.1.1 (other than the first sentence thereof), 4.1.2 (other than the first sentence thereof), 4.2.3, 4.2.4, 4.3.2 (beginning at clause (c)(ii) thereof), 4.4, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11.1 (other than the first sentence thereof), 4.11.2, 4.12, 4.13, 4.14, 4.15, 4.16, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24, 4.25, 4.26.2 and 4.27.

"▇▇▇ Option" shall mean an option to purchase shares of ▇▇▇ Common Stock granted pursuant to the ▇▇▇ Stock Benefit Plan and as set forth in ▇▇▇ Disclosure Schedule 4.2.1.

"▇▇▇ Preferred Stock" shall mean the preferred stock, no par value per share, of ▇▇▇.

"▇▇▇ Real Property" shall mean a parcel of real estate owned or leased by ▇▇▇ or a ▇▇▇ Subsidiary.

"▇▇▇ Recommendation" shall have the meaning set forth in Section 8.1.1.

"▇▇▇ Regulatory Agreement" shall have the meaning set forth in Section 4.11.3.

"▇▇▇ Regulatory Reports" shall mean the Consolidated Report of Condition and Income of ▇▇▇ and accompanying schedules, as filed with the FDIC, for each calendar quarter beginning with the quarter ended December 31, 2014, through the Closing Date.

"▇▇▇ Shareholders Meeting" shall have the meaning set forth in Section 8.1.1.

"▇▇▇ Stock Benefit Plan" shall mean the East River Bank 2013 Stock Compensation Plan.

"▇▇▇ Subsequent Determination" shall have the meaning set forth in Section 6.10.5.

"▇▇▇ Subsidiary" shall mean a Subsidiary of ▇▇▇.

"▇▇▇ Voting Agreements" shall have the meaning set forth in the recitals of this Agreement.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Exchange Agent" shall mean Computershare, Inc., or such other bank or trust company or other agent designated by DNB and reasonably acceptable to ▇▇▇.

"Exchange Fund" shall have the meaning set forth in Section 3.3.1.

 

 

 

 

"Exchange Ratio" shall mean 0.6562, subject to adjustment as provided in Section 3.1.3 hereof.

"FDIA" shall mean the Federal Deposit Insurance Act, as amended.

"FDIC" shall mean the Federal Deposit Insurance Corporation or any successor thereto.

"FHLB" shall mean the Federal Home Loan Bank of Pittsburgh.

"FRB" shall mean the Board of Governors of the Federal Reserve System.

"GAAP" shall mean accounting principles generally accepted in the United States of America, consistently applied with prior practice.

"Governmental Entity" shall mean any federal or state court, administrative agency or commission or other governmental authority or instrumentality.

"▇▇▇▇▇▇▇" shall have the meaning set forth in Section 4.13.

"health plans" shall have the meaning set forth in Section 7.8.4.

"HIPAA" shall have the meaning set forth in Section 4.12.2.

"Indemnified Parties" shall have the meaning set forth in Section 7.9.1.

"Index Price" shall have the meaning set forth in Section 11.1.7.

"Index Ratio" shall have the meaning set forth in Section 11.1.7.

"IRS" shall mean the United States Internal Revenue Service.

"Knowledge" as used with respect to a Person (including references to such Person being aware of a particular matter), shall mean those facts that are known or should have been known after due inquiry by the executive officers (as defined in Rule 3b-7 under the Exchange Act) of such Person, and in the case of ▇▇▇ shall include, without limitation, those persons set forth in ▇▇▇ Disclosure Schedule 1.1, and includes any facts, matters or circumstances set forth in any written notice from any Bank Regulator or any other written notice received by that Person.

"Mailing Date" shall have the meaning set forth in Section 3.2.2.

 

 

 

 

"Material Adverse Effect" shall mean, with respect to DNB or ▇▇▇, respectively, any effect that (a) is material and adverse to the financial condition, results of operations or business of DNB and the DNB Subsidiaries taken as a whole, or ▇▇▇ and the ▇▇▇ Subsidiaries taken as a whole, respectively, or (b) does or would materially impair the ability of either ▇▇▇, on the one hand, or DNB, on the other hand, to perform its obligations under this Agreement on a timely basis or otherwise materially threaten or materially impede the consummation of the transactions contemplated by this Agreement; provided, however, that "Material Adverse Effect" shall not be deemed to include the impact of (i) changes in laws and regulations affecting banks or thrift institutions or their holding companies generally, or interpretations thereof by courts or Governmental Entities, (ii) changes in GAAP or regulatory accounting principles generally applicable to financial institutions and their holding companies, (iii) actions and omissions of a party hereto (or any of its Subsidiaries) taken with the prior written consent of the other party, (iv) the announcement of this Agreement and the transactions contemplated hereby, and compliance with this Agreement on the business, financial condition or results of operations of the parties and their respective subsidiaries, including the expenses incurred by the parties hereto in consummating the transactions contemplated by this Agreement, (v) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (vi) economic, financial market, or geographic conditions in general, including changes in economic or financial markets or changes in interest rates; (vii) any legal action asserted or other actions initiated by any holder of shares of ▇▇▇ Common Stock or the holder of any shares of DNB Common Stock arising out of or related to this Agreement; or (viii) any failure, in and of itself, by such party to meet any internal projections, forecasts or revenue or earnings projections (it being understood that the facts giving rise or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or would reasonably be expected to be, a Material Adverse Effect); except, with respect to clauses (i), (ii), (v) and (vi), to the extent that the effects of such changes or conditions disproportionately affect ▇▇▇ and its Subsidiaries taken as a whole or DNB and its Subsidiaries taken as a whole, as the case may be, as compared to similarly situated community banks and their holding companies located in the United States.

"Material Contracts" shall have the meaning set forth in Section 4.8.3.

"Materials of Environmental Concern" shall mean pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products, and any other hazardous or toxic materials regulated under Environmental Laws.

"Maximum Amount" shall have the meaning set forth in Section 7.9.3.

"Merger" shall have the meaning set forth in the recitals of this Agreement.

"Merger Consideration" shall mean the Per Share Cash Consideration and the Per Share Stock Consideration, as the case may be, to be paid pursuant to the provisions of Article III hereof.

"Merger Registration Statement" shall mean the registration statement, together with all amendments, filed with the SEC under the Securities Act for the purpose of registering shares of DNB Common Stock to be offered to holders of ▇▇▇ Common Stock in connection with the Merger.

"Nasdaq" shall mean the NASDAQ Capital Market of the NASDAQ Stock Market.

"NBA" shall mean the National Bank Act.

"Non-Election Shares" shall have the meaning set forth in Section 3.1.5.

 

 

 

 

"Notice of Superior Proposal" shall have the meaning set forth in Section 6.10.5.

"OCC" shall mean the Office of the Comptroller of the Currency.

"OREO" shall mean real estate acquired through foreclosure or in lieu of foreclosure, including in-substance foreclosures.

"Participation Facility" shall have the meaning set forth in Section 4.14.1.

"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor thereto.

"Pennsylvania Department" shall mean the Pennsylvania Department of Banking and Securities.

"Pension Plan" shall have the meaning set forth in Section 4.12.2.

"Per Share Cash Consideration" shall mean $18.65, subject to adjustment as provided in Section 3.1.4.

"Per Share Merger Consideration" shall mean, collectively, the Per Share Cash Consideration together with the Per Share Stock Consideration.

"Per Share Stock Consideration" shall mean such number of shares or fraction of a share, as the case may be, of DNB Common Stock as is equal to the product of (i) one and (ii) the Exchange Ratio, subject to adjustment as provided in Section 3.1.3.

"Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, trust or "group" (as that term is defined under the Exchange Act).

"Phase I" shall mean a Phase I Environmental Site Assessment performed in accordance with ASTM E1527-05 and/or the "all appropriate inquiry" standards set forth at 40 C.F.R. Part 312.

"Phase II" shall have the meaning set forth in Section 6.3.

"Policies, Practices and Procedures" shall have the meaning set forth in Section 4.27.2.

"Pre-Closing" shall have the meaning set forth in Section 10.1.

"Proxy Statement-Prospectus" shall have the meaning set forth in Section 8.2.1.

"Regulatory Approvals" shall mean the approval of any Bank Regulator that is necessary in connection with the consummation of the Merger, and the related transactions contemplated by this Agreement.

"Representative" shall have the meaning set forth in Section 3.2.2.

"Rights" shall mean warrants, options, rights, convertible securities, stock appreciation rights and other arrangements or commitments which obligate an entity to issue or dispose of any of its capital stock or other ownership interests or which provide for compensation based on the equity appreciation of its capital stock.

 

 

 

 

"SEC" shall mean the United States Securities and Exchange Commission or any successor thereto.

"Securities Act" shall mean the Securities Act of 1933, as amended.

"Securities Documents" shall mean all reports, prospectuses, proxy or information statements, registration statements and all other documents filed, or required to be filed, by DNB with the SEC pursuant to the Securities Laws.

"Securities Laws" shall mean the Securities Act; the Exchange Act; the Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940, as amended; the Trust Indenture Act of 1939, as amended, and the rules and regulations of the SEC promulgated thereunder.

"Shortfall Number" shall have the meaning set forth in Section 3.2.6.

"Starting Date" shall have the meaning set forth in Section 11.1.7.

"Starting Price" shall have the meaning set forth in Section 11.1.7.

"Stock Conversion Number" shall have the meaning set forth in Section 3.2.1.

"Stock Election" shall have the meaning set forth in Section 3.1.3.

"Stock Election Number" shall have the meaning set forth in Section 3.2.5.

"Stock Election Shares" shall have the meaning set forth in Section 3.1.3.

"Subsidiary" shall mean a corporation, limited liability company, partnership, trust, joint venture or other entity in which a Person owns, directly or indirectly, an equity interest representing 50% or more of any class of the capital stock thereof or other equity interests therein.

"Superior Proposal" shall have the meaning set forth in Section 6.10.2.

"Surviving Institution" shall have the meaning set forth in Section 2.1 hereof.

"Tax" shall mean any tax, including any fees, levies, duties, tariffs, imposts, and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any federal, state, provincial, local or foreign Taxing Authority, including: (a) income, franchise, profits, gross receipts, ad valorem, net worth, value added, sales, use, service, real, personal or intangible property, special assessments, capital stock, license, payroll, withholding, employment, social security, workers' compensation, unemployment compensation, estimated, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, recording, transfer and gains taxes; (b) interest, penalties, additional taxes and additions to tax imposed; and (c) any obligations under any agreements or arrangements with any other Person with respect to such amounts and including any liability for taxes of a predecessor entity.

 

 

 

 

"Tax Return" shall mean any return, declaration, report, claim for refund, estimates, elections, agreements, statements, declarations of estimated tax, information returns or other documents of any nature or kind, relating to, or required to be filed in connection with, any Taxes, including any schedule or attachment thereto and amendments thereof, and including any information returns or reports with respect to backup withholding and other payments to third parties.

"Taxing Authority" shall mean any Governmental Entity responsible for the imposition or collection of any Taxes, whether domestic or foreign.

"Termination Date" shall mean November 30, 2016.

"Treasury Stock" shall have the meaning set forth in Section 3.1.2.

"Troubled Debt Restructurings" shall mean loans that are "troubled debt restructurings" as defined in Statement of Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring" (ASC 310-40), or any successor thereto.

Other terms used herein are defined in the recitals and elsewhere in this Agreement.

ARTICLE II
THE MERGER

Subject to the terms and conditions of this Agreement, at the Effective Time or such other later time as may be specified by the OCC: (a) ▇▇▇ shall merge with and into DNB Bank under the laws of the United States and the Commonwealth of Pennsylvania, with DNB Bank as the resulting or surviving institution (the "Surviving Institution"); and (b) in addition to the effects set forth in 12 U.S.C. § 215a, the applicable provisions of the regulations of the OCC and other applicable law, the separate existence of ▇▇▇ shall cease and all of the rights, privileges, powers, franchises, properties, assets, liabilities and obligations of ▇▇▇ shall be vested in and assumed by DNB Bank.  As part of the Merger, each share of ▇▇▇ Common Stock (other than Treasury Stock and Dissenting Shares) will be converted into the right to receive the Merger Consideration pursuant to the terms of Article III hereof.

The closing ("Closing") shall occur no later than the close of business on the twentieth calendar day following the satisfaction or (to the extent permitted by applicable law) waiver of the conditions set forth in Article IX (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by applicable law) waiver of those conditions), or such other date that may be agreed to in writing by the parties, provided however, that in no event shall the Closing occur prior to July 1, 2016.  The Merger shall be effected by a certification of the OCC on the day of the Closing (the "Closing Date"), in accordance with the NBA.  The "Effective Time" shall mean the date and time upon which the Merger shall be effective as specified by the OCC.

 

 

 

 

The articles of association and bylaws of DNB Bank in effect immediately prior to the Effective Time shall be the articles of association and bylaws of the Surviving Institution, until altered, amended or repealed in accordance with their terms and applicable law.

Subject to Section 7.12, the directors of DNB Bank immediately prior to the Effective Time shall be the initial directors of the Surviving Institution, each to hold office in accordance with the articles of association and bylaws of DNB Bank. Subject to Section 7.8.6 and the Employment Agreements referenced therein, the officers of DNB Bank immediately prior to the Effective Time shall be the initial officers of the Surviving Institution, in each case until their respective successors are duly elected or appointed and qualified.

At and after the Effective Time, the Merger shall have the effects as set forth in this Agreement and the NBA.

It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a "plan of reorganization" as that term is used in Sections 354 and 361 of the Code.  From and after the date of this Agreement and until the Closing, each party hereto shall use its reasonable best efforts to cause the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken which action or failure to act could prevent the Merger from qualifying as a reorganization under Section 368(a) of the Code.  Following the Closing, neither DNB, ▇▇▇ nor any of their affiliates shall knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could cause the Merger to fail to qualify as a reorganization under Section 368(a) of the Code.  DNB and ▇▇▇ each hereby agrees to deliver certificates substantially in compliance with IRS published advance ruling guidelines, with customary exceptions and modifications thereto, to enable counsel to deliver the legal opinion contemplated by Section 9.1.6, which certificates shall be effective as of the date of such opinion.

Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time DNB shall be entitled to revise the structure of the Merger, including, without limitation, by merging ▇▇▇ into a newly created wholly-owned Subsidiary of DNB; provided that (a) any such Subsidiary shall become a party to, and shall agree to be bound by, the terms of this Agreement; (b) there are no adverse federal or state income tax or other adverse tax consequences to ▇▇▇ shareholders as a result of the modification; (c) the consideration to be paid to the holders of ▇▇▇ Common Stock under this Agreement is not thereby changed in kind or value or reduced in amount; and (d) such modification will not materially delay or jeopardize the receipt of Regulatory Approvals or other consents and approvals relating to the consummation of the Merger, otherwise materially delay or jeopardize the satisfaction of any condition to Closing set forth in Article IX or otherwise adversely affect ▇▇▇ or the holders of ▇▇▇ Common Stock.  The parties hereto agree to appropriately amend this Agreement and any related documents in order to reflect any such revised structure.

 

 

 

 

Subject to any specific provisions of this Agreement, it is the intent of the parties hereto that DNB by reason of this Agreement shall not be deemed (until consummation of the transactions contemplated hereby) to control, directly or indirectly, ▇▇▇ or to exercise, directly or indirectly, a controlling influence over the management or policies of ▇▇▇.

ARTICLE III
CONVERSION OF SHARES

At the Effective Time, by virtue of the Merger and without any action on the part of DNB, ▇▇▇ or the holders of any of the shares of ▇▇▇ Common Stock, the Merger shall be effected in accordance with the following terms:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇

▇▇▇ represents and warrants to DNB that the statements contained in this Article IV are true and correct as of the date hereof and thereafter as of all times up to and including the Effective Time, subject to such qualifications and exceptions as are set forth in the ▇▇▇ Disclosure Schedules delivered by ▇▇▇ to DNB on the date hereof.  ▇▇▇ has made a good faith effort to ensure that the disclosure on each schedule of the ▇▇▇ Disclosure Schedule corresponds to the section referenced herein.  However, for purposes of the ▇▇▇ Disclosure Schedule, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant as and to the extent that it is reasonably clear on the face of such schedule that such item applies to such other schedule.  References to the Knowledge of ▇▇▇ shall include the Knowledge of ▇▇▇ and each of the ▇▇▇ Subsidiaries.

 

 

 

 

 

 

 

 

Except for (a) filings with Bank Regulators, the receipt of the Regulatory Approvals, and compliance with any conditions contained therein, (b) the certification of the merger by the OCC (c) the filing with the SEC of (i) the Merger Registration Statement and (ii) such reports under Sections 13(a), 13(d), 13(g) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (d) approval of the listing of DNB Common Stock to be issued in the Merger on the Nasdaq, (e) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of DNB Common Stock pursuant to this Agreement, (f) the approval of this Agreement by the requisite vote of the shareholders of ▇▇▇ and (g) the approval of the issuance of shares of DNB Common Stock in connection with the Merger by the requisite vote of the shareholders of DNB, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity are necessary, and no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with (x) the execution and delivery of this Agreement by ▇▇▇, and (y) the completion of the Merger by ▇▇▇ and the other transactions contemplated by this Agreement.  ▇▇▇ has no reason to believe that any Regulatory Approvals or other required consents or approvals will not be received.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

▇▇▇ has not suffered any Material Adverse Effect since December 31, 2015 and no event has occurred or circumstance arisen since that date which, in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on ▇▇▇.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Except as set forth on ▇▇▇ Disclosure Schedule 4.10, neither ▇▇▇ nor any ▇▇▇ Subsidiary is a party to any, and there are no pending or, to ▇▇▇'▇ Knowledge, threatened legal, administrative, arbitration or other proceedings, claims (whether asserted or unasserted), actions or governmental investigations or inquiries of any nature (a) against ▇▇▇ or any ▇▇▇ Subsidiary, (b) to which ▇▇▇ or any ▇▇▇ Subsidiary's assets are or may be subject, (c) challenging the validity or propriety of any of the transactions contemplated by this Agreement, (d) which could adversely affect the ability of ▇▇▇ to perform under this Agreement, or (e) which would be reasonably likely to materially impair ▇▇▇'▇ or any ▇▇▇ Subsidiary's ability to operate its business as currently conducted or proposed to be conducted post-Merger.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Neither ▇▇▇ nor any ▇▇▇ Subsidiary, nor any of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any such person in connection with the transactions contemplated by this Agreement except for the retention of ▇▇▇▇▇▇▇ Financial Group, LLC ("▇▇▇▇▇▇▇") by ▇▇▇ and the fee payable pursuant thereto.  A true and correct copy of the engagement agreement with ▇▇▇▇▇▇▇, setting forth the fee payable to ▇▇▇▇▇▇▇ for its services rendered to ▇▇▇ in connection with the Merger and transactions contemplated by this Agreement, is attached to ▇▇▇ Disclosure Schedule 4.13.

 

 

 

 

 

 

 

 

▇▇▇ has made available to DNB copies of its annual reports and proxy materials used or for use in connection with its meetings of shareholders, each since January 1, 2011.

Except as set forth in ▇▇▇ Disclosure Schedule 4.17, neither ▇▇▇ nor any ▇▇▇ Subsidiary is a party to any transaction (including any loan or other credit accommodation) with any Affiliate of ▇▇▇ or any ▇▇▇ Affiliate.  All such transactions (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve substantially more than the normal risk of collectability or present other unfavorable features (as such terms are used under Regulation O of the FRB).  No loan or credit accommodation to any Affiliate of ▇▇▇ or any ▇▇▇ Subsidiary is presently in default or, during the three year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended.  Neither ▇▇▇ nor any ▇▇▇ Subsidiary has been notified that principal and interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation by ▇▇▇ is inappropriate.

 

 

 

 

Except as set forth in ▇▇▇ Disclosure Schedule 4.18, as of the date of this Agreement, none of the deposits of ▇▇▇ or any ▇▇▇ Subsidiary is a "brokered deposit" as defined in 12 CFR Section 337.6(a)(2).

The affirmative vote of two-thirds of the issued and outstanding shares of ▇▇▇ Common Stock is required to approve this Agreement and the Merger under ▇▇▇'▇ articles of incorporation and applicable law.

Neither ▇▇▇ nor any ▇▇▇ Subsidiary is under any obligation, contingent or otherwise, which will survive the Effective Time by reason of any agreement to register any transaction involving any of its securities under the Securities Act.

All interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for ▇▇▇'▇ own account, or for the account of one or more of ▇▇▇'▇ Subsidiaries or their customers (all of which are set forth in ▇▇▇ Disclosure Schedule 4.21), were entered into in the ordinary course of business consistent with past practice and in compliance with all applicable laws, rules, regulations and regulatory policies, and with counterparties believed at the time to be financially responsible and able to understand (either alone or in consultation with their advisors) and to bear the risks of such transactions; and each of them constitutes the valid and legally binding obligation of ▇▇▇ or one of its Subsidiaries, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors' rights or by general equity principles), and is in full force and effect.  Neither ▇▇▇ nor any ▇▇▇ Subsidiary, nor to the Knowledge of ▇▇▇ any other party thereto, is in breach of any of its obligations under any such agreement or arrangement in any respect and there are no allegations or assertions of such by any party thereunder.

The board of directors of ▇▇▇ has received an oral opinion from ▇▇▇▇▇▇▇ to the effect that, subject to the terms, conditions and qualifications set forth therein, as of the date hereof, the Merger Consideration to be received by the shareholders of ▇▇▇ pursuant to this Agreement is fair to such shareholders from a financial point of view, which opinion will be confirmed in writing dated as of the date of this Agreement.  Such opinion has not been amended or rescinded as of the date of this Agreement.

 

 

 

 

▇▇▇ and each of its Subsidiaries has properly administered all accounts for which it acts as a fiduciary, including but not limited to accounts for which it serves as trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable laws and regulations.  None of ▇▇▇, any other ▇▇▇ Subsidiary, or any of their respective directors, officers or employees, has committed any breach of trust with respect to any such fiduciary account and the records for each such fiduciary account are true and correct in all material respects and accurately reflect the assets of such fiduciary account.

▇▇▇ and each ▇▇▇ Subsidiary (a) owns or possesses valid and binding licenses and other rights (subject to expirations in accordance with their respective terms) to use any and all patents, copyrights, trade secrets, trade names, service marks and trademarks, and (b) is a party to valid and binding licenses for any software, which are required for ▇▇▇ and each ▇▇▇ Subsidiary to conduct their respective businesses as currently conducted.  Neither ▇▇▇ nor any ▇▇▇ Subsidiary has received any notice or has any Knowledge of any conflict with respect any patents, copyrights, trade secrets, trade names, service marks, trademarks, or licensed software used by ▇▇▇ or any ▇▇▇ Subsidiary in their respective businesses as currently conducted.  ▇▇▇ and each ▇▇▇ Subsidiary has performed all of the obligations required to be performed as of the date of this Agreement, and is not in default in any material respect, under any license, contract, agreement, arrangement or commitment relating to any of the foregoing.  The conduct of the business of ▇▇▇ and each ▇▇▇ Subsidiary as currently conducted or proposed to be conducted does not infringe upon, dilute, misappropriate or otherwise violate any intellectual property owned or controlled by any third party, and no third party has infringed, diluted, misappropriated or otherwise violated any intellectual property rights of ▇▇▇ or any ▇▇▇ Subsidiary.  ▇▇▇ and each ▇▇▇ Subsidiary (a) owns or possesses confidential information, including, but not limited to, customer lists and customer data, (b) has taken reasonable steps to protect such confidential information from unintended disclosure, and (c) represents and warrants that such confidential information has not been disclosed to any third parties other than their Affiliates, third parties with which they have contractual nondisclosure agreements or DNB and its Affiliates.

There are no labor or collective bargaining agreements to which ▇▇▇ or any ▇▇▇ Subsidiary is a party.  There is no union organizing effort pending or to the Knowledge of ▇▇▇, threatened against ▇▇▇ or any ▇▇▇ Subsidiary.  There is no labor strike, labor dispute (other than routine employee grievances that are not related to union employees), work slowdown, stoppage or lockout pending or, to the Knowledge of ▇▇▇, threatened against ▇▇▇ or any ▇▇▇ Subsidiary.  There is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of ▇▇▇, threatened against ▇▇▇ or any ▇▇▇ Subsidiary (other than routine employee grievances that are not related to union employees).  ▇▇▇ and each ▇▇▇ Subsidiary is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including but not limited to the Fair Labor Standards Act, the Family and Medical Leave Act, Title VII of the Civil Rights Act, the Immigration and Nationality Act, and the National Labor Relations Act, and are not engaged in any unfair labor practice.  ▇▇▇ and each ▇▇▇ Subsidiary represents that they have not made any commitments to others inconsistent with or in derogation of any of the foregoing.  There are no pending or, to the Knowledge of ▇▇▇, threatened claims or suits against ▇▇▇ or any ▇▇▇ Subsidiary, or for which any of them might be legally responsible, under any labor or employment law or brought or made by a current or former employee or applicant.  Neither ▇▇▇ nor any ▇▇▇ Subsidiary is delinquent in any material respect in payments to any of its current or former officers, directors, managers, members, partners, employees or independent contractors for any wages, salaries, commissions, bonuses, benefits, expenses, or other compensation for any services performed or amounts required to be reimbursed, or has, to its Knowledge, any liability, whether actual or contingent, with respect to any misclassification of any person as an independent contractor rather than as an employee, or with respect to any employee leased from another employer.

 

 

 

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DNB

DNB represents and warrants to ▇▇▇ that the statements contained in this Article V are true and correct as of the date hereof and thereafter as of all times up to and including the Effective Time, subject to such qualifications and exceptions as are set forth in the DNB Disclosure Schedules delivered by DNB to ▇▇▇ on the date hereof or as disclosed in any report, schedule, form or other document filed with or furnished to the SEC by DNB on or after the date on which DNB filed with the SEC its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (but excluding any risk factor disclosures contained under the heading "Risk Factors," any disclosure of risks included in any "forward-looking statements" disclaimer or any other statements that are similarly non-specific or predictive or forward-looking in nature) and prior to the date hereof.  DNB has made a good faith effort to ensure that the disclosure on each schedule of the DNB Disclosure Schedule corresponds to the section referenced herein.  However, for purposes of the DNB Disclosure Schedule, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant as and to the extent that it is reasonably clear on the face of such schedule that such item applies to such other schedule.  References to the Knowledge of DNB shall include the Knowledge of DNB Bank and the other DNB Subsidiaries.

 

 

 

 

 

 

 

 

 

 

 

 

Except for (a) filings with Bank Regulators, the receipt of the Regulatory Approvals, and compliance with any conditions contained therein, (b) the certification of the merger by the OCC, (c) the filing with the SEC of (i) the Merger Registration Statement, and (ii) such reports under Sections 13(a), 13(d), 13(g) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (d) approval of the listing of DNB Common Stock to be issued in the Merger on the Nasdaq, (e) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of DNB Common Stock pursuant to this Agreement, (f) the approval of this Agreement by the requisite vote of the shareholders of ▇▇▇ and (g) the approval of the issuance of the shares of DNB Common Stock in connection with the Merger by the requisite vote of the shareholders of DNB, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity are necessary, and no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with (i) the execution and delivery of this Agreement by DNB, and (ii) the completion of the Merger by DNB and the other transactions contemplated by this Agreement.  DNB has no reason to believe that any Regulatory Approvals or other required consents or approvals will not be received.

 

 

 

 

 

 

 

 

 

 

 

 

DNB has not suffered any Material Adverse Effect since December 31, 2015 and no event has occurred or circumstance arisen since that date which, in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on DNB.

 

 

 

 

Neither DNB nor any DNB Subsidiary is a party to any, and there are no pending or, to the Knowledge of DNB, threatened legal, administrative, arbitration or other proceedings, claims (whether asserted or unasserted), actions or governmental investigations or inquiries of any nature (a) against DNB or any DNB Subsidiary that could reasonably be expected to have a Material Adverse Effect, (b) to which DNB or any DNB Subsidiary's assets are or may be subject, (c) challenging the validity or propriety of any of the transactions contemplated by this Agreement, or (d) which could adversely affect the ability of DNB to perform under this Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DNB has made available to ▇▇▇ copies of its (a) annual reports on Form 10-K for the years ended December 31, 2015, 2014 and 2013, and (b) proxy materials used or for use in connection with its meetings of shareholders held in 2015, 2014 and 2013.  Such reports and such proxy materials complied, at the time filed with the SEC, in all material respects, with the Securities Laws.

Neither DNB nor any DNB Subsidiary, nor any of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any such person in connection with the transactions contemplated by this Agreement except for the retention of Ambassador Financial Group, Inc. ("Ambassador") and the fee payable pursuant thereto.

The shares of DNB Common Stock to be issued pursuant to this Agreement, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and subject to no preemptive rights.

 

 

 

 

All loans receivable (including discounts) and accrued interest entered on the books of DNB and the DNB Subsidiaries arose out of bona fide arm's-length transactions, were made for good and valuable consideration in the ordinary course of DNB's or the appropriate DNB Subsidiary's respective business, and the notes or other evidences of indebtedness with respect to such loans (including discounts), and all pledges, mortgages, deeds of trust and other collateral documents or security instruments relating thereto, are valid, true and genuine and are what they purport to be.  To DNB's Knowledge, the loans, discounts and the accrued interest reflected on the books of DNB and the DNB Subsidiaries are subject to no defenses, set-offs or counterclaims (including, without limitation, those afforded by usury or truth-in-lending laws), except as may be provided by bankruptcy, insolvency or similar laws affecting creditors' rights generally or by general principles of equity.  With respect to all such loans, DNB or a DNB Subsidiary has good and marketable title, free and clear of any and all encumbrances, liens, pledges, equities, claims, charges, rights of first refusal or similar rights or security interests of any nature encumbering such loan and are evidenced by notes, agreements or other evidences of indebtedness which are true, genuine and correct, and to the extent secured, are secured by valid liens and security interests that are legal, valid and binding obligations of the maker thereof, enforceable in accordance with the respective terms thereof, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws or equitable principles affecting the enforcement of creditors' rights, which have been perfected.

Except as set forth in DNB Disclosure Schedule 5.19, neither DNB nor any DNB Subsidiary is a party to any transaction (including any loan or other credit accommodation) with any Affiliate of DNB or any DNB Affiliate.  All such transactions (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve substantially more than the normal risk of collectability or present other unfavorable features (as such terms are used under Regulation O of the FRB).  No loan or credit accommodation to any Affiliate of DNB or any DNB Subsidiary is presently in default or, during the three year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended.  Neither DNB nor any DNB Subsidiary has been notified that principal and interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation by DNB is inappropriate.

 

 

 

 

DNB and its shareholders have received an opinion from Ambassador to the effect that, subject to the terms, conditions and qualifications set forth therein, as of the date hereof, the Merger Consideration payable to pursuant to this Agreement is fair, from a financial point of view, to DNB and its shareholders.  Such opinion has not been amended or rescinded as of the date of this Agreement.

DNB and each DNB Subsidiary (a) owns or possesses valid and binding licenses and other rights (subject to expirations in accordance with their respective terms) to use any and all patents, copyrights, trade secrets, trade names, service marks and trademarks, and (b) is a party to valid and binding licenses for any software, which are required for DNB and each DNB Subsidiary to conduct their respective businesses as currently conducted.  Neither DNB nor any DNB Subsidiary has received any notice or has any Knowledge of any conflict with respect any patents, copyrights, trade secrets, trade names, service marks, trademarks, or licensed software used by DNB or any DNB Subsidiary in their respective businesses as currently conducted.  DNB and each DNB Subsidiary has performed all of the obligations required to be performed as of the date of this Agreement, and is not in default in any material respect, under any license, contract, agreement, arrangement or commitment relating to any of the foregoing.  The conduct of the business of DNB and each DNB Subsidiary as currently conducted or proposed to be conducted does not infringe upon, dilute, misappropriate or otherwise violate any intellectual property owned or controlled by any third party, and no third party has infringed, diluted, misappropriated or otherwise violated any intellectual property rights of DNB or any DNB Subsidiary.  DNB and each DNB Subsidiary (a) owns or possesses confidential information, including, but not limited to, customer lists and customer data, (b) has taken reasonable steps to protect such confidential information from unintended disclosure, and (c) represents and warrants that such confidential information has not been disclosed to any third parties other than their Affiliates or third parties with which they have contractual nondisclosure agreements.

 

 

 

 

ARTICLE VI
COVENANTS OF ▇▇▇

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subject to Section 12.1 hereof, ▇▇▇ shall permit DNB reasonable access during normal business hours upon reasonable notice to its properties and those of the ▇▇▇ Subsidiaries, and shall disclose and make available to DNB during normal business hours all of its books, papers and records relating to the assets, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors' (other than minutes that discuss any of the transactions contemplated by this Agreement or any other subject matter ▇▇▇ determines based on the advice of legal counsel should be treated as confidential) and shareholders' meetings, organizational documents, bylaws, contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees, and any other business activities or prospects in which DNB may have a reasonable interest; provided, however, that ▇▇▇ shall not be required to take any action that would provide access to or to disclose information where such access or disclosure would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel or that is otherwise prohibited by law or contractual agreement.  DNB shall use commercially reasonable efforts to minimize any interference with ▇▇▇'▇ regular business operations during any such access to ▇▇▇'▇ property, books and records.  ▇▇▇ shall permit DNB, at its expense, to cause a Phase I and any Phase II Environmental Site Assessment  ("Phase II") recommended therein to be performed at each ▇▇▇ Real Property (provided that such right, with respect to leased ▇▇▇ Real Property, shall be subject to the applicable landlord's prior written consent) provided, however, that DNB shall only have the right to conduct a Phase II prior to the Closing Date only to the extent that a Phase II is within the scope of additional testing recommended by the Phase I to be performed as a result of "Recognized Environmental condition" (as such term is defined by the American Society for Testing Materials") that was discovered in the Phase I.  Any such Phase I shall be commenced within 30 days after the date of this Agreement and any such Phase II, to the extent permitted by the provisions hereof to be conducted prior to Closing, recommended to be performed by any such Phase I shall be commenced within 30 days of the Phase I report recommending such Phase II.  DNB shall use its best efforts to cause any such Phase I conducted to be completed within 30 days of the date of commencement thereof, but in no event more than 45 days after the date of commencement thereof.  In the event DNB elects to commence any Phase II, to the extent permitted pursuant to the provisions of this Section 6.3 to be conducted prior to Closing, DNB shall use its best efforts to have any such Phase II completed within 45 days of the commencement thereof, but in no event more than 60 days after the date of commencement thereof.  DNB and its environmental consultant shall conduct all environmental assessments pursuant to this Section at mutually agreeable times and so as to eliminate or minimize to the greatest extent possible interference with ▇▇▇'▇ operation of its business, and DNB shall maintain or cause to be maintained reasonably adequate insurance with respect to any assessment conducted hereunder.  DNB shall be required to restore each ▇▇▇ Real Property to substantially its pre-assessment condition.  All costs and expenses incurred in connection with any Phase I or Phase II and any restoration and clean up, shall be borne solely by DNB.  DNB hereby agrees to indemnify, defend and hold ▇▇▇ harmless from and against any cost, expense, charge, lien, action or judgment, as well as any claim of a right to any such cost, expense, charge, lien, action or judgment arising from any act or omission of DNB, DNB's agents or contractors, or any services, labor, supplies or materials provided or performed by surveyors, engineers, architects and others hired by DNB to make the inspections and tests, and from and against any personal injury and property damage caused by the act or neglect of DNB or any of its agents, or independent contractors in connection with any Phase I or Phase II.

 

 

 

 

▇▇▇ shall maintain, and cause each ▇▇▇ Subsidiary to maintain, insurance in such amounts as are reasonable to cover such risks as are customary in relation to the character and location of their properties and the nature of their business, but in no event shall such coverage be less than coverage by the policies in place as of the date of this Agreement.

From time to time as necessary, but in no event less than ten (10) days prior to the Effective Time, ▇▇▇ will supplement or amend the ▇▇▇ Disclosure Schedule delivered in connection herewith with respect to any matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such ▇▇▇ Disclosure Schedule or which is necessary to correct any information in such ▇▇▇ Disclosure Schedule which has been rendered inaccurate thereby.  Notwithstanding the foregoing, ▇▇▇ shall promptly notify DNB if any representation or warranty of ▇▇▇ becomes materially inaccurate but in no event more than five (5) Business Days after ▇▇▇ has Knowledge of such material inaccuracy.  No supplement or amendment to such ▇▇▇ Disclosure Schedule shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article IX.

 

 

 

 

▇▇▇ shall use all commercially reasonable efforts to obtain as soon as practicable all consents and approvals necessary or desirable for the consummation of the transactions contemplated by this Agreement.

Subject to the terms and conditions herein provided, ▇▇▇ agrees to use reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.

In the event that ▇▇▇ determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify DNB.

For purposes of this Agreement, "Acquisition Proposal" shall mean any inquiry, offer or proposal (other than an inquiry, offer or proposal from DNB), whether or not in writing, contemplating, relating to, or that could reasonably be expected to lead to, an Acquisition Transaction.  For purposes of this Agreement, "Acquisition Transaction" shall mean (a) any transaction or series of transactions involving any merger, consolidation, recapitalization, share exchange, liquidation, dissolution or similar transaction involving ▇▇▇ or any of its Subsidiaries; (b) any transaction pursuant to which any third party or group acquires or would acquire (whether through sale, lease or other disposition), directly or indirectly, any assets of ▇▇▇ or any of its Subsidiaries representing, in the aggregate, fifteen percent (15%) or more of the assets of ▇▇▇ and its Subsidiaries on a consolidated basis; (c) any issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase or securities convertible into, such securities) representing fifteen percent (15%) or more of the votes attached to the outstanding securities of ▇▇▇ or any of its Subsidiaries; (d) any tender offer or exchange offer that, if consummated, would result in any third party or group beneficially owning fifteen percent (15%) or more of any class of equity securities of ▇▇▇ or any of its Subsidiaries; or (e) any transaction which is similar in form, substance or purpose to any of the foregoing transactions, or any combination of the foregoing.

 

 

 

 

For purposes of this Agreement, "Superior Proposal" shall mean any unsolicited bona fide written proposal (on its most recently amended or modified terms, if amended or modified made by a third party to enter into an Acquisition Transaction on terms that the Board of Directors of ▇▇▇ reasonably determines in its good faith judgment, after consultation with and having considered the advice of outside legal counsel and its financial advisor, (a) would, if consummated, result in the acquisition of all, but not less than all, of the issued and outstanding shares of ▇▇▇ Common Stock or all, or substantially all, of the assets of ▇▇▇ and its Subsidiaries on a consolidated basis; (b) would result in a transaction that (i) involves consideration to the holders of the shares of ▇▇▇ Common Stock that is more favorable than the Merger Consideration to be paid to ▇▇▇'▇ shareholders pursuant to this Agreement, considering, among other things, the nature of the consideration being offered, any regulatory approvals or other risks associated with the timing of the proposed transaction beyond the identity of such Person making such proposal or other factors and risks in addition to those specifically contemplated hereby, and which proposal is not conditioned upon obtaining additional financing and (ii) is, in light of the other terms of such proposal, more favorable to ▇▇▇ than the Merger and the transactions contemplated by this Agreement; and (c) is reasonably likely to be completed on the terms proposed, in each case taking into account all legal, financial, regulatory and other aspects of the proposal.

 

 

 

 

 

 

 

 

▇▇▇ agrees to consult with DNB with respect to its loan, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves).  DNB and ▇▇▇ shall also consult with respect to the character, amount and timing of restructuring charges to be taken by each of them in connection with the transactions contemplated hereby and shall take such charges as DNB shall reasonably request and which are not inconsistent with GAAP; provided that no such actions need be effected (i) until DNB shall have irrevocably certified to ▇▇▇ that all conditions set forth in Article IX to the obligation of DNB to consummate the transactions contemplated hereby have been satisfied or, where legally permissible, waived and (ii) more than five (5) Business Days prior to the Closing Date.

▇▇▇ shall permit a representative of DNB to attend any meeting of the Board of Directors of ▇▇▇ or the Executive, Asset-Liability and Loan Committees (including loan review and any other loan committees) thereof as an observer; provided that ▇▇▇ shall not be required to permit the DNB representative to remain present during any confidential discussion of this Agreement and the transactions contemplated hereby or any third party proposal to acquire control of ▇▇▇ or during any other matter that the respective Board of Directors or committee thereof has reasonably determined to be confidential with respect to DNB's participation.

 

 

 

 

ARTICLE VII
COVENANTS OF DNB

During the period from the date of this Agreement to the Effective Time, except with the written consent of ▇▇▇, which consent will not be unreasonably withheld, DNB will, and it will cause each DNB Subsidiary to use reasonable efforts to preserve intact its business organization and assets and maintain its rights and franchises; and voluntarily take no action that would, or would be reasonably likely to: (a) adversely affect the ability of the parties to obtain the Regulatory Approvals or other approvals of Governmental Entities required for the transaction contemplated hereby, or increase the period of time necessary to obtain such approvals; (b) adversely affect its ability to perform its covenants and agreements under this Agreement; or (c) result in the representations and warranties contained in Article V of this Agreement not being true and correct on the date of this Agreement or at any future date on or prior to the Closing Date or in any of the conditions set forth in Article IX hereof not being satisfied.

During the period from the date of this Agreement to the Effective Time as necessary, DNB will cause one or more of its representatives to confer with representatives of ▇▇▇ and report the general status of its financial condition, operations and business and matters relating to the completion of the transactions contemplated hereby, at such times as ▇▇▇ may reasonably request.  DNB will promptly notify ▇▇▇, to the extent permitted by applicable law, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), which might adversely affect the ability of the parties to obtain the Regulatory Approvals or increase the period of time necessary to obtain such approvals; or the institution of material litigation involving DNB and any DNB Subsidiary.  DNB shall be reasonably responsive to requests by ▇▇▇ for access to such information and personnel regarding DNB and its Subsidiaries as may be reasonably necessary for ▇▇▇ to confirm that the representations and warranties of DNB contained herein are true and correct and that the covenants of DNB contained herein have been performed in all material respects; provided, however, that DNB shall not be required to take any action that would provide access to or to disclose information where such access or disclosure, in DNB's reasonable judgment, would interfere with the normal conduct of DNB's business or would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel.

DNB will make available to ▇▇▇ the Securities Documents filed by it with the SEC under the Securities Laws.  DNB will furnish to ▇▇▇ copies of all documents, statements and reports that it or DNB Bank intends to file with any Bank Regulator with respect to the Merger.  DNB will furnish to ▇▇▇ copies of all documents, statements and reports that it sends to the shareholders of DNB.

 

 

 

 

From time to time prior to the Effective Time as necessary, DNB will supplement or amend the DNB Disclosure Schedule delivered in connection herewith with respect to any material matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such DNB Disclosure Schedule or which is necessary to correct any information in such DNB Disclosure Schedule which has been rendered inaccurate thereby.  No supplement or amendment to such DNB Disclosure Schedule shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article IX.

DNB shall use all commercially reasonable efforts to obtain as soon as practicable all consents and approvals, necessary or desirable for the consummation of the transactions contemplated by this Agreement.

Subject to the terms and conditions herein provided, DNB agrees to use all reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.

In the event that DNB determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify ▇▇▇.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior to the Effective Time, DNB will take all steps necessary to list on the Nasdaq (or such other national securities exchange on which the shares of the DNB Common Stock shall be listed as of the date of consummation of the Merger), subject to official notice of issuance, the shares of DNB Common Stock to be issued in the Merger.

DNB agrees at all times from the date of this Agreement until the Merger Consideration has been paid in full to reserve a sufficient number of shares of its common stock and to maintain sufficient liquid accounts (at either the DNB or DNB Bank level) or borrowing capacity to fulfill its obligations under this Agreement.

Following the date of this Agreement, DNB and DNB Bank shall take all action necessary to (a) cause each of their boards of directors to be increased by three members, effective immediately following the Effective Time, and (b) elect ▇▇▇▇ ▇. ▇▇▇▇▇▇ and two other current directors of ▇▇▇ selected by ▇▇▇ and reasonably acceptable to DNB from the list set forth in DNB Disclosure Schedule 7.12 (the "▇▇▇ Directors") as independent directors to each of DNB and DNB Bank in the class of directors whose terms expire at the 2017, 2018 and, with respect to ▇▇. ▇▇▇▇▇▇, 2019 annual meeting of shareholders of DNB, respectively.  At the end of the initial term of each of such ▇▇▇ Director, he will be re-nominated for at least one additional three-year term, subject to the fiduciary duties of the board of directors and any applicable eligibility requirements set forth in DNB's and DNB Bank's articles of incorporation, articles of association, bylaws, or nominating and corporate governance committee guidelines, or any applicable law, rule, regulation or listing standard.  Upon election to the boards of directors of DNB and DNB Bank, ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be appointed Vice Chairman of the DNB and DNB Bank boards of directors, subject to the fiduciary duties of the board of directors and any applicable eligibility requirements set forth in DNB's and DNB Bank's articles of incorporation, articles of association, bylaws, or nominating and corporate governance committee guidelines, or any applicable law, rule, regulation or listing standard.  The ▇▇▇ Directors will also have appropriate representation on committees of DNB and DNB Bank as set forth in DNB Disclosure Schedule 7.12. In the event an ▇▇▇ Director is unable to complete his term or elects to not stand for re-election following his initial term, the remaining former directors of ▇▇▇ then serving on the DNB board of directors will be permitted to nominate a replacement director for consideration by DNB's nominating and corporate governance committee and board of directors, subject to such Person's compliance with the eligibility requirements set forth in DNB's and DNB Bank's articles of incorporation, articles of association, bylaws or nominating and corporate governance committee guidelines, or any applicable law, rule, regulation or listing standard and to the boards' fiduciary duty.

 

 

 

 

ARTICLE VIII
REGULATORY AND OTHER MATTERS

 

 

 

 

Each of ERB and DNB will cooperate with the other and use all reasonable efforts to promptly prepare all necessary documentation, to effect all necessary filings within forty-five (45) days after the date of this Agreement or as soon as practicable thereafter and to obtain all necessary permits, consents, waivers, approvals and authorizations of the SEC, the Bank Regulators and any other third parties and governmental bodies necessary to consummate the transactions contemplated by this Agreement.  ERB and DNB will furnish each other and each other's counsel with all information concerning themselves, their Subsidiaries, directors, officers and shareholders and such other matters as may be necessary or advisable in connection with the Proxy Statement-Prospectus and any application, petition or any other statement or application made by or on behalf of ERB or DNB to any Bank Regulatory or governmental body in connection with the Merger, and the other transactions contemplated by this Agreement.  Each party shall have the right to review and approve in advance all characterizations of the information relating to such party and any of its Subsidiaries, which appear in any filing made in connection with the transactions contemplated by this Agreement with any governmental body.  Each party shall give the other party and its counsel reasonable opportunity to review and comment on each filing prior to its being filed with a Bank Regulator and shall give the other party and its counsel reasonable opportunity to review and comment on all regulatory filings, amendments and supplements to such filings and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, a Bank Regulator.

 

 

 

 

ARTICLE IX
CLOSING CONDITIONS

The respective obligations of each party under this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following conditions, none of which may be waived:

 

 

 

 

The obligations of DNB under this Agreement shall be further subject to the satisfaction of the conditions set forth in this Section 9.2 at or prior to the Closing Date:

 

 

 

 

ERB will furnish DNB with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in this Section 9.2 as DNB may reasonably request.

The obligations of ERB under this Agreement shall be further subject to the satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.4 at or prior to the Closing Date:

 

 

 

 

DNB will furnish ERB with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in this Section 9.3 as ERB may reasonably request.

ARTICLE X
THE CLOSING

Subject to the provisions of Articles IX and XI hereof, the Closing of the transactions contemplated hereby shall take place at the offices of Stradley Ronon Stevens & Young, LLP, 2600 One Commerce Square, Philadelphia, PA at 10:00 a.m. on the Closing Date, or at such other place or time upon which DNB and ERB mutually agree.  A pre-closing of the transactions contemplated hereby (the "Pre-Closing") shall take place at the offices of Stradley Ronon Stevens & Young, LLP, 2600 One Commerce Square, Philadelphia, PA at 10:00 a.m. on the Business Day prior to the Closing Date.

At the Pre-Closing there shall be delivered to DNB and ERB the opinions, certificates, and other documents and instruments required to be delivered under Article IX hereof.  At or prior to the Closing, DNB shall have delivered the Merger Consideration as set forth under Section 9.3.4 hereof.

ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER

This Agreement may be terminated at any time prior to the Closing Date, whether before or after approval of the Merger by the shareholders of ERB or DNB:

 

 

 

 

 

 

 

 

For purposes hereof, the condition set forth in clause (A) above shall be deemed not to exist if the Exchange Ratio is increased so that the Adjusted Per Share Stock Consideration (calculated by using the Average Closing Price, as provided in the definition of "Adjusted Per Share Stock Consideration") after such increase is not less than 80% of the Adjusted Per Share Stock Consideration calculated by using the Starting Price in lieu of the Average Closing Price.

For purposes hereof, the condition set forth in clause (B) above shall be deemed not to exist if the Exchange Ratio is increased so that the Adjusted DNB Ratio is not less than the Index Ratio.

If DNB makes this election, within such period, it shall give prompt written notice to ERB of such election and the revised Exchange Ratio, whereupon no termination shall have occurred pursuant to this Section 11.1.7 and this Agreement shall remain in effect in accordance with its terms (except as the Exchange Ratio, and derivatively the Per Share Stock Consideration, shall have been so modified), and any references in this Agreement to "Exchange Ratio" and "Per Share Stock Consideration" shall thereafter be deemed to refer to the Exchange Ratio and Per Share Stock Consideration after giving effect to any adjustment made pursuant to this Section 11.1.7.

For purposes of this Section 11.1.7, the following terms shall have the meanings indicated:

"Adjusted DNB Ratio" means the number obtained by dividing (x) the sum of (i) the Average Closing Price plus (ii) the quotient obtained by dividing the aggregate increase in transaction value resulting from an increase in the Exchange Ratio by the total number of shares of ERB Common Stock outstanding multiplied by the initial Exchange Ratio, on the Determination Date, by (y) the Starting Price. For purposes of calculating the increase in transaction value, the price per share of DNB Common Stock shall be deemed to be the Average Closing Price.

 

 

 

 

"Adjusted Per Share Stock Consideration" means the product of the Per Share Stock Consideration times the Average Closing Price.

"Average Closing Price" means the average of the last reported sale prices per share of DNB Common Stock as reported on the NASDAQ Stock Market (as reported in The Wall Street Journal or, if not reported therein, in another mutually agreed upon authoritative source) for the twenty consecutive trading days immediately preceding the Determination Date.

"Determination Date" shall mean the tenth calendar day immediately prior to the Effective Time, or if such calendar day is not a trading day on the Nasdaq Stock Market, the trading day immediately preceding such calendar day.

"Index Price" on a given date means the closing price of the NASDAQ Bank Index.

"Starting Date" means the trading day on the NASDAQ Stock Market immediately preceding the day on which the parties publicly announce the signing of this Agreement.

"Starting Price" means $29.16.

If DNB declares or effects a stock dividend, reclassification, recapitalization, split-up, combination, exchange of shares or similar transaction between the Starting Date and the Determination Date, the prices for the common stock of DNB shall be appropriately adjusted for the purposes of applying this Section 11.1.7.

 

 

 

 

 

 

 

 

Subject to applicable law, at any time prior to the Effective Time (whether before or after approval thereof by the shareholders of ERB and DNB), the parties hereto by action of their respective boards of directors, may (a) amend this Agreement, (b) extend the time for the performance of any of the obligations or other acts of any other party hereto, (c) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (d) waive compliance with any of the agreements or conditions contained herein; provided, however, that after any approval of this Agreement and the transactions contemplated hereby by the shareholders of ERB or the approval of the issuance of shares of DNB Common Stock in connection with the Merger by the shareholders of DNB, no amendment to this Agreement may be made which under applicable law or the applicable listing and corporate governance rules and regulations of NASDAQ further approval by the shareholders of ERB or DNB is required, unless such further shareholder approval is so obtained.  This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.  Any agreement on the part of a party hereto to any extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party, but such waiver or failure to insist on strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

ARTICLE XII
MISCELLANEOUS

Except as specifically set forth herein, DNB and ERB mutually agree to be bound by the terms of the confidentiality agreements dated October 19, 2015 and February 2, 2016 (the "Confidentiality Agreements"), previously executed by the parties hereto, which Confidentiality Agreements are hereby incorporated herein by reference.  The parties hereto agree that the Confidentiality Agreements shall continue in accordance with their respective terms, notwithstanding the termination of this Agreement.

ERB and DNB shall cooperate with each other in the development and distribution of all news releases and other public disclosures with respect to this Agreement, and except as may be otherwise required by law or the applicable listing and corporate governance rules and regulations of NASDAQ, neither ERB nor DNB shall issue any news release, or other public announcement or communication with respect to this Agreement unless such news release, public announcement or communication has been mutually agreed upon by the parties hereto.

All representations, warranties and covenants in this Agreement or in any instrument delivered pursuant hereto or thereto shall expire on and be terminated and extinguished at the Effective Time, except for those covenants and agreements contained herein which by their terms apply in whole or in part after the Effective Time.

 

 

 

 

All notices or other communications hereunder shall be in writing and shall be deemed given if delivered by receipted hand delivery, mailed by prepaid United States registered or certified mail, return receipt requested, or sent by a nationally recognized overnight courier addressed as follows:

or such other address as shall be furnished in writing by any party, and any such notice or communication shall be deemed to have been given: (a) as of the date delivered by hand; (b) three (3) Business Days after being delivered to the U.S. mail, postage prepaid; or (c) one (1) Business Day after being delivered to the overnight courier if next Business Day delivery is requested by the sender.

This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party.  Except for the provisions of Article III and Section 7.9, following the Effective Time, nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

 

 

 

This Agreement, including the Exhibits and Disclosure Schedules hereto and the documents and other writings referred to herein or therein or delivered pursuant hereto, and the Confidentiality Agreements referred to in Section 12.1, contains the entire agreement and understanding of the parties with respect to its subject matter.  There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties other than those expressly set forth herein or therein.  This Agreement supersedes all prior agreements and understandings (other than the Confidentiality Agreements referred to in Section 12.1 hereof) between the parties, both written and oral, with respect to its subject matter.

This Agreement may be executed in one or more counterparts all of which shall be considered one and the same agreement and each of which shall be deemed an original.  A facsimile copy or electronic transmission of a signature page shall be deemed to be an original signature page.

In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.

This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania, without giving effect to its principles of conflicts of laws.

When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated.  The recitals hereto constitute an integral part of this Agreement.  References to Sections include subsections, which are part of the related Section (e.g., a section numbered "Section 5.5.1" would be part of "Section 5.5" and references to "Section 5.5" would also refer to material contained in the subsection described as "Section 5.5.1").  The table of contents, index and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation".  The phrases "the date of this Agreement", "the date hereof" and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the Recitals to this Agreement.  The parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.  All documents and information set forth in DNB's Securities Documents shall be deemed to have been "made available" or "provided" to ERB.

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, DNB and ERB have caused this Agreement to be executed by their duly authorized officers as of the date first set forth above.

	DNB Financial Corporation
	By: /s/ William J. Hieb
	Name: William J. Hieb
	Title: President and CEO
	East River Bank
	By: /s/ John F. McGill
	Name: John F. McGill
	Title: Chairman

 

 

 

BANK PLAN OF MERGER

THIS BANK PLAN OF MERGER ("Plan of Merger") dated ________, 2016 is by and between East River Bank, a Pennsylvania-chartered savings bank ("ERB"), and DNB First, N.A., a national bank ("DNB").

Background:

WHEREAS, ERB is a Pennsylvania-chartered savings bank. The authorized capital stock of ERB consists of 10,000,000 shares of common stock, par value $0.10 per share, of which ___________ shares of common stock will be issued and outstanding at the Effective Time;

WHEREAS, in accordance with the terms of that certain Agreement and Plan of Merger, dated April 4, 2016 (the "Agreement"), by and between DNB Financial Corporation, a Pennsylvania corporation ("DNBF") and ERB, ERB will be merged with and into DNB pursuant to the terms of the Agreement and this Plan of Merger;

WHEREAS, the respective Boards of Directors of ERB and DNB have determined that the merger of ERB with and into DNB, with DNB being the surviving institution (the "Resulting Institution"), under and pursuant to the terms and conditions set forth herein (said transaction being hereinafter referred to as the "Bank Merger") is in the best interests of ERB and DNB;

WHEREAS, the Agreement, including the form of this Plan of Merger (which constitutes Exhibit A of the Agreement) has been approved by the unanimous written consent of the sole shareholder of DNB and the requisite vote of the shareholders of ERB; and

WHEREAS, the transactions contemplated by the Agreement and this Plan of Merger must be approved by the Office of the Comptroller of the Currency ("OCC").

NOW, THEREFORE, in consideration of the mutual promises and mutual agreements contained herein, the parties hereto agree as follows:

 

 

 

 

 

 

 

 

 

 

 

Signature Page Follows

 

 

 

 

IN WITNESS WHEREOF, the parties have caused this Bank Plan of Merger to be executed by their respective officers thereunto duly authorized as of the date first above written.

	DNB FIRST, N.A.
[SEAL]
	By:
	Name:
	Title:
	By:
	Name:
	Title:
	EAST RIVER BANK
[SEAL]
	By:
	Name:
	Title:
	By:
	Name:
	Title:

 

 

 

 

 

EXHIBIT B

FORM OF VOTING AGREEMENT

April 4, 2016

East River Bank
4341 Ridge Avenue
Philadelphia, PA  19129

DNB Financial Corporation
4 Brandywine Avenue
Downingtown, PA  19335

Ladies and Gentlemen:

DNB Financial Corporation ("DNB") and East River Bank ("ERB") have entered into an Agreement and Plan of Merger dated as of April 4, 2016 (the "Merger Agreement"), pursuant to which, subject to the terms and conditions set forth therein, (a) ERB will merge with and into DNB First, N.A. ("DNB Bank"), with DNB Bank surviving the merger (the "Merger"); and (b) the shareholders of ERB will receive common stock of DNB and/or cash consideration as stated in the Merger Agreement.

DNB has requested, as a condition to its execution and delivery to ERB of the Merger Agreement, that the undersigned, being directors and executive officers of ERB, execute and deliver to DNB this Letter Agreement.

Each of the undersigned, in order to induce DNB to execute and deliver to ERB the Merger Agreement, and intending to be legally bound, hereby irrevocably:

 

 

 

 

The obligations set forth herein shall terminate concurrently with any termination of the Merger Agreement.

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This Letter Agreement may be executed in two or more counterparts, each of which shall be deemed to constitute an original, but all of which together shall constitute one and the same Letter Agreement.

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The undersigned intend to be legally bound hereby.

	Sincerely,
	Name:
	Title:

                                                                                                  

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