<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1997
FORM 8-B
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION OF SECURITIES OF CERTAIN SUCCESSOR ISSUERS
FILED PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
Pennwood Bancorp, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1783648
- ------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer ID No.)
of incorporation or organization)
683 Lincoln Avenue, Pittsburgh, Pennsylvania 15202
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
None.
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value Per Share
--------------------------------------
(Title of class)
<PAGE>
Item 1. General Information
- ----------------------------
(a) Pennwood Bancorp, Inc. (the "Registrant") was incorporated as a
corporation pursuant to the laws of the Commonwealth of Pennsylvania in February
1996.
(b) The Registrant's fiscal year ends on June 30.
Item 2. Transaction of Succession
- ----------------------------------
(a) The common stock, $.01 par value per share, of Pennwood Savings Bank
(the "Savings Bank") was registered with the Federal Deposit Insurance
Corporation in June 1996 pursuant to Section 12(g) of the Securities Exchange
Act of 1934, as amended ("1934 Act"), at the time of the Savings Bank's
conversion from mutual to stock form.
(b) Incorporated by reference herein is the information contained under
the heading "Holding Company Formation" on pages 21 through 50 of the Proxy
Statement - Offering Memorandum filed as Exhibit 1 hereto.
Item 3. Securities to be Registered
- ------------------------------------
The Registrant's Articles of Incorporation presently authorize the issuance
of up to 4,000,000 shares of common stock, $.01 par value per share ("Common
Stock"), and 1,000,000 shares of preferred stock ("Preferred Stock"). As of the
date hereof, 100 shares of Common Stock were issued and outstanding, all of
which are owned by the Savings Bank. Upon consummation of the Savings Bank's
reorganization into the holding company form of organization, such shares will
be cancelled and the Company will issue one share of Common Stock for each share
of common stock of the Savings Bank issued and outstanding, which amounted to
610,128 shares on January 8, 1997. No shares of Preferred Stock are presently
issued and outstanding and, consequently, no shares of Preferred Stock are
registered hereby. Moreover, there are no shares of the Registrant's capital
stock held by or for the account of the Registrant.
Item 4. Description of Registrant's Securities to be Registered
- ----------------------------------------------------------------
Incorporated by reference herein is the information contained under the
heading "Holding Company Formation - Description of Company Capital Stock" and
"Holding Company Formation - Comparison of Stockholders' Rights" on pages 34
through 50 of the Proxy Statement - Offering Memorandum filed as Exhibit 1
hereto.
<PAGE>
Item 5. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements.
No financial statements are being filed with this registration statement
because the capital structure and consolidated balance sheet of the Registrant
immediately following the succession are substantially the same as those of the
Savings Bank prior to the succession.
(b) Exhibits.
1. Proxy Statement - Offering Memorandum to approve the succession and
reorganization.
2. Agreement and Plan of Reorganization, dated September 18, 1996, by and
among the Savings Bank, Pennwood Interim Bank Savings Bank and Pennwood Bancorp,
Inc. is attached as Appendix A to the Proxy Statement - Offering Memorandum.
3. (i) Registrant's Articles of Incorporation are attached as Appendix B
to the Proxy Statement - Offering Memorandum.
(ii) Registrant's Bylaws are attached as Appendix C to the Proxy
Statement - Offering Memorandum.
(iii) Form of the Registrant's Common Stock Certificate.
(iv) List of Subsidiaries of the Registrant.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
PENNWOOD BANCORP, INC.
Date: January 9, 1997 By: /s/ Paul S. Pieffer
-------------------------------------
Paul S. Pieffer
President and Chief Executive Officer
<PAGE>
EXHIBIT 1
Proxy Statement - Offering Memorandum
<PAGE>
[Pennwood Savings Bank Letterhead]
October 8, 1996
Dear Stockholder,
Enclosed is a Notice of Annual Meeting, a Proxy Statement-Offering
Memorandum and a proxy card for the upcoming first Annual Meeting of
Stockholders of Pennwood Savings Bank ("Pennwood Savings" or the "Savings
Bank"). In addition to the election of directors and the ratification of the
selection of auditors, at the Annual Meeting you will be asked to consider and
vote upon an Agreement and Plan of Reorganization pursuant to which the Savings
Bank would become a wholly-owned subsidiary of "Pennwood Bancorp, Inc." (the
"Company"), a recently-formed company organized under the laws of the
Commonwealth of Pennsylvania (the "Reorganization"). Upon consummation of the
Reorganization, each outstanding share of Savings Bank common stock will be
converted into one share of common stock of the Company and the Savings Bank
will be a wholly-owned subsidiary of the Company, operating with the same
directors, officers and employees as before the Reorganization.
The Board of Directors of Pennwood Savings believes that the formation of a
holding company will provide greater financial and operating flexibility,
including without limitation providing for the most cost-effective means of
initiating a stock repurchase program. For these reasons, the Board of
Directors of the Savings Bank has unanimously approved the proposal to form a
holding company for the Savings Bank and recommends that you vote in favor of
this proposal.
The accompanying Proxy Statement-Offering Memorandum provides a detailed
description of the Reorganization, including descriptions of the effects of the
Reorganization on the rights of stockholders. Please give this information your
careful attention.
In view of the importance of the action to be taken, we urge you to
complete, sign, and date your proxy and return it promptly in the enclosed
envelope, whether or not you plan to attend the Annual Meeting. If you attend
the Annual Meeting, you may vote in person even if you have previously mailed
your proxy.
Sincerely,
Paul S. Pieffer
President and Chief Executive Officer
<PAGE>
PENNWOOD SAVINGS BANK
683 LINCOLN AVENUE
PITTSBURGH, PENNSYLVANIA 15202
(412) 761-1234
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1996
NOTICE IS HEREBY GIVEN that an annual meeting of stockholders of Pennwood
Savings Bank ("Pennwood Savings" or the "Savings Bank") will be held at the main
office of the Savings Bank located at 683 Lincoln Avenue, Pittsburgh,
Pennsylvania on November 20, 1996, at 6:00 p.m., Eastern Time, for the following
purposes:
1. To elect three directors for a three-year term, two directors for a
two-year term and three directors for a one-year term and, in each case, until
their successors are elected and qualified;
2. To consider a proposal to approve the formation of a new bank holding
company for Pennwood Savings by approving an Agreement and Plan of
Reorganization pursuant to which (a) Pennwood Savings will, subject to necessary
approvals, become a wholly-owned subsidiary of a recently-formed Pennsylvania
corporation known as "Pennwood Bancorp, Inc." (the "Company") and (b) each
outstanding share of common stock of Pennwood Savings will become, by operation
of law, one share of common stock of the Company;
3. To ratify the appointment of KPMG Peat Marwick LLP as the Savings
Bank's independent public accountants for the year ending June 30, 1997; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors of Pennwood Savings has fixed September 30, 1996 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting. Only those stockholders of record as of the
close of business on that date will be entitled to vote at the Annual Meeting or
at any such adjournment.
By Order of the Board of Directors
James W. Kihm
Vice President and Secretary
October 8, 1996
Pittsburgh, Pennsylvania
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER
YOU OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED
BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF.
<PAGE>
PENNWOOD SAVINGS BANK
PENNWOOD BANCORP, INC.
__________________
PROXY STATEMENT-OFFERING MEMORANDUM
This document serves as a Proxy Statement for the Annual Meeting of
Stockholders of Pennwood Savings Bank ("Pennwood Savings" or the "Savings
Bank"), to be held on November 20, 1996 and at any adjournment of such meeting
(the "Annual Meeting"). This document also serves as an Offering Memorandum of
Pennwood Bancorp, Inc. (the "Company") with respect to the issuance of up to a
maximum of 610,128 shares of the Company's common stock, par value $.01 per
share ("Company Common Stock"), to stockholders of Pennwood Savings in exchange
for an equal number of shares of common stock of Pennwood Savings, par value
$.01 per share ("Pennwood Savings Common Stock"), upon consummation of the
Savings Bank's reorganization into the holding company form of organization (the
"Reorganization"). The shares of Pennwood Savings Common Stock are being
offered by the Company pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
contained in Section 3(a)(12) thereof, which exempts any equity security issued
in connection with certain holding company reorganizations by banks and savings
associations such as Pennwood Savings.
This Proxy Statement-Offering Memorandum and the accompanying Notice of
Annual Meeting of Stockholders and Proxy Card are first being mailed to
stockholders on or about October 8, 1996.
____________________
The date of this Proxy Statement-Offering Memorandum is October 8, 1996.
1
<PAGE>
TABLE OF CONTENTS
Heading Page
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . 4
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Matters to be Considered . . . . . . . . . . . . . . . . . . . . . 9
Shares Outstanding and Entitled to Vote; Record Date . . . . . . . 9
Votes Required . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Voting, Solicitation and Revocation of Proxies . . . . . . . . . . 10
Beneficial Ownership of Common Stock . . . . . . . . . . . . . . . . . 12
Election of Directors. . . . . . . . . . . . . . . . . . . . . . . . . 13
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Information with Respect to Nominees for Director . . . . . . . . 14
Stockholder Nominations . . . . . . . . . . . . . . . . . . . . . 16
Executive Officers Who Are Not Directors . . . . . . . . . . . . . 17
Committees and Meetings of the Board of the Savings Bank . . . . . 17
Director's Compensation . . . . . . . . . . . . . . . . . . . . . 18
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . 18
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Transactions With Certain Related Persons . . . . . . . . . . . . 20
Section 16(a) Beneficial Ownership Reporting Compliance . . . . . 20
Holding Company Formation. . . . . . . . . . . . . . . . . . . . . . . 21
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Reasons for the Reorganization . . . . . . . . . . . . . . . . . 22
Description of the Reorganization. . . . . . . . . . . . . . . . . 22
Capital Resources. . . . . . . . . . . . . . . . . . . . . . . . . 23
Conditions to the Reorganization and Abandonment . . . . . . . . . 24
Certain Federal Tax Consequences . . . . . . . . . . . . . . . . . 25
Accounting Treatment of the Reorganization . . . . . . . . . . . . 25
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . 25
Board of Directors and Management of the Company . . . . . . . . . 28
Management Remuneration and Effect on Employee
Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Market for Company Common Stock; Anticipated Dividend Policy;
and Resales of Company Common Stock. . . . . . . . . . . . . . . 30
Regulation of the Company. . . . . . . . . . . . . . . . . . . . . 31
Description of Company Capital Stock . . . . . . . . . . . . . . . 34
Comparison of Stockholders' Rights . . . . . . . . . . . . . . . . 36
Ratification of Appointment of Independent Public Accountants. . . . . 51
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Stockholder Proposals. . . . . . . . . . . . . . . . . . . . . . . . . 52
Annual Reports and Financial Statements. . . . . . . . . . . . . . . . 52
2
<PAGE>
Appendix A - Agreement and Plan of Reorganization. . . . . . . . . . . A-1
Appendix B - Articles of Incorporation of the Company. . . . . . . . . B-1
Appendix C - Bylaws of the Company . . . . . . . . . . . . . . . . . . C-1
Appendix D - Subchapter D of the Pennsylvania Business Corporation Law
relating to Dissenters Rights. . . . . . . . . . . . . D-1
3
<PAGE>
AVAILABLE INFORMATION
Pennwood Savings is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
administered by the Federal Deposit Insurance Corporation ("FDIC"), and in
accordance therewith files reports and other information with the FDIC. Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the FDIC's Registration and
Disclosure Section, 1776 F Street, N.W., Washington, D.C. 20006.
The Company currently is a wholly-owned subsidiary of Pennwood Savings that
was formed for the purpose of becoming the parent holding company of Pennwood
Savings upon consummation of the Reorganization. As a wholly-owned subsidiary,
the Company has not previously been subject to the requirements of the Exchange
Act, and there is currently no public market for the Company Common Stock.
However, in connection with the Reorganization, the Company will become subject
to the same information, reporting and proxy statement requirements under the
Exchange Act as currently apply to Pennwood Savings, except that such filings
will be required to be made with the Securities and Exchange Commission ("SEC")
rather than the FDIC and will be available for inspection and copying at
prescribed rates at the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549; and at the SEC's regional office at
7 World Trade Center, Suite 1300, New York, New York 10048. Pennwood Savings'
reporting obligations under the Exchange Act will terminate when the Company's
reporting obligations begin. The Pennwood Savings Common Stock is quoted on the
Nasdaq Stock Market's Small-Cap Market, and the Company Common Stock will be
quoted on the Nasdaq Stock Market's Small-Cap Market upon consummation of the
Reorganization. Reports, proxy statements and other information concerning
Pennwood Savings and, upon consummation of the Reorganization, the Company, may
be inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company intends to file an application on Form FR Y-3 under the Bank
Holding Company Act of 1956, as amended ("BHCA") with the Federal Reserve Bank
of Cleveland under authority delegated by the Board of Governors of the Federal
Reserve System ("Federal Reserve Board"). A copy of such application can be
obtained from the Federal Reserve Bank of Cleveland, 1655 Superior Avenue,
Cleveland, Ohio 44115 and the Federal Reserve Bank of New York, 33 Liberty
Street, New York, New York 10045.
Applications for approval of the merger of Pennwood Interim Savings Bank, a
to-be-formed subsidiary of the Company, with and into Pennwood Savings will be
filed with the Pennsylvania Department of Banking ("Department") and the FDIC.
An application for approval of the acquisition by the Company of 100% of the
capital stock of Pennwood Savings will also be filed with the Department.
Copies of applications to the Department and to the FDIC can be obtained from
the Pennsylvania Department of Banking, 33 Market
4
<PAGE>
Street, Harrisburg, Pennsylvania 17101 and the office of the Regional Director
of the FDIC, 452 Fifth Avenue, 21st Floor, New York, New York 10018,
respectively.
_____________________
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT-OFFERING MEMORANDUM AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT-OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT-OFFERING MEMORANDUM IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT-OFFERING MEMORANDUM NOR ANY
DISTRIBUTION OF THE SECURITIES BEING OFFERED PURSUANT TO THIS PROXY
STATEMENT-OFFERING MEMORANDUM SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY,
PENNWOOD SAVINGS OR THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS
PROXY STATEMENT-OFFERING MEMORANDUM.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE PENNSYLVANIA
DEPARTMENT OF BANKING OR ANY OTHER GOVERNMENT AGENCY. THE SECURITIES ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
INVESTED.
5
<PAGE>
SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT-OFFERING MEMORANDUM. REFERENCE IS MADE TO, AND THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED
IN THIS PROXY STATEMENT-OFFERING MEMORANDUM, INCLUDING THE AGREEMENT AND PLAN OF
REORGANIZATION, ARTICLES OF INCORPORATION AND BYLAWS ATTACHED AS APPENDICES
HERETO.
DATE, TIME AND PLACE OF THE ANNUAL MEETING AND RECORD DATE. The Annual
Meeting will be held at the main office of the Savings Bank located at 683
Lincoln Avenue, Pittsburgh, Pennsylvania, on November 20, 1996, at 6:00 p.m.,
Eastern Time, and at any adjournment thereof. Stockholders of record at the
close of business on September 30, 1996 are entitled to notice of and to vote at
the Annual Meeting.
PURPOSES OF THE ANNUAL MEETING. At the Annual Meeting, stockholders will
be asked to consider (1) a proposal to elect three directors for a three-year
term, two directors for a two-year term, and three directors for a one-year term
and, in each case, until their successors are elected and qualified; (2) a
proposal to form a bank holding company for Pennwood Savings pursuant to an
Agreement and Plan of Reorganization (the "Agreement") pursuant to which (a)
Pennwood Savings will, subject to necessary approvals, become a wholly-owned
subsidiary of a newly-formed Pennsylvania corporation known as "Pennwood
Bancorp, Inc." and (b) each outstanding share of Pennwood Savings Common Stock
will become, by operation of law, one share of Company Common Stock; (3) a
proposal to ratify the appointment of KPMG Peat Marwick LLP as Pennwood Savings'
independent public accountants for the year ending June 30, 1997; and (4) such
other business as may properly come before the meeting or any adjournment
thereof.
REASONS FOR THE REORGANIZATION. The Board of Directors of Pennwood Savings
believes that a holding company form of organization will (1) provide
flexibility for meeting the future financial needs of Pennwood Savings,
including without limitation providing the most cost-effective means of
initiating a Common Stock repurchase program, (2) facilitate the acquisition of
other financial institutions, subject to restrictions of applicable laws and
regulations, and (3) increase Pennwood Savings' ability to compete effectively
with commercial banks in its market area, many of which are subsidiaries of
holding companies. See "Holding Company Formation - Reasons for the
Reorganization."
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors of
Pennwood Savings has unanimously approved the Agreement, subject to the receipt
of stockholder approval and necessary regulatory approvals, and unanimously
recommends that stockholders of Pennwood Savings approve such Agreement.
REQUIRED STOCKHOLDER APPROVAL. The affirmative vote of the holders of
two-thirds of the issued and outstanding Pennwood Savings Common Stock is
required to approve the
6
<PAGE>
Agreement. As of September 30, 1996, directors and executive officers of
Pennwood Savings as a group (10 persons) beneficially owned 11.1% of the issued
and outstanding shares of Pennwood Savings Common Stock, all of which are
expected to be voted in favor of the Agreement and the other proposals to be
considered at the Annual Meeting. See "Beneficial Ownership of Common Stock"
and "Holding Company Formation."
DISSENTERS' RIGHTS. Holders of shares of Pennwood Savings Common Stock who
object to the Reorganization and comply with the prescribed statutory procedures
are entitled to have the fair value of their shares, determined in accordance
with the BCL, and paid to them in cash. A copy of the pertinent statutory
provisions of the BCL is attached to this Proxy Statement-Offering Memorandum as
Appendix D. FAILURE TO FOLLOW SUCH PROVISIONS PRECISELY MAY RESULT IN A LOSS OF
DISSENTERS' RIGHTS. See "Holding Company Formation - Dissenters' Rights."
REQUIRED REGULATORY APPROVALS AND REGULATION. The Reorganization is
subject to the approval of the Federal Reserve Board and the Department. Upon
consummation of the Reorganization, the Company will be a bank holding company
subject to regulation by the Federal Reserve Board under the BHCA and by the SEC
with respect to certain matters arising under federal securities laws. See
"Holding Company Formation - Regulation of the Company."
CERTAIN FEDERAL TAX CONSEQUENCES. Pennwood Savings has received a legal
opinion to the effect that none of the Company, Pennwood Savings or the
stockholders of Pennwood Savings will recognize gain or loss for federal income
tax purposes as a result of the Reorganization. See "Holding Company Formation
- - Certain Federal Tax Consequences."
MANAGEMENT OF THE COMPANY. Directors and officers of the Company consist
of certain persons who also currently serve as directors and officers of
Pennwood Savings. See "Holding Company Formation - Management of the Company."
MARKET FOR COMMON STOCK. The Company Common Stock will be substituted for
the Pennwood Savings Common Stock on the Nasdaq Stock Market's Small-Cap Market
under the symbol "PWBK" upon consummation of the Reorganization. On September
17, 1996, the last full trading day on which shares of Pennwood Savings Common
Stock were traded prior to the day the Board of Directors adopted the Agreement
and Plan of Reorganization, the closing sale price of a share of Pennwood
Savings Common Stock on the Nasdaq Stock Market's Small-Cap Market was $10.00.
On October 2, 1996, the closing sale price of a share of Pennwood Savings Common
Stock on the Nasdaq Stock Market's Small-Cap Market was $10.75. See "Holding
Company Formation - Market for Company Common Stock; Anticipated Dividend
Policy; and Resales of Company Common Stock."
DIVIDENDS. It is not anticipated that the dividend policy of the Company
will differ from that of Pennwood Savings. See "Holding Company Formation -
Market for Company Common Stock; Anticipated Dividend Policy; and Resales of
Company Common Stock."
7
<PAGE>
EFFECTS OF THE REORGANIZATION ON RIGHTS OF STOCKHOLDERS. Pennwood Savings
is regulated under the Pennsylvania Banking Code of 1965, as amended (the
"Banking Code"), and the Company, as a Pennsylvania corporation, is governed by
the corporate laws under the Pennsylvania Business Corporation Law of 1988, as
amended ("BCL"). Although Pennwood Savings believes that the rights of
stockholders of Pennwood Savings and the Company are substantially similar,
there are certain differences between the Banking Code and the BCL, and the
provisions of the Articles of Incorporation and Bylaws of the Company and the
Amended and Restated Articles of Incorporation and Bylaws of Pennwood Savings
differ in certain respects. For a comparison of the rights of stockholders
under the laws of Banking Code and the BCL and the Articles of Incorporation and
Bylaws of the Company and the Amended and Restated Articles of Incorporation and
Bylaws of Pennwood Savings, see "Holding Company Formation - Comparison of
Stockholders' Rights."
8
<PAGE>
PENNWOOD SAVINGS BANK
PENNWOOD BANCORP, INC.
_______________
PROXY STATEMENT - OFFERING MEMORANDUM
THE ANNUAL MEETING
This Proxy Statement-Offering Memorandum is being furnished to stockholders
of Pennwood Savings in connection with the solicitation of proxies by the Board
of Directors of Pennwood Savings for use at the Annual Meeting to be held at the
main office of the Savings Bank located at 683 Lincoln Avenue, Pittsburgh,
Pennsylvania, on November 20, 1996, at 6:00 p.m., Eastern Time, and at any
adjournment or adjournments thereof.
MATTERS TO BE CONSIDERED
At the Annual Meeting, stockholders will be asked to consider (1) a
proposal to elect three directors for a three-year term, two directors for a
two-year term and three directors for a one-year term and, in each case, until
their successors are elected and qualified; (2) a proposal to adopt the
Agreement; (3) a proposal to ratify the appointment of KPMG Peat Marwick LLP as
Pennwood Savings' independent public accountants for the year ended June 30,
1997; and (4) such other business as may properly come before the meeting or any
adjournment thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
Only the holders of record of the outstanding shares of Pennwood Savings
Common Stock at the close of business on September 30, 1996 (the "Record Date")
will be entitled to notice of and to vote at the Annual Meeting. At such date,
there were 610,128 shares of Pennwood Savings Common Stock issued and
outstanding.
Holders of record of Pennwood Savings Common Stock at the close of business
on the Record Date will be entitled to one vote per share on any matter that may
properly come before the Annual Meeting.
VOTES REQUIRED
A quorum, consisting of a majority of the voting power of the issued and
outstanding Pennwood Savings Common Stock, must be present in person or by proxy
before any action may be taken at the Annual Meeting. The affirmative vote of
the holders of two-thirds of the outstanding shares of Pennwood Savings Common
Stock is required to approve the Agreement. Assuming a quorum is present,
directors will be elected by a plurality of the votes cast and a majority of the
votes present in person or represented by proxy at the
9
<PAGE>
Annual Meeting is necessary for ratification of KPMG Peat Marwick LLP as
independent public accountants for fiscal 1997.
Under rules applicable to broker-dealers, the proposal to adopt the
Agreement is considered a "non-discretionary item" whereby brokerage firms may
not vote in their discretion on behalf of their clients if such clients have not
furnished voting instructions. Abstentions and such broker "non-votes" (as well
as withheld votes in the case of the election of directors) will be considered
in determining the presence of a quorum at the Annual Meeting but will not be
counted as a vote cast for a proposal. Because the proposal to adopt the
Agreement is required to be approved by the holders of two-thirds of the
outstanding shares of Pennwood Savings Common Stock, abstentions and broker
"non-votes" will have the same effect as a vote against the proposals. Assuming
the presence of a quorum, abstentions and broker "non-votes" also will not be
counted as votes to ratify the appointment of Pennwood Savings' independent
public accountants, and accordingly will have the same effect as votes against
such proposal. Withheld votes and broker "non-votes" will not affect the votes
required for election of directors.
As of September 30, 1996, directors and executive officers of Pennwood
Savings as a group (10 persons) beneficially owned 68,000 shares of Pennwood
Savings Common Stock, which represented 11.1% of the total amount of such stock
outstanding at such date. Such persons have indicated that they intend to vote
all such shares for approval of the matters described herein.
VOTING, SOLICITATION AND REVOCATION OF PROXIES
A proxy for use at the Annual Meeting accompanies this Proxy
Statement-Offering Memorandum and is solicited by the Board of Directors of
Pennwood Savings. Any Pennwood Savings stockholder who has given a proxy may
revoke it at any time prior to its exercise at the Annual Meeting by (i) giving
written notice of revocation to the Corporate Secretary of Pennwood Savings,
(ii) properly submitting to Pennwood Savings a duly-executed proxy bearing a
later date or (iii) attending the Annual Meeting and voting in person. All
written notices of revocation and other communications with respect to
revocation of proxies should be addressed as follows: James W. Kihm, Secretary,
Pennwood Savings Bank, 683 Lincoln Avenue, Pittsburgh, Pennsylvania 15202
Attendance at the Annual Meeting will not, in and of itself, constitute
revocation of a proxy.
Shares of Pennwood Savings Common Stock represented by properly executed
proxies, if such proxies are received in time and not revoked, will be voted in
accordance with the instructions indicated on the proxies. If no instructions
are indicated, such proxies will be voted: (i) FOR the election of the nominees
for director described herein; (ii) FOR approval of the Agreement; (iii) FOR the
ratification of KPMG Peat Marwick LLP as Pennwood Savings' independent public
accountants for fiscal 1997; and (iv) in the discretion of the proxies as to any
other matter which may properly come before the Annual Meeting. If necessary,
the proxy holder may vote in favor of a proposal to adjourn the Annual
10
<PAGE>
Meeting in order to permit further solicitation of proxies in the event that
there are not sufficient votes to approve the foregoing proposals at the
Annual Meeting.
Pennwood Savings will bear the costs of printing and mailing this Proxy
Statement-Offering Memorandum and the proxy and Annual Report to Shareholders
which accompany this Proxy Statement-Offering Memorandum, as well as all other
costs incurred in connection with the solicitation of proxies from Pennwood
Savings stockholders on behalf of the Board of Directors. Proxies will be
solicited by mail and may be further solicited, for no additional compensation,
by directors, officers or employees of Pennwood Savings, by telephone or by
personal contact. Arrangements also will be made with brokerage houses, voting
trustees, banks, associations and other custodians, nominees and fiduciaries,
who are record holders of Pennwood Savings Common Stock not beneficially owned
by them, for forwarding such solicitation materials to and obtaining proxies
from the beneficial owners of Pennwood Savings Common Stock entitled to vote at
the Annual Meeting, and Pennwood Savings will reimburse such persons for their
reasonable expenses incurred in doing so.
11
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of September 30, 1996 with
respect to (i) any person or entity known by Pennwood Savings to be the
beneficial owner of more than 5% of the issued and outstanding Pennwood Savings
Common Stock and (ii) ownership of the Pennwood Savings Common Stock by all
directors and executive officers of Pennwood Savings as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of
Owner Beneficial Ownership(1) Percent of Class
- ------------------------------ ----------------------- -----------------
<S> <C> <C>
Pennwood Savings Bank Employee 48,810 8.0%
Stock Ownership Plan
Trust(2)
683 Lincoln Avenue
Pittsburgh, Pennsylvania
15202
Jeffrey S. Halis(3) 43,000 7.0%
500 Park Avenue, Fifth Floor
New York, New York 10022
All directors and executive 68,000 11.1%
officers as a group (10 persons)
</TABLE>
__________________________________
(1) A person is considered to beneficially own shares of Pennwood Savings
Common Stock if he or she has or shares: (1) voting power, which includes the
power to vote, or direct the voting of the shares; or (2) investment power,
which includes the power to dispose, or direct the disposition of the shares.
(2) The Pennwood Savings Bank Employee Stock Ownership Plan Trust ("ESOP
Trust") holds Common Stock on behalf of employee participants of the plan. None
of the shares held in the ESOP Trust have been allocated to the accounts of
participating employees to date and, as a result, will be voted by Messrs.
Frank, Pieffer and Mallon (the "Trustees") pursuant to the terms of the ESOP.
Shares allocated to participating employees are voted in accordance with the
instructions of the participants. The shares held in the ESOP Trust are not
included in the individual beneficial ownership amounts of the Trustees or the
amount of Common Stock beneficially owned by all officers and directors as a
group.
(3) Pursuant to a Form F-11 filed by Mr. Halis with the FDIC, 41,700 of the
indicated shares are owned by Tyndall Partners L.P. and 1,300 shares are owned
by Madison Avenue Partners L.P. Mr. Halis serves as a general partner of Halo
Capital Partners, L.P., which serves as the sole general partner of each of
Tyndall Partners, L.P. and Madison Avenue Partners, L.P.
12
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL ONE)
GENERAL
The Amended and Restated Articles of Incorporation of Pennwood Savings
provide that at the first annual meeting of stockholders, the Board of Directors
shall be elected and classified into three classes as nearly equal in number as
possible, and that at subsequent annual meetings the members of each class shall
be elected for terms of three years and until their successors are elected and
qualified, with one of the three classes of directors to be elected each year.
The number of directors is currently set at eight.
At the Annual Meeting, stockholders of Pennwood Savings will be asked to
elect three directors of Pennwood Savings for a three-year term, two directors
for a two-year term and three directors for a one-year term and, in each case,
until their successors are elected and qualified. The nominees for election as
directors were selected by the Nominating Committee of the Board of Directors
and all of such nominees currently serve as directors of Pennwood Savings.
There are no arrangements or understandings between the persons named and any
other person pursuant to which such person was selected as a nominee for
election as a director at the Annual Meeting, and no director or nominee for
director is related to any other director or executive officer of Pennwood
Savings by blood, marriage or adoption except that Charles R. Frank and Mary M.
Frank are husband and wife.
If any person named as nominee should be unable or unwilling to stand for
election at the time of the Annual Meeting, the proxies will nominate and vote
for any replacement nominee or nominees recommended by the Board of Directors of
Pennwood Savings. Alternatively, under such circumstances the Board of Directors
of Pennwood Savings may reduce the number of directors of Pennwood Savings.
13
<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR
The following tables set forth information relating to the nominees of
Pennwood Savings for election as director.
NOMINEES FOR THREE-YEAR TERM EXPIRING IN 1999
<TABLE>
<CAPTION>
Pennwood Savings
Common Stock Owned
Directly or Indirectly as
of September 30, 1996(1)
__________________________
Director
Name Age Since No. Percentage
--------------------------- ----- ---------- ------- ----------
<S> <C> <C> <C> <C>
Mary M. Frank 78 1971 15,000(2) 2.5%
John B. Mallon 75 1975 6,500 1.1
C. Joseph Touhill 58 1991 5,000 *
</TABLE>
NOMINEES FOR TWO-YEAR TERM EXPIRING IN 1998
<TABLE>
<CAPTION>
Pennwood Savings
Common Stock Owned
Directly or Indirectly as
of September 30, 1996(1)
_________________________
Director
Name Age Since No. Percentage
--------------------------- ------- -------- ------- ----------
<S> <C> <C> <C> <C>
Charles R. Frank 83 1938 15,000(2) 2.5%
H. J. Zoffer 66 1991 7,500 1.2
</TABLE>
14
<PAGE>
NOMINEES FOR ONE-YEAR TERM EXPIRING IN 1997
<TABLE>
<CAPTION>
Pennwood Savings
Common Stock Owned
Directly or Indirectly as
of September 30, 1996(1)
________________________
Director
Name Age Since No. Percentage
------------------------ ------- --------- ------ ----------
<S> <C> <C> <C> <C>
Paul S. Pieffer 48 1985 15,000 2.5%
Robert W. Hannan 57 1991 9,000 1.5
Michael Kotyk 67 1993 7,500 1.2
</TABLE>
____________________
* Represents less than 1% of the outstanding Common Stock.
(1) Pursuant to rules promulgated by the SEC under the Exchange Act, a person
is considered to beneficially own shares of Pennwood Savings Common Stock if he
or she has or shares: (1) voting power, which includes the power to vote, or
direct the voting of the shares; or (2) investment power, which includes the
power to dispose, or direct the disposition of the shares.
(2) The indicated shares are held jointly by Mr. and Mrs. Frank.
THE BOARD OF DIRECTORS OF PENNWOOD SAVINGS RECOMMENDS A VOTE FOR APPROVAL
OF THE NOMINEES FOR DIRECTOR.
15
<PAGE>
Set forth below is information with respect to the principal occupations
during at least the last five years for the Directors of the Savings Bank.
CHARLES R. FRANK. Mr. Frank has served as Chairman of the Board of
Directors of the Savings Bank since 1985. Prior thereto, Mr. Frank served as
the President of the Savings Bank from 1975 to 1985.
MARY M. FRANK. Ms. Frank has served as Vice Chairman of the Board of
Directors of the Savings Bank since 1985 and Treasurer of the Savings Bank since
1992. Prior thereto, Ms. Frank served as the Executive Vice President and
Secretary of the Savings Bank from 1975 to 1985. Ms. Frank is the wife of Mr.
Charles R. Frank.
PAUL S. PIEFFER. Mr. Pieffer has served as President and Chief Executive
Officer of the Savings Bank since 1985. Prior thereto, Mr. Pieffer was the Vice
President of South Pittsburgh Savings and Loan Association, Pittsburgh,
Pennsylvania, from 1973 to 1985.
JOHN B. MALLON. Mr. Mallon is presently retired. Prior thereto, Mr.
Mallon served as the President of Suburban General Hospital located in
Pittsburgh, Pennsylvania from 1952 to 1986.
C. JOSEPH TOUHILL. Mr. Touhill has been the Executive Vice President of EG
& G Environmental, Inc. located in Pittsburgh, Pennsylvania since 1994. Prior
thereto, Mr. Touhill served as the Group Senior Vice President of ICF Kaiser
International located in Pittsburgh, Pennsylvania from 1990 to 1994.
ROBERT W. HANNAN. Mr. Hannan has been the President of Thrift Drug Inc.
located in Pittsburgh, Pennsylvania since 1987.
MICHAEL KOTYK. Mr. Kotyk is presently retired. Prior thereto, Mr. Kotyk
was the Technical Director of Materials Technology at U.S. Steel Corporation,
Pittsburgh, Pennsylvania, from 1991 to 1993.
H. J. ZOFFER. Mr. Zoffer is presently retired. Previously, he was the
Dean of the Joseph M. Katz Graduate School of Business at the University of
Pittsburgh from 1968 until August 1996.
STOCKHOLDER NOMINATIONS
Pursuant to Section 3.3 of Pennwood Savings' Bylaws, stockholders of
Pennwood Savings may name nominees for election to the Board of Directors by
submitting such written nominations to the Secretary of Pennwood Savings at
least 30 days prior to the Annual Meeting. Such stockholder's notice shall set
forth as to each person whom the stockholder proposes to nominate for election
or re-election as a director, (a) the name, age, business address and residence
address of such person, (b) the principal occupation or employment of such
person, (c) the class and number of shares of Pennwood Savings stock
16
<PAGE>
which are beneficially owned by such person on the date of the notice, and
(d) any other information relating to such person that is required to be
disclosed in solicitation of proxies with respect to nominees for election as
directors pursuant to Regulation 14A of the Exchange Act, and any successor
thereto. If a nomination is made in accordance with applicable requirements,
ballots will be provided for use by stockholders at the Annual Meeting bearing
the name of such nominee or nominees.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Set forth below is information with respect to the principal occupations
during the last five years for the two executive officers of the Savings Bank
who do not serve as directors.
JAMES W. KIHM. Mr. Kihm has been the Vice President and Secretary of the
Savings Bank since 1985. Prior thereto, Mr. Kihm was the Vice President of
Concord Liberty Savings and Loan Association, Pittsburgh, Pennsylvania, from
1981 to 1985.
JOSEPH W. MESSNER. Mr. Messner has been the Vice President of Lending of
the Savings Bank since June 1994. Prior thereto, Mr. Messner served as an
underwriter with Creditvest, Inc. located in Pittsburgh, Pennsylvania from 1992
to 1994 and served as a loan officer at Norwest Mortgage, Pittsburgh,
Pennsylvania, from August 1991 to January 1992 and at NVR Mortgage, Pittsburgh,
Pennsylvania, from 1987 to April 1991.
COMMITTEES AND MEETINGS OF THE BOARD OF THE SAVINGS BANK
The Board of Directors of the Savings Bank meets on a monthly basis and may
have additional special meetings. During the fiscal year ended June 30, 1996,
the Board of Directors met 14 times. No director attended fewer than 75% of the
total number of Board meetings and committee meetings on which he served that
were held during this period. The Board of Directors of the Savings Bank has
established the following committees:
AUDIT COMMITTEE. The Audit Committee consists of Messrs. Touhill
(Chairman), Mallon, Pieffer and Ms. Frank. The Audit Committee reviews the
records and affairs of the Savings Bank, recommends the Savings Bank's external
auditor and reviews their reports. The Audit Committee met two times in fiscal
1996.
PERSONNEL COMMITTEE. The Personnel Committee consists of Messrs. Mallon
(Chairman), Hannan, Zoffer, Pieffer and Ms. Frank. The Personnel Committee
reviews the performance of the Savings Bank's officers, makes recommendations as
to pay increases and evaluates the Savings Bank's overall personnel
requirements. The Personnel Committee met two times in fiscal 1996.
17
<PAGE>
DIRECTOR'S COMPENSATION
Members of the Board of Directors, with the exception of Mr. Pieffer,
receive $7,200 per annum for serving on the Board. Members of the Board serving
on committees do not receive any additional compensation for serving on such
committees.
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information concerning
the compensation paid by the Savings Bank for services rendered in all
capacities during the last two fiscal years to the President and Chief Executive
Officer of the Savings Bank. No executive officers of the Savings Bank had
total compensation during the year ended June 30, 1996 which exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------
Other
Name and Year Ended Annual
Principal Position June 30, Salary Bonus Compensation(1)
------------------ ----------- -------- --------- ---------------
<S> <C> <C> <C> <C>
Paul S. Pieffer 1996 $80,750 $-- $--
President and Chief 1995 78,000 -- --
Executive Officer
</TABLE>
_____________________
(1) Does not include amounts attributable to miscellaneous benefits received by
the named executive officer. In the opinion of management of the Savings
Bank, the costs to the Savings Bank of providing such benefits to the named
executive officer during the year ended June 30, 1996 did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus reported
for the individual.
BENEFITS
EMPLOYEE STOCK OWNERSHIP PLAN. The Savings Bank has established and
Employee Stock Ownership Plan ("ESOP") for employees of the Savings Bank.
Employees of the Savings Bank who have been credited with at least 1,000 hours
of service during a twelve month period and who have attained age 21 are
eligible to participate in the ESOP.
As part of the Savings Bank's conversion to the stock form in July 1996
(the "Conversion"), in order to fund the purchase of 48,810 shares, or 8% of
the Pennwood Savings Common Stock issued in the Conversion, the ESOP borrowed
$488,100 from an independent third party lender. The loan to the ESOP will be
repaid from scheduled discretionary cash contributions to the ESOP by the
Savings Bank sufficient to amortize the principal and interest on the loan,
which has a maturity of 10 years. The Savings Bank may,
18
<PAGE>
in any plan year, make additional discretionary contributions for the benefit
of plan participants in either cash or shares of Pennwood Savings Common Stock,
which may be acquired through the purchase of outstanding shares in the market
or from individual stockholders, upon the original issuance of additional
shares by the Savings Bank or upon the sale of treasury shares by the Savings
Bank. Such purchases, if made, would be funded through additional borrowing
by the ESOP or additional contributions from the Savings Bank. The timing,
amount and manner of future contributions to the ESOP will be affected by
various factors, including prevailing regulatory policies, the requirements of
applicable laws and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan are held in a
suspense account and released on a pro rata basis as debt service payments are
made. Discretionary contributions to the ESOP and shares released from the
suspense account will be allocated among participants on the basis of
compensation. Forfeitures will be reallocated among remaining participating
employees and may reduce any amount the Savings Bank might otherwise have
contributed to the ESOP. Participants will be 100% vested in their rights to
receive their account balances within the ESOP after completing five years of
service. Credit is given for years of service with the Savings Bank prior to
adoption of the ESOP. In the case of a "change in control," as defined,
however, participants will become immediately fully vested in their account
balances, subject to certain tax considerations. Benefits may be payable upon
retirement or separation from service. The Savings Bank's contributions to the
ESOP are not fixed, so benefits payable under the ESOP cannot be estimated.
Messrs. Frank, Pieffer and Mallon serve as trustees of the ESOP. Under
the ESOP, the trustees must vote all allocated shares held in the ESOP in
accordance with the instructions of the participating employees, and allocated
shares for which employees do not give instructions, and unallocated shares,
will generally be voted in the same ratio on any matter as to those shares for
which instructions are given.
Generally accepted accounting principles requires that any third party
borrowing by the ESOP be reflected as a liability on the Savings Bank's
consolidated statement of financial condition. In addition, shares purchased
with borrowed funds are, to the extent of the borrowings, excluded from
stockholders' equity, representing unearned compensation to employees for future
services not yet performed. Consequently, if the ESOP purchases already issued
shares in the open market, the Savings Bank's consolidated liabilities will
increase to the extent of the ESOP's borrowings, and total and per share
stockholders' equity will be reduced to reflect such borrowings. If the ESOP
purchases newly-issued shares from the Savings Bank, total stockholders' equity
would neither increase nor decrease, but per share stockholders' equity and per
share net income would decrease because of the increase in the number of
outstanding shares. In either case, as the borrowings used to fund ESOP
purchases are repaid, total stockholders' equity will correspondingly increase.
19
<PAGE>
The ESOP is subject to the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the regulations of the Internal
Revenue Service and the Department of Labor thereunder.
PENSION PLAN. The Savings Bank participates in a multiple employer defined
benefit pension plan that covers all employees that have attained 21 years of
age and have completed one full year of service (consisting of 1,000 hours
worked during the year). In general, the pension plan provides for benefits
payable monthly at retirement or normal retirement age 65 in an amount equal to
a percentage of the participant's average annual salary for the three
consecutive years of highest salary during his service with the Savings Bank,
multiplied by the number of his years of service, with a reduced level of
benefits in the event of early retirement prior to having attained age 65.
Payment of benefits under the pension plan generally will be made in the
form of a life annuity to an unmarried participant or in the form of a qualified
joint and survivor annuity to a married participant, although alternative forms
of benefits are available. The pension plan also provides a death benefit
payment, in the event of death prior to retirement.
For the years ended June 30, 1996 and 1995, no pension expense was
recognized by the Savings Bank.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
All loans or extensions of credit to executive officers and directors must
be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with the
general public and must not involve more than the normal risk of repayment or
present other unfavorable features.
The Savings Bank's policy provides that all loans made by the Savings Bank
to its directors and officers are made in the ordinary course of business, are
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons
and do not involve more than the normal risk of collectibility or present other
unfavorable features. As of June 30, 1996, the Savings Bank had no loans
outstanding to its executive officers and directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, Pennwood Savings' directors and
executive officers and any persons holding more than 10% of the outstanding
Pennwood Savings Common Stock are required to report their ownership of Pennwood
Savings' securities and any changes in that ownership to the FDIC by specific
dates.
20
<PAGE>
HOLDING COMPANY FORMATION
(PROPOSAL TWO)
GENERAL
Stockholders of Pennwood Savings are being asked to approve an Agreement
and Plan of Reorganization between Pennwood Savings, Interim and the Company,
pursuant to which Interim will merge with and into Pennwood Savings and, as a
result, the Company will become the parent holding company of Pennwood Savings
and all of the outstanding shares of Pennwood Savings Common Stock will be
converted into and exchanged for shares of Company Common Stock on a one-for-one
basis. The full text of the Agreement is attached as Appendix A to this Proxy
Statement-Offering Memorandum, and the discussion below is qualified in its
entirety by reference thereto.
The Company is a recently-formed Pennsylvania corporation that was formed
by Pennwood Savings as a direct wholly-owned subsidiary for the purpose of
becoming the parent holding company of Pennwood Savings and, therefore, has no
operating history. As part of the Reorganization, Pennwood Savings and the
Company will organize Interim as a wholly-owned subsidiary of the Company. If
the Reorganization is approved by the stockholders of Pennwood Savings, and
subject to the satisfaction of all other conditions set forth in the Agreement,
Interim will be merged with and into Pennwood Savings, with Pennwood Savings as
the surviving institution.
After the Reorganization, Pennwood Savings will continue its existing
business and operations as a wholly-owned subsidiary of the Company. The
consolidated assets, liabilities, stockholders' equity and income of the Company
immediately following the Reorganization will be the same as those of Pennwood
Savings immediately prior to the consummation of the Reorganization. The Board
of Directors of the Company is comprised of the members of the Board of
Directors of Pennwood Savings, and the officers of the Company are the executive
officers of Pennwood Savings. Pennwood Savings will continue to operate under
the name "Pennwood Savings Bank" and its deposit accounts will continue to be
insured by the FDIC to the maximum extent permitted by law. The corporate
existence of Pennwood Savings will continue unaffected and unimpaired by the
Reorganization, except that all of the outstanding shares of Pennwood Savings
Common Stock will be owned by the Company. The existing stockholders of
Pennwood Savings will, in turn, own all of the outstanding shares of Company
Common Stock, having received that stock in exchange for their shares of
Pennwood Savings Common Stock as part of the Reorganization.
THE BOARD OF DIRECTORS OF PENNWOOD SAVINGS HAS UNANIMOUSLY APPROVED THE
AGREEMENT, SUBJECT TO THE RECEIPT OF STOCKHOLDER APPROVAL AND NECESSARY
REGULATORY APPROVALS, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF PENNWOOD
SAVINGS APPROVE SUCH AGREEMENT.
21
<PAGE>
REASONS FOR THE REORGANIZATION
The Board of Directors of Pennwood Savings believes that the holding
company form of organization will provide flexibility for meeting the future
financial needs of Pennwood Savings or other subsidiaries of the Company. For
example, the holding company form of organization would permit the Company to
repurchase shares of Company Common Stock without the adverse tax consequences
which would be experienced by Pennwood Savings in the event that it repurchased
shares of Pennwood Savings Common Stock, which tax consequences would be a
result of the recapture of a portion of the bad debt reserves which Pennwood
Savings has established for federal income tax purposes under Section 593 of the
Internal Revenue Code of 1986 ("Code").
In addition, applicable laws and regulations limit the types of businesses
in which Pennwood Savings and its subsidiaries may engage and the amount which
Pennwood Savings can invest in its subsidiaries. The establishment of the
holding company for Pennwood Savings will permit diversification of operations
free of these restrictions. It is anticipated that the increased acquisition
and diversification flexibility provided by the holding company form of
organization ultimately will increase Pennwood Savings' ability to compete
effectively with commercial banks in its market area, many of which are
subsidiaries of holding companies.
The Board of Directors of Pennwood Savings also believes that a holding
company form of organization will facilitate the acquisition of other financial
institutions, subject to restrictions of applicable laws and regulations. For
example, the holding company form of organization will permit an acquired
institution to operate on a more autonomous basis as a wholly-owned subsidiary
of the Company and to retain its own directors, officers, corporate name and
local identity. In addition, the Company would be able to acquire a new
subsidiary, for cash or stock, in a transaction that may not require approval of
the Company's stockholders. Pennwood Savings has not been actively involved in
evaluating prospective acquisition candidates and there are no current
agreements or understandings with respect to the acquisition of any financial
institution or other company. The Board of Directors of Pennwood Savings
believes, however, that Pennwood Savings' ability to act promptly to take
advantage of any desirable opportunities in this regard that may arise in the
future could be jeopardized if formation of the holding company is deferred.
Pennwood Savings' management recognizes that some increased costs will be
incurred in the operation of the Company and that securities of the Company,
unlike those of Pennwood Savings, must be registered with the SEC and may not be
legal investments for institutions as fiduciaries in some jurisdictions.
Nevertheless, for the reasons stated above, the Board of Directors believes that
the holding company formation is in the best interests of Pennwood Savings and
its stockholders.
DESCRIPTION OF THE REORGANIZATION
Pennwood Savings incorporated the Company as a direct wholly-owned
subsidiary under the laws of the Commonwealth of Pennsylvania in February 1996
for purposes of
22
<PAGE>
becoming the parent holding company of Pennwood Savings upon consummation of
the Reorganization, and Pennwood Savings and the Company are currently in the
process of organizing Interim solely for purposes of facilitating such
Reorganization. Pursuant to the Agreement, Interim will merge with and into
Pennwood Savings, with Pennwood Savings as the surviving institution. In
connection with such merger, (i) each share of Pennwood Savings Common Stock
will be converted into one share of Company Common Stock, (ii) each share of
capital stock of Interim held by the Company will be automatically converted on
a one-for-one basis into shares of Pennwood Savings Common Stock, and (iii)
shares of Company Common Stock indirectly held by Pennwood Savings prior
thereto will be cancelled. The result of the merger of Interim with and
into Pennwood Savings will be that the Company will become the owner of all of
the outstanding shares of Pennwood Savings Common Stock and each stockholder of
Pennwood Savings will become the owner of one share of Company Common Stock for
each share of Pennwood Savings Common Stock held by him or her immediately prior
thereto.
The merger of Interim with and into Pennwood Savings and the resultant
holding company formation will become effective on the date that the articles of
merger relating to the merger are filed with the Pennsylvania Department of
State ("Effective Date").
Upon consummation of the Reorganization, the outstanding stock certificates
which prior thereto represented shares of Pennwood Savings Common Stock will
thereafter for all purposes represent an equal number of shares of Company
Common Stock. After the Reorganization, stockholders will be entitled to
exchange their present stock certificates for new certificates evidencing shares
of Company Common Stock, although stockholders will not need to make such an
exchange in order to have all of the rights of stockholders of the Company. An
agent appointed by the Company and Pennwood Savings will notify stockholders of
record by mail promptly after consummation of the Reorganization of the
procedures to be followed in order to surrender their certificates evidencing
shares of Pennwood Savings Common Stock to the transfer agent for the Company
and Pennwood Savings in exchange for certificates evidencing an identical number
of shares of Company Common Stock. Until so exchanged, certificates evidencing
shares of Pennwood Savings Common Stock will for all purposes represent the same
number of shares of Company Common Stock, and the holders of those certificates
will have all the rights of stockholders of the Company.
Although the terms of the Agreement were determined by arm's-length
negotiations, because the Company and Interim were organized at the direction of
Pennwood Savings and because all members of the managements of the Company and
Interim prior to the Reorganization also serve as directors or officers of
Pennwood Savings, the Agreement cannot be considered the result of arm's-length
negotiations.
CAPITAL RESOURCES
Pennwood Savings intends to provide the Company with an initial
capitalization by contributing $100,000 to the Company immediately prior to
consummation of the Reorganization. Additional financial resources may be
available to the Company in the
23
<PAGE>
future through dividends paid to the Company by Pennwood Savings, acquired
entities or new businesses, borrowings or debt or equity financings. It is
anticipated that Pennwood Savings will dividend to the Company on an annual
basis the amount of dividends anticipated to be paid by the Company on the
Company Common Stock during the following year. For a discussion of regulatory
limitations on the payment of dividends by Pennwood Savings, see "Holding
Company Formation - Market for Company Common Stock; Anticipated Dividend
Policy; and Resales of Company Common Stock."
Currently, Pennwood Savings has capital resources which substantially
exceed applicable requirements. At June 30, 1996, Pennwood Savings' net worth
amounted to $4.1 million or 8.7% of its total assets, and Pennwood Savings'
regulatory capital exceeded its 4.0% Tier I capital requirement by 13.06% or
$3.2 million and its 8.0% risk-based capital requirement by 10.31% or $2.5
million. Such amounts do not include approximately $5.7 million raised in the
conversion of Pennwood Savings to the stock form in July 1996 (the
"Conversion").
CONDITIONS TO THE REORGANIZATION AND ABANDONMENT
The Agreement provides that it shall not become effective until all of the
following first shall have occurred: (i) the Agreement shall have been approved
by a vote of the holders of two-thirds of the issued and outstanding Pennwood
Savings Common Stock; (ii) the Reorganization shall have been approved by the
Federal Reserve Board and the Department and all applicable waiting periods
shall have expired; (iii) Pennwood Savings and Interim shall have received a
favorable opinion from counsel concerning the federal income tax consequences of
the merger of Interim with and into Pennwood Savings; (iv) the Company Common
Stock to be issued in exchange for Pennwood Savings Common Stock shall be
registered or qualified for issuance under the Securities Act and applicable
state securities laws, except in each case to the extent that the Company relies
on an available exemption therefrom; and (v) Pennwood Savings and the Company
shall have obtained any other necessary consents or approvals required for the
Reorganization.
Applications will be filed with the Federal Reserve Board and the
Department to obtain approval of the Reorganization. A favorable opinion of
counsel regarding the federal income tax consequences of the Reorganization has
been received. See "Holding Company Formation - Federal Income Tax
Consequences."
If stockholders of Pennwood Savings approve the Reorganization at the
Annual Meeting, the Reorganization is expected to become effective as soon
thereafter as required regulatory approvals are received, required waiting
periods have expired and the other conditions to consummation of the
Reorganization have either been satisfied or waived. If the Reorganization is
not approved by Pennwood Savings' stockholders, Pennwood Savings will continue
to operate without a holding company structure. All expenses which relate
solely to the Reorganization will be paid by Pennwood Savings whether or not the
Reorganization is approved by its stockholders and the Reorganization is
consummated.
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The Agreement provides that it may be abandoned by the Board of Directors
of Pennwood Savings or Interim if, among other things, (i) any action, suit,
proceeding or claim has been instituted, made or threatened relating to the
proposed Reorganization which will make its consummation inadvisable in the
opinion of Pennwood Savings or Interim, or (ii) for any other reason
consummation of the Reorganization is inadvisable in the opinion of Pennwood
Savings or Interim.
CERTAIN FEDERAL TAX CONSEQUENCES
Pennwood Savings and Interim have obtained an opinion of counsel from
Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., to the effect that, for
federal income tax purposes: (1) no gain or loss will be recognized by the
stockholders of Pennwood Savings upon the receipt of Company Common Stock in
exchange for their shares of Pennwood Savings Common Stock; (2) the basis of the
Company Common Stock to be received by stockholders of Pennwood Savings will be
the same, in each instance, as the basis of the Pennwood Savings Common Stock
surrendered; (3) the holding period of the Company Common Stock to be received
by each stockholder of Pennwood Savings will include the holding period of the
Pennwood Savings Common Stock surrendered, provided that the Pennwood Savings
Common Stock was held as a capital asset on the date of the Reorganization; and
(4) the Reorganization will not result in any taxable gain or loss to Pennwood
Savings or the Company.
THE FOREGOING DISCUSSION IS BASED UPON CURRENT LAW AND IS INTENDED FOR
GENERAL INFORMATION ONLY. EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN
TAX ADVISOR CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE REORGANIZATION TO
SUCH STOCKHOLDER, INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE,
LOCAL OR OTHER TAX LAWS AND OF ANY PROPOSED CHANGES IN THE CODE.
ACCOUNTING TREATMENT OF THE REORGANIZATION
The Reorganization is expected to be treated as a "pooling of interests"
(rather than a "purchase") for financial reporting and related purposes. Under
the pooling of interests method of accounting, the historical basis of the
assets and liabilities of Pennwood Savings and the Company will be combined at
the effective time of the Reorganization and carried forward at their previously
recorded amounts and the stockholders' equity accounts of Pennwood Savings and
the Company will be combined. Income and other financial statements of the
Company issued after the Reorganization will be restated retroactively to
reflect the consolidated operations of Pennwood Savings and the Company as if
the Reorganization had taken place prior to the periods covered by such
financial statements.
DISSENTERS' RIGHTS
Any owner of shares of Pennwood Savings Common Stock has the right under
Subchapter 15D of the BCL (which is applicable to savings banks pursuant to
Section 1607 of the Banking Code) to object to the Reorganization and demand to
be paid in cash the fair value of such shares upon complying in full with the
provisions of Subchapter 15D. THE
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FOLLOWING DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROVISIONS OF
SUBCHAPTER 15D OF THE BCL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THOSE PROVISIONS, A COPY OF WHICH IS ATTACHED HERETO AS APPENDIX D. SUCH
PROVISIONS MUST BE STRICTLY COMPLIED WITH OR A STOCKHOLDER'S DISSENTERS'
RIGHTS WILL BE LOST.
If an owner of shares of Pennwood Savings Common Stock wants to exercise
the right to dissent, such owner must satisfy all the following conditions: (a)
the owner must file with Pennwood Savings prior to the vote with respect to the
Reorganization a written notice of his intention to demand that he be paid the
fair value of his shares of Pennwood Savings Common Stock if the Reorganization
takes place (Neither a vote in person or by proxy against adoption and approval
of the Agreement and Plan of Reorganization nor an abstention from voting with
respect to, or a failure to vote for adoption and approval of, the Agreement
will constitute such a written notice.); (b) the owner must not effect any
change in the beneficial ownership of his shares of Pennwood Savings Common
Stock from the date of filing such written notice continuously through the
Effective Time of the Reorganization; and (c) the owner must not vote in person
or by proxy for adoption and approval of the Agreement. (Neither an abstention
from voting with respect to, nor a failure to vote in person or by proxy against
adoption and approval of, the Agreement will constitute a vote for adoption and
approval of the Agreement.) Unless an owner follows all these steps, he will not
acquire any right to payment of the fair value of his shares and will be
conclusively presumed to have consented to the Reorganization and will be bound
by its terms. A written notice of an intention to demand payment of fair value
should be sent prior to the Annual Meeting to Pennwood Savings Bank, 683 Lincoln
Avenue, Pittsburgh, Pennsylvania 15202, Attention: Secretary.
A person who is the beneficial owner, but not the record holder, of shares
of Pennwood Savings Common Stock and who desires to exercise the rights of a
dissenting stockholder may assert those rights with respect to shares held on
that person's behalf. Such a person will be treated as a dissenting stockholder
if he submits to Pennwood Savings a written consent of the record holder of
those shares to such treatment no later than the time dissenters' rights are
asserted with respect to those shares. A beneficial owner may not dissent with
respect to less than all shares of which such person is the owner, whether or
not the shares so owned are registered in such person's name.
A record holder for more than one beneficial owner may assert dissenters'
rights as to less than all of the shares registered in his name only if that
holder dissents with respect to all shares beneficially owned by a person that
are held by him and discloses the name and address of that person. In that
event, the record holder will be treated as if the shares as to which he has
dissented and the other shares held by him were registered in the names of
different persons.
If the Agreement is adopted and approved by the requisite vote of the
stockholders, either Pennwood Savings or the Company will mail a "further
notice" to each owner who followed all of the steps described above (a
"Dissenter"). The "further notice" will (i) state the location where and the
date by which a demand for payment must be sent and certificates formerly
representing shares of Pennwood Savings Common Stock ("Certificates")
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must be deposited in order to obtain payment, which date will not be less
than 30 days after the date of mailing of the "further notice", (ii) supply
a form for demanding payment that includes a request for certification of the
date on which the Dissenter acquired beneficial ownership of his shares of
Pennwood Savings Common Stock, and (iii) include a copy of Subchapter 15D of
the BCL. If a Dissenter fails to timely demand payment or to timely deposit
his Certificates as required by the "further notice," that person will not
have any right to receive payment of the fair value of his shares.
If the Reorganization has not been consummated within 60 days after the
date specified in the "further notice" for demanding payment and depositing
Certificates, Pennwood Savings will return any deposited Certificates. At any
time thereafter, Pennwood Savings or the Company may send a new "further notice"
containing the provisions described above to all Dissenters.
Promptly after the Effective Time of the Reorganization, or upon timely
receipt of demand for payment if the Reorganization has already occurred, the
Company will either (i) pay the amount that the Company estimates is the fair
value of the Dissenters' shares to the Dissenters who timely made demand for
payment and timely deposited their Certificates, or (ii) provide written notice
to those Dissenters that no payment will be made. This payment or written
notice will be accompanied by a closing balance sheet and statement of income of
Pennwood Savings for a fiscal year ending not more than 16 months before the
date of payment or notice, the latest available interim financial statements of
Pennwood Savings, a statement of the Company's estimate of the fair value of the
Dissenters' shares, a notice of the right of a Dissenter to demand payment or
supplemental payment, as the case may be, and a copy of Subchapter 15D of the
BCL. If the Company does not pay its estimate of the fair value of the shares
of Pennwood Savings Common Stock of any Dissenter, it must return his deposited
Certificates to him. The Company may make a notation on any returned
Certificate that a demand for payment of fair value with respect to that
Certificate has been made. If that Certificate is transferred, any new
Certificate will bear a similar notation, together with the name of the original
dissenting holder or owner thereof. A transferee will not acquire by transfer
any rights other than those that the original Dissenter had after making demand
for payment of fair value.
If a Dissenter believes that the Company's estimate of the fair value of
his shares of Pennwood Savings Common Stock is less than their fair value, that
Dissenter should send the Company his own estimate of their fair value. A
Dissenter's estimate will constitute a demand for payment of his estimate of the
fair value of his shares of Pennwood Savings Common Stock or for payment of the
difference between the two estimates if the Company has paid that Dissenter its
estimate. If a Dissenter does not file with the Company his own estimate within
30 days after the mailing to him of the payment of Pennwood Savings' estimated
fair value or its written notice thereof, that Dissenter will not be entitled to
receive any amount greater than the payment remitted by the Company or the
amount stated in that notice.
Within 60 days after the latest of (i) the Effective Time of the
Reorganization, (ii) timely receipt of any demands for payment of fair value in
response to a "further notice",
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or (iii) timely receipt of a Dissenter's estimate of the fair value of his
shares of Pennwood Savings Common Stock, if any demand for payment remains
unsettled, Pennwood Savings or the Company may file an application for relief
in the County Court of Common Pleas (the "Court"), requesting that the fair
value of the remaining Dissenters' shares be determined. All Dissenters whose
demands for payment of the fair value of their Dissenters' shares have not
been settled will be made parties to such proceeding. Each Dissenter who is
made a party to such proceeding will be entitled to recover the amount by which
the fair value of his Dissenters' shares exceeds any amount previously paid to
that Dissenter by Pennwood Savings or the Company for his shares, plus
interest. If Pennwood Savings or the Company fails to file an application
with the Court prior to the expiration of that 60-day period, any Dissenter
who has made a demand for payment of the fair value of his Dissenters' shares,
and has not already settled his claim against Pennwood Savings may file an
application with the Court in the name of Pennwood Savings within 30 days of
the expiration of that 60-day period. If no such Dissenter files an
application within that 30-day period, all remaining Dissenters will be paid
the Company's estimate of the fair value of their Dissenters' shares and
will not be entitled to any additional amounts. In any proceeding before the
Court, the fair value of the Dissenters' shares to be determined by the Court is
the fair value of those shares immediately prior to the Effective Time of the
Reorganization, taking into account all relevant factors, but excluding any
appreciation or depreciation in anticipation of the Reorganization.
The costs and expenses of any proceeding to determine the fair value of the
remaining Dissenters' shares will be determined by the Court and assessed
against the Company, although all or any part of those costs and expenses may be
apportioned and assessed as the Court deems appropriate against any Dissenters
who are parties to the proceeding and whose actions in demanding supplemental
payments the Court finds to be dilatory, obdurate, arbitrary, vexatious or in
bad faith. The fees and expenses of counsel and experts for the respective
parties may be assessed as the Court deems appropriate against the Company and
in favor of any or all Dissenters if the Company failed to comply substantially
with the requirements of Subchapter 15D and may be assessed against the Company
or any Dissenter, in favor of any other party, if the Court finds that the party
against whom the fees and expenses are assessed acted in bad faith or in a
dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by Subchapter 15D. If the Court decides that any Dissenter's counsel
provided substantial benefits to other Dissenters, but that the fees of such
counsel should not be assessed against the Company, then the Court may award
that counsel reasonable fees to be paid out of the amounts awarded to those
other Dissenters.
BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS. Following consummation of the Reorganization, the
Board of Directors of the Company will be elected by the stockholders of the
Company and the Board of Directors of Pennwood Savings will be elected by the
Company, as the sole stockholder of Pennwood Savings. The initial composition
of the Board of Directors of the Company is identical with the Board of
Directors of Pennwood Savings as the initial directors of the Company are the
eight persons whom currently serve as directors of
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Pennwood Savings, all of whom will have the same classes and terms as
directors of the Company. For information about the principal occupation
and business experience during the past five years of the directors of the
Company, see "Election of Directors - Information with respect to Nominees
for Director."
The directors of the Company and Pennwood Savings are divided into three
approximately equal classes, with members of one class to be elected annually
for a term of three years and until their successors are elected and qualified.
The first class of directors consists of Ms. Frank and Messrs. Mallon and
Touhill, the second class of directors consists of Messrs. Pieffer, Hannan and
Kotyk and the third class of directors consists of Ms. Frank and Mr. Zoffer.
The directors in the first, second and third classes of directors have terms
which expire at the first, second and third annual meeting of stockholders after
the effective date of the Company's Articles of Incorporation, respectively.
Approval of the Reorganization by the stockholders of Pennwood Savings will be
deemed to be approval of the directors of the Company without further action and
without changes in classes and terms.
The Board of Directors of the Company intends, after the Reorganization, to
establish audit, personnel and nominating committees which have the same
responsibilities and members as the comparable committees of the Board of
Directors of Pennwood Savings. See "Election of Directors - Committees and
Meetings of the Board of Directors of the Savings Bank."
MANAGEMENT. Following consummation of the Reorganization, the executive
officers of the Company and Pennwood Savings will be elected or appointed
annually by or under the direction of their respective Boards of Directors and
will hold office until their successors are elected and qualified. The
executive officers of the Company currently are as follows: Paul S. Pieffer,
President and Chief Executive Officer, James W. Kihm, Vice President and
Secretary, and Joseph W. Messner, Vice President of Lending. At the present
time, the Company does not intend to employ any persons other than its
management.
MANAGEMENT REMUNERATION AND EFFECT ON EMPLOYEE BENEFIT PLANS
It is not anticipated that separate compensation will be paid to the
directors and officers of the Company until such time as the directors and
officers of the Company devote significant time to the separate management of
the Company's affairs, which is not expected to occur until the Company becomes
actively involved in additional businesses. The Company may determine that such
compensation is appropriate in the future, however.
Upon consummation of the Reorganization, the ESOP of Pennwood Savings will
become the ESOP of the Company.
Because the directors and officers of the Company initially will not be
compensated by the Company but will continue to serve and be compensated by
Pennwood Savings, no separate employee benefit plans of the Company are
anticipated at this time. Pennwood Savings will continue to maintain its other
employee benefit plans.
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MARKET FOR COMPANY COMMON STOCK; ANTICIPATED DIVIDEND POLICY; AND RESALES OF
COMPANY COMMON STOCK
MARKET FOR COMPANY COMMON STOCK. Because the Company is a newly-formed
corporation and there is currently no established trading market for its
securities, no information can be provided as to historical market prices for
the Company Common Stock. Pennwood Savings and the Company will take all action
as may be necessary or advisable to ensure that the Company Common Stock will be
approved for quotation on the Nasdaq Stock Market's Small-Cap Market upon
consummation of the Reorganization.
On September 17, 1996, the last full trading day on which shares of
Pennwood Savings Common Stock were traded prior to the adoption by the Board of
Directors of the Agreement and Plan of Reorganization, the closing sale price of
a share of Pennwood Savings Common Stock on the Nasdaq Stock Market's Small-Cap
Market was $10.00. On October 2, 1996, the closing sale price of a share of
Pennwood Savings Common Stock on the Nasdaq Stock Market's Small-Cap Market was
$10.75.
ANTICIPATED DIVIDEND POLICY. Holders of Company Common Stock will be
entitled to receive dividends when, as and if declared by the Board of Directors
of the Company out of funds legally available therefor. The timing and amount
of future dividends will be within the discretion of the Board of Directors of
the Company and will depend on the consolidated earnings, financial condition,
liquidity and capital requirements of the Company and its subsidiaries,
applicable governmental regulations and policies and other factors deemed
relevant by the Board of Directors. Currently, it is not anticipated that the
dividend policy of the Company will differ from that of Pennwood Savings.
After consummation of the Reorganization, dividends from Pennwood Savings
will be the Company's primary source of funds for the payment of dividends
because initially the Company will have no source of income other than such
dividends and the capital contributed to the Company by Pennwood Savings
immediately prior to consummation of the Reorganization. Pennwood Savings is
not permitted to pay dividends if its stockholders' equity would be reduced
below the amount required for the liquidation account established in the
Conversion.
In addition, under Pennsylvania law, a savings bank, such as Pennwood
Savings, is required to maintain at all times surplus in an amount which is at
least equal to its required capital as set forth under the Banking Code.
Dividends may be declared by Pennwood Savings and paid only out of accumulated
net earnings after any required transfers to surplus and only if the Savings
Bank's surplus would not be reduced by the payment of such dividend.
The ability of Pennwood Savings to make funds available to the Company also
will be subject to restrictions imposed by federal law on the ability of any
such savings association to extend credit to the Company and its non-bank
subsidiaries, to purchase the assets thereof, to issue a guarantee, acceptance
or letter of credit on their behalf (including an endorsement or standby letter
of credit) or to invest in the stock or securities thereof,
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or to take such stock or securities as collateral for loans to any borrower.
For additional information, see "Holding Company Formation - Regulation of the
Company - Transactions with Affiliates."
RESALES OF COMPANY COMMON STOCK. The Company Common Stock to be issued to
stockholders of Pennwood Savings in connection with the Reorganization has not
been registered under the Securities Act and instead will be issued in reliance
on the exemption contained in Section 3(a)(12) thereof. The staff of the SEC
has stated that, (i) shares of Company Common Stock received by stockholders of
Pennwood Savings upon consummation of the Reorganization will be freely
transferable under the Securities Act by those stockholders of Pennwood Savings
not deemed to be "affiliates" of the Company or Pennwood Savings and (ii)
pursuant to Rule 145 under the Securities Act, shares of Company Common Stock
acquired by persons who are "affiliates" of the Company or Pennwood Savings will
be subject to the resale restrictions contained in paragraphs (c), (e), (f) and
(g) of Rule 144 under the Securities Act. Affiliates are generally defined as
persons who control, are controlled by, or are under common control with the
Company or Pennwood Savings at the time of the Annual Meeting (generally
executive officers and directors).
Under paragraph (e) of Rule 144, each affiliate of the Company, together
with any other person whose sales are required to be aggregated with those of
the affiliate under Rule 144, would be able to sell in the public market,
without registration, a number of shares not to exceed, in any three-month
period, the greater of (i) 1% of the outstanding shares of Company Common Stock
or (ii) the average weekly trading volume in such shares during the preceding
four calendar weeks. Pursuant to paragraph (f) of Rule 144, the shares are
required to be sold in "brokers' transactions," as defined in paragraph (g) of
Rule 144, or in transactions directly with a "market maker," as defined in
Section 3(a)(38) of the Exchange Act, as well as comply with certain other
manner of sale requirements set forth in paragraph (f). Pursuant to paragraph
(c) of Rule 144, the ability of affiliates to resell shares of Company Common
Stock received in the Reorganization under Rule 144 will be subject to the
Company's having satisfied its Exchange Act reporting requirements for specified
periods prior to the time of sale. Affiliates also would be permitted to resell
Company Common Stock received in the Reorganization pursuant to an effective
registration statement under the Securities Act or an available exemption from
the Securities Act registration requirements. This Proxy Statement-Offering
Memorandum does not cover any resales of Company Common Stock received by
persons who may be deemed to be affiliates of the Company upon consummation of
the Reorganization.
REGULATION OF THE COMPANY
The references to laws and regulations which are applicable to the Company
and Pennwood Savings set forth below and elsewhere herein are brief summaries
thereof which do not purport to be complete and are qualified in their entirety
by reference to such laws and regulations.
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From time to time various bills are introduced in the United States
Congress which could result in additional or in less regulation of the business
of the Company and Pennwood Savings. It cannot be predicted at this time
whether any such legislation actually will be adopted or how such adoption would
affect the business of the Company or Pennwood Savings.
GENERAL. The Company will apply for the approval of the Federal Reserve
Board to become a registered bank holding company pursuant to the BHCA by
acquiring all the stock of Pennwood Savings. The Company, as a bank holding
company, will be subject to regulation and supervision by the Federal Reserve
Board and the Department. The Company will be required to file annually a
report of its operations with, and will be subject to examination by, the
Federal Reserve Board and the Department.
BHCA ACTIVITIES AND OTHER LIMITATIONS. The BHCA prohibits a bank holding
company from acquiring direct or indirect ownership or control of more than 5%
of the voting shares of any bank, or increasing such ownership or control of any
bank, without prior approval of the Federal Reserve Board. The BHCA also
generally prohibits a bank holding company from acquiring any bank located
outside of the state in which the existing bank subsidiaries of the bank holding
company are located unless specifically authorized by applicable state law. No
approval under the BHCA is required, however, for a bank holding company already
owning or controlling 50% of the voting shares of a bank to acquire additional
shares of such bank.
The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring more than 5% of the voting shares of any company that is not a
bank and from engaging in any business other than banking or managing or
controlling banks. Under the BHCA, the Federal Reserve Board is authorized to
approve the ownership of shares by a bank holding company in any company, the
activities of which the Federal Reserve Board has determined to be so closely
related to banking or to managing or controlling banks as to be a proper
incident thereto. In making such determinations, the Federal Reserve Board is
required to weigh the expected benefit to the public, such as greater
convenience, increased competition or gains in efficiency, against the possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.
The Federal Reserve Board has by regulation determined that certain
activities are closely related to banking within the meaning of the BHCA. These
activities include operating a mortgage company, finance company, credit card
company, factoring company, trust company or savings association; performing
certain data processing operations; providing limited securities brokerage
services; acting as an investment or financial advisor; acting as an insurance
agent for certain types of credit-related insurance; leasing personal property
on a full-payout, non-operating basis; providing tax planning and preparation
services; operating a collection agency; and providing certain courier services.
The Federal Reserve Board also has determined that certain other activities,
including real estate brokerage and syndication, land development, property
management and underwriting of
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life insurance not related to credit transactions, are not closely related to
banking and a proper incident thereto.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. Transactions between
savings institutions and any affiliate are governed by Sections 23A and 23B
of the Federal Reserve Act. An affiliate of a savings institution is any
company or entity which controls, is controlled by or is under common control
with the savings institution. In a holding company context, the parent
holding company of a savings institution (such as the Company) and any
companies which are controlled by such parent holding company are affiliates
of the savings institution. Generally, Sections 23A and 23B (i) limit the
extent to which the savings institution or its subsidiaries may engage in
"covered transactions" with any one affiliate to an amount equal to 10% of
such institution's capital stock and surplus, and contain an aggregate limit
on all such transactions with all affiliates to an amount equal to 20% of
such capital stock and surplus and (ii) require that all such transactions be
on terms substantially the same, or at least as favorable, to the institution
or subsidiary as those provided to a non-affiliate. The term "covered
transaction" includes the making of loans, purchase of assets, issuance of a
guarantee and other similar transactions. In addition to the restrictions
imposed by Sections 23A and 23B, no savings institution may (i) loan or
otherwise extend credit to an affiliate, except for any affiliate which
engages only in activities which are permissible for bank holding companies,
or (ii) purchase or invest in any stocks, bonds, debentures, notes or similar
obligations of any affiliate, except for affiliates which are subsidiaries of
the savings institution.
In addition, Sections 22(h) and (g) of the Federal Reserve Act places
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer
and to a greater than 10% stockholder of a savings institution, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the savings
institution's loans to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus). Section 22(h) also requires
that loans to directors, executive officers and principal stockholders be
made on terms substantially the same as offered in comparable transactions to
other persons and also requires prior board approval for certain loans. In
addition, the aggregate amount of extensions of credit by a savings
institution to all insiders cannot exceed the institution's unimpaired
capital and surplus. Furthermore, Section 22(g) places additional
restrictions on loans to executive officers.
CAPITAL REQUIREMENTS. The Federal Reserve Board has adopted capital
adequacy guidelines pursuant to which it assesses the adequacy of capital in
examining and supervising a bank holding company and in analyzing
applications to it under the BHCA. The Federal Reserve Board capital
adequacy guidelines generally require bank holding companies to maintain
total capital equal to 8% of total risk-adjusted assets, with at least
one-half of that amount consisting of Tier I or core capital and up to
one-half of that amount consisting of Tier II or supplementary capital. Tier
I capital for bank holding companies generally consists of the sum of common
stockholders' equity and perpetual preferred stock (subject
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in the case of the latter to limitations on the kind and amount of such
stocks which may be included as Tier I capital), less goodwill and, with
certain exceptions, intangibles. Tier II capital generally consists of
hybrid capital instruments; perpetual preferred stock which is not eligible
to be included as Tier I capital; term subordinated debt and
intermediate-term preferred stock; and, subject to limitations, general
allowances for loan losses. Assets are adjusted under the risk-based
guidelines to take into account different risk characteristics, with the
categories ranging from 0% (requiring no additional capital) for assets such
as cash to 100% for the bulk of assets which are typically held by a bank
holding company, including multi-family residential and commercial real
estate loans, commercial business loans and consumer loans. Single-family
residential first mortgage loans which are not past-due (90 days or more) or
non-performing and which have been made in accordance with prudent
underwriting standards are assigned a 50% level in the risk-weighing system,
as are certain privately-issued mortgage-backed securities representing
indirect ownership of such loans. Off-balance sheet items also are adjusted
to take into account certain risk characteristics.
In addition to the risk-based capital requirements, the Federal Reserve
Board requires bank holding companies to maintain a minimum leverage capital
ratio of Tier I capital to total assets of 3.0%. Total assets for this
purpose does not include goodwill and any other intangible assets and
investments that the Federal Reserve Board determines should be deducted from
Tier I capital. The Federal Reserve Board has announced that the 3.0% Tier I
leverage capital ratio requirement is the minimum for the top-rated bank
holding companies without any supervisory, financial or operational
weaknesses or deficiencies or those which are not experiencing or
anticipating significant growth. Other bank holding companies will be
expected to maintain Tier I leverage capital ratios of at least 4.0% to 5.0%
or more, depending on their overall condition.
FINANCIAL SUPPORT OF AFFILIATED INSTITUTIONS. Under Federal Reserve
Board policy, the Company will be expected to act as a source of financial
strength to the Savings Bank and to commit resources to support the Savings
Bank in circumstances when it might not do so absent such policy. The
legality and precise scope of this policy is unclear, however, in light of
recent judicial precedent.
DESCRIPTION OF COMPANY CAPITAL STOCK
GENERAL. The Articles of Incorporation of the Company authorizes the
issuance of capital stock consisting of 4,000,000 shares of Company Common
Stock and 1,000,000 shares of preferred stock, par value $.01 per share
("Company Preferred Stock"). There are 100 shares of Company Common Stock
currently issued and outstanding, all of which are owned by Pennwood Savings.
After the Reorganization is consummated, such shares will be cancelled. THE
COMPANY COMMON STOCK, LIKE THE PENNWOOD SAVINGS COMMON STOCK, WILL REPRESENT
NON-WITHDRAWABLE CAPITAL, WILL NOT BE OF AN INSURABLE TYPE AND WILL NOT BE
INSURED BY THE FDIC.
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In the future, the authorized but unissued and unreserved shares of
Company Common Stock and the authorized and unissued shares of Company
Preferred Stock will be available for general corporate purposes, including,
but not limited to, possible issuance as stock dividends or stock splits, in
future mergers or acquisitions, pursuant to stock compensations plans of the
Company, or in future private placements or public offerings. Currently, the
Company has no plans for the issuance of additional authorized shares of its
capital stock. Except as otherwise may be required to approve a merger or
other transaction in which the additional authorized shares of Company Common
Stock or authorized shares of Company Preferred Stock would be issued or as
may then be required by the National Association of Securities Dealers, Inc.
("NASD") for companies to have their equity securities quoted on the Nasdaq
Stock Market (or by any exchange on which the Company's capital stock may
then be listed), no stockholder approval will be required for the issuance of
additional shares of capital stock of the Company.
COMPANY COMMON STOCK. Each share of Company Common Stock has the same
relative rights as, and is identical in all respects with, each other share
of Company Common Stock. Until such time as Preferred Stock with voting
rights is issued, if ever, the holders of shares of Company Common Stock will
possess all rights, including exclusive voting rights, pertaining to the
capital stock of the Company. Each share of Company Common Stock will
entitle the holder thereof to one vote on all matters upon which stockholders
have the right to vote, and stockholders of the Company will not be entitled
to cumulate their votes for the election of directors. The holders of
Company Common Stock will be entitled to dividends when, as and if declared
by the Company's Board of Directors out of funds legally available therefor.
Holders of shares of Company Common Stock will not be entitled to
preemptive rights with respect to any shares which may be issued. The
Company Common Stock will not be subject to call or redemption and, upon
receipt by the Company of the full purchase price therefor, each share of
Company Common Stock will be fully paid and non-assessable.
In the event of any liquidation or dissolution of the Company, the
holders of Company Common Stock will be entitled to receive, after payment or
provision for payment of all debts and liabilities of the Company, all assets
of the Company available for distribution, in cash or in kind. If Company
Preferred Stock should be issued, the holders thereof may have a priority
over the holders of Company Common Stock in the event of liquidation or
dissolution.
COMPANY PREFERRED STOCK. The Board of Directors of the Company is
authorized to issue Company Preferred Stock in series and fix and state
voting powers, designations, preferences or other special rights of the
shares of each such series of Company Preferred Stock and the qualifications,
limitations and restrictions thereof. Company Preferred Stock may rank prior
to Company Common Stock as to dividend rights, liquidation preferences, or
both, may have full or limited voting rights, and may be convertible into
Company Common Stock. The holders of any class or series of Company
Preferred Stock also may
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have the right to vote separately as a class or series under the terms of
such class or series or as may be otherwise provided by Pennsylvania law. No
Company Preferred Stock will be issued in connection with the Reorganization
and the Company does not have any current plans to issue any such stock.
COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL. As a result of the Reorganization, the stockholders of Pennwood
Savings, a Pennsylvania-chartered savings bank, will become stockholders of
the Company, a Pennsylvania corporation. Although Pennwood Savings believes
that the rights of stockholders of Pennwood Savings and the Company are
substantially similar, there are certain differences in stockholder rights
arising from distinctions between laws with respect to Pennsylvania-chartered
savings banks under the Banking Code and Pennsylvania corporations under the
BCL and from distinctions between Pennwood Savings' Amended and Restated
Articles of Incorporation and Bylaws and the Company's Articles of
Incorporation and Bylaws.
The discussion herein is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes the
more significant differences and certain important similarities. The
discussion herein is qualified in its entirety by reference to the Articles
of Incorporation and Bylaws of the Company, which are attached hereto as
Appendices B and C, respectively, and to the applicable provisions of the BCL.
AUTHORIZED CAPITAL STOCK. The Company's authorized capital stock
consists of 4,000,000 shares of Company Common Stock, par value $.01 per
share, and 1,000,000 shares of Company Preferred Stock, par value $.01 per
share. Pennwood Savings' authorized capital stock similarly consists of
4,000,000 shares of Pennwood Savings Common Stock, par value $.01 per share,
and 1,000,000 shares of preferred stock ("Pennwood Savings Preferred Stock").
VOTING RIGHTS. Each share of Company Common Stock and Pennwood Savings
Common Stock is entitled to one vote per share, and neither Pennwood Savings'
Amended and Restated Articles of Incorporation nor the Company's Articles of
Incorporation authorize cumulative voting in elections of directors.
Neither the Amended and Restated Articles of Incorporation of Pennwood
Savings nor the Articles of Incorporation of the Company contain any
specification of or limitation on the circumstances under which separate
class voting rights may be provided to a particular class or series of
Company Preferred Stock.
For information about the effects of the Reorganization on the voting
rights of stockholders in connection with business combinations, see "-
Mergers, Consolidations and Sales of Assets" and "- Pennsylvania Law -
Business Combination Statute" below.
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PAYMENT OF DIVIDENDS. The ability of Pennwood Savings to pay dividends
on its capital stock is restricted by the Banking Code and federal law and
regulations and by tax considerations related to savings institutions such as
Pennwood Savings. See "Holding Company Formation - Market for Company Common
Stock; Anticipated Dividend Policy; and Resales of Company Common Stock."
Although the Company is not subject to these restrictions as a Pennsylvania
corporation, such restrictions will indirectly affect the Company because
dividends from Pennwood Savings will be the Company's primary source of funds
for the payment of dividends to stockholders of the Company.
The Company's Bylaws provide that dividends may be declared by the Board
of Directors and paid by the Company in accordance with the conditions and
subject to the limitations imposed by the laws of Pennsylvania. The BCL
generally provides that, subject to any restrictions in the corporation's
bylaws, distributions to stockholders may be made, provided that, after
giving effect thereto, (1) the corporation would be able to pay its debts as
they become due in the usual course of business and (2) the total assets of
the corporation would not be less than the sum of its total liabilities plus
(unless otherwise provided in the corporation's articles of incorporation)
the amount that would be needed, if the corporation were to be dissolved, at
the time of the distribution, to satisfy the preferential rights upon
dissolution of stockholders whose preferential rights are superior to those
receiving the distribution.
BOARD OF DIRECTORS. Pennwood Savings' Amended and Restated Articles of
Incorporation and Bylaws and the Articles of Incorporation and Bylaws of the
Company require the Boards of Directors of Pennwood Savings and the Company,
respectively, to be divided into three classes as nearly equal in number as
possible and that the members of each class shall be elected for a term of
three years and until their successors are elected and qualified, with one
class being elected annually.
The Amended and Restated Articles of Incorporation of Pennwood Savings
provide that the number of directors shall be determined in the manner
provided in the Bylaws, which permit a range in the number of the directors
from five to 15 and allow for an increase or decrease in such number by a
vote of a majority of the directors present at a meeting, as long as any
decrease in the number would not shorten the term of any incumbent director.
The Articles of Incorporation of the Company contain similar provisions.
Under Pennwood Savings' Bylaws, vacancies occurring in its Board of
Directors, including vacancies created by newly created directorships
resulting from an increase in the number of directors, may be filled by the
affirmative vote of a majority of the remaining directors, even if less than
a quorum, following the nominating procedures set forth in the Bylaws, and
any director so chosen shall serve for the unexpired term of his or her
predecessor in office and until his or her successor is elected and
qualified. The Company's Articles of Incorporation contains similar
provisions for filling vacancies on the Board of Directors.
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Under the Banking Code, a director of Pennwood Savings may be removed
without cause by a majority vote of the stockholders entitled to vote at an
annual election of directors unless, in the case of an individual director,
if the entire board is not removed, there shall be cast against the
resolution for his removal the votes of a sufficient number of shares which
if cumulatively voted at an annual election would be sufficient to elect one
or more directors. The Board of Directors of Pennwood Savings may remove a
director if (i) he is adjudicated an incompetent by a court or is convicted
of a felony, (ii) he does not, within 60 days after his election, accept the
office in writing or by attendance at a meeting and fulfill other
requirements for holding the office, or (iii) he fails to attend regular
meeting of the board for six successive months without having been excused by
the board. In addition, the Court of Common Pleas may, in a suit in which
Pennwood Savings is a party filed by the a majority of the Board or by the
holders of at least ten percent of the outstanding Pennwood Savings Common
Stock, remove a director for fraudulent or dishonest acts or gross abuse of
authority or discretion in the affairs of Pennwood Savings. The Company's
Articles of Incorporation provide that a director may be removed from office
by the stockholders only with cause by an affirmative vote of not less than a
majority of the total votes eligible to be cast by stockholders. Cause for
removal exists only if the director whose removal is proposed has been either
declared of unsound mind by an order of a court of competent jurisdiction,
convicted of a felony or of an offense punishable by imprisonment for a term
of more than one year by a court of competent jurisdiction or has been deemed
liable by a court of competent jurisdiction for gross negligence or
misconduct in the performance of such director's duty to the Company.
LIMITATIONS ON LIABILITY. In accordance with the Pennsylvania Directors'
Liability Act, the Articles of Incorporation and Bylaws of the Company
provide that a director or an officer of the Company will not be personally
liable for monetary damages for actions taken, or any failure to take any
action, as a director except to the extent that by law a director's liability
for monetary damages may not be limited. This provision does not limit the
personal liability of the Company's directors or officers for monetary
damages for breaches of their duty of care which constitute self-dealing,
willful misconduct or recklessness. In addition, this provision does not
limit the liability of directors or officers arising under any criminal
statute or for the payment of any federal, state or local taxes. However,
with respect to other matters, this provision may preclude stockholder
derivative actions and may be construed to preclude other third-party claims
against the directors. The Articles of Incorporation and Bylaws also provide
that any amendment or repeal of this provision will not adversely affect any
right of a director or an officer of the Company with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
The Pennwood Savings' Bylaws provide that a director shall not be
personally liable for monetary damages for any action taken, or any failure
to take any action, as a director except to the extent that by law a
director's liability for monetary damages may not be limited. Neither the
Amended and Restated Articles of Incorporation or Bylaws of Pennwood Savings
provides for the limitation of monetary damages for an officer.
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INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. Pennwood Savings'
Bylaws provide that Pennwood Savings shall indemnify any person who was or is
a party to any threatened, pending or completed action, including actions by
or in the right of the Pennwood Savings, by reason of the fact that such
person is or was a director, officer, employee or agent against expenses
(including attorneys' fees), judgments, fines, excise taxes and amounts paid
in settlement incurred by such persons in connection with such action to the
fullest extent permissible under Pennsylvania law. Pennwood Savings also is
permitted to pay reasonable expenses incurred by a officer, director,
employee or agent in defending an action in advance of the final disposition
of such action upon receipt of an undertaking by or on behalf of such person
to repay such amount if it shall ultimately be determined that the person is
not entitled to be indemnified. The rights of indemnification provided in
Pennwood Savings' Bylaws are not exclusive of any other rights the person
seeking indemnification or advancement of expenses may be entitled. In
addition, Pennwood Savings' Bylaws provide that it may obtain insurance to
protect it and its officers, directors, employees and agents against any
liability asserted against him and incurred in such capacity, whether or not
Pennwood Savings would have the power to indemnify him against such liability
under the provisions of the Bylaws. However, Pennwood Savings shall not
indemnify a director, officer, employee or agent for any liability incurred
in an action initiated (which shall not include counter-claims or affirmative
defenses) or participated in as an intervenor or amicus curiae by the person
seeking indemnification unless such initiation of or participation in the
action is authorized by the affirmative vote of majority of the board of
directors.
The Company's Bylaws provide that the Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, because such person is or was a director,
officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. Such
indemnification is furnished to the full extent provided by law against
expenses (including attorneys' fees), judgments, fines, excise taxes and
amounts paid in settlement actually and reasonably incurred in connection
with such action, suit or proceeding. Such indemnification shall be made
unless a judgment or other final adjudication establishes that the act or
failure to act giving rise to the claim for indemnification constituted
self-dealing, willful misconduct or recklessness. The indemnification
provisions also permit the Company to pay reasonable expenses in advance of
the final disposition of any action, suit or proceeding as authorized by the
Company's Board of Directors, provided that the indemnified person undertakes
to repay the Company if it is ultimately determined that such person was not
entitled to indemnification. The rights of indemnification provided in the
Company's Bylaws are not exclusive of any other rights which may be available
under any insurance or other agreement, by vote of stockholders or
disinterested directors or otherwise. In addition, the Bylaws authorize the
Company to maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company, whether or not the
Company would have the power to provide indemnification to such person. By
action of the Board of
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Directors, the Company may create and fund a trust fund or fund of any
nature, and may enter into agreements with its officers and directors, for
securing or insuring in any manner its obligation to indemnify or advance
expenses provided for in the provisions in the Bylaws regarding
indemnification. These provisions are designed to reduce, in appropriate
cases, the risks incident to serving as a director, officer, employee or
agent and to enable the Company to attract and retain the best personnel
available.
Currently, there is no pending or threatened litigation against either
Pennwood Savings or the Company for which indemnification may be sought.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the SEC such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
SPECIAL MEETINGS OF STOCKHOLDERS. Pennwood Savings' Bylaws provide that
special meetings of the stockholders of Pennwood Savings may be called by the
President, the Chairman, the Vice-Chairman, the Board of Directors or the
holders of not less than one-fifth of the outstanding stock of Pennwood
Savings entitled to vote at the meeting. The Company's Articles of
Incorporation provide that special meetings of stockholders of the Company
may be called only by the affirmative vote of a majority of the Board of
Directors. Consequently, under the Company's Articles of Incorporation,
stockholders of the Company will not be entitled to call special meetings of
stockholders.
STOCKHOLDER NOMINATIONS AND PROPOSALS. Pennwood Savings' Bylaws provide
that stockholders may submit written nominations for election as director at
an annual meeting of stockholders or a stockholder proposal for business to
be considered at the meeting at least 30 days before the date of any such
meeting. A stockholder's notice for nominations shall set forth as to each
person whom the stockholder proposes to nominate for election or re-election
as a director, (a) the name, age, business address and residence address of
such person, (b) the principal occupation or employment of such person, (c)
the class and number of shares of Pennwood Savings stock which are
beneficially owned by such person on the date of the notice, and (d) any
other information relating to such person that is required to be disclosed in
solicitations of proxies with respect to nominees for election as directors
pursuant to Regulation 14A of the Exchange Act, and any successor thereto. A
stockholder's notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (a) a brief description of the
proposal desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (b) the name and address, as
the appear on the Pennwood Savings' books, of the stockholder proposing such
business, (c) the class and number of shares of Pennwood Savings stock which
are beneficially owned by such person on the date of the notice, and (d) any
financial interest of the stockholder in the proposal.
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The Company's Bylaws require all nominations for election to the Board of
Directors other than those made by the Board to be made by a stockholder
eligible to vote at an annual meeting of stockholders who has complied with
the notice provisions of the Bylaws. Written notice of a stockholder
nomination must be delivered to, or mailed to and received at, the principal
executive offices of the Company not later than 90 days prior to the
anniversary date of the immediately preceding annual meeting, provided that,
with respect to the first scheduled annual meeting following completion of
the Reorganization, notice must be received no later than the close of
business on the tenth day following the day on which notice of the date of
the scheduled annual meeting was mailed. Each such notice shall set forth:
(a) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of the Company entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholder and
each nominee and any arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed
by such stockholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC; and (e) the consent of each
nominee to serve as a director of the Company if so elected.
The Company's Bylaws provide that only such business as shall have been
properly brought before an annual meeting of stockholders shall be conducted
at the annual meeting. In order to be properly brought before an annual
meeting following completion of the Reorganization, business must be (a)
brought before the meeting by or at the direction of the Board of Directors
or (b) otherwise properly brought before the meeting by a stockholder who has
given timely and complete notice thereof in writing to the Company. For
stockholder proposals to be included in the Company's proxy materials, the
stockholder must comply with all the timing and informational requirements of
Rule 14a-8 of the Exchange Act. With respect to stockholder proposals to be
considered at the annual meeting of stockholders but not included in the
Company's proxy materials, the stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Company not
less than 90 days prior to the anniversary date of the immediately preceding
annual meeting; provided, however, that with respect to the first scheduled
annual meeting after the Reorganization, such written notice must be received
no later than the close of business on the tenth day following the day on
which notice of the date of the scheduled annual meeting was mailed. A
stockholder's notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a brief description of the
business desired to be brought before the annual meeting, (b) the name and
address, as they appear on the Company's books, of the stockholder proposing
such business, (c) the class and number of shares of the Company which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. The chairman of an annual meeting shall
determine and declare to the meeting whether the business was properly
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brought before the meeting in accordance with the provisions of the Bylaws,
and any such business not properly brought before the meeting shall not be
transacted.
The procedures regarding stockholder proposals are designed to provide
the Board with sufficient time and information to evaluate a stockholder
proposal and other relevant information, such as existing stockholder support
for the proposal. The proposed procedures, however, will give incumbent
directors advance notice of a business proposal. This may make it easier for
the incumbent directors to defeat a stockholder proposal, even when certain
stockholders view such proposal as in the best interests of the Company or
its stockholders.
STOCKHOLDER ACTION WITHOUT A MEETING. The Bylaws of Pennwood Savings and
the Articles of Incorporation of the Company provide that any action to be
taken or which may be taken at any meeting of stockholders may be taken
without a meeting if a consent in writing, setting forth the action so taken,
is given by the holders of all outstanding shares entitled to vote.
STOCKHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS. The right to inspect
books and records of both Pennwood Savings and the Company by stockholders
are governed by the BCL. The BCL provides that a stockholder may inspect
books and records upon written demand stating the purpose of the inspection,
if such purpose is reasonably related to such person's interest as a
stockholder.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. Under the Banking Code, the
approval of the Board of Directors of Pennwood Savings and the holders of
two-thirds of the outstanding stock of Pennwood Savings entitled to vote
thereon is required for mergers, consolidations and sales of all or
substantially all of Pennwood Savings' assets. The BCL requires the
approval of the Board of Directors and the holders of a majority of the
outstanding stock of the Company entitled to vote thereon for mergers or
consolidations, and for sales, leases or exchanges of all or substantially
all of the Company's assets (not made in the usual or regular course of
business). The BCL permits the Company to merge with another corporation
without obtaining the approval of the Company's stockholders if: (i) (A) the
plan of merger ("plan") whether or not the corporation is the surviving
corporation, does not alter the status of the corporation as a domestic
business corporation or alter in any respect, subject to certain exceptions,
the provisions of its articles; and (B) each share of the corporation
outstanding immediately prior to the effective date of the merger is to
continue as or to be converted into, except as may be otherwise agreed by the
holder thereof, an identical share of the surviving or new corporation after
the effective date of the merger or consolidation; (ii) immediately prior to
the adoption of the plan and at all times thereafter prior to its effective
date, another corporation that is a party to the plan owns directly or
indirectly 90% or more of the outstanding shares of each class of the
corporation; or (iii) no shares of the corporation have been issued prior to
the adoption of the plan by the board of directors.
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DISSENTERS' RIGHTS OF APPRAISAL. The Banking Code provides that the
rights of appraisal of dissenting stockholders of Pennwood Savings shall be
governed by the provisions of the BCL. Similarly, the rights of appraisal of
dissenting stockholders of the Company will be governed by the BCL. Pursuant
thereto, a stockholder of a Pennsylvania corporation generally has the right
to dissent from any merger or consolidation involving the corporation or sale
of all or substantially all of the corporation's assets, subject to specified
procedural requirements. However, generally no such appraisal rights are
available for the shares of any class or series of a corporation's capital
stock if (i) as of the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of stockholders to
act upon an agreement of merger or consolidation, such shares were either
listed on a national securities exchange or held of record by more than 2,000
stockholders, and (ii) the shares are converted solely into shares of the
acquiring, surviving, new or other corporation or solely into such shares and
money in lieu of fractional shares.
ACQUISITION OF CAPITAL STOCK. Pennwood Savings' Amended and Restated
Articles of Incorporation provide that for five years from the date of the
conversion of Pennwood Savings to the stock form (which was consummated in
July 1996), no person shall directly or indirectly offer to acquire or
acquire the beneficial ownership of more than 10% of the issued and
outstanding shares of any class of an equity security of Pennwood Savings.
The term "person" is broadly defined to prevent circumvention of this
restriction. The foregoing restrictions do not apply to the Reorganization
or to any offer with a view toward public resale made exclusively to Pennwood
Savings by underwriters or a selling group acting on their behalf. In the
event that shares are acquired in violation of Pennwood Savings' Amended and
Restated Articles of Incorporation, all shares beneficially owned by any
person in excess of 10% shall be considered "Excess Shares" and shall not be
counted as shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matters submitted to
stockholders for a vote. The Company's Articles of Incorporation contains
similar provisions effective for five years form the date of the
Reorganization.
AMENDMENT OF GOVERNING INSTRUMENTS. Pennwood Savings' Amended and
Restated Articles of Incorporation may not be amended unless the amendment is
first proposed by the Board of Directors and thereafter approved by the
stockholders by at least a majority of the then outstanding shares of voting
stock, voting together as a single class. Pennwood Savings' Bylaws can be
amended by a majority of the Board of Directors or a majority of the
stockholders present in person or by proxy at a legal meeting.
The Company's Articles of Incorporation generally provides that any
amendment of the Articles of Incorporation must be first approved by a
majority of the Board of Directors and then by the holders of a majority of
the shares of the Company entitled to vote in an election of directors,
except that the approval of 75% of the shares of the Company entitled to vote
in an election of directors is required for any amendment to Articles 6
(directors), 7 (meetings of stockholders; action without a meeting), 8
(liability of directors and officers), 9 (restrictions on acquisitions) and
11 (amendments) which are not approved by the
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affirmative vote of 80% of the Company's Board of Directors then in office.
The Bylaws of the Company may be amended by a majority of the Board of
Directors then in office or by the affirmative vote of a majority of the
total shares entitled to vote in an election of directors, except that the
affirmative vote of at least 75% of the total shares entitled to vote in an
election of directors shall be required to amend, adopt, alter, change or
repeal any provision inconsistent with certain specified provisions of the
Bylaws which are not approved by the affirmative vote of 80% of the Company's
Board of Directors then in office.
PENNSYLVANIA LAW. In addition to the provisions contained in Pennwood
Savings' Amended and Restated Articles of Incorporation and Bylaws and the
Company's Articles of Incorporation and Bylaws, the BCL includes certain
provisions applicable to Pennsylvania corporations such as the Company, which
may be deemed to have an anti-takeover affect. Such provisions include,
among other things, (i) rights of stockholders to receive the fair value of
their shares of stock following a control transaction from the controlling
person or group and (ii) requirements relating to certain business
combinations. Pennwood Savings' Amended and Restated Articles of
Incorporation provide that, except to the extent inconsistent with the
Banking Code or the Amended and Restated Articles of Incorporation, the
provisions of the BCL shall apply to Pennwood Savings. The Department and
the Pennsylvania courts have not definitively indicated whether a savings
bank's articles of incorporation may effectively incorporate the BCL.
However, management of the Savings Bank has incorporated the BCL into the
Amended and Restated Articles of Incorporation of Pennwood Savings pending a
resolution of this issue by the appropriate authorities instead of waiting
until the effectiveness of such an incorporation of the BCL is determined.
STOCK RIGHTS AND OPTIONS
Section 1525 of the BCL authorizes the board of directors of Pennsylvania
business corporations to create and issue (whether or not in connection with
the issuance of any of its shares or other securities) option rights or
securities having conversion or option rights entitling the holders thereof
to purchase or acquire (i) shares, option rights, securities having
conversion or option rights, or obligations of any class or series, or assets
of the corporation; or (ii) shares, option rights or securities having
conversion or option rights, or obligations of any class or series, owned by
the corporation and issued by any other person. The securities, contracts,
warrants or other instruments evidencing any shares, option rights,
securities having conversion or option rights or obligations of a corporation
may contain such terms as are fixed by the Board of Directors and in
accordance with Section 2513 of the BCL, the Board of Directors may preclude
or limit any person from exercising, converting, transferring or receiving
such securities, contracts, warrants or other instruments.
PROVISIONS RELATING TO THE BOARD OF DIRECTORS
Section 1711 of the BCL provides that directors of a "registered
corporation" (such as the Company upon consummation of the Reorganization)
may consider certain factors and interests enumerated in Sections 1715 or
1716 of the BCL in discharging their duties.
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Section 1715 of the BCL will automatically apply to the Company as a
"registered corporation" unless it provides that such section shall not be
applicable, in which case, Section 1716 will be applicable. Both the Amended
and Restated Articles of Incorporation of Pennwood Savings and the Articles
of Incorporation of the Company provide that Section 1715 of the BCL shall
not apply, and thus Section 1716 is applicable to both Pennwood Savings and
the Company.
Section 1716 of the BCL provides that directors in discharging their
duties, may, in considering the best interests of the corporation, consider
the effects of any action upon employees, upon suppliers and customers of the
corporation and upon communities in which offices or other establishments of
the corporation are located, and all other pertinent factors. The
consideration of those factors shall not constitute a violation of the
standard of care set forth in Section 1712 of the BCL. In addition, absent
of breach of fiduciary duty, lack of good faith or self-dealing, actions
taken as a director shall be presumed to be in the best interests of the
corporation.
CONTROL TRANSACTION STATUTE
Subchapter E of Chapter 25 (Sections 2541 through 2548) of the BCL
includes anti-takeover provisions which allow holders of voting shares of a
business corporation that becomes the subject of a control transaction to
object to such transaction and demand they be paid the fair value of their
shares unless: (1) the articles or bylaws (in specified circumstances) of
such corporation explicitly provide otherwise; or (2) the articles of such
corporation are amended prior to the control transaction to provide that such
anti-takeover provisions are not applicable, which amendment would require
the affirmative vote of the holders of at least 80% of the outstanding stock.
"Fair value" for purposes of these provisions means an amount not less than
the highest price per share paid by the controlling person or group at any
time during the 90-day period ending on and including the date of the control
transaction plus any incremental value that may not be reflected in such
price. A "control transaction" for purposes of these provisions means the
acquisition by a person or group of persons acting in concert of at least 20%
of the outstanding voting stock of the corporation, with certain exceptions.
BUSINESS COMBINATION STATUTE
Under Subchapter F of Chapter 25 (Sections 2551 through 2556) of the BCL,
a Pennsylvania corporation may not engage in a Business Combination with an
Interested Shareholder as defined by Section 2553 of the BCL ("Interested
Shareholder") except for the following types of Business Combinations: (i) a
Business Combination approved by the corporation's board of directors prior
to the date on which the Interested Shareholder became an Interested
Shareholder ("Share Acquisition Date"); (ii) a Business Combination approved
(a) by the affirmative vote of the holders of all the outstanding common
shares, or (b) by the affirmative vote of the holders of at least a majority
of the outstanding voting stock, not including any shares owned by the
Interested Shareholder or affiliate or associate
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thereof, at a meeting called for such purpose no earlier than three months
after the Interested Shareholder became, and provided that at the time of
such meeting the Interested Shareholder is, the Beneficial Owner of at least
80% of the outstanding voting stock, and provided that the Business
Combination satisfies the requirements of clauses (a) through (e) of clause
(v) below; (iii) a Business Combination approved by the affirmative vote of
all of the holders of all of the outstanding common stock; (iv) a Business
Combination approved by the holders of at least a majority of the outstanding
voting stock, not including any voting shares owned by the Interested
Shareholder, at a meeting called for such purpose no earlier than five years
after the Share Acquisition Date; or (v) a Business Combination approved at a
stockholders meeting called for such purpose no earlier than five years after
the Share Acquisition Date that meets all of the following conditions: (a)
the consideration received per share by holders of the outstanding common
stock is at least equal to the higher of: (I) the highest price per share
paid by the Interested Shareholder after he became a 5% stockholder within
five years prior to the earlier of the date of the public announcement of the
Business Combination ("Announcement Date") or the Share Acquisition Date,
plus interest paid from the earlier date on which the highest per share
acquisition price was paid through the consummation date of the Business
Combination, less dividends paid during such period up to the amount of such
interest, or (II) the market value per common share on the Announcement Date
or the Interested Shareholder's Share Acquisition Date, whichever is higher,
plus interest and less dividends up to the amount of such interest; (b)
similar conditions to those set forth in clause (v)(a) above in the case of
classes of stock other than common stock; (c) the consideration to be
received in the Business Combination by the holders of any class of the
corporation's stock must be in cash or the same form as the consideration
used by the Interested Shareholder to acquire the largest number of shares of
such class previously acquired by it; (d) the holders of all outstanding
shares not beneficially owned by the Interested Shareholder are entitled to
receive in the Business Combination consideration meeting the requirements of
clauses (v)(a), (b) and (c) above; and (e) after the Share Acquisition Date
and prior to the consummation of the Business Combination, the Interested
Shareholder has not acquired any additional voting shares except, among other
things, as part of the transaction in which the Interested Shareholder became
an Interested Shareholder, stock dividends or stock splits which apply
equally to all stockholders or certain other specified conditions.
Section 2554 of the BCL defines a "Business Combination" generally to
include, with respect to a corporation, certain sales, purchases, exchanges,
leases, mortgages, pledges, transfers or dispositions of assets, mergers or
consolidations, certain issuances or reclassification of securities,
liquidations or dissolutions or certain loans, guarantees or financial
assistance, pursuant to an agreement or understanding between such
corporation or any subsidiaries, on the one hand, and an Interested
Shareholder or an "Affiliate" or "Associate" thereof, on the other hand. An
Interested Shareholder is defined by Section 2553 of the BCL as generally to
include any individual, partnership, association or corporation which is the
beneficial owner (as defined) of at least 20% of the outstanding voting stock
of the corporation, or which is an affiliate or associate of such corporation
and
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at any time within the five-year period prior to the date in question was the
beneficial owner of at least 20% of the outstanding voting stock.
CONTROL SHARE ACQUISITION STATUTE
Subchapter G of Chapter 25 (Sections 2561 through 2568) of the BCL
generally requires stockholder approval of a "control-share acquisition,"
which is defined to mean the direct or indirect acquisition by any person of
voting power over voting shares of a "registered corporation" that, when
added to all other shares of the corporation over which such person may
exercise voting power (other than "existing shares," as defined) would give
such person for the first time the power to vote any of the following ranges
of voting power that all stockholders would be entitled to cast in an
election of directors of the corporation: at least 20% but less than 33 1/3%;
at least 33 1/3% but less than 50%; or 50% or more.
Pursuant to Section 2564 of the BCL, control shares (which are shares
that upon acquisition of voting power pursuant to Subchapter G of Chapter 25
of the BCL would result in a control-share acquisition) shall not have any
voting rights unless the person or group who or which makes or proposes to
make a control-share acquisition (an "acquiring person") requests the
restoration of such voting rights and the restoration of such voting rights
is approved by the holders of a majority of the "disinterested shares" of the
corporation and by the holders of a majority of all voting shares of the
corporation. Unless prohibited by its articles of incorporation, the
corporation may, for a specified period, redeem at the publicly traded price
of such securities, control shares that are not granted voting rights after
the proposal is presented to stockholders (or which have lapsed by passage of
time) or for which voting rights are not sought after a control share
acquisition is consummated.
Section 2563 of the BCL excludes certain person from being deemed an
acquiring person based upon similar circumstances provided in Section 2574 of
the BCL relating to exclusions of "controlling person or group." See
"-Disgorgement Statute." Both Pennwood Savings and the Company have
determined to opt-out of Subchapter G of Chapter 25 of the BCL as described
above.
DISGORGEMENT STATUTE
Subchapter H of Chapter 25 (Sections 2571 though 2576) of the BCL
generally provides that any "profit" realized by any person or group who is
or was a "controlling person or group" with respect to a registered
corporation (such as the Company upon consummation of the Reorganization)
from the disposition of any equity security of the corporation to any person
shall belong to and be recoverable by the corporation where the profit is
realized by such person or group:
(1) from the disposition of the equity security within 18 months after
the person or group attained the status of a controlling person or group; and
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(2) the equity security had been acquired by the controlling person or
group within 24 months prior to or 18 months subsequent to the attaining by
the person or group of the status of a controlling person or group.
A "controlling person or group" for purposes of Subchapter H is defined
in Section 2573 of the BCL to mean (1) a person or group who has acquired,
offered to acquire or, directly or indirectly, publicly disclosed or caused
to be disclosed the intention of acquiring voting power over voting shares of
a registered corporation that would entitle the holder thereof to cast at
least 20% of the votes that all stockholders would be entitled to cast in an
election of directors of the corporation or (2) a person or group who has
otherwise, directly or indirectly, publicly disclosed or caused to be
disclosed that it may seek to acquire control of a corporation through any
means. The definition of "controlling person or group" in Section 2573 also
includes terms which are designed to facilitate a corporation's determination
of the existence of a group and members of a controlling group.
Section 2574(a) of the BCL excludes certain persons and holders from
being deemed a controlling person or group (absent "significant other
activities" indicating that a person or group should be deemed a controlling
person or group) by reason of voting or giving a proxy or consent as a
shareholder of the corporation if the person or group is one who or which:
(i) did not acquire any voting shares of the corporation with the purpose of
changing or influencing control of the corporation or seeking to acquire
control of the corporation or in connection with or as a participant in any
agreement, arrangement, relationship, understanding or otherwise having any
such purpose; (ii) if control were acquired, would not be a person or group
or a participant in a group that has control over the corporation and will
not receive, directly or indirectly, any consideration from a person or group
that has control over the corporation other than consideration offered
proportionately to all holders of voting shares of the corporation; and (iii)
if a proxy or consent is given, executes a revocable proxy or consent given
without consideration in response to a proxy or consent solicitation made in
accordance with the applicable rules and regulations under the Exchange Act
under circumstances not then reportable on Schedule 13D under the Exchange
Act (or any comparable or successor report) by the person or group who gave
the proxy or consent. Section 2574(b) of the BCL excludes a person or group
from being deemed a controlling person or group if such person or group holds
voting power: (i) in good faith and not for the purpose of circumventing
Subchapter H of Chapter 25 of the BCL, as an agent, bank, broker, nominee or
trustee for one or more beneficial owners who do not individually or, if they
are a group acting in concert, as a group have the voting power specified in
Section 2573(l)(i) of the BCL (possessing 20% of the voting power); (ii) in
connection with the solicitation of proxies or consents by or on behalf of
the corporation in connection with shareholder meetings or actions of the
corporation; or (iii) in the amount specified in Section 2573(l)(i) of the
BCL (possessing 20% of the voting power) as a result of the solicitation of
revocable proxies or consents with respect to voting shares if such proxies
or consents both: (i) given without consideration in response to a
solicitation pursuant to the Exchange Act and the regulations thereunder and
(ii) do not empower the holder thereof to vote such shares except on the
specific matters described in such proxy or
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consent and in accordance with the instructions of the giver of such proxy or
consent. Subchapter H of Chapter 25 of the BCL also does not apply to
certain specified transfers of equity securities, including certain
acquisitions and dispositions which are approved by a majority vote of both
the board of directors and stockholders of the corporation in the prescribed
manner.
Actions to recover any profit due to a registered corporation under
Subchapter H of Chapter 25 of the BCL may be commenced by the corporation in
any court of competent jurisdiction within two years from the date any
recoverable profit was realized. Such an action also may be commenced by a
stockholder on behalf of the corporation if the corporation refuses to bring
the action within 60 days after written request by a stockholder or the
corporation shall fail to prosecute the action diligently. Any recovery of
profits would be due the corporation and the stockholder would be entitled to
reimbursement of all costs incurred in connection with the bringing of any
such action in the event that such action results in a judgment recovering
profits for the corporation. The enforcement provision in Subchapter H of
the BCL also provides that, by engaging in activities necessary to become a
controlling person or group and thereby becoming a controlling person or
group, the person or group are deemed to consent to personal jurisdiction in
the Pennsylvania courts for enforcement of Subchapter H of Chapter 25 of the
BCL.
SEVERANCE COMPENSATION AND LABOR CONTRACTS
Subchapter I of Chapter 25 (Sections 2581 through 2583) of the BCL
generally provides statutory rights to severance compensation to certain
employees of a registered corporation such as the Company whose employment is
terminated in connection with a change in control of the corporation, other
than for willful misconduct. In addition, Subchapter J of Chapter 25
(Sections 2585 through 2588) of the BCL generally provide that certain
business combinations shall not result in the termination or impairment of
specialized labor contracts, subject to certain exceptions.
APPLICABILITY OF THE BCL TO PENNWOOD SAVINGS AND THE COMPANY
The provisions of the BCL discussed above provide that a corporation may
opt-out of such subchapters by, among other things, expressly providing in
its original articles of incorporation that a certain subchapter shall not be
applicable. BOTH THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
PENNWOOD SAVINGS AND THE ARTICLES AND INCORPORATION OF THE COMPANY PROVIDE
THAT SECTION 1715 (RELATING TO CONSIDERATION OF CERTAIN FACTORS BY THE BOARD
OF DIRECTORS IN DISCHARGING THEIR DUTIES) AND SUBCHAPTER G (RELATING TO
CONTROL-SHARE ACQUISITIONS) SHALL NOT BE APPLICABLE TO PENNWOOD SAVINGS OR
THE COMPANY, RESPECTIVELY.
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ANTI-TAKEOVER EFFECTS. Although the Company has opted out of certain of
the antitakeover provisions contained in Chapter 25 of the BCL, certain other
provisions of the Articles of Incorporation and Bylaws of the Company and the
BCL could have the effect of discouraging an acquisition of the Company, or
stock purchases in furtherance of an acquisition, and could accordingly,
under certain circumstances, discourage transactions which might otherwise
have a favorable effect on the price of the Company Common Stock. However,
the Amended and Restated Articles of Incorporation and Bylaws of Pennwood
Savings contain similar provisions.
Notwithstanding the foregoing, the Board of Directors of each of Pennwood
Savings and the Company believes that the provisions described above with
respect to the Company's Articles of Incorporation and Bylaws and certain
provisions of the BCL are prudent and will reduce vulnerability to takeover
attempts and certain other transactions that are not negotiated with and
approved by the Board of Directors of the Company. The Board of Directors of
the Company believes that these provisions are in the best interests of the
Company and its stockholders. In the Board of Directors' judgment, the Board
of Directors is in the best position to determine the true value of the
Company and to negotiate more effectively for what may be in the best
interests of its stockholders. Accordingly, the Board of Directors of the
Company believes that it is in the best interest of the Company and its
stockholders to encourage such negotiations and discourage hostile takeover
attempts. It is also the Board of Directors' view that these provisions
should not discourage persons from proposing a merger or other transaction at
prices reflective of the true value of the Company and in which the
transaction is in the best interests of all stockholders.
Despite the Board of Directors' belief as to the benefits to the
Company's stockholders of the foregoing provisions, these provisions also may
have the effect of discouraging a future takeover attempt in which
stockholders might receive a substantial premium for their shares over then
current market prices. These provisions may serve to make it more difficult
to remove incumbent management and may also discourage all attempts to
acquire control not approved by the Board of Directors for any reason. As a
result, stockholders who might desire to participate in, or benefit from,
such a transaction may not have an opportunity to do so. The Board of
Directors, however, has concluded that the potential benefits of these
provisions outweigh their possible disadvantages.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL THREE)
At the Annual Meeting, stockholders of Pennwood Savings will be asked to
ratify the appointment of KPMG Peat Marwick LLP as Pennwood Savings'
independent public accountants for the year ending June 30, 1997. This
appointment was recommended by the Audit Committee of Pennwood Savings and
approved by the Board of Directors of Pennwood Savings. If the stockholders
of Pennwood Savings do not ratify the appointment of KPMG Peat Marwick LLP,
the appointment will be reconsidered by the Board of Directors of Pennwood
Savings.
KPMG Peat Marwick LLP has advised Pennwood Savings that neither the firm
nor any of its members has any direct or indirect financial interest in, or
during the last three years, has had any other connection with Pennwood
Savings other than the usual relationship which exists between independent
public accountants and clients.
A representative of KPMG Peat Marwick LLP will be present at the Annual
Meeting and available to respond to appropriate questions and will be given
an opportunity to make a statement if the representative chooses to do so.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE BY STOCKHOLDERS FOR
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS PENNWOOD SAVINGS'
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 1997.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described in this Proxy Statement-Offering
Memorandum. However, if any other matters should properly come before the
Annual Meeting, it is intended that the proxies solicited hereby will be
voted with respect to those other matters in accordance with the judgment of
the persons voting the proxies.
The cost of solicitation of proxies will be borne by Pennwood Savings.
Pennwood Savings has retained Corporate Investor Communications ("CIC"), a
professional proxy solicitation firm, to assist in the solicitation of
proxies. Such firm will be paid a fee of $4,000, plus reimbursement for
out-of-pocket expenses. Pennwood Savings will also reimburse brokerage firms
and other custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial owners of
Pennwood Savings Common Stock. In addition to solicitations by mail,
directors, officers and
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employees of Pennwood Savings may solicit proxies personally or by telephone
without additional compensation.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
solicitation materials to be used in connection with the next annual meeting
of stockholders of the Company or Pennwood Savings, as applicable, must be
received at the main office of the Company/Pennwood Savings no later than
June 10, 1997. If such proposal is in compliance with all of the requirements
of Rule 14a-8 under the Exchange Act, it will be included in the Proxy
Statement and set forth on the form of proxy issued for the next annual
meeting of stockholders. It is urged that any such proposals be sent by
certified mail, return receipt requested.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
Stockholders of Pennwood Savings as of the record date for the Annual
Meeting are being forwarded a copy of Pennwood Savings' Annual Report to
Stockholders for the year ended June 30, 1996 (the "Annual Report").
Included on pages 16 to 38 of the Annual Report are the consolidated
financial statements of Pennwood Savings as of June 30, 1996 and 1995 and for
each of the years in the two-year period ended June 30, 1996, prepared in
accordance with generally accepted accounting principles, and the related
report of Pennwood Savings' independent public accountants, which are
incorporated herein by reference. The Annual Report is not a part of this
Proxy Statement-Offering Memorandum.
UPON RECEIPT OF A WRITTEN REQUEST, PENNWOOD SAVINGS WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM F-2 FILED WITH
THE FDIC UNDER THE EXCHANGE ACT FOR THE YEAR ENDED JUNE 30, 1996. UPON
WRITTEN REQUEST, PENNWOOD SAVINGS WILL FURNISH TO ANY SUCH STOCKHOLDER A COPY
OF THE EXHIBITS TO THE ANNUAL REPORT ON FORM F-2. SUCH WRITTEN REQUESTS
SHOULD BE DIRECTED TO JAMES W. KIHM, VICE PRESIDENT AND SECRETARY, PENNWOOD
SAVINGS BANK, 683 LINCOLN AVENUE, PITTSBURGH, PENNSYLVANIA 15202. THE ANNUAL
REPORT ON FORM F-2 IS NOT A PART OF THIS PROXY STATEMENT-OFFERING MEMORANDUM.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
Agreement and Plan of Reorganization, dated as of September 18, 1996 (the
"Agreement"), by and between Pennwood Savings Bank ("Pennwood Savings" or the
"Surviving Bank"), a Pennsylvania-chartered savings bank, and Pennwood
Interim Savings Bank ("Interim"), a Pennsylvania-chartered interim savings
bank which will be organized for the sole purpose of consummating the
reorganization provided for herein, and Pennwood Bancorp, Inc. ("Company"), a
Pennsylvania corporation.
WITNESSETH:
WHEREAS, the Board of Directors of Pennwood Savings has determined that
it is in the best interests of Pennwood Savings and its stockholders for
Pennwood Savings to be reorganized into a holding company form of ownership;
and
WHEREAS, Pennwood Savings has caused the Company to be organized under
Pennsylvania law as a wholly-owned subsidiary for the purpose of becoming the
holding company of Pennwood Saving; and
WHEREAS, the formation of a holding company by Pennwood Savings will be
facilitated by causing the Company to become the sole stockholder of a
newly-formed interim Pennsylvania-chartered stock savings bank, and then
merging the interim savings bank with and into Pennwood Savings, so that as
part of the merger all of the outstanding shares of common stock of Pennwood
Savings will be converted automatically into and become shares of common
stock of the Company, which would then become the sole stockholder of
Pennwood Savings ("Merger"); and
WHEREAS, Interim is being organized by Pennwood Savings as an interim
Pennsylvania-chartered stock savings bank with the Company as its sole
stockholder in order to effect the Merger; and
WHEREAS, Pennwood Savings and Interim (the "Constituent Banks") desire to
provide for the terms and conditions of the Merger.
NOW, THEREFORE, Pennwood Savings, Interim and the Company hereby agree as
follows:
1. EFFECTIVE DATE. The Merger shall become effective as of the date of
the filing of the articles of merger relating to the Merger filed with the
Department of State of the Commonwealth of Pennsylvania pursuant to 7 P.S.
Section 1609(g), or any successor thereto (the "Effective Date").
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2. THE MERGER AND EFFECT THEREOF. Subject to the terms and conditions
set forth herein, including, without limitation, the prior approval of the
Department of Banking of the Commonwealth of Pennsylvania ("Department") and
the Board of Governors of the Federal Reserve System ("Federal Reserve
Board") and the expiration of all applicable waiting periods, Interim shall
merge with and into Pennwood Savings, which shall be the Surviving Bank.
Upon consummation of the Merger, the Surviving Bank shall be considered the
same business and corporate entity as each of the Constituent Banks and
thereupon and thereafter all the property, rights, powers and franchises of
each of the Constituent Banks shall vest in the Surviving Bank and the
Surviving Bank shall be subject to and be deemed to have assumed all of the
debts, liabilities, obligations and duties of each of the Constituent Banks
and shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, obligations, duties and relationships
had been originally acquired, incurred or entered into by the Surviving Bank.
In addition, any reference to either of the Constituent Banks in any
contract, will or document, whether executed or taking effect before or after
the Effective Date, shall be considered a reference to the Surviving Bank if
not inconsistent with the other provisions of the contract, will or document;
and any pending action or other judicial proceeding to which either of the
Constituent Banks is a party shall not be deemed to have abated or to have
been discontinued by reason of the Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the Merger had not
occurred or the Surviving Bank may be substituted as a party to such action
or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Banks if the Merger had not occurred.
3. CONVERSION OF STOCK.
(a) On the Effective Date, (i) each share of common stock, par
value $.01 per share, of Pennwood Savings ("Pennwood Savings Common Stock")
issued and outstanding immediately prior to the Effective Date shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into one share of common stock, par value $.01 per
share, of the Company ("Company Common Stock"), (ii) each share of common
stock, par value $.01 per share, of Interim ("Interim Common Stock") issued
and outstanding immediately prior to the Effective Date shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into one share of Pennwood Savings Common Stock, and (iii) each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Date shall, by virtue of the Merger and without any action on the
part of the holder thereof, be cancelled. By voting in favor of this
Agreement, the Company, as the sole stockholder of Interim, shall have agreed
(i) to issue shares of Company Common Stock in accordance with the terms
hereof and (ii) to cancel all previously issued and outstanding shares of
Company Common Stock upon the effectiveness of the Merger.
(b) On and after the Effective Date, there shall be no
registrations of transfers on the stock transfer books of Interim or Pennwood
Savings of shares of Interim
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Common Stock or Pennwood Savings Common Stock which were outstanding
immediately prior to the Effective Date.
4. EXCHANGE OF SHARES.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Pennwood
Savings Common Stock, upon surrender of the same to an agent, duly appointed
by the Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares
of Company Common Stock for which the shares of Pennwood Savings Common Stock
theretofore represented by the certificate or certificates so surrendered
shall have been converted as provided in Section 3 hereof. The Exchange
Agent shall mail to each holder of record of an outstanding certificate which
immediately prior to the Effective Date evidenced shares of Pennwood Savings
Common Stock, and which is to be exchanged for Company Common Stock as
provided in Section 3 hereof, a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to such
certificate shall pass, only upon delivery of such certificate to the
Exchange Agent) advising such holder of the terms of the exchange effected by
the Merger and of the procedure for surrendering to the Exchange Agent such
certificate in exchange for a certificate or certificates evidencing Company
Common Stock.
(b) After the Effective Date, certificates representing shares of
Pennwood Savings Common Stock shall be treated as evidencing ownership of the
number of full shares of Company Common Stock into which the shares of
Pennwood Savings Common Stock represented by such certificates shall have
been converted by virtue of the Merger, notwithstanding the failure on the
part of the holder thereof to surrender such certificates.
(c) If any certificate evidencing shares of Company Common Stock is
to be issued in a name other than that in which the certificate evidencing
Pennwood Savings Common Stock surrendered in exchange therefor is registered,
it shall be a condition of the issuance thereof that the certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange pay to the Exchange
Agent any transfer or other tax required by reason of the issuance of a
certificate for shares of Company Common Stock in any name other than that of
the registered holder of the certificate surrendered or otherwise establish
to the satisfaction of the Exchange Agent that such tax has been paid or is
not payable.
(d) If, between the date hereof and the Effective Date, the shares
of Pennwood Savings Common Stock shall be changed into a different number or
class of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or a stock
dividend thereon shall be declared with a record date within said period, the
exchange ratio specified in Section 3(a) hereof shall be adjusted accordingly.
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5. DISSENTING SHARES. Subject to the provisions of 7 P.S. Section 1607
of the Pennsylvania Banking Code ("Banking Code") and Subchapter D of the
Pennsylvania Business Corporation Law ("BCL"), or any successors thereto,
holders of shares of Pennwood Savings Common Stock shall have dissenter or
appraisal rights in connection with the Merger at set forth in the BCL.
6. NAME OF SURVIVING BANK. The name of the Surviving Bank shall be
"Pennwood Savings Bank."
7. DIRECTORS OF THE SURVIVING BANK. Upon and after the Effective Date,
until changed in accordance with the Amended and Restated Articles of
Incorporation and Bylaws of the Surviving Bank and applicable law, the number
of directors of the Surviving Bank shall be eight. The names and addresses
of those persons who, upon and after the Effective Date, shall be directors
of the Surviving Bank are set forth in Schedule A hereto, which is hereby
incorporated herein by reference. Each such director shall serve for the
term which expires at the annual meeting of stockholders of the Surviving
Bank in the year set forth after his or her respective name in Schedule A,
and until a successor is elected and qualified.
8. OFFICERS OF THE SURVIVING BANK. Upon and after the Effective Date,
until changed in accordance with the Amended and Restated Articles of
Incorporation and Bylaws of the Surviving Bank and applicable law, the
officers of Pennwood Savings immediately prior to the Effective Date shall be
the officers of the Surviving Bank.
9. OFFICES. Upon the Effective Date, all offices of Pennwood Savings
and Interim (which shall have no offices) shall be offices of the Surviving
Bank. As of the Effective Date, the home office of the Surviving Bank shall
remain at 683 Lincoln Avenue, Pittsburgh, Pennsylvania 15202 and the location
of the other offices of the Surviving Bank shall be as set forth in Schedule
B hereto, which is hereby incorporated herein by reference, except for the
addition of offices authorized or the deletion of offices closed subsequent
to the date hereof and the Effective Date.
10. ARTICLES OF INCORPORATION AND BYLAWS. On and after the Effective
Date, the Amended and Restated Articles of Incorporation and Bylaws of
Pennwood Savings as in effect immediately prior to the Effective Date shall
be the Amended and Restated Articles of Incorporation and Bylaws of the
Surviving Bank until amended in accordance with the terms thereof and
applicable law.
11. SAVINGS ACCOUNTS. Upon the Effective Date, all savings accounts of
Pennwood Savings, without reissue, shall be and become savings accounts of
the Surviving Bank without change in their respective terms, including,
without limitation, maturity, minimum required balances or withdrawal value.
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12. STOCK COMPENSATION PLANS. By voting in favor of this Agreement, the
Company shall have approved adoption of Pennwood Savings' existing Employee
Stock Ownership Plan (the "Plan") as a plan of the Company.
13. STOCKHOLDER APPROVAL. The affirmative vote of the holders of
two-thirds of the issued and outstanding Pennwood Savings Common Stock shall
be required to approve this Agreement on behalf of Pennwood Savings and the
approval of the Company, as the sole holder of Interim Common Stock, shall be
required to approve this Agreement on behalf of Interim.
14. REGISTRATION; OTHER APPROVALS. In addition to the approvals set
forth in Section 2 hereof, the parties' obligations to consummate the Merger
shall be subject to (i) the Company Common Stock to be issued hereunder in
exchange for Pennwood Savings Common Stock being registered under the
Securities Act of 1933 and registered or qualified under applicable state
securities laws, except in each case to the extent that the Company relies on
an applicable exemption therefrom, and (ii) the receipt of all other
approvals, consents or waivers as the parties may deem necessary or advisable.
15. INCOME TAX MATTERS. The parties hereto shall have received an
opinion of counsel, satisfactory to them in form and substance, with respect
to the federal income tax consequences of the Agreement and the formation of
a holding company, as contemplated therein.
16. ABANDONMENT OF AGREEMENT. This Agreement may be abandoned by each
of Pennwood Savings, Interim or the Company at any time before the Effective
Date in the event that (a) any action, suit, proceeding or claim has been
instituted, made or threatened relating to the Agreement which shall make
consummation of the transaction contemplated hereby inadvisable in the
opinion of Pennwood Savings, Interim or the Company, or (b) for any other
reason consummation of the transaction contemplated hereby is inadvisable in
the opinion of Pennwood Savings, Interim or the Company. Such abandonment
shall be effected by written notice by Pennwood Savings, Interim or the
Company to the others, authorized or approved by the Board of Directors of
the party giving such notice. Upon the giving of such notice, this Agreement
shall be terminated and there shall be no liability hereunder or on account
of such termination on the part of Pennwood Savings, Interim or the Company
or the directors, officers, employees, agents or stockholders of each of
them. In the event of abandonment of this Agreement, Pennwood Savings shall
pay the fees and expenses incurred by itself, Interim and the Company in
connection with this Agreement and the Merger.
17. AMENDMENTS. To the extent permitted by law, this Agreement may be
amended by a subsequent writing signed by the parties hereto upon the
approval of the Board of Directors of each of the parties hereto; provided,
however that the provisions of Section 3 hereto relating to the consideration
to be exchanged for shares of Pennwood Savings Common Stock shall not be
amended after the meeting of stockholders of
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Pennwood Savings at which this Agreement is considered so as to decrease the
amount of change the form of such consideration without the approval of such
stockholders.
18. SUCCESSORS. This Agreement shall be binding on the successors of
Pennwood Savings, Interim and the Company.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts.
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America and, to the extent
not governed by such laws, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Pennwood Savings, Interim and the Company have
caused this Agreement to be executed by their duly authorized officers as of
the day and year first above written.
PENNWOOD SAVINGS BANK
Attest:
/s/ James W. Kihm By: /s/ Paul S. Pieffer
- ---------------------------- --------------------------------
James W. Kihm Paul S. Pieffer
Secretary President and Chief Executive Officer
PENNWOOD BANCORP, INC.
Attest:
/s/ James W. Kihm By: /s/ Paul S. Pieffer
- ---------------------------- --------------------------------
James W. Kihm Paul S. Pieffer
Secretary President and Chief Executive Officer
PENNWOOD INTERIM SAVINGS BANK
(In Organization)
Attest:
/s/ James W. Kihm By: /s/ Paul S. Pieffer
- ---------------------------- --------------------------------
James W. Kihm Paul S. Pieffer
Secretary President and Chief Executive Officer
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SCHEDULE A
DIRECTORS OF THE SURVIVING BANK
Terms
Name Residence Address Expires
- ---- ----------------- -------
Charles R. Frank 100 Waverly Avenue 1998
Apartment 4
Pittsburgh, Pennsylvania 15229
Mary M. Frank 100 Waverly Avenue 1996
Apartment 4
Pittsburgh, Pennsylvania 15229
Paul S. Pieffer 2524 Josephine Street 1997
Pittsburgh, Pennsylvania 15203
John B. Mallon 8575 Babcock Boulevard 1996
Pittsburgh, Pennsylvania 15237
C. Joseph Touhill 2206 Almanack Court 1996
Pittsburgh, Pennsylvania 15237
Robert W. Hannan 9367 N. Florence Road 1997
Pittsburgh, Pennsylvania 15237
Michael Kotyk 1017 Edgewood Road 1997
New Kensington, Pennsylvania 15068
H. J. Zoffer 5620 Aylesboro Avenue 1998
Pittsburgh, Pennsylvania 15217
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SCHEDULE B
OFFICES OF THE SURVIVING BANK
HOME OFFICE
683 Lincoln Avenue
Pittsburgh, Pennsylvania, 15202
OTHER OFFICES
125 Market Street
Kittanning, Pennsylvania 16201
4 Hilltop Plaza
Kittanning, Pennsylvania 16201
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APPENDIX B
ARTICLES OF INCORPORATION
OF
PENNWOOD BANCORP, INC.
ARTICLE I
NAME
The name of the corporation is Pennwood Bancorp, Inc. (hereinafter referred
to as the "Corporation").
ARTICLE II
REGISTERED OFFICE
The address of the initial registered office of the Corporation in the
Pennwood of Pennsylvania is 683 Lincoln Avenue, Pittsburgh, Pennsylvania
15202-3493.
ARTICLE III
NATURE OF BUSINESS
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the Business Corporation Law of
1988, as amended, of the Pennwood of Pennsylvania (the "BCL"). The Corporation
is incorporated under the provisions of the BCL.
ARTICLE IV
CAPITAL STOCK
A. AUTHORIZED AMOUNT. The total number of shares of capital stock which
the Corporation has authority to issue is 5,000,000 of which 1,000,000 shall be
serial preferred stock, par value $.01 per share (hereinafter the "Preferred
Stock"), and 4,000,000 shall be common stock, par value $.01 per share
(hereinafter the "Common Stock"). Except to the extent required by governing
law, rule or regulation, the shares of capital stock may be issued from time to
time by the Board of Directors without further approval of stockholders. The
Corporation shall have the authority to purchase its capital stock out of funds
lawfully available therefor.
B. COMMON STOCK. Except as provided in this Article IV (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power of the Corporation shall be vested in the Common
Stock, with each holder thereof being entitled to one vote for each share of
such Common Stock standing in the holder's name on the books of the Corporation.
Subject to any rights and preferences of any class of stock having preference
over the Common Stock, holders of Common Stock shall be entitled to
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such dividends as may be declared by the Board of Directors out of funds
lawfully available therefor. Upon any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or involuntary, holders of
Common Stock shall be entitled to receive pro rata the remaining assets of the
Corporation after the holders of any class of stock having preference over the
Common Stock have been paid in full any sums to which they may be entitled.
C. AUTHORITY OF BOARD TO FIX TERMS OF PREFERRED STOCK. The Board of
Directors shall have the full authority permitted by law to divide the
authorized and unissued shares of Preferred Stock into series and to fix by
resolution full, limited, multiple or fractional, or no voting rights, and such
designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights, and other special or relative rights
of the Preferred Stock or any series thereof that may be desired.
D. PREEMPTIVE RIGHTS. Except as may be provided in a resolution or
resolutions of the Board of Directors providing for the issue of any series of
Preferred Stock, no holder of shares of capital stock of the Corporation as such
shall have any preemptive or preferential right to purchase or subscribe to any
part of any new or additional issue of capital stock of any class whatsoever of
the Corporation, or of securities convertible into capital stock of any class
whatsoever, whether now or hereafter authorized or issued.
ARTICLE V
INCORPORATOR
The name and mailing address of the sole incorporator is as follows:
Number and
Class of
Shares
Name Address Subscribed For
- ------------------- ----------------------------------- ----------------
Pennwood Savings 683 Lincoln Avenue 100 shares of
Bank Pittsburgh, Pennsylvania 15202-3493 Common Stock
ARTICLE VI
DIRECTORS
A. DIRECTORS AND NUMBER OF DIRECTORS. The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors.
Except as otherwise increased from time to time by the exercise of the rights of
the holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect additional directors, the
number of directors of the Corporation shall be determined as stated in the
Corporation's Bylaws, as may be amended from time to time.
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B. CLASSIFICATION AND TERM. The Board of Directors, other than those who
may be elected by the holders of any class or series of stock having preference
over the Common Stock as to dividends or upon liquidation, shall be divided into
three classes as nearly equal in number as possible, with one class to be
elected annually. The term of office of the initial directors shall be as
follows: the term of directors of the first class shall expire at the first
annual meeting of stockholders after the effective date of these Articles of
Incorporation; the term of office of the directors of the second class shall
expire at the second annual meeting of stockholders after the effective date of
these Articles of Incorporation; and the term of office of the third class shall
expire at the third annual meeting of stockholders after the effective date of
these Articles of Incorporation; and, as to directors of each class, when their
respective successors are elected and qualified. At each annual meeting of
stockholders, directors elected to succeed those whose terms are expiring shall
be elected for a term of office to expire at the third succeeding annual meeting
of stockholders (except to the extent necessary to ensure that the Board of
Directors shall be divided into three classes as nearly equal in number as
possible) and when their respective successors are elected and qualified.
C. NO CUMULATIVE VOTING. Stockholders of the Corporation shall not be
permitted to cumulate their votes for the election of directors.
D. VACANCIES. Except as otherwise fixed pursuant to the provisions of
Article IV hereof relating to the rights of the holders of any class or series
of stock having preference over the Common Stock as to dividends or upon
liquidation to elect directors, any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, shall be filled by a majority vote of the directors then in office,
whether or not a quorum is present, or by a sole remaining director, and any
director so chosen shall serve until the term of the class to which he was
appointed shall expire and until his successor is elected and qualified. When
the number of directors is changed, the Board of Directors shall determine the
class or classes to which the increased or decreased number of directors shall
be apportioned, provided that no decrease in the number of directors shall
shorten the term of any incumbent director.
E. REMOVAL. Except as otherwise required by law, and subject to the
rights of any class or series of stock having preference over the Common Stock
as to dividends or upon liquidation to elect directors, any director (including
persons elected by directors to fill vacancies in the Board of Directors) may be
removed from office by stockholders only for cause and only upon the affirmative
vote of not less than a majority of the total votes eligible to be cast by
stockholders at a duly constituted meeting of stockholders called expressly for
such purpose. Cause for removal shall exist only if the director whose removal
is proposed has been either declared of unsound mind by an order of a court of
competent jurisdiction, convicted of a felony or of an offense punishable by
imprisonment for a term of more than one year by a court of competent
jurisdiction, or deemed liable by a court of competent jurisdiction for gross
negligence or misconduct in the performance of such director's duties to the
Corporation.
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ARTICLE VII
MEETINGS OF STOCKHOLDERS; ACTION WITHOUT A MEETING
A. SPECIAL MEETINGS OF STOCKHOLDERS Except as otherwise required by law,
and subject to the rights of the holders of any class or series of Preferred
Stock, special meetings of stockholders may be called only by the Board of
Directors of the Corporation pursuant to a resolution approved by the
affirmative vote of a majority of the directors then in office.
B. ACTION WITHOUT A MEETING. An action permitted to be taken by the
stockholders of the Corporation at a meeting of stockholders may be taken
without a meeting only if a unanimous written consent setting forth the action
so taken is signed by all stockholders who would be entitled to vote at a
meeting for such purpose and such consent is filed with the Secretary of the
Corporation as part of the corporate records.
ARTICLE VIII
LIABILITY OF DIRECTORS AND OFFICERS
The personal liability of the directors and officers of the Corporation for
monetary damages for conduct in their capacities as such shall be eliminated to
the fullest extent permitted by the BCL as it exists on the effective date of
these Articles of Incorporation or as such law may be thereafter in effect. No
amendment, modification or repeal of this Article VIII, nor the adoption of any
provision of these Articles of Incorporation inconsistent with this Article
VIII, shall adversely affect the rights provided hereby with respect to any
claim, issue or matter in any proceeding that is based in any respect on any
alleged action or failure to act prior to such amendment, modification, repeal
or adoption.
ARTICLE IX
RESTRICTIONS ON OFFERS AND ACQUISITIONS OF
THE CORPORATIONS' EQUITY SECURITIES
A. DEFINITIONS.
(a) ACQUIRE. The term "Acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise.
(b) ACTING IN CONCERT. The term "Acting in Concert" means (a)
knowing participation in a joint activity or conscious parallel action towards a
common goal whether or not pursuant to an express agreement, or (b) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
B-4
<PAGE>
(c) AFFILIATE. An "Affiliate" of, or a Person "affiliated with," a
specified Person, means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
(d) ASSOCIATE. The term "Associate" used to indicate a relationship
with any Person means:
(i) Any corporation or organization (other than the Corporation
or a Subsidiary of the Corporation), or any subsidiary or parent
thereof, of which such Person is a director, officer or partner or is,
directly or indirectly, the Beneficial Owner of 10% or more of any
class of equity securities;
(ii) Any trust or other estate in which such Person has a 10% or
greater beneficial interest or as to which such Person serves as
trustee or in a similar fiduciary capacity, provided, however, such
term shall not include any employee stock benefit plan of the
Corporation or a Subsidiary of the Corporation in which such Person
has a 10% or greater beneficial interest or serves as a trustee or in
a similar fiduciary capacity;
(iii) Any relative or spouse of such Person (or any relative of
such spouse) who has the same home as such Person or who is a director
or officer of the Corporation or a Subsidiary of the Corporation (or
any subsidiary or parent thereof); or
(iv) Any investment company registered under the Investment
Company Act of 1940 for which such Person or any Affiliate or
Associate of such Person serves as investment advisor.
(e) BENEFICIAL OWNER (INCLUDING BENEFICIALLY OWNED). A Person shall
be considered the "Beneficial Owner" of any shares of stock (whether or not
owned of record):
(i) With respect to which such Person or any Affiliate or
Associate of such Person directly or indirectly has or shares (A)
voting power, including the power to vote or to direct the voting of
such shares of stock, and/or (B) investment power, including the power
to dispose of or to direct the disposition of such shares of stock;
(ii) Which such Person or any Affiliate or Associate of such
Person has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
and/or (B) the right to vote pursuant to any agreement, arrangement or
understanding (whether such right is exercisable immediately or only
after the passage of time); or
B-5
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(iii) Which are Beneficially Owned within the meaning of (i) or
(ii) of this Article IXA(e) by any other Person with which such
first-mentioned Person or any of its Affiliates or Associates either
(A) has any agreement, arrangement or understanding, written or oral,
with respect to acquiring, holding, voting or disposing of any shares
of stock of the Corporation or any Subsidiary of the Corporation or
acquiring, holding or disposing of all or substantially all, or any
Substantial Part, of the assets or business of the Corporation or a
Subsidiary of the Corporation, or (B) is Acting in Concert. For the
purpose only of determining whether a Person is the Beneficial Owner
of a percentage specified in this Article IX of the outstanding Voting
Shares, such shares shall be deemed to include any Voting Shares which
may be issuable pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants, options or otherwise and which are deemed to be
Beneficially Owned by such Person pursuant to the foregoing provisions
of this Article IXA(e), but shall not include any other Voting Shares
which may be issuable in such manner.
(f) OFFER. The term "Offer" shall mean every offer to buy or
acquire, solicitation of an offer to sell, tender offer or request or invitation
for tender of, a security or interest in a security for value; provided that the
term "Offer" shall not include (i) inquiries directed solely to the management
of the Corporation and not intended to be communicated to stockholders which are
designed to elicit an indication of management's receptivity to the basic
structure of a potential acquisition with respect to the amount of cash and or
securities, manner of acquisition and formula for determining price, or (ii)
non-binding expressions of understanding or letters of intent with the
management of the Corporation regarding the basic structure of a potential
acquisition with respect to the amount of cash and or securities, manner of
acquisition and formula for determining price.
(g) PERSON. The term "Person" shall mean any individual,
partnership, corporation, association, trust, group or other entity. When two
or more Persons act as a partnership, limited partnership, syndicate,
association or other group for the purpose of acquiring, holding or disposing of
shares of stock, such partnership, syndicate, associate or group shall be deemed
a "Person."
(h) SUBSTANTIAL PART. The term "Substantial Part" as used with
reference to the assets of the Corporation or of any Subsidiary means assets
having a value of more than 10% of the total consolidated assets of the
Corporation and its Subsidiaries as of the end of the Corporation's most recent
fiscal year ending prior to the time the determination is being made.
(i) SUBSIDIARY. "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or indirectly, by
the Person in question.
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(j) VOTING SHARES. "Voting Shares" shall mean shares of the
Corporation entitled to vote generally in an election of directors.
(k) CERTAIN DETERMINATIONS WITH RESPECT TO ARTICLE IX. A majority of
the directors shall have the power to determine for the purposes of this Article
IX, on the basis of information known to them and acting in good faith: (A) the
number of Voting Shares of which any Person is the Beneficial Owner, (B) whether
a Person is an Affiliate or Associate of another, (C) whether a Person has an
agreement, arrangement or understanding with another as to the matters referred
to in the definition of "Beneficial Owner" as hereinabove defined, and (D) such
other matters with respect to which a determination is required under this
Article IX.
(l) DIRECTORS, OFFICERS OR EMPLOYEES. Directors, officers or
employees of the Corporation or any Subsidiary thereof shall not be deemed to be
a group with respect to their individual acquisitions of any class of equity
securities of the Corporation solely as a result of their capacities as such.
B. RESTRICTIONS. For a period of five years from the effective date of
the reorganization of Pennwood Savings Bank (the "Bank") as a subsidiary of the
Corporation, no Person shall directly or indirectly Offer to acquire or acquire
the Beneficial Ownership of (i) more than 10% of the issued and outstanding
shares of any class of an equity security of the Corporation, or (ii) any
securities convertible into, or exercisable for, any equity securities of the
Corporation if, assuming conversion or exercise by such Person of all securities
of which such Person is the Beneficial Owner which are convertible into, or
exercisable for, such equity securities (but of no securities convertible into,
or exercisable for, such equity securities of which such Person is not the
Beneficial Owner), such Person would be the Beneficial Owner of more than 10% of
any class of an equity security of the Corporation.
C. EXCLUSIONS. The foregoing restrictions shall not apply to (i) any
Offer with a view toward public resale made exclusively to the Corporation by
underwriters or a selling group acting on its behalf, (ii) any tax qualified
employee benefit plan or arrangement established by the Corporation or a
Subsidiary of the Corporation and any trustee of such a plan or arrangement, and
(iii) any other Offer or acquisition approved in advance by the affirmative vote
of 80% of the members of the Corporation's Board of Directors then in office.
D. REMEDIES. In the event that shares are acquired in violation of this
Article IX, all shares Beneficially Owned by any Person in excess of 10% shall
be considered "Excess Shares" and shall not be counted as shares entitled to
vote and shall not be voted by any Person or counted as Voting Shares in
connection with any matters submitted to stockholders for a vote, and the Board
of Directors may cause such Excess Shares to be transferred to an independent
trustee for sale on the open market or otherwise, with the expenses of such
trustee to be paid out of the proceeds of the sale.
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ARTICLE X
APPLICABILITY OF CERTAIN PROVISIONS OF THE BCL
Section 1715 and Subchapter G, "Control-Share Acquisitions," of Chapter 25
of the BCL, and in each case any successor to such provisions, shall not apply
to the Corporation.
ARTICLE XI
AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by law, and all rights conferred upon stockholders herein
are granted subject to this reservation. No amendment, addition, alteration,
change or repeal of these Articles of Incorporation shall be made unless it is
first approved by the Board of Directors of the Corporation pursuant to a
resolution adopted by the affirmative vote of a majority of the directors then
in office, and, to the extent required by applicable law, thereafter is approved
by the holders of a majority (except as provided below) of the shares of the
Corporation entitled to vote generally in an election of directors, voting
together as a single class, as well as such additional vote of the Preferred
Stock as may be required by the provisions of any series thereof.
Notwithstanding anything contained in these Articles of Incorporation to the
contrary, the affirmative vote of the holders of at least 75% of the shares of
the Corporation entitled to vote generally in an election of directors, voting
together as a single class, as well as such additional vote of the Preferred
Stock as may be required by the provisions of any series thereof, shall be
required to amend, adopt, alter, change or repeal any provision inconsistent
with Articles VI, VII, VIII, IX and XI hereof which is not approved by the
affirmative vote of 80% of the Corporation's Board of Directors then in office.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the Business Corporation Law of
1988, as amended, of the Pennwood of Pennsylvania through these Articles of
Incorporation, has caused these Articles of Incorporation to be signed by its
President and Chief Executive Officer, who hereby declares and certifies that
the facts herein stated are true and who has hereunto set his hand this 22nd day
of February 1996.
ATTEST PENNWOOD SAVINGS BANK
/s/ James W. Kihm By: /s/ Paul S. Pieffer
- ------------------------------ ----------------------------------------
James W. Kihm, Secretary Paul S. Pieffer, President
and Chief Executive Officer
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APPENDIX C
BYLAWS
OF
PENNWOOD BANCORP, INC.
SECTION I
OFFICES
1.1 REGISTERED OFFICE AND REGISTERED AGENT. The registered office of
Pennwood Bancorp, Inc. ("Corporation") shall be located in the Commonwealth
of Pennsylvania at such place as may be fixed from time to time by the Board
of Directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office.
1.2 OTHER OFFICES. The Corporation may have other offices within or
outside the Commonwealth of Pennsylvania at such place or places as the Board
of Directors may from time to time determine.
SECTION II
STOCKHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. All meetings of the stockholders shall be held
at such place within or without the Commonwealth of Pennsylvania as shall be
determined by the Board of Directors.
2.2 ANNUAL MEETINGS. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the third
Wednesday of October at the hour of 6:00 p.m., if not a legal holiday, and if
a legal holiday, then on the day following, at the same hour, or at such
other date and time as may be determined by the Board of Directors and stated
in the notice of such meeting.
2.3 ORGANIZATION AND CONDUCT. Each meeting of the stockholders shall be
presided over by the Chairman, or if the Chairman is not present, by the
Vice-Chairman, or if both are not present, the President, or if all of the
above are not present, by such other director as designated by the Board of
Directors. The Secretary, or in his absence a temporary Secretary, shall act
as secretary of each meeting of the stockholders. In the absence of the
Secretary and any temporary Secretary, the chairman of the meeting may
appoint any person present to act as secretary of the meeting. The chairman
of any meeting of the stockholders, unless prescribed by law or regulation or
unless the Board of Directors has otherwise determined, shall determine the
order of the business and the procedure at
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the meeting, including such regulation of the manner of voting and the
conduct of discussions as shall be deemed appropriate by him in his sole
discretion.
2.4 NOTICE.
(a) Written notice of every meeting of stockholders shall be given by,
or at the direction of, the Secretary of the Corporation or other authorized
person to each stockholder of record entitled to vote at the meeting at least
(i) ten days prior to the day named for a meeting that will consider a
fundamental change under Chapter 19 of the Pennsylvania Business Corporation
Law ("BCL"), or any successor thereto, or (ii) five days prior to the day
named for a meeting in any other case. A notice of meeting shall specify the
place, day and hour of the meeting, and in the case of a special meeting the
general nature of the business to be transacted thereat, as well as any other
information required by law.
(b) When a meeting of stockholders is adjourned, it shall not be
necessary to give any notice of the adjourned meeting or of the business to
be transacted at an adjourned meeting, other than by announcement at the
meeting at which the adjournment is taken, unless the Board of Directors
fixes a new record date for the adjourned meeting or notice of the business
to be transacted is required to be given by applicable law and such notice
previously has not been given.
2.5 RECORD DATE. The Board of Directors may fix in advance a record
date for the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders, or any adjournment thereof, such date to
be not more than 90 days and not less than (i) ten days in the case of a
meeting that will consider a fundamental change under Chapter 19 of the BCL,
or any successor thereto, or (ii) five days in the case of a meeting for any
other purpose, prior to the date of the meeting established by the Board of
Directors.
2.6 VOTING LIST. The officer or agent having charge of the transfer
books for shares of the Corporation shall make a complete list of the
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order, with the address of and number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any stockholder during the whole
time of the meeting for the purposes thereof.
2.7 QUORUM. Except as otherwise required by law:
(a) The presence of stockholders entitled to vote at least a majority of
the votes that all stockholders are entitled to cast on a particular matter
to be acted upon at a meeting of stockholders shall constitute a quorum for
the purposes of consideration and action on the matter.
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(b) The stockholders present at a duly organized meeting can continue to
do business until adjournment notwithstanding the general withdrawal of
enough stockholders to leave less than a quorum.
2.8 VOTING OF SHARES.
(a) Except as otherwise provided in these Bylaws or to the extent that
voting rights of the shares of any class or classes are limited or denied by
the Articles of Incorporation, each stockholder, on each matter submitted to
a vote at a meeting of stockholders, shall have one vote for each share of
stock registered in his name on the books of the Corporation.
(b) Except as otherwise provided by law or paragraph (c) of this Section
2.8, any corporate action to be taken by vote of the stockholders of the
Corporation shall be authorized by receiving the affirmative vote of a
majority of the votes cast by all stockholders entitled to vote thereon and,
if any stockholders are entitled to vote thereon as a class, upon receiving
the affirmative vote of a majority of the votes cast by stockholders entitled
to vote as a class.
(c) Directors are to be elected by a plurality of votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. If, at any meeting of the stockholders, due to a vacancy or
vacancies or otherwise, directors of more than one class of the Board of
Directors are to be elected, each class of directors to be elected at the
meeting shall be elected in a separate election by a plurality vote.
2.9 PROXIES. Every stockholder entitled to vote at a meeting of
stockholders may authorize another person to act for him by a proxy duly
executed by the stockholder or his duly authorized attorney-in-fact. The
presence of, or vote or other action at a meeting of stockholders, by a proxy
of a stockholder shall constitute the presence of, or vote or other action
by, the stockholder for all purposes. No proxy shall be valid after three
years from the date of execution unless a longer time is expressly provided
therein.
2.10 PROPOSALS. At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be
(a) specified in the notice of meeting (or any supplement thereto) given by
or at the direction of the Board of Directors, or (b) otherwise properly
brought before the meeting by a stockholder. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation.
To be timely a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation not later than
ninety days prior to the anniversary date of the mailing of proxy materials
by the Corporation in connection with the immediately preceding annual
meeting of stockholders of the Corporation or, in the case of the first
annual meeting of stockholders of the Corporation following its acquisition
of all of the outstanding capital stock of Pennwood Savings Bank, not later
than the close of business on the tenth day
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following the day on which notice of the date of the scheduled annual meeting
was mailed. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting, (b) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (c) the class and number of
shares of the Corporation which are beneficially owned by the stockholder,
and (d) any material interest of the stockholder in such business. The
chairman of an annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 2.10, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted. This
provision is not a limitation on any other applicable laws and regulations.
2.11 JUDGES OF ELECTION.
(a) For each meeting of stockholders, the Board of Directors may appoint
judges of election, who need not be stockholders, to act at the meeting or
any adjournment thereof. If judges of election are not so appointed, the
presiding officer of the meeting may, and on the request of any stockholder
shall, appoint judges of election at the meeting. The number of judges shall
be one or three. A person who is a candidate for office to be filled at the
meeting shall not act as a judge.
(b) The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all stockholders. The judges
of election shall perform their duties impartially, in good faith, to the
best of their ability and as expeditiously as is practical. If there are
three judges of election, the decision, act or certificate of a majority
shall be effective in all respects as the decision, act or certificate of all.
SECTION III
BOARD OF DIRECTORS
3.1 NUMBER AND POWERS. The business affairs of the Corporation shall be
managed under the direction of a Board of Directors of not less than five nor
more than 15, as set from time to time by resolution of the Board of
Directors. Directors need not be stockholders or residents of the
Commonwealth of Pennsylvania. In addition to the powers and authorities
expressly conferred upon it by these Bylaws and the Articles of
Incorporation, all such powers of the Corporation as are not by statute or
by the Corporation's Articles of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders may be exercised by or
under the authority of the Board of Directors.
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3.2 CLASSIFICATION AND TERMS. The classification and terms of the
directors shall be as set forth in the Corporation's Articles of
Incorporation, which provisions are incorporated herein with the same effect
as if they were set forth herein.
3.3 VACANCIES. All vacancies in the Board of Directors shall be filled
in the manner provided in the Corporation's Articles of Incorporation, which
provisions are incorporated herein with the same effect as if they were set
forth herein.
3.4 REMOVAL OF DIRECTORS. Directors may be removed in the manner
provided in the Corporation's Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.
3.5 REGULAR MEETINGS. Regular meetings of the Board of Directors or any
committee may be held without notice at the principal place of business of
the Corporation or at such other place or places, either within or without
the Commonwealth of Pennsylvania, as the Board of Directors or such
committee, as the case may be, may from time to time appoint or as may be
designated in the notice of the meeting. A regular meeting of the Board of
Directors shall be held without notice immediately after the annual meeting
of stockholders.
3.6 SPECIAL MEETINGS.
(a) Special meetings of the Board of Directors may be called at any
time by the Chairman, the Vice-Chairman, the President or by a majority of
the authorized number of directors, to be held at the principal place of
business of the Corporation or at such other place or places as the Board of
Directors or the person or persons calling such meeting may from time to time
designate. Written notice of all special meetings of the Board of Directors
shall be given to each director by five days' service of the same. Such
notice need not specify the business to be transacted at, nor the purpose of,
the meeting.
(b) Special meetings of any committee may be called at any time by
such person or persons and with such notice as shall be specified for such
committee by the Board of Directors, or in the absence of such specification,
in the manner and with the notice required for special meetings of the Board
of Directors.
3.7 ACTION OF DIRECTORS BY COMMUNICATIONS EQUIPMENT. One or more
persons may participate in a meeting of directors, or of a committee thereof,
by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
3.8 QUORUM OF AND ACTION BY DIRECTORS. A majority of the Board of
Directors then in office shall be necessary at all meetings to constitute a
quorum for the transaction of business and the acts of a majority of the
directors present and voting at a meeting at
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which a quorum is present shall be the acts of the Board of Directors. Every
director of the Corporation shall be entitled to one vote.
3.9 REGISTERING DISSENT. A director who is present at a meeting of the
Board of Directors or of a committee thereof, at which action on a corporate
matter is taken on which the director is generally competent to act, shall be
presumed to have assented to such action unless his dissent is entered in the
minutes of the meeting, or unless he files his written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof, or unless he delivers his dissent in writing to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
3.10 ACTION BY DIRECTORS WITHOUT A MEETING. Any action which may be
taken at a meeting of the directors, or of a committee thereof, may be taken
without a meeting if, prior or subsequent to the action, a consent or
consents in writing, setting forth the action so taken or to be taken, is
signed by all of the directors in office, or by all of the members of the
committee, as the case may be, and filed with the Secretary of the
Corporation. Such consent shall have the same effect as a unanimous vote.
3.11 COMPENSATION OF DIRECTORS. The Board of Directors shall have the
authority to fix the compensation of directors for their services as directors
and a director may be a salaried officer of the Corporation.
3.12 NOMINATIONS OF DIRECTORS Subject to the rights of holders of any
class or series of stock having a preference over the common stock as to
dividends or upon liquidation, nominations for the election of directors may be
made by the Board of Directors or committee appointed by the Board of Directors
or by any stockholder entitled to vote generally in an election of directors.
However, any stockholder entitled to vote generally in an election of directors
may nominate one or more persons for election as directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid to the Secretary of the Corporation not later than (i)
ninety days prior to the anniversary date of the mailing of proxy materials by
the Corporation in connection with the immediately preceding annual meeting of
stockholders of the Corporation or, in the case of the first annual meeting of
stockholders of the Corporation following its acquisition of all of the
outstanding capital stock of Pennwood Savings Bank, the close of business on the
tenth day following the day on which notice of the date of the scheduled annual
meeting was mailed, and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, the close of business on
the tenth day following the date on which notice of such meeting is first given
to stockholders. Each such notice shall set forth: (a) the name and address of
the stockholder who intends to make the nomination and of the person or persons
to be nominated; (b) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the
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notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (e) the consent of each nominee to serve as a director of the
Corporation if so elected. The presiding officer of the meeting may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing procedures.
SECTION IV
EXECUTIVE AND OTHER COMMITTEES
4.1 EXECUTIVE COMMITTEE.
(a) The Board of Directors may appoint from the Board of Directors an
Executive Committee of not less than three members, and may delegate to such
committee, except as otherwise provided by law or the Articles of
Incorporation, the powers of the Board of Directors in the management of the
business and affairs of the Corporation in the intervals between meetings of
the Board of Directors in all cases in which specific directions shall not
have been given by the Board, as well as the power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
(b) Meetings of the Executive Committee shall be held at such times and
places as the Chairman of the Executive Committee may determine. The
Executive Committee, by a vote of a majority of its members, may appoint a
Chairman and fix its rules of procedure, determine its manner of acting and
specify what notice, if any, of meetings shall be given, except as otherwise
set forth in these Bylaws or as the Board of Directors shall by resolution
otherwise provide.
(c) The Executive Committee shall keep minutes of all business
transacted by it. All completed action by the Executive Committee shall be
reported to the Board of Directors at its meeting next succeeding such action
or at its meeting held in the month following the taking of such action, and
shall be subject to revision or alteration by the Board of Directors.
4.2 AUDIT COMMITTEE. The Board of Directors shall designate not less
than three members of the Board of Directors who are not employed by the
Corporation to constitute an Audit Committee, which shall receive and
evaluate internal and independent auditor's reports, monitor the
Corporation's adherence in accounting and financial reporting to generally
accepted accounting principles and perform such other duties as may be
delegated to it by the Board of Directors. Meetings of the Audit Committee
shall be held at such times and places as the Chairman of the Audit Committee
may determine. The Audit Committee, by a vote of a majority of its members,
may fix its rules of procedure, determine
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its manner of acting and specify what notice, if any, of meetings shall be
given, except as otherwise set forth in these Bylaws or as the Board of
Directors shall by resolution otherwise provide.
4.3 OTHER COMMITTEES. The Board may, by resolutions passed by a
majority of the Board of Directors, designate members of the Board to
constitute other committees, which shall in each case consist of one or more
directors and shall have and may execute such powers as may be determined and
specified in the respective resolutions appointing them. A majority of all
the members of any such committee may fix its rules of procedure, determine
its manner of acting and fix the time and place of its meetings and specify
what notice thereof, if any, shall be given, except as otherwise set forth in
these Bylaws or as the Board of Directors shall by resolution otherwise
provide.
4.4 TERM. A majority of the Board of Directors shall have the power to
change the membership of any committee of the Board of Directors at any time,
to fill vacancies therein and to discharge any such committee or to remove
any member thereof, either with or without cause, at any time.
SECTION V
OFFICERS
5.1 DESIGNATIONS. The Board of Directors shall annually appoint a
Chairman of the Board, a Vice-Chairman of the Board, a President, a
Secretary, a Treasurer and such other officers as the Board of Directors may
from time to time deem appropriate.
5.2 POWERS AND DUTIES. The officers of the Corporation shall have such
authority and perform such duties as are specified in these Bylaws and as the
Board of Directors may from time to time authorize or determine. In the
absence of action by the Board of Directors, the officers shall have such
powers and duties as generally pertain to their respective offices.
5.3 CHAIRMAN OF THE BOARD. The Chairman of the Board, who shall be
chosen from among the directors, shall preside at all meetings of the Board
of Directors and stockholders. He shall supervise the carrying out of the
policies adopted or approved by the Board of Directors.
5.4 VICE-CHAIRMAN OF THE BOARD. The Vice-Chairman of the Board, who
shall be chosen from among the directors, shall preside at all meetings of
the Board of Directors and stockholders at which the Chairman of the Board is
absent. In the absence of the Chairman, the Vice Chairman shall also
supervise the carrying out of the policies adopted or approved by the Board
of Directors.
5.5 PRESIDENT. The President shall, in the absence of the Chairman of
the Board and the Vice-Chairman of the Board, preside at all meetings of the
Board of Directors and
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stockholders. The President shall have general executive powers and shall
have and may exercise any and all other powers and duties pertaining by law,
regulations or practice to the office of President, or imposed by these
Bylaws.
5.6 SECRETARY. The Secretary shall keep the minutes of the meetings of
the stockholders and the Board of Directors and shall give notice of all such
meetings as required in these Bylaws, the Corporation's Articles of
Incorporation or by law. The Secretary shall have custody of such minutes,
the seal of the Corporation and the stock certificate records of the
Corporation, except to the extent some other person is authorized to have
custody and possession thereof by a resolution of the Board of Directors.
5.7 TREASURER. The Treasurer shall keep, or cause to be kept, the
fiscal accounts of the Corporation, including an account of all monies
received or disbursed.
5.8 TERM; REMOVAL. Each officer of the Corporation shall hold office
for a term of one year and until his successor has been selected and
qualified or until his earlier death resignation or removal. Any officer or
agent of the Corporation may be removed at any time, with or without cause,
by the Board of Directors, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment
of an officer or agent shall not of itself create contract rights.
5.9 COMPENSATION. The officers of the Corporation shall receive such
salary or compensation as may be determined by or under authority of the
Board of Directors.
5.10 DELEGATION. In the case of absence or inability to act of any
officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any director or other person
whom it may select.
5.11 VACANCIES. Vacancies in any office arising from any cause may be
filled by the Board of Directors at any regular or special meeting of the
Board.
5.12 BONDS. The Board of Directors may, by resolution, require any and
all of the officers to give bonds to the Corporation, with sufficient surety
or sureties, conditioned for the faithful performance of the duties of their
respective offices, and to comply with such other conditions as may from time
to time be required by the Board of Directors.
SECTION VI
INDEMNIFICATION
6.1 THIRD PARTY ACTIONS. The Corporation shall indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (other than an
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action by or in the right of the Corporation), by reason of the fact that he
is or was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a representative of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action or proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation and, with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful,
provided that the Corporation shall not be liable for any amounts which may
be due to any such person in connection with a settlement of any action or
proceeding effected without its prior written consent or any action or
proceeding initiated by any such person (other than an action or proceeding
to enforce rights to indemnification hereunder).
6.2 DERIVATIVE AND CORPORATE ACTIONS. The Corporation shall indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action by or in the right of the Corporation
to procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust
or other enterprise, against expenses (including attorney's fees) actually
and reasonably incurred by him in connection with the defense or settlement
of the action if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
provided that the Corporation shall not be liable for any amounts which may
be due to any such person in connection with a settlement of any action or
proceeding affected without its prior written consent. Indemnification shall
not be made under this Section 6.2 in respect of any claim, issue or matter
as to which the person has been adjudged to be liable to the Corporation
unless and only to the extent that the court of common pleas of the judicial
district embracing the county in which the registered office of the
Corporation is located or the court in which the action was brought
determines upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court of common
pleas or other court deems proper.
6.3 MANDATORY INDEMNIFICATION. To the extent that a representative of
the Corporation has been successful on the merits or otherwise in defense of
any action or proceeding referred to in Section 6.1 or Section 6.2 or in
defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
6.4 PROCEDURE FOR EFFECTING INDEMNIFICATION. Unless ordered by a court,
any indemnification under Section 6.1 or Section 6.2 shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the representative is proper in the circumstances because
he has met the applicable standard of conduct set forth in those sections.
The determination shall be made:
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(1) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to the action or proceeding;
(2) if such a quorum is not obtainable, or if obtainable and a majority
vote of a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion; or
(3) by the stockholders.
6.5 ADVANCING EXPENSES. Expenses (including attorneys' fees) incurred
in defending any action or proceeding referred to in this Section VI shall be
paid by the Corporation in advance of the final disposition of the action or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined that he is not
entitled to be indemnified by the Corporation as authorized in this Section
VI or otherwise.
6.6 INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a representative of
the Corporation or is or was serving at the request of the Corporation as a
representative of another domestic or foreign corporation for profit or
not-for-profit, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would
have the power to indemnify him against that liability under the provisions
of this Section VI.
6.7 MODIFICATION. The duties of the Corporation to indemnify and to
advance expenses to a director or officer provided in this Section VI shall
be in the nature of a contract between the Corporation and each such person,
and no amendment or repeal of any provision of this Section VI shall alter,
to the detriment of such person, the right of such person to the advance of
expenses or indemnification related to a claim based on an act or failure to
act which took place prior to such amendment or repeal.
SECTION VII
CAPITAL STOCK
7.1 CERTIFICATES. Certificates of stock shall be issued in numerical
order, and each stockholder shall be entitled to a certificate signed by the
President or a Vice President, and the Secretary or the Treasurer, or in such
other manner as the Corporation may determine, and may be sealed with the
seal of the Corporation or a facsimile thereof. The signatures of such
officers may be facsimiles if the certificate is manually signed on behalf of
a transfer agent, or registered by a registrar, other than the Corporation
itself or an employee of the Corporation. If an officer who has signed or
whose facsimile signature has been placed upon such certificate ceases to be
an officer before the certificate is issued, it may be issued by the
Corporation with the same effect as if the person were an officer on the date
of issue. Each certificate of stock shall state:
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(a) that the Corporation is incorporated under the laws of the
Commonwealth of Pennsylvania;
(b) the name of the person to whom issued;
(c) the number and class of shares and the designation of the
series, if any, which such certificate represents; and
(d) the par value of each share represented by such certificate, or
a statement that such shares are without par value.
7.2 TRANSFERS.
(a) Transfers of stock shall be made only upon the stock transfer
books of the Corporation, kept at the registered office of the Corporation or
at its principal place of business, or at the office of its transfer agent or
registrar, and before a new certificate is issued the old certificate shall
be surrendered for cancellation. The Board of Directors may, by resolution,
open a share register in any state of the United States, and may employ an
agent or agents to keep such register, and to record transfers of shares
therein.
(b) Shares of stock shall be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificate or an assignment separate from the certificate, or by
a written power of attorney to sell, assign and transfer the same, signed by
the holder of said certificate. No shares of stock shall be transferred on
the books of the Corporation until the outstanding certificates therefor have
been surrendered to the Corporation.
7.3 REGISTERED OWNER. Registered stockholders shall be treated by the
Corporation as the holders in fact of the stock standing in their respective
names and the Corporation shall not be bound to recognize any equitable or
other claim to or interest in any share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
expressly provided below or by the laws of the Commonwealth of Pennsylvania.
The Board of Directors may adopt by resolution a procedure whereby a
stockholder of the Corporation may certify in writing to the Corporation that
all or a portion of the shares registered in the name of such stockholder are
held for the account of a specified person or persons. The resolution shall
set forth:
(a) The classification of shareholder who may certify;
(b) The purpose or purposes for which the certification may be made;
(c) The form of certification and information to be contained
therein;
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(d) If the certification is with respect to a record date, the time
after the record date within which the certification must be received by the
Corporation; and
(e) Such other provisions with respect to the procedure as are
deemed necessary or desirable.
Upon receipt by the Corporation of a certification complying with the
above requirements, the persons specified in the certification shall be
deemed, for the purpose or purposes set forth in the certification, to be the
holders of record of the number of shares specified in place of the
stockholder making the certification.
7.4 MUTILATED, LOST OR DESTROYED CERTIFICATES. In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place upon receipt of proof of such mutilation, loss or
destruction. The Board of Directors may impose conditions on such issuance
and may require the giving of a satisfactory bond or indemnity to the
Corporation in such sum as they might determine, or establish such other
procedures as they deem necessary.
7.5 FRACTIONAL SHARES OR SCRIP. The Corporation may (a) issue fractions
of a share which shall entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any of the assets of the
Corporation in the event of liquidation; (b) arrange for the disposition of
fractional interests by those entitled thereto; (c) pay in cash the fair
value of fractions of a share as of the time when those entitled to receive
such shares are determined; or (d) issue scrip in registered or bearer form
which shall entitle the holder to receive a certificate for a full share upon
the surrender of such scrip aggregating a full share.
SECTION VIII
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the 30th day of June of
each year. The Corporation shall be subject to an annual audit as of the end
of its fiscal year by independent public accountants appointed by and
responsible to the Board of Directors or the Audit Committee of the Board of
Directors. The appointment of such accountants shall be subject to annual
ratification by the stockholders.
SECTION IX
DIVIDENDS AND FINANCE
9.1 DIVIDENDS. Dividends may be declared by the Board of Directors and
paid by the Corporation in accordance with the conditions and subject to the
limitations imposed by the laws of the Commonwealth of Pennsylvania. The
Board of Directors may declare dividends payable only to stockholders of
record at the close of business on any business day not more than 90 days
prior to the date on which the dividend is paid.
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9.2 DEPOSITORIES. The monies of the Corporation shall be deposited in the
name of the Corporation in such bank or banks or trust company or trust
companies as the Board of Directors shall designate, and shall be drawn out only
by check or other order for payment of money signed by such persons and in such
manner as may be determined by resolution of the Board of Directors.
SECTION X
NOTICES
10.1 NOTICE. Whenever written notice is required to be given to any
person pursuant to these Bylaws, it may be given to the person either
personally or by sending a copy thereof by first class or express mail,
postage prepaid, or by telegram (with messenger service specified), telex or
TWX (with answerback received) or courier service, charges prepaid, or by
facsimile transmission, to his address (or to his telex, TWX or facsimile
number), in the case of stockholders, appearing on the books of the
Corporation or, in the case of directors, supplied by them to the Corporation
for the purpose of notice or, in the case of the Corporation, at the address
of its principal executive offices. If the notice is sent by mail, telegraph
or courier service, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with a telegraph
office or courier service for delivery to that person or, in the case of
telex or TWX, when dispatched.
10.2 WRITTEN WAIVER OF NOTICE. Whenever any written notice is required
to be given under these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of the notice.
Neither the business to be transacted at, nor the purpose of, a meeting need
be specified in the waiver of notice of the meeting.
10.3 WAIVER OF NOTICE BY ATTENDANCE. Attendance of a person at any
meeting shall constitute a waiver of notice of the meeting except where a
person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened.
SECTION XI
SEAL
The corporate seal of the Corporation shall be in such form and bear such
inscription as may be adopted by resolution of the Board of Directors, or by
usage of the officers on behalf of the Corporation.
SECTION XII
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes and proceedings of meetings of its
stockholders and Board of Directors;
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and it shall keep at its registered office or principal place of business, or
at the office of its transfer agent or registrar, a record of its
stockholders, giving the names and addresses of all stockholders and the
number and class of the shares held by each. Any books, records and minutes
may be in written form or any other form capable of being converted into
written form within a reasonable time.
SECTION XIII
AMENDMENTS
The Board of Directors, to the extent permitted by law, or stockholders
may adopt, alter, amend or repeal the Bylaws of the Corporation. Such action
by the Board of Directors shall require the affirmative vote of a majority of
the directors then in office at any regular or special meeting of the Board
of Directors. Such action by the stockholders shall require the affirmative
vote of the holders of a majority of the shares of the Corporation entitled
to vote generally in an election of directors, voting together as a single
class, as well as such additional vote of the Preferred Stock as may be
required by the provisions of any series thereof, provided that the
affirmative vote of the holders of at least 75% of the shares of the
Corporation entitled to vote generally in an election of directors, voting
together as a single class, as well as such additional vote of the Preferred
Stock as may be required by the provisions of any series thereof, shall be
required to amend, adopt, alter, change or repeal any provision of these
Bylaws which is inconsistent with Articles VI, VII, VIII, IX and XI of the
Articles of Incorporation of the Corporation and which is not approved by the
affirmative vote of 80% of the members of the Corporation's Board of
Directors then in office.
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APPENDIX D
PENNSYLVANIA BUSINESS CORPORATION LAW
SUBCHAPTER D. DISSENTERS RIGHTS
1571 APPLICATION AND EFFECT OF SUBCHAPTER.--(a) General rule.--Except as
otherwise provided in subsection (b), any shareholder of a business
corporation shall have the right to dissent from, and to obtain payment of
the fair value of his shares in the event of, any corporate action, or to
otherwise obtain fair value for his shares, where this 1 part expressly
provides that a shareholder shall have the rights and remedies provided in
this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section (2)2704(c) (relating to dissenters rights upon election).
SECTION 2705(d) (RELATING TO DISSENTERS RIGHTS UPON RENEWAL OF ELECTION).
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions).
SECTION 7104(b)(3) (RELATING TO PROCEDURE).
(b) Exceptions.--(1) Except as otherwise provided in paragraph (2), the
holders of the shares of any class or series of shares that, at the record
date fixed to determine the shareholders entitled to notice of and to vote at
the meeting at which a plan specified in any of section 1930, 1931(d),
1932(c) or 1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such
shares under this subchapter.
(2) Paragraph (I) shall not apply to and dissenters rights shall be
available without REGARD TO THE exception PROVIDED IN THAT PARAGRAPH in the
case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or solely
into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles, the
plan or the terms of the transaction entitle all shareholders of the class to
vote thereon and require for the adoption of the plan or the effectuation of
the transaction the affirmative vote of a majority of the votes cast by all
shareholders of the class.
(iii) SHARES ENTITLED TO DISSENTERS RIGHTS UNDER SECTION 1906(C)
(RELATING TO DISSENTERS RIGHTS UPON SPECIAL TREATMENT).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of the
other corporation and with or without the intervention of another corporation
or other person, shall not be entitled to the rights and remedies of
dissenting shareholders provided in this subchapter regardless of the fact,
if it be the case, that the acquisition was accomplished by the issuance of
voting shares of the corporation to be outstanding immediately after the
acquisition sufficient to elect a majority or more of the directors of the
corporation.
(c) Grant of optional dissenters rights.--The bylaws or a resolution of
the board of directors may direct that all or a part of the shareholders shall
have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholder to dissenters
rights.
(d) Notice of dissenters rights.--Unless otherwise provided by statute,
if a proposed corporate action that would give rise to dissenters rights
under this subpart is submitted to a vote at a meeting of shareholders, there
shall be included in or enclosed with the notice of meeting:
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PENNSYLVANIA BUSINESS CORPORATION LAW
(1) A statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value of
their shares by complying with the terms of this subchapter; and
(2) A copy of this subchapter.
(e) Other statutes.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this
(1)PART that makes reference to this subchapter for the purpose of granting
dissenters rights.
(f) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE.--THIS SUBCHAPTER MAY NOT
BE RELAXED BY ANY PROVISION OF THE ARTICLES.
(g) Cross references.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure). (Last amended by Act 198,
L. '90, eff. 12-19-90.)
__
Act 198, L. '90, eff. 12-19-90, added matter in italic and deleted
(1)"subpart" and (2)"2704.
1572 DEFINITIONS.--The following words and phrases when used in this
subchapter shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A PLAN OF DIVISION MAY
DESIGNATE WHICH OF THE RESULTING CORPORATIONS IS THE SUCCESSOR CORPORATION
FOR THE PURPOSES OF THIS SUBCHAPTER. THE SUCCESSOR CORPORATION IN A DIVISION
SHALL HAVE SOLE RESPONSIBILITY FOR PAYMENTS TO DISSENTERS AND OTHER
LIABILITIES UNDER THIS SUBCHAPTER EXCEPT AS OTHERWISE PROVIDED IN THE PLAN OF
DIVISION.
"Dissenter." A shareholder or beneficial owner who is entitled to and
does assert dissenters rights under this subchapter and who has performed
every act required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects taking
into account all relevant factors, but excluding any appreciation or
depreciation in anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate action
until the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors including the average
rate currently paid by the corporation on its principal bank loans. (Last
amended by Act 198, L. '90, eff. 12-19-90.)
__
Act 198, L. '90, eff. 12-19-90, added matter in italic.
1573 RECORD AND BENEFICIAL HOLDERS AND OWNERS.--(a) Record holders of
shares.--A record holder of shares of a business corporation may assert
dissenters rights as to fewer than all of the shares registered in his name
only if he dissents with respect to all the shares OF THE SAME CLASS OR
SERIES beneficially owned by any one person and discloses the name and
address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented
and his other shares were registered in the names of different shareholders.
(b) Beneficial owners of shares.--A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters
rights with respect to shares held on his behalf and shall be treated as a
dissenting shareholder under the terms of this subchapter if he submits to
the corporation not later than the time of the assertion of dissenters rights
a written consent of the record holder. A beneficial owner may not dissent
with respect to some but less than all shares of the same class or series
owned by the owner, whether or not the shares so owned by him are registered
in his name. (Last amended by Act 169, L. '92, eff. 2-16-93.)
__
Act 169, L. '92, eff. 2-16-93, added matter in italic.
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<PAGE>
1574 NOTICE OF INTENTION TO DISSENT.--If the proposed corporate action is
submitted to a vote at a meeting of shareholders of a business corporation,
any person who wishes to dissent and obtain payment of the fair value of his
shares must file with the corporation, prior to the vote, a written notice of
intention to demand that he be paid the fair value for his shares if the
proposed action is effectuated, must effect no change in the beneficial
ownership of his shares from the date of such filing continuously through the
effective date of the proposed action and must refrain from voting his shares
in approval of such action. A dissenter who fails in any respect shall not
acquire any right to payment of the fair value of his shares under this
subchapter. Neither a proxy nor a vote against the proposed corporate action
shall constitute the written notice required by this section.
1575 NOTICE TO DEMAND PAYMENT.--(a) General rule.--If the proposed
corporate action is approved by the required vote at a meeting of
shareholders of a business corporation, the corporation shall mail a further
notice to all dissenters who gave due notice of intention to demand payment
of the fair value of their shares and who refrained from voting in favor of
the proposed action. If the proposed corporate action is to be taken without
a vote of shareholders, the corporation shall send to all shareholders who
are entitled to dissent and demand payment of the fair value of their shares
a notice of the adoption of the plan or other corporate action. In either
case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment.--The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
1576 FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.--(a) Effect
of failure of shareholder to act.--A shareholder who fails to TIMELY demand
payment, or fails (in the case of certificated shares) to TIMELY deposit
certificates, as required by a notice pursuant to section 1575 (relating to
notice to demand payment)
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PENNSYLVANIA BUSINESS CORPORATION LAW
shall not have any right under this subchapter to receive payment of the fair
value of his shares.
(b) Restriction on uncertificated shares.--If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms
of section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder.--The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of
the proposed corporate action. (Last amended by Act 198, L. '90, eff.
12-19-90.)
__
Act 198, L. '90, eff. 12-19-90, added matter in italic.
1577 RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES.--(a) Failure to
effectuate corporate action.--Within 60 days after the date set for demanding
payment and depositing certificates, if the business corporation has not
effectuated the proposed corporate action, it shall return any certificates
that have been deposited and release uncertificated shares from any transfer
restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment.--When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming
to the requirements of section 1575 (relating to notice to demand payment),
with like effect.
(c) Payment of fair value of shares.--Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if
the corporate action has already been effectuated, the corporation shall
either remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates the amount that the
corporation estimates to be the fair value of the shares, or give written
notice that no remittance under this section will be made. The remittance or
notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance OR NOTICE together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand PAYMENT OR
supplemental payment, AS THE CASE MAY BE, accompanied by a copy of this
subchapter.
(d) Failure to make payment.--If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by
subsection (c), it shall return any certificates that have been deposited and
release uncertificated shares from any transfer restrictions imposed by
reason of the demand for payment. The corporation may make a notation on any
such certificate or on the records of the corporation relating to any SUCH
uncertificated shares that such demand has been made. If shares with respect
to which notation has been so made shall be transferred, each new certificate
issued therefor or the records relating to any transferred uncertificated
shares shall bear a similar notation, together with the name of the original
dissenting holder or owner of such shares. A transferee of such shares shall
not acquire by such transfer any rights in the corporation other than those
that the original dissenters had after making demand for payment of their
fair value. (Last amended by Act 198, L. '90, eff. 12-19-90.)
__
Act 198, L. '90, eff. 12-19-90, added matter in italic.
1578 ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES.--(a) General
rule.--If the business corporation gives notice of its estimate of the fair
value of the shares, without remitting such amount, or remits payment of its
estimate of the fair value of a dissenter's shares as permitted by section
1577(c) (relating to payment of fair value
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PENNSYLVANIA BUSINESS CORPORATION LAW
of shares) and the dissenter believes that the amount stated or remitted is
less than the fair value of his shares, he may send to the corporation his
own estimate of the fair value of the shares, which shall be deemed a demand
for payment of the amount or the deficiency.
(b) Effect of failure to file estimate.--Where (1) the dissenter does not
file his own estimate UNDER SUBSECTION (A) within 30 days after the mailing
by the corporation of its remittance OR NOTICE, the dissenter shall be
entitled to no more than the amount STATED IN THE NOTICE OR remitted to him
by the corporation. (Last amended by Act 198, L. '90, eff. 12-19-90.)
__
Act 198, L. '90, eff. 12-19-90, added matter in italic and deleted (1)"a
corporation has remitted payment of its estimated value of a dissenter's
shares, and".
1579 VALUATION PROCEEDINGS GENERALLY.--(a) General rule.--Within 60 days
after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578 (relating to
estimate by dissenter of fair value of shares);
If any demands for payment remain unsettled, the business corporation may
file in court an application for relief requesting that the fair value of the
shares be determined by the court.
(b) Mandatory joinder of dissenters.--All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding
as in an action against their shares. A copy of the application shall be
served on each such dissenter. If a dissenter is a nonresident, the copy may
be served on him in the manner provided or prescribed by or pursuant to 42
Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and
international procedure).
(c) Jurisdiction of the court.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or
in any amendment thereof.
(d) Measure of recovery.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is
found to exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application.--If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within
30 days after the expiration of the 60-day period. If a dissenter does not
file an application within the 30-day period, each dissenter entitled to file
an application shall be paid the corporation's estimate of the fair value of
the shares and no more, and may bring an action to recover any amount not
previously remitted.
1580 COSTS AND EXPENSES OF VALUATION PROCEEDINGS.--(a) General
rule.--The costs and expenses of any proceeding under section 1579 (relating
to valuation proceedings generally), including the reasonable compensation
and expenses of the appraiser appointed by the court, shall be determined by
the court and assessed against the business corporation except that any part
of the costs and expenses may be apportioned and assessed as the court deems
appropriate against all or some of the dissenters who are parties and whose
action in demanding supplemental payment under section 1578 (relating to
estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears.--Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the
corporation and in favor of any or all dissenters if the corporation failed
to comply substantially with the requirements of this subchapter and may be
assessed against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed
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PENNSYLVANIA BUSINESS CORPORATION LAW
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner
in respect to the rights provided by this subchapter.
(c) Award of fees for benefits to other dissenters.--If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefited.
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<PAGE>
EXHIBIT 3(iii)
Form of Common Stock Certificate
<PAGE>
(FORM OF STOCK CERTIFICATE - FRONT SIDE)
NUMBER SHARES
COMMON STOCK CUSIP
See reverse for
certain definitions
PENNWOOD BANCORP, INC.
PITTSBURGH, PENNSYLVANIA
$.01 par value common stock -- fully paid and non-assessable
This certifies that ___________________________________ is the registered
holder of _________________ shares of the Common Stock, par value $.01 per
share, of Pennwood Bancorp, Inc., Pittsburgh, Pennsylvania (the
"Corporation"), incorporated under the laws of the Commonwealth of
Pennsylvania.
The shares evidenced by this Certificate are transferable only on the
books of the Corporation by the holder hereof, in person or by duly
authorized attorney or legal representative, upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all the provisions of the Articles of Incorporation and
Bylaws of the Corporation and any and all amendments thereto. THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT
FEDERALLY INSURED OR GUARANTEED.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by the facsimile signatures of its duly authorized officers and has
caused its facsimile seal to be affixed hereto.
Dated:
- -------------------------- (SEAL) -----------------------------------
James W. Kihm Paul S. Pieffer
Secretary President and Chief Executive
Officer
<PAGE>
(FORM OF STOCK CERTIFICATE - BACK SIDE)
The Corporation is authorized to issue more than one class of stock,
including a class of preferred stock which may be issued in one or more
series. The Corporation will furnish to any stockholder, upon written request
and without charge, a full statement of the designations, preferences,
limitations and relative rights of the shares of each class authorized to be
issued and, with respect to the issuance of any preferred stock to be issued
in series, the relative rights and preferences between the shares of each
series so far as the rights and preferences have been fixed and determined
and the authority of the Board of Directors to fix and determine the relative
rights and preferences of subsequent series.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT - ____________________ Custodian ________________ under
(Cust) (Minor)
Uniform Gifts to Minors Act __________________________________
(State)
Additional abbreviations may also be used though not in the above list.
<PAGE>
For value received, _____________________ hereby sell, assign and transfer
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAXPAYER IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
unto ________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
________________ shares of Common Stock represented by this Certificate, and
do hereby irrevocably constitute and appoint _______________________ as
Attorney, to transfer the said shares on the books of the within named
Corporation, with full power of substitution.
Dated ________________ ____, ________
----------------------------
Signature
----------------------------
Signature
NOTICE: The signature(s) to this assignment must correspond with the name(s)
as written upon the face of the Certificate in every particular, without
alteration or enlargement, or any change whatever. The signature(s) should
be guaranteed by an eligible guarantor institution (bank, stockbroker,
savings and loan association or credit union) with membership in an approved
signature medallion program, pursuant to S.E.C. Rule 17Ad-15.
<PAGE>
EXHIBIT 3(iv)
List of Subsidiaries
<PAGE>
LIST OF SUBSIDIARIES
1. Pennwood Savings Bank, a Pennsylvania chartered savings bank
2. Pennwood Service Corporation, a subsidiary of Pennwood Savings Bank
(inactive)
